The Ongoing Burden of Specialty Drugs – What Drives It and What You Can Do About It

Specialty drugs are playing a significant role in the increasing healthcare costs in the commercial market. In this third episode of a mini-series based on the 2022 Employee Health Trends report, Janet Young, M.D., Lead Clinical Scientist at Springbuk and co-author of the report, talks about which specialty drugs are driving the most cost and alternatives that benefits leaders can explore.

Discover why one condition has a relatively small percentage of people receiving a specialty drug, but that is still drive a large dollar value of spending, and hear which conditions our data scientists expect to drive growth of specialty drug use over the next couple of years.

Get tips for how employers can reduce costs on specialty drugs without reducing efficacy, including looking at where the drugs are administered. 

And learn the steps employers can take now to increase adoption of lower-cost alternative drugs and to ensure they are able to reap cost savings as new biosimilars come into the market over the next two to three years.

Listen as Janet provides recommendations for both employers and their employees.

Have feedback, questions, or suggestions for show ideas? Send them to us at

Please rate and review us on your favorite podcast platform, and share it with your friends and colleagues. We appreciate you and thank you for listening!

Theme music: "Overboard" by Stay Outside


Full Transcript of the Episode:

Jennifer Jones 

Hello and welcome to Healthcare on the rocks employee benefits with a twist. I'm Jennifer Jones, population health practice leader at Springbuk.

Mike Pattengale

And I'm Mike Pattengale, senior account executive for Channel Sales. We're back with another episode in our mini series on important trends in Employee Health Care and Benefits Management. At this point, Jen, I think you're just rubbing in my face that y'all didn't allow me to participate in the employee health trends report. But it's okay. I'll get through it. But yeah, powering through my hurt ego here in in our first episode, just as a refresher, we talked with Chris Gagan about trends in telemedicine and how COVID caused dramatic swings in its use. Our second episode looked at other impacts of COVID and feature Genet Yun Springbuk. 's lead clinical scientists, both of those episodes are available in our podcast feed. If you missed either one, head on over to forward slash podcast to get your fix.


And Janet joins us once again today, this time to review the research and findings on specialty drug use. So Janet, thanks again for joining us.

Janet Young

Yeah, thank you. I'm excited to be back.


In the Employee Health Trends report, which by the way, you can download, we highlighted four main areas. The section that we'll be speaking to today is titled “The Ongoing Burden of Specialty Drugs.” And as a whole, that's a pretty heavy topic, so let's kind of start at the beginning level set. So let's just start with the basic definition, Janet, as far as how would you define a specialty drug?


Thanks, Jen. There's actually no standard definition of a specialty drug. But typically, a specialty drug has one or more of the following attributes:

  • It might be biological in nature, meaning it's made by living cells.
  • It might be high cost.
  • It might be used in a rare or complex chronic condition.
  • Or it might require specialized handling, administration or ongoing monitoring.

At Springbuk, we use a definition that's based on these attributes to categorize drugs, especially drugs, enabling us to compare use of specialty drugs among our customers, to trend use and so on. was actually kind of curious when the term specialty drug came into use. I'm not totally sure, but I did find out that there were specialty drug pharmacies as far back as the 1970s for injectable products used to treat conditions like hemophilia. It's hard to know exactly how many specialty drugs there were at different times in the past since there's no standard definition, but I've read that there were about 10 specialty drugs in 1990. By 2008, there were 200. And there were about 300 in 2015. So there's been a great deal of growth. And then one report predicted that two thirds of the drugs that are expected to gain FDA approval this year will be specialty drugs. So the number of drugs just continues to increase.

Mike  3:33  

We hear a lot about the impact of prescription drugs on health care costs. Can you share a little bit more for our listeners on how health care costs are impacted by specialty drugs in particular?

Janet  3:45  

Sure, Mike. Something to keep in mind about specialty drugs is that they're administered through both medical channels and pharmacy channels. It's something close to a 60/40 split, with more paid through the pharmacy channel than the medical channel. If we spread the cost of specialty drugs administered in either channel across all members in our book of business, not just the ones who received specialty drugs, what we see is about a $27 per member per month increase in spending based on plan paid amounts for specialty drugs between the beginning of 2018 and mid 2021. And that's about a 50% increase in growth in three and a half years. So, for Springbuk customers, the rate of increase is actually higher in the pharmacy channel compared to the medical channel. But we see that specialty drugs are playing a significant role in the increasing health care costs in the commercial market.

Mike  5:01  

So Janet, you had mentioned that there are over 300 specialty drugs out in the market today. Can you share some of the main conditions that you see specialty drugs being used for?

Janet  5:12  

Sure. So many of the specialty drugs are used in inflammatory conditions like inflammatory bowel disease and rheumatoid arthritis. They're also commonly used in multiple sclerosis. And cancer is another big area. Within the Springbuk book of business, psoriasis is the top condition in terms of spending. And that's followed by inflammatory bowel disease, rheumatoid arthritis, multiple sclerosis, and breast cancer. 

