People suffering from any number of serious diseases, including multiple sclerosis, central nervous system disorders, Hepatitis C, pulmonary hypertension, cancer or HIV know their drugs are costly—very costly. In 2014, specialty drugs accounted for less than 1% of all prescriptions, but for about 32% of all prescription drug spending. They can be up to 50 times more expensive than traditional drugs. So, are they worth the astronomical cost?
A peer-reviewed academic study in the journal Health Affairs tried to suss out exactly that—do new drugs offer significantly better value than existing drugs or non-drug treatments for a specific health condition? And do new specialty drugs offer value for the money spent compared with the cost of traditional drugs?
Researchers found that specialty drugs in particular were associated with significant improvements in terms of good health over time. The authors claimed, “Our study suggests that although specialty drugs often have higher costs than traditional drugs, they also tend to confer greater benefits and hence may still offer reasonable value for money.”
Researchers also said that for many of the aforementioned diseases, there were no or very few effective drugs to treat them, so the benefits conferred on the patient are not surprising.
On the flip side, paying for these drugs, some of which can run $3,000 a month or more, is a major hurdle. Insurance companies are struggling with the heavy burden of costs, and some plans now require patients to pay up to 50% of the cost of the drug out of pocket. Many patients, desperate for a cure or a better quality of life, are finding a way to pay for the specialty drugs or going into significant debt.
Self-funded plans should be aware that specialty drugs are on the rise. For now, there is no lifetime maximum of coverage for employer contributions, whereas the employee has an annual out-of-pocket maximum, so the costs for an employee’s health coverage in a self-funded plan could mount to significant totals.
Here are three actions a self-funded plan can take to mitigate risks from specialty drug costs:
- Consider what risk level you are willing to take and review your plan documents to be sure that your coverage is in line with your philosophy.
- Look at your plan to consider changes to co-pays or stop loss deductible levels.
- Discuss the cost of the drugs with the pharmacy benefit manager. Often, additional discounts are available to reduce the cost.
As always, contact us with any questions on this topic or to discuss your stop loss insurance coverage.