Report: Specialty Drug Spending Increased 26 Percent

A Blue Cross Blue Shield Association report released Thursday found that spending per patient on specialty drugs increased by 26 percent between 2013 and 2014.

The report examined both pharmacy and medical benefit claims, which takes into account the costs of drugs obtained by a prescription and those administered in a doctor’s office or hospital, which is where more than 80 percent of cancer drugs are given.

BCBSA’s studies are useful because its insurers are the most active participants on the Obamacare exchanges and they encompass a fairly large sample of insurers nationwide.

Like other studies, BCBSA found that the biggest driver of the spike was increases in drug prices, which accounted for 15 percent of the cost increase. Higher utilization costs accounted for another 11 percent of the increase.

Translation: Drugs are more expensive, and more people are using them.

“The recent, rapid increases in specialty drug costs are a concern for everyone — the public, medical professionals, health care companies, employers of all sizes, and taxpayers who bear the cost of prescription drugs provided by government programs such as Medicare, Medicaid, and those who receive financial assistance to purchase individual coverage,” said Trent Haywood, chief medical officer for BCBSA, in a statement.

Haywood suggested a few policies that could help reduce drug prices, including speeding up the approval of generic and biosimilar drugs as well as infusing more transparency into the drug pricing process.

“To promote affordability and access to new innovative medicines, it’s important to have greater competition and choice to bring costs down for everyone,” he said.

The report also found that drug spending is 17 percent higher per patient in the individual market — i.e., Obamacare exchanges. This was due mostly to higher use by those enrollees of cancer, HIV and hepatitis drugs.

It makes sense that people in the individual market would have spent more than those with employer-provided insurance in 2014. That was the first year of enrollment on Obamacare exchanges, and many of the enrollees were newly insured after the passage of the Affordable Care Act. The health care law prohibited insurers from discriminating against pre-existing conditions and allowed low-income people to get federal subsidies for health insurance.

Thus, many of the newly insured were either sick or poor, or both, and hadn’t had access to health care before. A spike in health care costs on the individual market was expected.

Different drugs highlighted in the report illustrate different challenges in understanding the role of drug pricing on the cost of patient care. For example, hepatitis C spending spiked in 2014 with the introduction of Sovaldi and Harvoni onto the market. Of the $87 per patient increase over a year, hepatitis medication accounted for $29 of that, and monthly treatment costs increased by 400 percent.

Since then, more hepatitis drugs have entered the market, lowering costs. The drugs available also provide a cure, meaning that patients won’t have to continuously take it. It’s a one-time cost, albeit a prolonged one.

The situation is not the same with new cancer drugs, as the number in the development pipeline is increasing. Oncology medication is particularly challenging when it comes to controlling costs because patients often take multiple drugs simultaneously. More drugs on the marketplace won’t necessarily have the same downward pressure on prices that occurs in other drug classes.

Cancer drugs are also being developed for more targeted patient groups, meaning that to recoup research and development costs, prices must be high.

The BCBSA report found a 7 percent increase in the monthly cost of cancer drugs per patient, but cancer drug utilization rates are almost 10 times higher than that of hepatitis drugs, which means the somewhat modest increase is magnified.

The report said insurers are trying to keep the spending under control. “BCBS companies help customers maximize their prescription coverage to get the drugs they need at the most affordable cost. For example, members are encouraged to use generic prescription medicines, mail-order delivery, and home infusion, when available, and follow medication plans as prescribed by their doctors.”

The report also defended its member companies’ use of drug tiers, which sort covered drugs into different categories with different levels of cost-sharing. Generic drugs, for example, usually have less cost-sharing to encourage their use. Expensive drugs are put on higher tiers to discourage use. Drug companies and some experts have complained that drug companies will put expensive drugs on high cost-sharing tiers even when there isn’t a cheaper alternative.

“BCBS companies also work hard to hold down health care costs through prescription drug tiers or lists, which set different out-of-pocket costs for different types of prescription medicines. In building these lists, BCBS companies bring together doctors, nurses and pharmacists to help evaluate safety and effectiveness as well as how drugs should be listed,” the report said.