Among the more intriguing and influential health care practices of the last few years is the increasing utilization of medications deemed specialty pharmaceuticals. Some are classified as such because of the diseases they treat or the small patient populations for which they are prescribed, while others are included because of the unique mechanisms used to distribute, dispense, administer, or monitor these drugs. Regardless, one characteristic they all share is high cost. 

Specialty pharmaceuticals account for approximately 25% of total prescription costs, with expenditures on specialty prescriptions expected to quadruple by 2020.¹ Traditionally, the term specialty was synonymous with biologics—complex medications derived from living organisms and used in the treatment of chronic, highly debilitating conditions—but the specialty pharmaceutical market has diversified and now includes oral, small molecule drugs, such as the hepatitis C medication, sofosbuvir.² The number of medications fitting the specialty description is increasing and the pipeline of investigational drugs suggests that this trend will continue.³ As a result, familiarity with specialty medications, both small molecule and biologic, as well as with the increasingly elaborate mechanisms for their acquisition, utilization, and reimbursement, is necessary to successfully manage the challenges and opportunities these medications present to health-system pharmacy.

What Is a Specialty Pharmaceutical?
When discussing specialty medications, the conversation is complicated by the fact that no universal definition exists. Usually, an agent’s manufacturer and the payor community determine whether a drug is special, the manner in which it will be distributed, and the conditions under which it will be reimbursed. Nevertheless, the following attributes increase the likelihood that a medication will be considered a specialty drug²: 

• Complex to manufacture
• Special requirements for handling and administration
• High cost, both in total and on a per-patient basis
• Taken by relatively small patient populations presenting with complex medical conditions
• Difficult for patients to take without ongoing clinical support 
• Challenging for providers to manage

Certain specialty medications are defined as such because they require controlled environments (eg, highly specific temperature controls) or other special handling procedures to ensure product integrity. For some, the FDA has mandated a specific process for use, such as patient registration upon initiation of treatment, dispensing by a limited number of providers, and ongoing monitoring. These requirements become part of a risk evaluation and mitigation strategy (REMS) program designed to ensure the safety and efficacy of medications that have clinical utility, but also have the potential to cause serious adverse events in the absence of education and strict monitoring.⁴

Some medications, specifically those used to treat rare, or orphan, diseases, are provided through a narrow supply chain because the patient population requiring these drugs is so small that it would be cost-prohibitive to maintain inventory across multiple distribution locations. Therefore, the support required to manage the limited distribution and the intense patient interaction and monitoring are provided by specialty pharmacy distributors and specialty pharmacies.

Benefit Versus Challenge
Cost is perhaps the most prominent factor driving specialty pharmaceutical designation. The Medicare Part D program defines a specialty drug as one that costs more than $600 per month.⁵ However, survey data of insurance plans suggest that some insurers raise this threshold up to, or in excess of, $1200 per month.⁵ The more expensive a product is, the more likely payors and pharmacy benefit managers (PBMs) will manage the drug as a specialty pharmaceutical and use prior authorizations and other procedures to control expenses. 

As mentioned, specialty pharmaceuticals have traditionally been synonymous with biologics—almost always an injectable medication used for the treatment of a chronic, high-acuity condition, such as an oncologic disease, rheumatoid arthritis, or multiple sclerosis.² These drugs historically were covered under the medical benefits of insurance plans because they required intravenous administration. However, as many of the new specialty drugs are self-injectable or oral formulations and do not require health care intervention for administration, they increasingly are managed under the pharmacy benefit.⁵ A good example of a novel specialty pharmacy drug is the oral agent sofosbuvir. 

Sofosbuvir also is an excellent example of both the benefit and the challenge of specialty medications. On one hand, this agent offers up to a 95% response rate as part of an interferon-free treatment regimen for hepatitis C.⁶ Generally speaking, it is more effective and better tolerated than alternative treatments.⁶ Unfortunately, the current per pill cost—$1,000—results in an $84,000 treatment course, creating barriers to therapy for many.⁶ Patients, providers, and payors alike have expressed outrage, and the debate has even drawn the attention of the US Congress.⁷ Despite these concerns, sofosbuvir rapidly has become a top seller in the United States (see TABLE 1⁸).

According to IMS Health, in 2012, 65% of spending on new drugs (those introduced within the last two years) was on specialty pharmaceuticals.⁹ Spending on specialty drugs continues to grow at 15% to 20% per year and could represent 50% of the total drug spend by 2019.^9,10 In contrast, recent projections for increases in drug spending in health systems have ranged from 1% to 3% for hospitals and 5% to 7% for clinics.¹¹ Therefore, specialty medications, both biologic and small molecule, will likely exert the greatest impact on pharmaceutical costs across all pharmacy practice environments, necessitating that pharmacy develop an integrated approach to manage expenses and ensure appropriate medication use. 