But the condition in our book of business with the most members receiving the specialty drug is migraine headache. Migraine headache is interesting because a relatively small percentage of people diagnosed with migraine headaches receive a specialty drug. It's about 14%. But compared to some of the other conditions I mentioned that are driving spending, there are a lot more people who have issues with migraine headaches. So 13% have a fairly large population of people who have migraines, results in a lot of people with migraines who are on specialty drugs.

Jennifer  6:36  

So Janet, when we think about you know, what's really driving the increase in costs related to specialty drugs? Is it truly just the the increase in the drug itself as far as the cost? Or are we seeing an increase in the incidence of disease or the prevalence of disease of the conditions that are treated by these specialty drugs?

Janet  6:59  

That's a great question, Jen. So overall, we saw an increase in the percentage of individuals taking a specialty drug that went from about 1.6% of the population to 2.1%, over a three and a half year period. Interestingly, the average spend per member filling at least one specialty drug script in a quarter only went up slightly during the same time period, suggesting that most of the increase in specialty drug spending for Springbuk is just that more people are taking specialty drugs. 

We found that the percentage of people receiving the specialty drug within a number of conditions increased. So for instance, in our most recent time period that we analyzed, we found about a 2.5-3.5% increase for people within conditions like rheumatoid arthritis, inflammatory bowel disease and psoriasis, who are being treated with specialty drugs now compared to two years earlier. That isn't surprising. If the treatments are working well, physicians are likely to become more comfortable with prescribing them. We also know that patients hear about these drugs through commercials on TV, the internet and support groups. 

In terms of the question about whether part of what we're seeing is due to an increase in the incidence of diseases that are treated by specialty drugs? I think there is an increase in incidence and prevalence of some conditions like inflammatory bowel disease. But I think over the short period of time we're looking at, the effect of that increase would be fairly small. A couple of conditions where I think we're likely to see more growth over the next few years wouldn't include migraine headaches, and eczema. These are two areas where there's a large opportunity for growth, possibly because the conditions traditionally haven't been treated with specialty drugs. So there's a lot of room for growth.

Mike  9:34  

Janet, could you share some ways that employers can diminish spending on specialty drugs without diminishing access to them?

Janet  9:43  

Sure, we need to remember first that these drugs can be life saving or life changing. While it's important to have measures in place to ensure that these drugs aren't given to people who don't need them. It's also Important not to create barriers that cause long delays in someone receiving a drug who really needs it. So it's kind of a delicate balance. One strategy that's been shown to decrease costs in the commercial population is site of service optimization for drugs that are administered through the medical channel. For commercial patients, these drugs are generally much less expensive when they're administered in settings other than the hospital outpatient setting. For instance, receiving the same drug in a physician's office can be a lot less expensive.

I saw a study by Milliman that showed an annual savings of $50,000 for Avonex, a drug that's used in treatment of multiple sclerosis, just by treating patients in a physician's office, rather than outpatient hospital. Something to keep in mind is that there are sometimes reasons why patients need to receive these drugs in an outpatient hospital setting. And this might be done if they're initiating a therapy, in case they have some type of reaction, or in patients who have some serious comorbid conditions. So don't expect to be able to move 100% of specialty drug administration out of the outpatient hospital setting. 

Another strategy that's often employed is step therapy. This can be used to ensure that individuals have tried other less expensive drugs first. For patients who are taking or administering drugs at home, it's important to provide a limited day's supply, particularly for initial prescriptions, that can eliminate wasteful spending on drugs that are continued within the first few doses due to issues like side effects. And then some of the specialty drugs or biologics, the drugs that are made by living cells. And a few of them have alternatives called biosimilars that typically result in a cost savings compared to the original drug. Right now, there are eight biologic drugs in the United States that have biosimilars in the market.

Jennifer  12:29  

And the subject of biosimilars is really interesting. You wrote an incredibly informative blog for us on them recently, that's on our Springbuk website as well. Can you describe for us, you know, what really is a biosimilar and the types of savings that we might be able to see as far as having an individual on a biosimilar versus a biologic.

Janet  12:50  

Traditional drugs like aspirin tend to be relatively small molecules that can be replicated in the lab, but biologics tend to be very large drugs. So a biologic drug like Herceptin that's used in cancer treatment has over 25,000 atoms, and it's not possible to make an exact copy. If you think about it, you not only would need the same elements arranged in the same order, but a configuration in three dimensions that has to be the same.

So a biosimilar is a drug that is highly similar to an FDA approved original biologic product, which is sometimes called a reference product. But it can have some minor differences in structure, provided it doesn't impact the clinical performance or safety. An average biosimilar drugs cost about 30% less than the reference products, and some have savings up to 45% greater than the original drug. While this is lower than the typical percent savings for generic drugs over brand name drugs, the savings are really quite substantial. Because the cost of the reference product may be in the 10s of $1000s per year. 

