The Growing Role of Specialty Drugs in Employer Benefits Programs

In a recent podcast episode, our team of data scientists and clinicians sat down to share the trends and analysis findings that shaped the 2023 Employee Health Trends report.

Listen to the full podcast episode here.

Mike
‍For the past few years, specialty drugs have played a large and growing role in the overall cost of employee healthcare. Today, on Healthcare on the Rocks: Employee Benefits with a Twist, we're going to look into the factors that are driving the biggest increases and get some tips on what employers can do to keep their costs under control.

I'm Mike Pattengale, mid-market practice leader here at Springbuk.

Jennifer
‍And I'm Jennifer Jones, enterprise practice leader. Joining us again today is Dr. Janet Young, Springbuk's lead clinical scientist, and one of the primary researchers and analysts for the 2023 Employee Health Trends report. If you don't have your own copy downloaded yet, you can get that at springbuk.com/eht23.

Janet, welcome back to the show.

Janet
‍Thanks, Jen. I'm glad to be back.

Jennifer
‍Well, I know we have a lot to cover today. But let's remind Patty and our listeners as far as when we say the term specialty drugs, what all does that comprise?

Janet
‍So this term is used a lot, but there's actually no universal definition, but drugs that are classified as specialty drugs typically have one or more of the following attributes. They're high cost, or they're biologic in nature, meaning they're made by living cells. They're used in the treatment of rare or complex chronic conditions. Or sometimes they require special handling.

So I think when we think about specialty drugs, mainly we're focused probably on the first, the high-cost nature and, to some degree, the fact that they're biologic in nature. But there are some drugs considered to be specialty drugs for other reasons as well.

Mike
‍Thank you for that refresher specifically for me. In this year's Employee Health Trends report, you noted there was an increase in the plan paid specialty drugs of about 4.6% over the previous year. Can you share more behind that?

Janet
‍Sure. So I think the full story is better described by the huge increase in costs. Related to specialty drugs over the last few years.

You mentioned that the increase in the last year was 4.6%, but we noted that over the last four years, there's actually been an increase in plan paid for specialty drugs of 20%. To give you an idea of how specialty drugs have impacted overall drug spending over time. I found some information from a study published in 2011, which showed that at that time, people were already worried about specialty drugs because they accounted for about 17% of overall pharmacy costs, but now a little over ten years later, they typically account for over half of our spending on pharmacy drugs.

Mike
‍So what's driving this increase? Is it that the drugs are more expensive, or are people just taking more of them?

Janet
‍I think many people would assume that it is due to the skyrocketing prices of drugs because we hear so much about that in the news, and it's true that news specialty drugs that come on the market tend to be very expensive. But in reality, we've only seen about a 5% increase in the specialty drug cost per claimant over the last four years.

So rising drug prices are a factor, but they're not the biggest factor in the increasing specialty drug spending. Where we've seen a bigger increase is in the percent of members who are taking at least one specialty drug.

Janet
There's been a 30% increase in the percent of members taking at least one specialty drug, so it's now about one in every 40 members.

Mike
‍Why is that?

Janet
‍There are probably a few reasons for the increased utilization of specialty drugs. One is that most new drugs coming on the market are specialty drugs. Another is that manufacturers have also filed for expansion of indications for existing specialty drugs and also expanded the use, particularly in children and adolescents.

So there are more people who qualify for the specialty drugs that already existed. Physicians are the ones who ultimately have to prescribe these drugs. Like other people, anecdotal evidence is a driver in physician behavior. So I think it's plausible that as physicians have seen positive outcomes from these drugs, they've been more likely to prescribe them.

And that's despite some of the hurdles they often have to jump through to get these drugs approved for their patients. And, of course, anyone who watches television knows that there is a lot of direct-to-consumer advertisement to encourage individuals with certain conditions to talk to their doctors about these drugs.

Jennifer
‍I think I could probably list a couple of different jingles off the top of my head.

Mike
‍Let's hear those.

Why don't you those for us, Jen?

