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Insight
Specialty Drug Costs: 7 Effective Ways to Manage Rising Spend
By Riley Nizzi, Vice President, Alliant Employee Benefits
Specialty medications can produce significant clinical value, but their high unit costs, complex administration and need for ongoing monitoring can place sustained pressure on employer-sponsored pharmacy and medical benefits.
A specialty drug is generally a medication used to treat complex, chronic or rare conditions that may require special handling, close clinical monitoring, patient education or coordination among prescribers, pharmacies and other care professionals. Specialty drugs are often high in cost, but price alone does not define the category.
Public entity employers should align their specialty-drug definition with the plan’s pharmacy benefit, pharmacy benefit manager (PBM) contract and applicable regulatory requirements, and revisit it as products and clinical practices evolve.
Seven Strategies Public Entities Can Use to Manage Specialty Drug Costs
The following measures can be combined and calibrated with a benefits advisor, pharmacy benefit manager (PBM), health plan, specialty pharmacy and clinical partners. Public entity employers should document the rationale for each requirement and apply it consistently under the plan’s governing documents.
1. Define clinical eligibility. Use FDA-approved indications, evidence-based guidelines and condition-specific criteria as the starting point. Criteria should be clinically defensible, easy to administer and reviewed periodically as evidence evolves.
2. Use prior authorization thoughtfully. Verify diagnosis, prescribing rationale, dose, route and required clinical documentation. Build in an efficient exception and appeals process so administrative controls do not create avoidable delays for members with urgent needs.
3. Coordinate specialty care. Use specialty pharmacies, designated practices or participating providers with relevant experience when they add clinical value. Match the level of oversight to the medication and condition rather than requiring a blanket specialist referral.
4. Support adherence and outcomes. Provide counseling, care coordination, injection training where applicable, side-effect management and other services that help members use therapy safely and consistently.
5. Reduce avoidable waste. Use appropriate dispensing quantities, refill timing, site-of-care controls and delivery processes to reduce unused product and improve the accuracy of utilization data.
6. Monitor utilization and value. Track starts, discontinuations, adherence, clinical outcomes, hospitalizations, total cost of care and net pharmacy cost. Use the results to refine the benefit, not simply to increase restrictions.
7. Enforce the policy consistently. Require the PBM and health plan to report approvals, denials, appeals, exceptions, outcomes and net cost in a form the employer can audit. Apply objective criteria consistently across similarly situated members.
Consider the Value Question for Specialty Medications
A specialty medication’s value cannot be determined by acquisition cost alone. Employers should evaluate clinical outcomes, avoided medical events, adherence, site-of-care costs, rebates and administrative fees together. Medication that is expensive at the pharmacy counter may still be valuable when it prevents hospitalization or disease progression; conversely, a restrictive policy may reduce rebates or adherence and increase total cost.
Because products, evidence and prices evolve, public entity employers should use a managed, measurable benefit with scheduled review points. This allows the plan to preserve clinically appropriate access while adjusting coverage, contracting and utilization controls as the specialty market changes.
Specialty Medication Implementation Checklist
Use the following implementation checklist to create a specialty medication benefit strategy:
Confirm the plan's coverage position and the approved indications to be covered.
Set objective eligibility, prior-authorization and renewal criteria.
Select lifestyle-management and clinical-support resources.
Define reporting requirements for the PBM and health plan.
Establish member communications, exceptions and appeals.
Review utilization, adherence, outcomes, net cost and equity at least annually.
Alliant Public Entity Benefits Team: Your Partner in Managing Specialty Drug Costs
Alliant Public Entity specialists work with public entities to manage the financial risks associated with rising specialty drug costs and ensure employees and their dependents have access to appropriate care. Taking your unique workforce into account, we develop tailored risk management strategies that support informed decision-making about long-term benefits sustainability.
If your organization is evaluating strategies to better manage specialty drug costs—or would like to receive compliance-focused white papers, the Friday Fast Facts Newsletter or invitations to future webinars led by clinical specialists—please contact the Alliant Public Entity Benefits team.
