What’s so special about specialty drugs?
You might be unfamiliar with the term unless you’re someone who has been or is currently being treated for HIV, cancer, multiple sclerosis, rheumatoid arthritis, psoriasis or any other serious disease or condition. In 2006, three of the top 10 best-selling drugs were specialty drugs; today nine of the top 10 best-selling drugs are specialty drugs.
There’s no standard definition for a specialty drug; however, they typically share one or more of the following characteristics. First, the majority are very expensive. Medicare defines a specialty drug as one that costs more than $670 a month. Although prescribed for a relatively small share of Part D enrollees, specialty drugs account for more than 20 percent of Medicare Part D spending.
A recent Kaiser Family Foundation report found that specialty drugs impose a major cost burden on Medicare beneficiaries. Kaiser analyzed 30 specialty tier drugs across 4 conditions: hepatitis C virus, multiple sclerosis, cancer, and rheumatoid arthritis. They found that Medicare Part D coverage and pricing of specialty drugs varies widely among Part D plans. The total median annual out-of-pocket costs in 2019 range from $2622 for Zepatier, a drug used to treat hepatitis C virus, to $16,551 for Idhifa, a leukemia therapy.
Under the Part D benefit design, the catastrophic phase kicks in when an enrollee has spent a certain amount out of pocket for drugs from the beginning to the end of a calendar year. At the catastrophic phase, enrollees pay no more than 5 percent of the price for each prescription. Although that doesn’t sound like too much imagine if the price of a specialty drug was $5,000 a month. Paying 5 percent coinsurance can really add up.
Specialty drugs are dispensed through specialty pharmacies. A specialty pharmacy is a branch of pharmacy care that has received accreditation for the special handling, dosing and dispensing of these complex medications. Today, there are over 900 specialty pharmacies across the country. Most of them are independent pharmacies. That’s a 20 percent increase in the number of specialty pharmacies since 2017.
Comparing Medicare Part D drug plans requires a great deal of due diligence on your part but it something that everyone should do on an annual basis. Studies have consistently shown that people can save thousands in out-of-pocket drug expenses by reviewing their coverage. You should review your plan’s formulary which is simply a list of drugs that the plan covers. Although Medicare law does require Part D plans to cover every type of medication your goal should be to choose a plan that covers all, or at least most, of your prescriptions.
The next step is to review the tier level for each of the medications you are prescribed. Part D plans have different pricing tiers. Pricing tiers are categories in which plans place different types of drugs. Typically, a tier level 1 drug is a preferred generic whereas a tier 2 drug may be a non-preferred generic. Brand name drugs are usually assigned a higher tier level. The tier level determines your co-pay. That’s why you are charged a higher co-pay for a brand name drug.
Most Part D plans use a five or six tier system. It’s fairly common for plans to move drugs from one tier level to another. All plans are required to send their enrollees an Annual Notice of Change in September. Review this notice very carefully because it outlines the plan’s benefit changes for the coming year.
Specialty drugs are almost always assigned to the highest tier level because they are the most expensive. Most plans charge you coinsurance rather than a fixed co-pay on specialty drugs. Again, never assume the drug you’re prescribed will remain on the same tier from one year to the next.
As you narrow down your choices to two or three plans, check to see if any of these plans place any restrictions on your mediations. Specialty drugs will almost always need prior authorization from your plan and the doctor who is prescribing the drug. This means that before the plan will cover a particular drug, your doctor, or your prescriber must first show that you have a medically necessary need for that particular drug and/or have met the prior authorization requirements for that drug.
Step therapy is a type of prior authorization. In most cases, you must first try a less expensive drug on the plan’s formulary that has been proven effective for most people with your condition before you can move up a step to a more expensive drug. Finally, for safety and cost reasons, a plan may impose quantity limits on the number of drugs they cover over a certain period of time.
Make sure that you use one of your plan’s in-network pharmacies. In fact, check to see what pharmacies offer preferred pricing. While generic and brand name drugs are easily accessible through a network of thousands of retail pharmacies, specialty drugs tend to be available only through a much smaller network of specialty pharmacies. Contact the plan directly if you can’t find an in-network specialty pharmacy in your area. Consider choosing a plan that is nationwide and offers mail-order service.
Medicare Open Enrollment is right around the corner. It starts October 15 and runs through December 7. The Extra Help or Low-Income Subsidy program has saved hundreds if not thousands of dollars for qualified Medicare beneficiaries. Given the high cost of specialty drugs you should contact your local APPRISE program to see if you may be eligible for the program. The Extra Help program is run by the Social Security Administration.
Another way to lower your drug costs if you are ineligible for Extra Help is to switch to a less-expensive drug with your doctor’s approval that may work equally well for your medical condition. Unfortunately, the newest brand name drugs are often the ones that doctors like to prescribe. Most doctors don’t have a grasp on how much these medications cost. Sign up for Pennsylvania’s State Pharmacy Assistance Program, called PACE. The PACE program helps many beneficiaries with or without Extra Help. Take some time to research drug manufacturer patient assistance programs or certified charities and patient organizations that may offer free or low-cost medication.
Many of the 10,000 Americans turning 65 every day will be aging into diseases like rheumatoid arthritis and cancer. Reigning in the price of specialty drugs has to be the administration’s top priority.
Joel Mekler is a certified senior adviser. Send him your Medicare questions at firstname.lastname@example.org.