Specialty drug pricing pushing limits for hospital pharmacies

Specialty drug pricing and generic drug pricing, especially around single-source generics during their exclusivity period, should be on the radar screens of hospital and managed care decision-makers, according to Catamaran’s 2013 Drug Trend data, which represents 25 million consumers.

While generic entries into the marketplace peaked in 2013 and helped lower overall drug cost, innovations in the specialty market, coupled with price increases on existing specialty drugs, increased specialty drug trend, although not as much as in 2012, according to Catamaran.

“Pricing for specialty products continues to push the envelope, especially for oncology drugs and agents with orphan drug status and/or breakthrough therapy designation,” according to Sumit Dutta, MD, senior vice president, chief medical officer of Catamaran.

“Another point here is that the trend we see with drug pricing is that brand products typically experience a spike in drug pricing when generic competition is approaching,” Dr. Dutta said. “Also, we see drug pricing strategies used when manufacturers want to shift use to a new formulation of an existing brand product, again in an effort to minimize effects of anticipated generic competition.”

  The generic “patent cliff ” continued to drive increased use of generics, and as key drugs lost patent protection, drug spend was impacted, according to Dr. Dutta.

“However, decreases in trend as a result of generic launches were offset by continued price inflation of brand and specialty drugs. In addition, several single-source generics with a six-month exclusivity period resulted in generic pricing that is not much lower than its brand counterpart pricing,” he said.

This combination of factors made for a delicate balancing act, prompting payers of all types to rethink their long-term strategies for managing costs and outcomes, according to Dr. Dutta.

“Effective plan design’s utilization management programs and extensive patient engagement to help increase adherence, are critical as health plans, employers, and the government look to reduce long-term rates of overall healthcare spending,” he said.

Specialty market: A closer look

The specialty market continues to expand due to the entry of novel new drugs and new formulations, including products offering new and simplified routes of administration.

Runaway orphan drug pricing is especially pushing the limits, according to Dr. Dutta.

A sampling of recently launched orphan drugs between 2012 to 2013 found at least five with annual costs close to or exceeding $150,000 per patient (eg, ponatinib (Iclusig) to treat two rare types of leukemia; cabozantinib (Cometriq) to treat a rare type of thyroid cancer; pasireotide (Signifor) to treat Cushing's disease; ibrutinib (Imbruvica) to treat chronic lymphocytic leukemia; and pomalidomide (Pomalyst) to treat advanced multiple myeloma, while costs for another three orphan drugs approached $300,000 or more per patient per year [eg, teduglutide (Gattex) to treat adults with short bowel syndrome; ivacaftor (Kalydeco) to treat a rare form of cystic fibrosis; and lomitapide (Juxtapid) for the treatment of homozygous familial hypercholesterolemia].

“Particularly concerning is the finding that orphan drugs without therapeutic competition are 2.6 times more expensive than orphan drugs with competition,” Dr. Dutta said.

By 2018, orphan drugs are forecast to account for worldwide sales of $127 billion, with a compound annual growth rate over the next four years of  7.4%, which is double that of the overall prescription market growth, excluding generics.

“It has never been more imperative to have specialty management tools in place, including optimized and coordinated benefit designs, effective utilization management programs, efficient distribution and maximized contracting, coupled with extensive patient engagement,” Dr. Dutta advised.

Generics impact

The generic market continued to expand in 2013, with the some of the world’s best-selling drugs losing patent protection. Market competition from generic drugs is saving public and private healthcare payers more than $1 billion every other day, according to the IMS Institute. Generic drug use has saved $1.1 trillion over the past decade for the U.S. healthcare market.

“Managed care decision-makers need to ensure that the benefit plan is optimized to motivate patients to take advantage of these cost-effective drugs,” Dr. Dutta said. “Generics are beginning to appear within the specialty arena as well, but significant cost savings are yet to be fully realized. While biosimilars continue to be a focus for research and development by pharmaceutical manufacturers, the U.S. market opportunity continues to lag behind Europe and other countries due to the lack of a finalized approval pathway.”

Hepatitis C

A sharp reduction of 41% in overall trend for the hepatitis C class decreased specialty trend by 1.5 percentage points. The main driver in reduction of trend for this class was a 42.5% decrease in utilization as a result of prescribers “warehousing” patients while awaiting the launch of new products in late 2013, according to Dr. Dutta.

Two new therapies, sofosbuvir (Sovaldi) and simeprevir (Olysio), were launched at the end of 2013. There has been much debate surrounding the high cost of these treatments.

“Given the price the manufacturers of these products have set, there is a high bar for these drugs to show value,” Dr. Dutta said. “It is unclear yet if they will be able to get there.”

The hepatitis C category is anticipated to experience significant expansion over the next couple of years, according to Catamaran data.

“The drug development happening in the hep C space is exciting because having multiple products available allows us to negotiate with pharmaceutical manufacturers to bring price down and provide payers the lowest net-cost option,” according to Dr. Dutta. “Fortunately, there is a pipeline of new products in this condition and over time Catamaran will have the ability to ensure appropriate use as demonstrated through data-driven evidence.”