At Munich Health North America (part of Munich Re), we‘ve seen a significant increase in specialty pharmaceuticals as a driver of reinsurance recoveries.

Many of your benefits clients may be seeing that, too.

Here’s a look at what we’re telling clients about the issue.

Maybe you could use our explanation to shape your own client communications about the specialty drug cost problem.

Seminar

1. What are “specialty pharmaceuticals”?

Although there is no official definition for the term, it generally applies to drugs administered by injection or infusion. The term can also apply to any drug costing over $600 per dose.

These drugs treat conditions, such as hemophilia, cancer, rheumatoid arthritis, HIV, multiple sclerosis, and Hepatitis C. And they represent a large percentage of prescription drug spending.

These drugs include Recombinant Factor VIII, prescribed for Hemophilia; H.P. Acthar, for Multiple Sclerosis; Soliris, for PNH Disorder; and Vimizim for Progressive Metabolic Disorder. New claims from Hepatitis C treatments currently average about $150,000 per claimant.

See also: UniQure’s gene therapy boosts clotting in two hemophiliacs

A big gorilla

2. Why are specialty drug prices such a major concern?

At Munich Re, we plan according to a 30–3 rule for specialty pharmacy: only 3 percent of the total pharmacy prescriptions are considered specialty, but they cost 30 percent of a plan’s overall pharmacy expense. These costs are expected to increase; according to most industry estimates, specialty drugs will represent over 50 percent of total pharmacy costs by 2017.

Annual prescription drug increases were in the single digits for a decade. In 2014, however, annual prescription drug spending jumped by 13 percent in 2014.

The increase was largely fueled by a 30.9 percent increase in spending on specialty pharmaceuticals. Without compound medications and Hep C therapies, drug spending would have increased by just 6.4 percent

See also: Roche CEO slams ‘stupid’ U.K. decision to drop some cancer drugs 

People crossing a busy street

3. Who’s already using these drugs, or could be using them?

Millions of Americans are already diagnosed with of chronic conditions that could be treated with specialty drugs:

  • 37 million Americans are contending with high cholesterol

  • 400,000 suffer from multiple sclerosis.

  • 20,000 are hemophiliacs.

  • 50 million adults (one in five) have been diagnosed with arthritis.

See also: Employers try to rein in specialty drug costs

Crystal ball

4. What factors could affect the number of people who use specialty drugs in the future?

We believe a number of factors will lead to an increase in use of specialty pharmaceuticals, including:

  • Our population is aging: People over age 65 consume three to four times more drugs than those under 65.

  • An increase in testing, even for asymptomatic patients, means that more disorders can be diagnosed.

  • For patients known to have many conditions, new medical guidelines call for more aggressive and earlier treatments.

  • Manufacturers are making compliance easier for patients, by switching from injectable formulas to pill formats, for example.

  • Direct-to-consumer advertising is increasing patient awareness of specialty drugs.

  • Existing chronic conditions, such as a high rate of obesity, could lead to complications that increase the need for specialty drugs.

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