If you’ve been wondering why the high cost of a new hepatitis C treatment has ignited such a fierce public debate over the past few months, it’s because more specialty drugs, such as Sovaldi, are going to flood the market in coming years. This class of drugs accounted for fewer than 1 percent of all prescriptions in 2013, but about 25 percent of all prescription-drug spending – and spending on specialty drugs – is projected to increase 63 percent by 2016, according to Express Scripts.
These complex and expensive specialty drugs cost an average of $3,000 per month and, by one count, are about 50 times the cost of traditional drugs. So, it seems like a useful exercise to ask what these expensive drugs actually buy.
A new study finds that specialty drugs often provide substantially higher health benefits than traditional drugs, and so despite significantly higher costs “may still offer reasonable value for money,” according to research from the Boston-based Center for Value and Risk in Health published in this month’s Health Affairs journal.
The researchers said it is not entirely surprising that the new specialty drugs provided greater health gains. They often represented treatments for complex diseases with few or no previously effective options, while the traditional drugs were mostly for ailments with effective treatment options for most patients.
But the difference in price further sets these drugs apart. The new traditional drugs, when compared with previous treatments, represented a median increase of $784. For specialty drugs, it was $12,238 – about 15 times as high. Determining whether these new treatments were more cost-effective was difficult, the researchers said.
The challenge for the health-care industry, though, is how to make sure people can afford these cures without hurting the financial incentives for drugmakers to invest in research leading to additional innovative cures. There is no one “magic bullet” for this problem, CVS executives write in another Health Affairs article this month.
WellPoint’s chief medical officer, Sam Nussbaum, expressed some of the insurance industry’s angst over specialty drug prices during a Brookings Institution forum on specialty drug pricing. While health insurers are moving more toward value-based care – that is, rewarding care providers for keeping patients healthier, instead of paying for each service – he said there is no comparable model for drugs. About 36 percent of WellPoint’s business is now in value-based payment arrangements, he said, but drugs have been the outlier.
“Drugs are really a price and volume business,” Nussbaum said. “Value-based payment, something we all wish to achieve, has been difficult to pursue.”
Unfortunately for patients, the answer so far has been to make patients pay more out of pocket for these specialty drugs. Some new health plans are requiring people to pay as much as half of the cost of these drugs, though the Affordable Care Act caps annual out-of-pocket costs at $6,350 for an individual and $12,700 for a family. Those costs could still be a burden, though, and advocacy groups representing HIV and AIDS patients have filed anti-discrimination lawsuits against insurers using these specialty drug tiers.
