The prescriptions with the most eye-popping price tags like cancer drugs can cost more than $20,000 a month they are usually classified as “specialty” drugs.
You’d think that since they’re so expensive, there would be clear criteria for placing drugs in the specialty category. But, according to a new report, you’d be wrong.
This question may seem arcane, but it is extremely important. Specialty drugs account for only about 2 percent of the volume of drugs dispensed in the United States, according to industry estimates, but they also account for more than 50 percent of overall drug spending.
The report, of data analytics firm 46Brooklyn Research, found that the three largest drug intermediaries in the United States often don’t classify the same medicines as specialties. He also said that a lot of what they put in that category are generic drugs that are usually off-patent and therefore should be cheaper because more drug makers can supply them.
“It’s pretty corny that there’s so much commonality around our shorthand use of the word ‘specialty’ in just the regular drug pricing dialogue,” said Antonio Ciaccia, CEO of 46Brooklyn. “But beyond that, for the definition of ‘specialty’ in contracts, that degree of ambiguity is quite large.”
Quite understandably, when concerns are raised about the high cost of prescription drugs, suspicion often falls on the companies that make them. And truth be told, drug makers have been credibly accused of a number of anti-competitive practices which increase costs and their profits.
But less well known is the role played by intermediaries known as pharmaceutical benefit managers. They contract with insurers to build pharmacy networks, create lists of covered drugs, and negotiate discounts from drug manufacturers in exchange for placing their products on those lists.
Each of the big three pharmaceutical benefit managers, or PBMs, has merged with a top ten health insurer in recent years and is now part of one of the 15 largest corporations in the United States. So they often contract with a company that is part of the same company. And together, they are estimated to manage more than 80% of all prescription transactions in the United States.
That level of dominance or “market power” in economic terms and lack of transparency about things like rebates, rebates, and pricing led the Federal Trade Commission to investigate them for any anti-competitive practices. Also, Ohio Attorney General Dave Yost announced in March an antitrust lawsuit against one of the big three, ExpressScripts.
Research has shown that while PBMs push drugmakers for ever bigger discounts and more discounts, they give drug companies an incentive increase the list prices of their products. The report released Wednesday by 46Brooklyn suggests that PBMs could raise prices in another way by arbitrarily classifying them as “specialties.”
The analysts used specialty drug lists published by the big three PBMs ExpressScripts, CVS Caremark and OptumRx and correlated them to national drug codes published by the United States and the Food and Drug Administration. He then compared the PBM lists with each other.
Rather than finding uniformity, the analysts determined that about half the time the drugs on one PBM’s specialty drug list didn’t appear on at least one of the others.
The analysis also found that a surprisingly large portion of drugs in specialty lists were generics at 42% to 54%. So despite the fact that they’re normally off-patent and should be cheaper due to competition, they were on pricey specialty lists.
And they can be expensive. For example, PBMs charged employers $16,000 for a 180-day supply of the generic multiple sclerosis drug Tecfidera late last year. Meanwhile Mark Cuban’s Cost Plus Drugs charges $162 for the same prescription in a transaction that doesn’t use insurance and PBM.
As another example, PBMs charged employers $6,250 for 30 tablets of the generic leukemia drug Gleevec in December 2022. Cuban’s business charged $39 when insurers and PBMs are barred from the settlement.
But having many generic drugs also means having many drugs that do the same thing. To check this, 46Brooklyn analysts grouped generics that did the same things together.
They still found huge disparities between what the big PBMs consider specialty drugs.
Everyone agreed that 971 drugs were special. But ExpressScripts listed 1,121 drugs in the specialty category that at least one of the other two doesn’t have. For CVS, that number was 1,089 and for Optum, it was 520.
A spokesman for a PBM industry group could not be reached immediately for comment. But the 46Brooklyn Report said the conclusion was obvious.
“Yes, the drug supply chain just collectively decided to start calling a group of drugs ‘specialty’ and then started complaining about how much these drugs cost,” the report said.
As evidence of the “claim,” he cited a report from ExpressScripts’ parent company that states: Even though less than 2% of the population uses specialty drugs, those prescriptions represent a staggering 51% of total pharmacy spending.
He also quoted a statement from Optum headlined “Do specialty drug prices give you sticker shock?” He said, “Despite accounting for approximately 2% of overall prescription volume, specialty drugs now account for 53% of total annual pharmacy spending.
But Ciaccia, the chief executive officer of 46Brooklyn, said the PBMs failed to mention that their own lack of clarity about what specialty drugs are could be behind it all.
“This is the latitude that allows for overpricing for many drugs,” he said.
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