Specialty pharmaceuticals are one of the fastest growing classes of medications in part due to rapidly rising drug prices, increased approval of biological agents, and medications that require specialized handling or administration techniques, and a focus on costly drugs to treat orphan conditions and/or complex conditions.
Based on data from Artemetrx, a pharmaceutical data analytics firm, both the percentage of people utilizing specialty drugs and the cost of these agents have increased. About 3.4% of the population used at least one specialty drug in 2017 compared with 4.0% in 2019, with the overall average cost per specialty claim rising from $4,879 in 2018 to $5,029 in 2019. However, net spending for these pharmaceuticals is often difficult to measure since they are subject to rebates, which are paid to insurers, Medicaid programs, and pharmacy benefit managers and not pharmacies.
In an attempt to capture net spending on retail specialty drugs, the Agency for Healthcare Research and Quality examined Medical Expenditure Panel Survey (MEPS) data from 2010 to 2017. They focused on the Household Component, which provides data on outpatient retail and mail-order pharmaceutical sales. A survey was also conducted of pharmacies to determine their retail transaction price and spending data. Unfortunately, information on specialty drugs that are administered directly by providers is not included in MEPS. The authors utilized CMS guidelines, which define retail specialty drugs as drugs with a median price per 30-day supply greater than $600 between 2010 and 16 and $670 for 2017.
MEPS data was analyzed by insurance type: Medicare Part D, private drug coverage, and Medicaid. Net spending for both specialty and other prescription fills obtained by MEPS was calculated by subtracting an estimate of the average rebate for the drug in the year. Additional details are provided on calculating the lower boundary on rebates for Medicaid claims and for estimating non-Medicaid rebates for private insurance and Medicare Part D claims using data from SSR Health. SSR Health collects information on net revenue for products licensed or manufactured by public companies and rebate rates for 64% of specialty drug fills covered by private insurance or Medicare Part D.
However, this study had a number of limitations, which included that it may have underestimated Medicaid rebates since this information may be proprietary; it may contain inaccuracies due to the lack of separate rebate rates for private insurance compared with Medicare Part D; it omitted information on cancer medications and many injectables, which were administered directly by the provider; it included a small sample size of Medicaid specialty-drug beneficiaries; and there was wide variation in the specialty drugs that were used by a relatively small patient population. As a result, rebates to private insurance and Medicare Part D may have been overestimated.
Nonetheless, the authors provided valuable insight into net spending for specialty drugs in the U.S. from 2010-11 to 2016-17. Specialty drugs accounted for 1.0% and 2.3%, respectively, of retail fills for the overall population. Examining this growth of retail fills further based on insurance type, private insurance rose from 1.0% to 2.7%, Medicare Part D increased from 0.9% to 1.8%, and Medicaid beneficiary use went from 1.4% to 2.6%, respectively.
There was a doubling of the proportion of people who obtained at least one retail specialty drug during this period, rising from 2.2% to 5.0%, respectively. One important finding was that throughout the study, Medicare Part D beneficiaries were more than twice as likely to use retail specialty drugs as people with Medicaid or private drug coverage.
Average annual gross spending and average total net retail spending on retail specialty drugs more than doubled from $61.1 billion in 2010-11 to $157.3 billion in 2016-17, respectively, and $49.6 billion in 2010-11 to $112.6 billion in 2016-17, respectively. At the same time, the average annual rebates nearly quadrupled, rising from 19% of gross spending to 28% of gross spending or $11.5 billion to $44.7 billion, respectively. From 2010 to 2011, there was a 3.7-fold increase in average annual gross spending and 3.1-fold increase in net spending for retail specialty drugs among Medicate Part D beneficiaries. This is compared with the 2.6-fold increase in average annual gross spending and 2.3-fold increase in net spending for retail specialty drugs for those with private insurance.
Rebates were greatest in 2016-17 for Medicaid, totaling 53% of gross spending, followed by Medicare Part D, accounting for 30% of gross spending, and lastly, for private insurance, amounting to 24% of gross spending. There was a slower rate of growth in gross spending among Medicaid beneficiaries compared with Medicare Part D recipients for retail specialty drugs.
Net spending on retail specialty drugs as a share of net spending for all retail drugs doubled for private insurance and Medicare Part D during the two time periods studied. By 2016-17, net spending on specialty drugs totaled 31.5%, 37.8%, and 43.6% of net spending for all retail drugs for Medicare Part D, Medicaid, and private drug coverage, respectively. Medicaid spending witnessed an opposite trend with the share of net spending for retail specialty drugs, falling slightly from 2012-13 to 2014-15; however, limitations of Medicare data may affect these values, as may the use of less costly specialty psychotherapeutic agents compared with most costly antiviral drugs.
This paper offers the specialty pharmacist insight into gross and net spending trends based on insurance coverage and can provide valuable information as the field of specialty pharmacy continues to expand in upcoming years.
The content contained in this article is for informational purposes only. The content is not intended to be a substitute for professional advice. Reliance on any information provided in this article is solely at your own risk.
« Click here to return to Specialty Pharmacy Update.