10 Top Trends in Specialty Pharmacy

The introduction of personalized genomics, improvements in the design of diagnostic tools, and recent initiatives promoting increased patient data transparency have all contributed to the development of better, more targeted therapies in the treatment of chronic disease. But innovation typically comes at a price, and the mere existence of such sophisticated solutions does not certify their accessibility to all patients.

While it is estimated that the Affordable Care Act (ACA) will cover 24 million¹ more patients when fully implemented, little is known about how many patients will begin treatment with specialty medications as a result of these legislative changes. Less is known about whether these patients will be able to afford specialty drugs, even after they are insured.

“The number of new lives that may be covered under the Affordable Care Act seems to present a moving target, and as most will agree, this number has fluctuated,” Kevin Alder, chief operating officer, Specialty Pharmacy Association of America (SPAARx), said in an interview with SpecialtyPharmacyTimes.com. “What we do see, with the advent of the use of genomic markers, the quality of overall patient care, and the discovery of innovative therapies, is an increase in the prescribing and utilization of specialty medications to improve overall patient outcomes.”

Spending on specialty drugs in the United States is projected to increase 67% by the end of 2015, and spending in 8 of the top 10 specialty therapy classes will continue to increase over the next 3 years, according to a 2013 analysis by Express Scripts.² Prime Therapeutics estimates that by 2018, more than 50% of total drug spend will be on specialty medications.³ Increased innovation in the biopharmaceutical pipeline, greater medication utilization, and inflation have all been cited as major reasons for an increase in the specialty spend.

The following article examines the 10 major factors that contributed to the current boom in biologics, as well as the potential consequences of such rapid growth in specialty pharmacy.

1. Total Drug Spending Will Increase
Health care reform driven by the ACA will cause an increase in total drug spending as a larger number of Americans will be covered by health insurance.

As a result of the focus on drug development in the biotechnology sector, pharmacy revenues will be dominated by specialty drugs. Increased spending will also occur as a result of a shrinking Medicare Part D coverage gap, according to Adam J. Fein, PhD, president of Pembroke Consulting and chief executive officer of Drug Channels.⁴ The introduction of health insurance exchanges will also mean that more people will receive federal aid to help them purchase health insurance coverage.

A push toward value-based care will be implemented, and there will be a greater focus on rewarding providers for helping patients achieve positive health outcomes. In addition, health plans may avert providers from the use of expensive, newly developed treatment options that may have only a marginally higher success rate than alternatives—so even though drug spending is expected to increase, health plans may try to avoid paying for new therapies unless they are part of a clinical pathway or are deemed a “preferred” medication by the plan’s formulary committee.

Fein wrote in the 2012-2013 Economic Report on Retail, Mail, and Specialty Pharmacies that health care reform could have a negative effect on pharmacies “due to the new pharmacy reimbursement metrics and the forthcoming publication of pricing data.” He also noted that the expansion of professional services surrounding medication therapy management could produce extra revenue.⁴

“Spending for specialty drugs continues to grow at 15% to 20% annually,” Fein told SpecialtyPharmacyTimes.com. “Specialty pharmacies will benefit from the expected overall growth in demand for prescription pharmaceuticals and the corresponding increase in drug spending.”

2. Drug Manufacturers Aim for a “Me-First” Strategy
Drug development strategy is moving from a “me-too” strategy to a “me-first” approach, as manufacturers turn their attention to rare diseases, orphan drugs, and medications showing a substantial benefit over existing treatments.

With the Orphan Drug Act, Congress sought to encourage research into treatments for rare diseases affecting a small population of patients that may not be economically advantageous because of the relatively low rate of return compared with the cost associated with drug development. Since the Act’s passage in 1983, government incentives, shortened trial periods, high rates of regulatory success, and extended exclusivity periods have made the development of orphan drugs more attractive to pharmaceutical companies.

As a result of the regulatory changes made to reduce the costs of developing such drugs and the incentives now being offered to companies willing to direct their attention to the treatment of rare diseases, orphan drugs have the potential to become the industry’s next blockbusters, according to Thomson Reuters’ report, “The Economic Power of Orphan Drugs.”⁵

Specialty drugs treating conditions with unmet needs are often faced with fewer barriers to approval, and efforts to expedite their journey through the pipeline have been facilitated by the FDA’s recent approval designations—Accelerated Approval, Fast Track, Priority Review, and Breakthrough Therapy.

One example is ibrutinib’s recent breakthrough therapy designation.⁶ Ibrutinib is a selective tyrosine kinase inhibitor that received an expedited designation for the treatment of chronic lymphocytic leukemia, mantle cell lymphoma with deletion of the short arm of chromosome 17, relapsed or refractory mantle cell lymphoma, and Waldenström’s macroglobulinemia. “Ibrutinib is a great example of how this type of legislation can accelerate the development of drugs so they can be administered to patients sooner,” Craig L. Tendler, MD, vice president, late development and global medical affairs for oncology, Janssen Oncology, said in a video for OncLiveTV.⁷ According to Dr. Tendler, this type of legislation path is a crucial win for drug developers, as existing evidence suggests that ibrutinib is superior to available therapies.

According to a recent study by Kantar Health, 60% of the ongoing pivotal trials for oncology agents are being conducted in indications with a target population of fewer than 12,500 patients—and more than 50% of oncology pipeline agents possess novel mechanisms of action and are vying to be first-in-class.⁸ Although a separate breakthrough designation request must be submitted for each indication, a request for a Breakthrough Therapy designation can be submitted for multiple indications of the same drug, according to the FDA. Additional indication approvals could further drive the overall usage of a specialty drug.