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A New Breed of Blockbuster 
Historically, the larger the population for which a medication was prescribed, the more valuable the drug, but today, most of the drugs fitting the description of blockbuster are used for far less common treatment indications and for far fewer patients (see TABLE 2).⁸

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And yet, the cost of developing medications continues to increase. Analyses have placed the expense of bringing an individual prescription drug to market anywhere between $802 million and $2.6 billion.¹² Pharmaceutical manufacturers must recoup their investments, and given the target therapeutic areas of some of the newest specialty drugs, those costs must be spread over smaller numbers of patients. As a result, more drugs will continue to be included in the specialty medication category and approach the cost levels of the most expensive therapies, which are traditionally orphan drugs (see TABLE 3^13-15).¹³

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In the past, agents used in the retail setting dominated the list of top drug purchases across all health care settings. The supply chains for retail and inpatient pharmacy were clearly delineated, and changes in one environment did not dramatically affect the other. Now, the increasing influence of biologics and other specialty medications has blurred that line of demarcation. Traditional top spend products, such as atorvastatin and clopidogrel, have reached patent expiration, and biologics, such as infliximab, rituximab, pegfilgrastim, and bevacizumab—all of which are used extensively in the health system setting (eg, outpatient infusion environment)¹¹—are replacing them. As a result, actions taken by payors and manufacturers to control costs now have a more direct and severe impact on the inpatient pharmacy environment. Following are some of the more impactful strategies for managing specialty pharmaceuticals.

Medical versus Pharmacy Benefit
Historically, the most expensive medications have been managed under the medical benefit of insurance plans because of the complexity of the drugs and the need for health care workers to administer and monitor treatment. In this scenario, the physician or hospital is paid under a buy-and-bill approach. The provider purchases the medication, administers it to the patient, and bills the payor. In many cases, payment for the medication is bundled with other services, making identification of the drug’s cost difficult to elucidate.⁹

As research advances have led to the development of many self-injectable and oral drugs that provide comparable, if not superior, results, payors have moved the coverage of more specialty drugs from the medical to the pharmacy benefit. Under the pharmacy benefit, payors have greater access to information on price, use, and associated outcomes. This strategy is increasingly utilized by payors and PBMs, even for infused medications.^5,9

Brown and White Bagging
For cost containment reasons, payors have attempted to employ a different distribution and payment method for office-based, injectable therapies. Rather than allow providers to purchase medications directly, payors increasingly are requiring that a third-party specialty pharmacy deliver the medication to the health care treatment location (white bagging) or directly to the patient (brown bagging) in advance of the drug being administered within a physician office or hospital outpatient infusion clinic.¹⁶ Through these mechanisms, payors retain greater control of drug costs. 

This process, however, creates substantial obstacles for providers.¹⁷ First, the introduction of additional intermediaries in the supply of the drug (eg, a patient or a specialty pharmacy) limits the provider’s ability to ensure the integrity of the medication, especially in the context of brown bagging. Second, medications provided in this fashion are patient-specific prescriptions. Unlike products purchased directly by the provider, which can be administered to any patient, brown- and white-bagged drugs may be used only by the patients for whom they were prescribed. This process creates the potential for tremendous waste, especially when medications are discontinued or dosing changes are made. Finally, under the buy-and-bill method, providers forced to participate in brown or white bagging can charge only for the cost of administration, thereby limiting revenue opportunities. Many organizations have successfully limited brown-bagging strategies, although white bagging remains an issue for some providers, depending upon their payor distribution and resources available to challenge these coverage determinations.¹⁷

Channel Shifting
Whereas brown and white bagging are strategies employed primarily by the payor community, drug manufacturers also are taking steps to exert greater control over specialty pharmaceuticals. These efforts include transitioning agents from open access availability to limited distribution. This change occurred in 2013 with the colony stimulating factor, pegfilgrastim, specifically when the product is purchased at 340B pricing.¹⁸ And, effective October 1, 2014, Genentech restricted access of the biologics, rituximab, bevacizumab, and trastuzumab, to specialty pharmacy distribution only.¹⁹

This transition presents several challenges for health systems. First, the process for acquiring these commonly used biologics is likely to be less efficient given the diminished frequency of deliveries from specialty pharmacy distributors versus primary wholesalers. Second, most hospitals benefit from a contractual relationship with their wholesaler whereby medications are purchased under a cost-minus agreement (ie, at prices below the manufacturer’s list price) in return for volume orders and rapid invoice payment guarantees. These contractual relationships can result in tremendous savings for hospitals, given the high cost of specialty and biologic drugs. Specialty distributors generally do not offer such discounts. Therefore, changes in distribution may result in substantial and sustained financial hardships for the health system environment.