Something else we have to remember is that competition ultimately drives down the price of the original drug. A good example is Remicade, a drug that's used in treatment of conditions like inflammatory bowel disease and rheumatoid arthritis, which has several biosimilar competitors. So 4.5 years after the first biosimilar for Remicade became available, the price of Remicade dropped 50%.

Mike  14:58  

Well, I'll ask the question that everyone’s thinking. If these drugs cost less, why aren’t they more widely used like generic drugs?

Janet  15:08  

That is a good question. Unfortunately, biosimilars seem to have suffered from a perception that they are not as good as the original drug, probably because they are similar rather than identical to the original drug. Another factor is familiarity, because there are so few biosimilars on the market. We only have ones right now for eight different biologic drugs. Many physicians are unfamiliar with the drugs, and so they're somewhat hesitant to prescribe them. And of course, patients are even less likely to know about them. Another reason is that some by biosimilar drugs, like those for Remicade, are used in treatment of chronic conditions. So you can imagine that both the physician and patient may be reluctant to switch to a biosimilar if the patient is stable on the original product. 

There have been studies that have shown that physicians are more comfortable initiating treatment with biosimilars for patients who have never taken a biologic drug than switching from a biologic drug to a biosimilar. Something else that I was surprised by is that biosimilars may not be on a preferred list for a prescription drug plan. That seemed a bit strange to me, given that they're less expensive. I think the reason for this may be that PBMs who are involved in creating the preferred list may make more money from the expensive original drugs, by receiving rebates from their manufacturers. And even if the biosimilar is on the preferred list, and it might even have a lower coinsurance for patients than the original product. 

Manufacturers often offer coupons to patients to reduce their copay to zero or near zero for the original product. And then finally, part of the reason generics have become so common is because pharmacists can generally substitute generic drugs for brand name drugs, although there are some differences by state. But most states do not allow substitution of a biosimilar drug for the original biologic without physician consent, unless the FDA has designated that the biosimilar is interchangeable. A biosimilar that is considered interchangeable has gone through additional steps to show that there is not risk and changing from the reference biologic to the biosimilar.

Jennifer  18:04  

Seems like it always comes back to the money in the rebates. But Janet, you mentioned that there are only eight drugs that have biosimilars currently. What can we expect over the next few years as far as any new biologics coming to the market?

Janet  18:23  

So in 2023, we're going to see six or seven biosimilars for Humira come to market. I find this really exciting because Humira is the number one drug in terms of total paid for specialty drugs for most of our customers. In fact, it accounts for about 20% of specialty drug spending through the pharmacy channel. The first biosimilar for Humira is expected to come to market around the end of January 23. Others will come to market in the summer of 2023, including one that's interchangeable.

So to take advantage of the new biosimilars employers need to be sure that these drugs will be on their formulary and that they have appropriate education and incentives in place. There's also going to be a biosimilar for Lucentis, a drug used in treatment of macular degeneration, which I think is expected to be launched this summer. There are other important biosimilars that had been approved, but that actually won't be coming to market for quite a while. In fact, the first biosimilar for Enbrel, another common specialty drug, was actually approved back in 2016. But it's not expected to come to market until 2029 due to issues related to patent issues.

Jennifer  20:03  

I know you had kind of touched on this before, Janet, but can you share any thoughts on how employers can increase adoption of these biosimilars among their employees? So not just the ones that are coming down the pipeline, but you know, some of those that are available today?

Janet  20:19  

Sure, since most of the members are probably unaware of biosimilars, I think education is a good place to start. I would suggest targeting individuals with conditions commonly treated with specialty drugs, like psoriasis and inflammatory bowel disease, keeping in mind that those who have not initiated specialty drug therapy yet may actually be the ones who are more receptive to using biosimilars than than individuals who are already taking one. 

Another step is to check that the formulary for your members includes biosimilars. Incentivize their use by being sure that they cost less for your members than the original drug, for instance, being sure that they're in a tier with a lower copay than the original drug. 

Encourage your members to use navigation tools that allow them to see the costs of the drugs they're taking, so that they understand the difference in costs of biosimilars compared to a reference product. 

We provide some additional strategies and our biosimilar Insights cards within the Springbuk product. But whatever strategies you employ, it's always a good practice to be sure to look at your data before you employ them. And afterwards, just to be sure that your strategies are working, and to tweak them appropriately if necessary.

Mike  21:55  

I love the shameless plug of Insights there – don't think it went unnoticed. Janet, thanks again for joining us. I always learn something from you whenever we have the chance to talk. You've definitely become my favorite co author of the Employee Health Trends report. You know, definitely not Jen – but as a reminder for our listeners, you can download the full Employee Health Trends report and get all Janet's blog posts and other podcast episodes

Jennifer  22:27  

And thanks for listening to Healthcare on the Rocks: Employee Benefits with a Twist. (This will be Mike Pattengale’s last episode with us. 😄 ) Please take a moment to rate us or leave a review on your favorite podcast platform. You'll be helping other people find the show and letting us know what you enjoy. 

Until next time – Cheers!