Beyond the Pharmacy Benefit: Managing Specialty Drug Costs in an Era of Rapid Growth
Key Takeaways
- Specialty drugs now account for the majority of US drug spending, requiring payers to adopt integrated medical-pharmacy strategies and shift toward proactive cost forecasting.
- Managing oncology costs demands a broader value-based approach that includes network design, site-of-care optimization, and evidence-based treatment selection.
- Biosimilars remain underutilized due to systemic barriers, while digital tools offer near-term opportunities to improve efficiency, adherence, and cost control.
Please introduce yourself by stating your name, title, and any relevant experience you’d like to share.
Allison Oakes, PhD: My name is Allison Oakes. I'm the VP and chief research officer at Trilliant Health. We're a health care data analytics and market research company. We study the different trends that are shaping the health economy and often use the framework of demand, supply, and yield to do that.
In terms of my background, I am a PhD-trained health services researcher, having completed my doctoral training at Johns Hopkins University. Since then, I have worked both on the provider and payer side of things. I have worked at Penn Medicine, the Philadelphia Veterans Affairs Medical Center, and Anthem, where I served on their health services research team before moving over to Trilliant Health over 3 years ago.
Your data show that specialty drugs now account for more than half of US drug spending. From a managed care perspective, what does reaching this tipping point change immediately in how plans should think about benefit design and utilization management in 2026?
Dr Oakes: As of 2023, 54% of spending was attributed to specialty drugs. This is projected to reach 55% in 2028. Despite the name, it’s important to note that specialty drugs are not an exception or a carve-out within the health care system.
Addressing this issue requires, from a benefit design and utilization management perspective, better integration of pharmacy management into medical management. Payers and employers also need to be doing expected cost forecasting by disease cohort and prospective risk modeling rather than just retrospective reconciliation. They need to get ahead of the curve and figure out what to expect rather than just reacting to what happens.
In terms of trying to bend the cost curve, it's important that we prioritize cost-effectiveness with our drugs and make sure that they're providing value to the patient and to the system. This also includes prioritizing things like biosimilars, which are just as effective but cost a lot less money to patients and to the system.
With oncology accounting for nearly one-half of specialty spend, how can payers and employers better manage the financial risk tied to a single therapeutic area?
Dr Oakes: Like anything else, it's obviously most important to make sure that people are getting the highest-value cancer care possible. Notably, oncology makes up around 47% of specialty drugs on the market. It also accounts for 24% of total specialty drug spending. It’s the biggest research and development (R&D) pipeline for many of the largest manufacturers. There are about 100 oncology therapies that are anticipated to launch over the next 5 years.
Cancer is also one of the least price-elastic categories in health care. People are often willing to do whatever they can to try and treat the cancer. All of that provides an important backdrop for understanding the oncology specialty pharmacy space.
In terms of how to manage the therapeutic area, the biggest thing is that we can't manage oncology drug spending without managing oncology care more broadly. This includes things like site of care decisions and also making sure that patients are being sent to high-value providers.
Employers have to demand networks that have a proven high-value oncology network strategy, which is based on data related to both price or negotiated rates and quality. This value approach also relates to drug selection. There are a good number of oncology drugs that come to the market and are approved based on surrogate endpoints rather than true long-term outcomes. It's important to make sure that patients are on evidence-based regimens, which help ensure the best possible outcomes
As distribution consolidates and biosimilars expand, where are payers falling short in realizing the savings they expect?
Dr Oakes: In a lot of ways, this is an incentives problem that is made worse by vertical integration. Things that contribute to this issue are rebate walls, the 340B program, pharmacy benefit managers (PBMs), state-specific substitution laws, and even provider and patient education. All of those things create barriers to biosimilar uptake. Importantly, biosimilars launch at around 50% of the reference product price. Just by bringing competition to the market, it often ends up reducing the average sales price of the original drug by about 25%.
Taking all of that into consideration, between 2021 and 2025 biosimilar savings were on the order of around $40 billion. There are billions of dollars in potential savings here. This is something to keep an eye as we look toward the future. Generics or biosimilars are expected for nearly one-half of the top 25 specialty drugs, which potentially exposes $100 billion in annual drug spend to competition.
Addressing these barriers and figuring out how to get more biosimilars to market, as well as increasing their uptake in utilization, is critical for trying to address some of this pharmacy spend.
Where can digital tools truly improve access and adherence in specialty pharmacy—and where are expectations outpacing reality?
Dr Oakes: Focusing on the upside, logistics and friction reduction is where we see the most potential. These are things like prior authorization automation and refill coordination.
We think that those sorts of digital tools have the potential to increase adherence and reduce administrative waste. Anywhere that administrative processes can be streamlined or duplication of effort reduced represents low-hanging fruit and areas with the highest return on investment as it relates to digital tools in specialty pharmacy at this time.