Clinical and Financial Impact 
The continued influence of specialty high-cost medications is unlikely to change given the industry’s product pipeline. In fact, the most valuable products in the pharmaceutical industry (based on projections of future sales) are those that treat oncologic or immunologic diseases or other narrow indications, and, as such, are likely to be categorized as specialty pharmaceuticals (see TABLE 4).³ The three products on this list that are already FDA-approved entered the market with substantial price tags: $94,500 per course of therapy for ledipasvir/sofosbuvir, and $150,000 per year of therapy for nivolumab and pembrolizumab.^20-22

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In addition to high costs and limited distribution opportunities, accountability is a problem. As payors implement programs that result in decreased reimbursement for hospitals and redirect much of the patient care management of these medications to specialty pharmacies, hospitals will have less control over the medications that have the potential to directly impact quality care and outcomes. This comes at a time when health systems are increasingly being held accountable for overall patient wellness and the prevention of unnecessary readmissions. 

How Should Pharmacy Respond?
It is important that pharmacy directors seek greater involvement in the negotiation of payor contracts within their organizations. Rather than reacting to unfavorable situations, such as required white bagging for infused drugs, pharmacists should assume a proactive position and provide input regarding the operational and financial implications of payors’ efforts to restrict access and decrease reimbursement for specialty pharmaceuticals.

In addition, many health systems are evaluating the introduction of specialty pharmacy services either through the creation of their own practice location or in collaboration with third-party providers. This strategy allows health systems to overcome the limited distribution aspect of specialty pharmaceuticals, and also enables the provision of integrated care across acute and non-acute settings, which, in turn, minimizes the potential for adverse outcomes and patient readmissions. To support such efforts, organizations, such as University HealthSystem Consortium (UHC), have implemented programs to assist hospitals and academic medical centers in the creation or expansion of their own specialty pharmacy services.²³ Such programs also:

• Help organizations overcome distribution and reimbursement hurdles that would otherwise limit their capacity to manage specialty pharmaceutical availability.
• Assist clinical pharmacists in providing a comprehensive approach to health care that spans the continuum of treatment settings.
• Enable the integration of clinical data from both the acute care and non-acute settings to facilitate better identification of high-risk patients and ensure more timely intervention before adverse outcomes and treatment failures occur. 

The absence of competition upon patent expiration has enabled the cost of biologic drugs to increase seemingly without a ceiling. FDA now has regulatory authority to approve highly similar, or biosimilar, medications to compete with originator products, thus opening the door for cost minimization strategies.²⁴ Many issues related to the biosimilar market are yet to be defined. Nevertheless, at the time of writing of this article, at least four biosimilar applications are with the FDA for competing versions of filgrastim, infliximab, pegfilgrastim, and epoetin.^25,26 On January 7, 2015, the Oncologic Drug Advisory Committee recommended approval of a biosimilar version of filgrastim from Sandoz.²⁵ In addition, the panel endorsed this biosimilar for all five indications of the reference product, Neupogen (Amgen).²⁵ FDA could render a final approval decision as early as March 2015, although ongoing patent litigation between Amgen and Sandoz could result in a delay in availability even after the product receives final licensing.²⁷ By 2020, competition should exist for most of the biologics that occupy the top spend for the US health care market.²⁸ Pharmacists must be proactive in preparing their organizations and prescribers for the introduction of these products as soon as they receive formal approval. Many publications are available to assist in this process.^24,29,30 

Looking Ahead
The expanding use and impact of specialty pharmaceuticals provides new opportunities. As evidenced by sofosbuvir, although expensive, this medication has resulted in treatment cures for many patients with hepatitis C, which diminishes the need for even more expensive liver transplants. Many new oncology agents are receiving approval, as are companion diagnostics that help to identify the patients most likely to respond. More targeted therapy will enable not only improved treatment with better outcomes and fewer adverse events, but also more cost-effective use of specialty agents. Pharmacists should become increasingly involved in the implementation of pharmacogenomic programs to identify the patients most likely to respond to these high-cost drugs. Several recent publications have highlighted the steps needed to integrate pharmacogenomics into routine clinical practice.^31,32 

Specialty medications, both biologics and small-molecule drugs, have improved the quality of treatment for numerous patients, and subsequent products aim to provide even better patient outcomes. However, the cost associated with these innovations impairs the ability of health care organizations to provide treatment to their entire patient populations. Health-system pharmacists should expand their understanding, not only of the clinical considerations related to these products and their therapeutic classes, but also the financial implications of their use from the perspectives of payors, providers, and especially, patients. Effective, accountable care requires seamless integration of all aspects of the patient experience throughout acute and non-acute settings. Health-system pharmacy must extend its influence and expertise to incorporate specialty pharmacy competency into its standards of practice.

Steven D. Lucio, PharmD, BCPS, is the senior director for clinical solutions and pharmacy program development for Novation in Irving, Texas. Steven holds a PharmD from Creighton University and a BS in pharmacy from the University of Texas at Austin. His professional interests include improving medication safety, mitigating the impact of drug shortages, benchmarking pharmacy costs for key drug classes, evaluating the expense of high-cost biologics, and expanding the practice of pharmacy to more effectively manage specialty pharmaceuticals.

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