A top concern for employers, BHC, and the public is the high and exponentially growing cost of specialty medications, many of which are biologics. These products, produced from or containing components of living organisms, are the fastest-growing therapeutic class.

While specialty medications meaningfully improve or sustain life for many people, their expense can be thousands to millions of dollars or more per treatment or year. Their unique structure sometimes requires special handling, patient management, or medically-supervised injection or infusion. A review of data from the BHC Pharmacy Management Initiative confirms that specialty medications in the pharmacy benefit represent less than 1% of all prescriptions yet more than 50% of overall drug spending. In the medical benefit, health systems purchase the medication, mark it up, and then bill the plan. The cost can be two or more times higher than what is charged to the plan by other distribution channels, such as the plan’s specialty medication vendor.

Employers have watched this cost trend chisel away at the financial sustainability of their medical benefit for more than a decade. In the early years, a few companies tried a practice coined “brown bagging." The pharmacy benefit manager (PBM) would provide the medication to the patient to be taken by them to the provider visit for administration. Concern for the patient’s ability to adhere to proper handling protocols stunted its uptake. Under an alternative solution called “white bagging” the plan sponsor’s designated specialty pharmacy sends the patient’s specific medication directly to the site of care for administration by the provider at the scheduled time.

Health plans and PBMs are aggressively pursuing this opportunity, and a few BHC members have opted in to their programs. According to Drug Channels, in 2019 nearly a third of drugs infused in hospital outpatient settings were white bagged, including some oncology products. The number of drugs with white bagging arrangements available has grown to 78.

Health systems have noticed and are beginning to push back. Capturing revenues from the administration of these high-cost pharmaceuticals was a major goal fueling the acquisition of physician practices by health systems and venture capital firms. These dollars are an important and planned revenue source. Similar to the tracking of referrals which stay within their systems, specialty medicine administration capture rates are also tracked. To be fair, not all of health system’s concerns are financial. Managed Health Care Executive offers a fair and comprehensive list which is useful to employers seeking to be fully informed before adopting one of these programs.

While not a perfect solution, plan sponsors and patients can save a lot of money. As fiduciaries for their companies and their families, respectively, they both have reason to appreciate these programs. BHC is committed to supporting its members in understanding opportunities to reduce cost while improving or maintaining care quality. Shifting services to more efficient sites of care is a strategy worth considering, and other opportunities are emerging.

To aid in this, BHC has enlisted Adam J. Fein, PhD, as a keynote speaking during our November 18th Annual Meeting. Dr Fein is the CEO of Pembroke’s Drug Channels Institute and one of the country’s foremost experts on pharmaceutical economics and the drug distribution system. He is regularly quoted in such national publications as The Wall Street Journal, The New York Times, The Washington Post, Forbes, and many others. I look forward to seeing you at the event (either in person or virtually) and learning together.

Warm regards,

Louise Y. Probst
BHC Executive Director