Specialty Drugs – What Can A Plan Sponsor Do?

bulletSpecialty drugs are bankrupting self-funded health plans. 

By Bill Rusteberg

There have been many articles on out-of-control costs of specialty drugs. I have read many of them. None (except an article I wrote recently for this blog) offer plan sponsors any solutions that will significantly reduce risk exposure.

Specialty drug pricing is the latest, and fastest growing health care financial scam slamming plan sponsors whose financial backs are against the wall. Rx manufacturers are going after deep pockets for all they can get. In the non-competitive specialty drug world pricing is not negotiable, it is what it is, nothing more and nothing less.

Plan sponsors are struggling for solutions. But in reality they are faced with two options. They either commit to paying these high prices or don’t.

There is no other effective option to mitigate risk to any significant degree other than eliminating specialty drugs. Step therapy is not an effective option (there is no substitute). Cost shifting won’t work either due to the maximum out of pocket expense under ObamaCare. Even for grandfathered health plans, where the out of pocket can remain unlimited, there are schemes around that such as coupons issued by Rx manufacturers, pharmacy discounted copays, etc.

Should plan sponsors decide to bite the bullet and continue to cover specialty drugs, a specialty drug reserve silo of 20% or more of projected annual health/Rx plan risk exposure should be established. This reserve silo would be in addition to health plan / Rx reserves.

Procuring stop loss cover with a no new laser provision could also be an effective strategy in the short term only.

Bottom line: As long as drug manufacturers have unfettered access to deep pockets, specialty Rx costs cannot be mitigate per se. Plan sponsors can either eliminate or transfer risk through reserving and stop loss cover.

There is no magic bullet.