Jennifer
‍Oh, you don't want to hear that. But the Ozempic pops up right away Skyrizi. All right, back to the show here. Janet, in looking at our data, can you tell as far as whether we're seeing the increase in specialty drugs, is it greater in the pharmacy claims? Is it more medical claims, or is it really both? A combination of that? And then, can you really help us understand the impact of pharmacy versus medical channels spending on specialty drug claims as well for all employers?

Janet
‍Sure. So we're seeing a much greater increase in specialty drug use in the pharmacy channel compared to the medical channel. About two-thirds of specialty drug spending is now through the pharmacy channel. And that's largely driven by drugs that are used in treating chronic conditions that members can self-inject at home.

I think employers need to understand different strategies that they can use to control specialty drug costs in the medical channel compared to the pharmacy channel. Drugs that are billed through the medical channel are typically drugs that require an infusion. For commercial patients, these drugs are typically much less expensive if they're administered in the home or an office setting. So steering members to less expensive settings than say an outpatient hospital when possible is one of the most effective strategies. On the pharmacy side, we know that pharmacy benefit managers typically control the pharmacy channel, usually referred to as PBMs, and that includes which drugs are on the formulary, tiering, the need for prior authorization and step therapy.

So on the pharmacy side, there's already a mechanism for some oversight, which can be helpful. But the employers may have to work with the PBM to be sure that their strategies align. If an employer's main objective is to ensure that members get the drugs they need at the lowest net cost, and the PBM strategy prioritizes the largest rebate, the objectives may actually be in conflict.

Jennifer
‍Yeah, I think that's the biggest challenge we've heard from employers is when trying to solve for solutions on the PBM side; there's a lot more hurdles to come across, so definitely agree with that. When we start looking at specific conditions, have you noticed, are there any in particular or specific ailments that are really driving the increase in some of these costs?

Janet
‍Much of the spending in the commercial market is for inflammatory or autoimmune conditions. Psoriasis, inflammatory bowel disease, and rheumatoid arthritis are the biggest contributors in this category. About 25% of the spending on specialty drugs is for drugs used in the treatment of cancer. And then there's several other conditions that contribute a fair amount in the commercial market, and those would include multiple sclerosis, AIDS, migraine headache, and cystic fibrosis.

Mike
‍I feel like we can't talk about specialty drugs without mentioning the elephant in the room, Humira. This is a topic that you've covered several times over the past year in some of your blogs on our website and even in a previous podcast with us. Can you share with our listeners just the latest about its use and how you see the market changing around that this year?

Janet
‍This is something I've been following closely for the last few years because Humira is the drug that is responsible for the highest percent of specialty drug spending for most of our employers. Overall, it accounts for about 12% of specialty drug spending in Springbuk's book of business for each of the last three years, and no other drug even comes close to that.

We've been anticipating the launch of Humira biosimilars for a number of years. A biosimilar is a drug that is very similar in composition and structure to an original biologic drug and is as effective and safe as the original drug. I think the name biosimilar brings to mind something that is similar, but it's not as good like the store brand of cola, instead of Coke or Pepsi. But actually, because biosimilars are as safe and as effective, we don't expect any difference in treatment outcome when used in place of the original drug.

So the first biosimilar for Humira was approved by the FDA back in 2016, but due to patent litigation, this drug, Amjevita, did not become available on the market until just a few weeks ago on Jan. 31. There are another seven biosimilars for Humira that have been approved already and a few more that may receive approval this year. And all of these biosimilars are expected to become available in the second half of this year.

Jennifer
‍So Janet, what should employers expect then, as far as with the availability of the biosimilars? Should we see a drop in the specialty drug costs related to Humira?

Janet
I think there will be a drop in costs, but it won't be precipitous, and there are a few reasons for that. The first reason is that Humira is used for chronic conditions like rheumatoid arthritis, inflammatory bowel disease, and psoriasis. Both physicians and patients are likely to be reluctant to switch to a biosimilar if they've been stable on Humira. So it's more likely that patients who have never taken Humira will be started on a biosimilar, which means the increase in the proportion of members taking a biosimilar rather than Humira will be gradual.