Speed to market isn’t the only metric that matters, however. “A Breakthrough designation doesn’t always mean the product gets approved ... sometimes it means that because you fail faster, you don’t waste money on programs that don’t pan out,” said Peter Pitts, a former head of communications for the FDA who is a board member of Context Matters and co-founder of the Center for Medicine in the Public Interest.⁹

3. More Effective Therapies Are Emerging
Market expansion is being driven by increased patient survival, and better survival rates are the result of more effective therapies.

Some of the specialty drugs that have come on the market have improved survival rates so markedly that conditions that were formally associated with high mortality rates are now associated with higher morbidity rates. Gleevec (imatinib mesylate), which was approved in 2001 to treat a rare cancer called chronic myeloid leukemia (CML), was the first oral oncolytic-targeted therapy released. It was the first treatment of its kind, working to fight cancer by turning off an enzyme that causes cells to multiply. It is one of the most effective therapies to treat CML, replacing many of the older treatments that were available.

The success of Gleevec was outlined in an article in the journal Blood¹⁰: “Imatinib and the new Bcr-Abl tyrosine kinase inhibitors (TKIs) became the most successful class of targeted therapies ever developed in cancer, exceeding all projected survival expectations. With TKI therapy, the annual all-cause mortality in CML declined to 2%, versus a historical rate of 10-20%, and the estimated 10-year survival increased from less than 20% to above 80%.”

Agents in the pipeline to treat hepatitis C have also demonstrated increased efficacy. Interferon-free investigational agents in the pipeline reportedly have fewer side effects than prior interferon-based therapies and appear to produce significantly higher sustained virologic response (SVR) rates in clinical trials. As a result, drug costs to treat hepatitis C are predicted to quadruple over the next 3 years. According to Express Scripts, by the end of 2015, “Spending on medications for hepatitis C will exceed that of much more common conditions, including high blood pressure.”²

4. Cost Pressures Impact Health Plans
Cost pressures associated with specialty medications are causing a dramatic shift in health plan benefit design.

Many studies in 2013 revealed that a significant portion of spend on specialty drugs is not tracked through the pharmacy benefit and is hidden instead under the medical benefit. Because many infusible and injectable biologics require specialized handling, administration, and clinical monitoring, they are often given to patients in the outpatient hospital setting and are billed using the Healthcare Common Procedure Coding System. A study by Artemetrx estimated that specialty drug spend is underreported by as much as 10% to 15% due to this oversight. When accounting for medical claims data, total specialty spend by health plans is actually closer to 30%, rather than the 15% to 20% statistic quoted by numerous reports.^2,11

Traditional utilization methods are meant to encourage generic utilization, but in the case of specialty medications, there are often very few or no alternative treatment options. Payers and benefit managers are also placing very expensive therapies in specialty tiers (usually tier 3 or 4 within a plan) and are shifting the cost of the drug to consumers via a coinsurance requirement. “Cost-sharing burdens are growing, because payers are moving expensive specialty medications to the fourth tier of benefit plans,” noted Fein. “About half of these drugs now face coinsurance, instead of flat copayments.”

Legislation to limit the total out-of-pocket dollar amount for specialty drugs has been proposed in many states, a move that the Academy of Managed Care Pharmacy wrote would “prevent health plans from designing an evidence-based pharmacy benefit that is also financially sustainable” in letters to multiple state legislators. Meanwhile, patient advocate groups support the cost limits, saying they allow patients increased access to pricey medications.

In response to fiscal pressures, payers may rely more heavily on prior authorization and utilization management tools, such as split fill for oral oncolytics and site-of-care optimization for injectables and infusibles. Although manufacturer-sponsored coupons and copay cards for “nonpreferred” specialty medications help reduce the overall drug cost to the patient, these initiatives circumvent the formulary tiering hierarchy constructed by payers. Because the cost savings from copay cards are not transferred back to sponsors, some health plans have begun blocking their use entirely. Payers may also begin to increasingly designate specific pharmacies as “preferred” providers in their quest to quell drug costs.

5. Oncology Practices Consolidate
Consolidation of oncology practices into large health systems is being driven by cost of drugs on the medical benefit and providers’ efforts to join an accountable care organization (ACO).

In 2005, the change in Medicare’s drug pricing of provider-administered specialty drugs from average wholesale price to average sales price meant that for many oncologists it was no longer financially feasible to administer injectable or infusible specialty drugs in their offices (Figure 1).

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“Economic pressures are encouraging physicians to become hospital employees, and for care to shift away from community practices to hospitals,” Fein asserted. “Both trends have negative consequences for the specialty distributors that sell to independent physician offices and clinics.”

“The cost of oncology products, whether in IV or oral form, is impacting the care landscape significantly,” said Eric Sredzinski, PharmD, AAHIVE, vice president, clinical affairs, Avella Specialty Pharmacy, in a SpecialtyPharmacyTimes.com interview.¹² “It will be interesting to see, because if a capitation cost to manage patients with an ACO is provided, treating an oncology patient with a drug that could cost over $100,000 per year could really bend or break that model of cost-containment.”

This shift in care location will be further facilitated by hospitals’ ability to use the 340B Drug Discount program to manage specialty drugs, noted Fein, and may actually spark growth in the 340B program. “The out-of-control 340B Drug Discount program will put more pressure on the manufacturers and payers, because hospitals will aggressively try to use their 340B contract pharmacies for specialty products,” he explained.