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What you need to know about this growing market

Although the definition of specialty medications continues to evolve, one thing is certain: Specialty is a booming area of healthcare, with dramatic increases in spending taking place and expected to continue. By 2020, spending on specialty drugs is expected to quadruple, to $402 billion a year, and account for 40% of what health plans spend on drugs.1

As you consider how to expand your retail business to include management of specialty prescriptions, here are answers to four commonly asked questions.

1. What is a specialty medication?

Specialty medications treat chronic, rare and complex conditions. The top three specialty therapy classes — which account for more than 60% of specialty spending billed through pharmacy benefits — are for inflammatory conditions, such as rheumatoid arthritis; multiple sclerosis; and cancer.2 In general, specialty drugs:

  • Are expensive, ranging from approximately $6,000 to $350,000 a year, and some can even cost $750,000 or more.3
  • Require special handling, case administration or monitoring of side effects.

2. What are the economics of specialty medications?

Specialty medications tend to be for conditions affecting only a relatively small number of patients. For example, among the new drugs introduced in 2013, 17 are for conditions that affect fewer than 200,000 people in the United States.4

However, the margin between net acquisition costs and third-party reimbursements for specialty medications can be attractive, ranging between 5% and 10%. Since these margins are on prescriptions that can cost thousands of dollars, the total profits can be significant.5 But, there are additional costs associated with filling specialty prescriptions related to proper handling and storage, additional layers of authorization, patient counseling, and managing the complex cases.

During the pilot program of Health Mart® Specialty Solutions, participating pharmacies experienced an additional lift of up to 5 to 10 non-specialty prescriptions associated with each new specialty prescription filled.

3. What is the forecast for specialty pharmaceuticals?

While total spending for traditional medications rose 2.4% in 2013, spending for specialty medications jumped 14.1%, according to the 2013 Drug Trend Report. Use of traditional medications increased less than 1%, while specialty drug utilization was up 2.5%. More than a quarter of total prescription spending, 27.7%, was for specialty drugs.6

Spending on the top 10 specialty therapy classes is expected to increase an average of about 17% annually from 2014 through 2016.7

The number of specialty drugs on the market grew from 10 in 1990 to more than 300 in 2012.8 Further, in 2013, 70% of the new drugs that the Food and Drug Administration approved were specialty products, including eight new cancer treatments.9 In addition, hundreds of specialty drugs are in the development pipeline. The FDA’s new “breakthrough therapies” approval process can put specialty drugs on the fast track to market, and the lack of generic or biosimilar products can keep prices high.

4. Where are patients filling their specialty prescriptions?

Currently, the retail market for specialty drugs is fairly consolidated, as nearly two-thirds of the revenue for pharmacy-dispensed specialty drugs goes to three companies — Express Scripts, CVS Caremark and Walgreens — according to Adam Fein, president of Pembroke Consulting. However, smaller pharmacy benefit managers, hospital systems and physician practices are opening their own specialty pharmacies.10 As a result, the number of accredited specialty pharmacy locations has been doubling in recent years.11

Preparing to Serve the Specialty Market

Any retail pharmacy that wants to dispense specialty medications needs the capabilities to:

  • Store and handle specialty products
  • Manage prior authorizations and patient assistance programs
  • Track patient adherence and outcomes
  • Execute risk evaluation and mitigation strategies
  • Provide case management (MTM)
  • Offer 24/7/365 call support for patient education and counseling on side effects

For more information about the growing specialty pharmacy market and the capabilities required to become a specialty pharmacy, check out the National Association of Specialty Pharmacy and the Specialty Pharmacy Certification Board.

To learn about McKesson’s specialty at retail solutions for independent pharmacies, email specialtysolutions@emg3.com or call 800.212.2606.

1. “New CVS Caremark Report Projects Annual Specialty Drug Spending Will Quadruple to $402 Billion by 2020,” CVS Caremark, November 20, 2014. [LINK] and “Specialty Pharmacy 101,” National Employer Initiative on Specialty Pharmacy. [LINK]
2. “2013 Drug Trend Report,” Express Scripts, April 8, 2014. [LINK]
3. “Employers Need to Better Understand the Costs of Specialty Pharmacy,” Managed Care, September 2013. [LINK]
4. “Prices Soaring for Specialty Drugs, Researchers Find,” Katie Thomas, The New York Times, April 15, 2014. [LINK]
5. How Medicaid Is Squeezing Specialty Pharmacy Profits, Adam J. Fein, Drug Channels, February 18, 2014. [LINK]
6. “2013 Drug Trend Report,” Express Scripts, April 8, 2014. [LINK]
7. “2013 to 2016 Trend Forecast for Key Specialty Therapy Classes,” Express Scripts, April 8, 2014. [LINK]
8. “The Growing Cost of Specialty Pharmacy — Is It Sustainable?” AJMC.com, Feb. 18, 2013. [LINK]
9. “Specialty Pipeline Highlights,” Aimee Tharaldson, Specialty Pharmacy Times, April 16, 2014. [LINK]
10. “Six factors driving new specialty pharmacies,” Adam J. Fein, Pharmaceutical Commerce, March 3, 2014. [LINK]
11. “The Explosion in Accredited Specialty Pharmacies,” Adam J. Fein, Drug Channels, January 30, 2014. [LINK]
Note: The information provided here is for reference use only and does not constitute the rendering of legal or other professional advice by McKesson. Readers should consult appropriate professionals for advice and assistance prior to making important decisions regarding their business. McKesson is not advocating any particular program or approach herein. McKesson is not responsible for, nor will it bear any liability for, the content provided herein.