Today's Specialty Landscape

Specialty pharmaceuticals account for
~60 percent of total drug spend

Person On Laptop
VIDEO (3:26)
May 2, 2019
Executive Vice President, Chief Pharmacy Officer, CVS Health

Prem Shah shares insights about the rapidly expanding specialty landscape and factors that impact spend in the sector.

Specialty spend continues to grow rapidly and survey after survey shows that managing this spend is a top priority for payors. The U.S. specialty market is expected to nearly triple, from $105 billion in 2011 to $280 billion by 2021.Barclays US Health Care Distribution and Technology Specialty Market Model 2017 Update: A Focus on Biosimilar Opportunities, Jan 30, 2017. In 2018, specialty accounted for 45 percent of our clients’ pharmacy benefit spend. Our analysts estimate that if spending under the medical benefit were included, specialty pharmaceuticals would account for 60 percent of total drug spend, despite the fact that only 2 percent of members are specialty utilizers.

In 2018, pharmaceutical manufacturers moderated their price increases slightly.  Average wholesale price (AWP) inflation declined from 8.3 percent in 2017 to 7.6 percent in 2018. Pharmacy benefit management (PBM) strategies reduced the trend impact of inflation significantly, to 1.7 percent. 

Utilization growth, at 9.3 percent, was the major contributor to trend, driven by new therapies and expanding indications for existing drugs. The specialty pipeline remains robust. Between now and 2021, 508 new drugs are expected to seek marketing approval from the U.S. Food and Drug Administration (FDA), according to our analysis. Of these, 307 — 60 percent — are specialty drugs. An increasing number of specialty pipeline drugs address higher-prevalence conditions such as atopic dermatitis, migraine and asthma, promising even greater utilization growth.

As is true in the non-specialty sector, competition in a category broadens the range of solutions that can help to manage spend. Rheumatoid arthritis (RA) claims nearly a quarter of specialty spend under the pharmacy benefit. With a number of drug options indicated for RA, we were able introduce indication-based rebates to enhance competition in this sub-segment of the autoimmune category. This strategy helped limit price growth for RA drugs to 4.6 percent in 2018. 

In contrast, there are few interchangeable products for cancer treatment. Price growth for oncolytics, at 9.6 percent, was more than double that for RA.

Pending patent expiries offer the prospect of greater biosimilar competition for some top specialty drugs, including Humira, Avastin, Herceptin, Rituxan, and Enbrel. The FDA has approved 18 biosimilars, but few have launched and those that have launched haven’t been able to penetrate the U.S. market as well as their European counterparts. CVS Health continues to prioritize biosimilars and generic specialty products to help manage clients’ spend, while simultaneously supporting measures that will increase competition in the sector.

Plans that implemented a multi-faceted specialty management approach significantly reduced trend in 2018.  Our proven capabilities, including formulary solutions, plan design, managed networks and utilization management strategies enable us to more effectively manage spend while ensuring high quality of care, across the pharmacy and medical benefit.

View more 2019 Forum highlights here.

Concerned about the potential impact of the specialty pipeline on your drug spend? Ask Us
VIDEO (3:26)
May 2, 2019
Executive Vice President, Chief Pharmacy Officer, CVS Health

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This page contains references to brand-name prescription drugs that are trademarks or registered trademarks of pharmaceutical manufacturers not affiliated with CVS Health.

Savings and results will vary for specific populations based on a variety of factors, including demographics, plan design, and programs adopted by the client.

Unless otherwise noted, data source is CVS Health Enterprise Analytics, 2019