Innovative new drugs hold great promise for patients with chronic conditions such as cancer, HIV, AIDS, and autoimmune diseases including rheumatoid arthritis. Often derived from living cells, these “specialty drugs” can save lives and alleviate suffering, but they frequently are costly. Prices can range from thousands to hundreds of thousands of dollars per patient per year. In fact, although fewer than 2 percent of all patients use such drugs, they are projected to account for more than half of all drug expenditures by 2020.
These specialty drugs—typically biological products, such as proteins and antibodies—present unique challenges as policymakers seek to control health care costs while providing needed treatment to patients. Creating follow-on versions of biologic drugs, known as biosimilars, is extremely difficult and expensive. As a result, the price difference between pioneering biologic drugs and their biosimilars will be significantly less than the difference between brand-name drugs and traditional generics. And although the Food and Drug Administration approved the first biosimilar in March 2015, patent protections will prevent the development of clinically equivalent substitutes for most specialty drugs for many years.
The lack of suitable lower-cost alternatives limits the ability of health insurance plans to negotiate lower prices with manufacturers of biologic drugs. In addition, once a biosimilar drug reaches the market, pharmacies are unlikely to automatically substitute it, as is typical with traditional generics, because biologics are not identical to their biosimilars. Even though biosimilars mimic the therapeutic benefits of biologics, they originate from different cells and are not exact chemical copies.
Further, unlike medications dispensed from pharmacies, specialty drugs are often administered intravenously in physicians’ offices. In such situations, the tools that insurers put in place to keep pharmacy costs down, such as requiring prior authorization for certain drugs, are usually not available.
Addressing these challenges will become more important as manufacturers focus their research and development on specialty drugs. Given the great therapeutic promise and rapid growth of these treatments, policymakers need new approaches for controlling costs.
Pew’s specialty drugs research initiative identifies policy options that will help manage such costs and provide patients with the lifesaving treatments they need.