Another reason I don't think we'll see a precipitous drop is that this first drug out of the gate, Amjevita, is only available at a less concentrated strength than the typical concentration prescribed to most patients for Humira. In fact, only about 15% of individuals in Springbuk's book of business take Humira at the less concentrated strength. Now that Amjevita has actually gone to market, we know that it is available at two list prices for the same formulation.

One that is a discount of 5 percent and another that's a discount of 55 percent compared to the list price for Humira. But you might be surprised to know that many PBMs have opted to include the drug with a smaller discount off the Humira list price.

And while that might seem counterintuitive, it's because the higher price drug can generate a larger rebate. The 5 percent discount is probably a lot less than what most employers would be hoping for. Once Amjevita is joined by a number of other biosimilars for Humira in the second half of the year, there will be a lot more competition. With the additional competition, we're likely to see lower costs for both Humira and the biosimilars as they all jockey for market share.

So to summarize, I think savings related to Humira biosimilars are coming. But we need to be a bit patient because they're likely to happen gradually over time rather than precipitously. But I'm hopeful that Humira biosimilars will pave the way to create greater familiarity and comfort with the use of biosimilars. Most people have never heard of biosimilars, so this is really the time to start educating members about them. We expect to see more biosimilars launched over the next few years, including for some popular drugs like Stelara. So we expect the potential for savings for biosimilars to keep growing.

Jennifer
‍So one thing I do wanna clarify real quick, Janet, on the specialty drugs, like them, or I should say the biosimilars, like these Humira biosimilars that are now on the market, it would be required as far as that PBM would have to offer that on their formulary in order for an employer to benefit from that too, correct?

Janet
‍That's correct.

Jennifer
‍So overall then, what are the three things employers should be aware of to really help reduce their costs on specialty drugs?

Janet
‍I'm going to start with one that may be the least obvious. The greatest reduction in specialty drug costs could result from members not needing these drugs in the first place. Promoting disease prevention through better life habits is key. And I know these are often the hardest issues to address, but it's amazing how these factors increase the risk even in conditions you might not expect.

For example, you might not think that obesity and smoking would be risk factors for psoriasis, but a number of studies have shown a relationship between these factors. And risk of developing psoriasis and also its severity. And just as a reminder, psoriasis is one of the main conditions treated by Humira as well as several other specialty drugs. For those who already have conditions where they need specialty drugs, we want to be sure that they're able to get the treatment they need, but at the lowest cost.

I know we barely touched on specialty drugs given through the medical channel, but for these drugs, the site of service has a large impact on cost. To the extent possible, incentivizing the administration of these drugs in the office or home setting instead of an outpatient hospital setting can save large sums of money.

I can't end without bringing up biosimilars again. It's critical that employers gain an understanding of the potential benefit of biosimilars and start working with PBMs to be sure that these drugs are part of the formulary. They should consider requiring step therapy that requires a fail-first approach with a biosimilar drug before starting on the original drug for members who are just starting therapy. Efforts to begin educating members about biosimilars, particularly to help them understand that they are as effective and as safe as the original drug, will also be key in members accepting the use of biosimilars.

Jennifer
‍Three excellent pieces of advice there. I can't emphasize number one enough. Being a dietician and in population health, I think that is by far one of the most important factors that you mentioned, Janet, as far as the whole disease prevention. A key part of that, and I think one, oftentimes overlooked because it is so difficult, but one that we certainly want to underscore.

All right, Janet, thanks again for joining us. We know specialty drug topic is an interesting one. We all will keep our eye on that, but we'll let you go for now. But we know we'll have you back on here to talk about some additional analysis that you've uncovered around cancer treatments and costs as we continue our series around employee health trends, so thanks again for joining us.

Janet
‍Thanks Jen and Patty.

Mike
‍That's it for this episode of Healthcare On the Rocks: Employee Benefits with a Twist. Remember to get your copy of the in-depth Employee Health Trends report at springbuk.com/eht23.

On that webpage, you'll also find links to the recent webinar that Janet and the other authors, not including myself, are on, as well as some other resources that are related to that report. We just released an infographic that I know has been super helpful to give a more brief overview of the report itself.

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