Drug spending growth to come solely from specialty meds, report says
- With spending on traditional medications slated to diminish, specialty treatments will be the sole growth driver of branded drug spending in developed markets this year, according to a new report from IQVIA Holdings Inc.
- The healthcare data provider estimates those markets — 10 including the U.S. and European countries — will shell out $318 billion on specialty medicines in 2018, representing 41% of their overall pharmaceutical spend. Net spend on all branded products should fall around 1-3%, however, as spending on traditional medicine continues a multi-year decline.
- Specialty drugs generally target complex or rare diseases, and often come with high price targets. Examples include Bioverativ Inc.'s hemophilia treatments Alprolix and Eloctate and Shire plc's hereditary angioedema product Cinryze. IQVIA predicts the specialty drug segment will account for nearly half of developed markets' pharmaceutical spending by 2022.
The report underscores the dramatic effects specialty drugs are having on the healthcare system.
Express Scripts Holding Co., one of the largest pharmacy benefit managers (PBMs) in the U.S., found last year that, among its plan members who had annual drug spend of at least $50,000, about 96% took specialty medicines. The company also noticed a steep influx of patients joining this expensive coverage group.
PBMs and insurers usually push back against high-priced products, in turn prompting drugmakers to issue rebates or discounts — or risk being excluded from formulary lists and coverage options. Specialty drugs can throw a wrench in that dynamic, however.
"Payers' ability to negotiate lower net costs is often related to the presence of direct competition, either other branded originators or generic or biosimilars, whereas specialty drugs generally have fewer direct competitors," IQVIA noted in its report.
"While significant levels of off-invoice discounts and rebates are common, especially for traditional medicines, they are understood to be lower for specialty medicines, partly due to these dynamics. Faced with the prospect of limiting access or paying rising costs, there are few simple choices for payers."
Healthcare providers won't be able to dodge specialty drug challenges anytime soon either. Express Scripts noted in its October 2017 report that 118 specialty drugs entered the market over the last half decade, and predicted that 25 more would arrive annually over the next five years.
How payers handle the influx of specialty drugs is yet to be seen. While PBMs, insurers and drugmakers are slowly beginning to experiment with new pricing models, such as outcomes-based agreements, it's too early to tell whether they will hold water in the long-run.
"These contracts come with challenges for both the manufacturer and the party they negotiate with, whether that is a payer or a provider," IQVIA said. "Key to any successful contract will be the use of easily captured data, adjudicated and verifiable independently, often informed by biomarkers or test results."
"Patients could be overburdened with costs, particularly if there are no means-testing mechanisms in place. Providers could face significant financial pressures if they pay up-front for a medicine before uncertain reimbursement and payers ability to control premiums and the overall rise of healthcare costs stretches their predictive powers when faced with high individual cost per patient," the report said.
Follow Jacob Bell on Twitter