Addressing Soaring Specialty Drug Costs

Despite accounting for just 1% of prescriptions written in 2014, specialty drugs represented nearly one-third of the total prescription drug spending. With specialty drugs representing an increasing share of the US prescription drug spend, addressing the cost trend is becoming critical to ensure affordability for businesses and consumers.

A new specialty drugs issue brief by America’s Health Insurance Plans (AHIP) explored the recent trends in the market and recommended policy solutions to promote high-value, high-quality care.

The unsustainable growth of spending on specialty drugs is the result of many factors, but mostly legal and regulatory treatment of specialty therapies is to be blamed, according to the issue brief.

AHIP explains that one of the biggest issues is the lengthy exclusivity period—12 years for brand-name biologic drugs—granted to specialty drugs.

“Granting lengthy exclusivity periods to specialty drugs removes the economic benefits of price competition, resulting in higher prices relative to what they would be in a perfectly competitive market,” according to the brief.

In addition, there is evidence of manufacturers gaming the system to prolong the exclusivity period even longer through a number of schemes including: “evergreening,” where manufacturers make minor changes to a drug’s chemical composition or delivery mechanism to extend the patent; and “product hopping,” when the company withdraws a drug from the market and introduces a new version with minor changes.

The AHIP brief recommended a number of policy options that would promote high-quality, cost-effective drug coverage, including:

• Encouraging alternative payment and incentive structures for new drugs and technologies
• Shortening the exclusivity period for biologics
• Prohibiting abuse of the patent process by drug companies
• Removing barriers at the state level that restrict the use of biosimilars
• Promoting transparency on prescription drug research, development and pricing

“These recommendations represent actionable steps that could be implemented to ensure the efficient and effective use of these high-cost treatments while—at the same time—promoting continued medical advances and innovations that offer promise and benefit patients and consumers,” the brief concluded.