Specialty Medications and Employee Benefit Plans

Specialty Medications and Employee Benefit Plans | GroupHEALTH Benefit Solutions
Prescription drugs make up a significant portion of the total cost of your employee benefit plan. Hopefully, you have an employee benefits provider who keeps you in the loop and this information is old news to you.

What may be news to you is that there are two general types of prescription drugs: traditional drugs and specialty drugs. The second type (specialty drugs) can have an enormous impact on your employee benefit plan.

What are Specialty Medications?

Specialty medications are prescription drugs that target specific, complex and chronic conditions. Examples include drugs used to treat:

  • Hepatitis C
  • Rheumatoid Arthritis
  • Cancer
  • Multiple Sclerosis

Specialty drugs are unique in that they require special handling, storage, administration and monitoring. As a result, they are often expensive – in some cases, very expensive. Many insurance companies define specialty drugs as those having an annual cost of $10,000 or more. They are an important category of drugs for you and your benefit plan.

Important Impacts of Specialty Drugs

  1. Health of Employees
    Specialty drugs represent important advances in science and medication. For those using these medications, they have been known to significantly improve the quality and longevity of life. Simply put, their impact can be life-changing.
  2. Financial Impacts on Benefit Plans
    Specialty drugs warrant special attention from you (the plan sponsor) because they can have a very significant impact on the cost of your benefit plan. Though they typically represent just 1% of prescription drug claims, they usually account for 29% of total drug expenditure! Without mechanisms in place to control specialty drug spending, even one specialty drug claims can threaten the sustainability of your employee benefits plan.

Rising Costs of Specialty Drugs

The financial impact of specialty drugs on employee benefit plans is only expected to increase. There are several reasons for the increase in specialty drug costs.

First off, half of the new drugs being developed are specialty drugs. This means many more specialty drugs are available to treat a wider range of illnesses. In addition, existing specialty drugs are being used to treat different conditions than they were initially intended. For example, a specialty drug created to treat plaque psoriasis is now being used to treat Crohn’s disease. As a result of these often unintended benefits, specialty drugs are being used more often.

The other factor driving up the cost of specialty drugs in your plan is the development of new oral forms of specialty medication. In the past, specialty medication was typically administered through an infusion or injection in a hospital or care clinic. As such, the medication was covered under provincial health plans. With the development of oral forms of these medications, patients can take the specialty medication at home in pill or tablet form. This increased convenience transfers the burden of the cost of the drugs to private plans.

Containing Prescription Drug Costs

As a plan sponsor trying to protect the long-term sustainability of the benefit plan for all employees, specialty drugs are a risk – you want to continue to provide your employees with the treatment they need, but the impact of these drugs can be severe.

Fortunately, there are several avenues available to contain drug costs.

  • Focus on containing overall drug costs – By implementing cost containment strategies for traditional drugs, savings in this area can be used towards covering high-cost specialty drugs. At GroupHEALTH, many of our Smart Rx solutions are aimed at reducing drug spend via techniques like tiered formularies and central dispensing pharmacies. Employees still get the prescription drugs they need, but the plan saves money.
  • Exhaust all other options – Ensuring that other lower-cost prescription drug options have been explored and tried prior to covering high-cost specialty drugs is another option. At GroupHEALTH, we build this “special authorization” check into many of our plans. It ensures that plan members don’t jump to the most expensive drug option, before trying alternatives.
  • Cap specialty drug spending – Although difficult to contemplate, capping the amount of spending on specialty drugs may be necessary to protect the sustainability of the benefit plan. This should not be done in isolation. The other part of this strategy is to provide services to help affected employees find alternative coverage options, and in the vast majority of cases, those alternative coverage options are readily available through government programs, manufacturer’s patient assistance programs or a spouse’s benefits plan.

The Future of Specialty Drugs

Specialty drugs are regularly being created and some existing specialty drugs are being adapted to be used for other indications. As new research is conducted and patents expire, the specialty drug landscape will continue to change.

Increasingly, biosimilar drugs are making an appearance. Because many specialty drugs are created with living cells, it is not possible to exactly replicate them (as with traditional drugs and their generic equivalents). Therefore, biosimilar drugs are very similar but not exactly “generic” to the originator drugs. They are still very expensive but give promise that there may be less costly alternatives available in the future.

Remember: for many plan sponsors, taking steps to control specialty drug costs within the benefit plan is essential to protecting the longevity of the plan.

Good Advice is Key

Have high-cost specialty drugs had a big impact on your plan costs? Have you considered what just a few specialty drug claims will do to your overall plan costs? If not, it’s time to give it some thought. Review your options with one of our licensed advisors on the phone, or contact us for a comparison quote.

Whether you’re looking for extended health and dental coverage, disability coverage, or life and critical illness coverage, GroupHEALTH has affordable benefits packages that work as hard as you do.

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