Employers Misunderstand Specialty Drugs and Costs

By Stephen Miller, CEBS October 6, 2011

One-quarter of U.S. employers have little or no understanding of "specialty pharmacy" benefits, while 53 percent have only a moderate understanding of this challenging benefit, according to a national survey by the nonprofit Midwest Business Group on Health (MBGH), representing private and public employers.

Specialty drugs are high-cost and highly complex pharmaceuticals, often developed through biotech research, that increasingly are being used to treat serious medical conditions including cancer, multiple sclerosis, rheumatoid arthritis and other diseases. These drugs are often self-injected or self-administered, and may require refrigeration or special handling. Tiered drug benefit plans may provide a different level of coverage for specialty drugs (see the SHRM Online article "Specialty Drugs Driving Pharmacy Benefit Costs.").

The vast majority of the employers surveyed by MBGH—ranging in size from 500 to 25,000 employees—indicated they did not know how much their company was spending on specialty pharmacy medications through their medical or pharmacy plans. Almost 30 percent indicated that they did not know how much their total specialty claim costs had increased in the past three to five years.

"In addition to the uncertainty and challenges that health reform and the economy are placing on employers, health plans and pharmacy benefit managers, the real driver of drug cost trend growth for employers lies in biologics and specialty pharmacy," said Cheryl Larson, MBGH vice president. "Our research confirms there is a broad lack of awareness and specific knowledge about benefit design related to specialty pharmacy that illustrates key gaps that need to be addressed."

Traditional vs. value-Based Benefit Design

Most employers are using a traditional benefit design, including tiered formularies, co-payments and co-insurance, for specialty drugs instead of value-based benefit designs that might be more appropriate for biologic/specialty pharmacy medications, the survey revealed. value-based designs might include lowering, rather than increasing, co-pays for specialty drugs deemed necessary for patient treatment and providing health coaching to ensure compliance with medical regimens and proper use of these drugs.

According to the survey, 76 percent of employers do not offer employees an incentive to ensure proper compliance and adherence to treatment for use of biologic/specialty medications. If not taken as prescribed, the value of specialty drugs might be lost.

Managing Specialty Drug Benefits

The survey showed that 42 percent of employers reported using pharmacy benefit managers to manage their specialty benefit, 22 percent were using their health plan, and 18 percent were using a combination of both. Only 13 percent of employers were using a specialty pharmacy provider that might have greater expertise on how to provide these drugs effectively. Vendor costs were the most important criteria employers cited when contracting with a specialty pharmacy.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

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