New Drug Pipeline: A Shift in Focus

Exploding costs are looming over pharmacy benefits plans.   Manufacturers have done the math and have come to the conclusion that pursuing traditional pathways for maintenance medications for mass market disorders with simple compounds is financially risky.  Cost of R&D, innovation, phase trials, and marketing leave a slim margin for profit.  After patent expiration, generic manufacturers reap the remaining benefits of successfully marketed drugs leaving the innovators out in the cold.  To minimize these financial risks, it appears as though drug manufacturers have changed direction and have a laser focus on a higher cost future.

For years, the drug manufacturers' focus has been on providing products that would reach a wide population base. The new drugs that entered the marketplace targeted disease states which could be found on most, if not all plans: diabetes, high cholesterol, and depression to name a few. Recently, however, we have seen a shift in focus and direction as manufacturers are turning their focus to acute disease states, gearing their research/product efforts towards complex biological that would treat diseases with a smaller population base for which a therapy may not exist. During 2014, the FDA reviewed and approved 41 new drug therapies, of which nearly 40% were for rare diseases.

Why the shift? Since these specialty therapies target a small subset of the population, they inherently carry with them a high price tag, often reaching over $100,000 per year for treatment. There is little to no competition in the marketplace, which allows manufacturers of Specialty products to set a higher price. Manufacturers that were previously developing products for the more traditional marketplace (e.g. diabetes, respiratory medication, high cholesterol) are moving into the Specialty space, as there is less competition/pricing pressures.

What can Plan Sponsors do, taking into account the recent shift in focus to Specialty development? When reviewing their program offering, Plan Sponsors will want to able to answer the following questions:

• Do we currently have any utilization management controls in place for Specialty medications to ensure proper usage (e.g. Prior Authorization, days' supply limits, etc.)? 

• How does my current PBM handle 'New to market' drugs? Are they immediately placed on the Formulary or are they excluded from coverage until they have a chance to review?

• As more competition enters the marketplace for specialty disease states, does my PBM have a strategy in place to target utilization for the lowest net cost therapies?

Please discuss how these important questions impact your PBM and your plan with your trusted Health Care professionals.