Specialty drugs are often injectibles, biologic drugs, or other drugs that require specialized administration, handling, or ongoing clinical assessment. Specialty drugs are often more expensive than standard pharmaceuticals. As the use of specialty pharmaceuticals has become more common, a paper by Hill, Miller and Ding (2020) aims to quantify how much spending on specialty pharmaceuticals has grown. Using data form MEPS between 2010 and 2017, the authors find:

We found that net spending on retail specialty drugs more than doubled from 2010–11 to 2016–17. Specialty drugs accounted for 37.7 percent of retail and mail-order prescription spending net of rebates in 2016–17

The figure below shows that there were large increases in spending on specialty drugs. While the average annual increase in spending on specialty pharmacy increased by 17.4% per year (gross), after rebates, this figure was only 14.9% (net). Rebates were especially large for the Medicaid population.

Increased spending should not be viewed as negative in and of itself. While price of course influences expenditures, so does quantity. In fact, Hill and co-authors find that the share of people using at least one specialty pharmacy drug increased from 2.2% of the population to 5.0% of the population. Specialty drug fills as a percentage of overall fills increased from 1.0% of fills in 2010 to 2.3% of fills in 2017. Thus, the quantity of medicines received rose. If specialty pharmacy represents significant innovation and high value to patients, the rise in spending may be considered a good thing.

To give a parallel example, spending on smartphones over recent decades has grown tremendously, but because consumers have received great value for this, no one is complaining about the rise of smartphone expenditures. In the case of specialty pharmaceuticals, value assessment is needed to insure that the health and societal benefits received are worth these additional costs.


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