Specialty drugs are significantly expensive, and prescribed by specialist doctors to treat cancers and complex, chronic diseases and disorders such as autoimmune diseases, inflammatory disorders, rare diseases, ultra-rare diseases, and chronic viral infections. Examples of specialty drugs include therapeutic antibodies, protein and peptide therapies, small molecules, therapeutic vaccines, stem cell therapies, and blood derivatives including IVIG therapies.
The costs of new specialty drugs entering the market rise continuously across all cancers and diseases. Most of these drugs cost more than $100,000 per year. Some are priced as high as $485,000 or more.
A specialty drug meets five or more of the following criteria: specialist-initiated (e.g., oncologist, rheumatologist); biotech product (covers both IP protected drugs, generics and biosimilars); injectable formulation; costs more than $6,000 per year; requires special handling; limited distribution; and necessitates risk evaluation and mitigation strategies (REMS) program.
Only ~5-20% of the patients achieve remission or excellent response to most of the specialty drug treatments. Current treatment protocols follow Russian Roulette and “fail-this-one-first” approaches, thus, wasting money on inappropriate drugs and missing the window-of-treatment opportunities—leading to significantly increased direct medical costs. In some disease indications (e.g., RA), finding the appropriate drug for a particular patient takes 5-10 years or more.
Pharmacy benefit management (PBM) companies, specialty pharmacies, specialty distributors, and providers add layers of inefficiency to the current drug pricing mechanism, which is not transparent. Rebates, coupons, and discounts are the general norms in this paradigm.
In the U.S., patients pay ~20% or more for specialty drugs (coinsurance amount). A significant majority of eligible patients cannot afford these therapies because of the exorbitant cost. To offset this, biopharma companies often provide coupons to cover the coinsurance amount.
Another reason for the increasing cost of specialty drugs has nothing to do with the prices set by the pharmaceutical industry. For instance, cancer drug costs can vary depending on who is administering the drug. If a chemotherapy is administered in a hospital outpatient setting instead of a physician's office, costs can be as much as 50% higher.
Physicians often have a monetary incentive to use a more expensive drug, especially where payers do not have mechanisms in place to minimize expenditures. After the passage of the Medicare Modernization Act of 2003, reimbursement was set at the average sales price plus a 6% mark-up to cover practice costs. Thus, a $6 mark-up on a $100 treatment is very low, but a $6000 mark-up on a $100,000 treatment is significantly high.
Specialty drug spending in the U.S. is expected to reach $1.7 trillion in 2030, accounting for an estimated 44% of a health plan’s total drug expenditure.
Current drug pricing, payment, and treatment models have significant inefficiencies involving multiple, financially conflicting stakeholders.
Band-aid solutions cannot provide answers to such complex, intertwined problems across the entire healthcare system.
A biosimilar is a biological drug, e.g., an antibody such as adalimumab (Humira®), that is structurally and functionally similar or identical to a reference product (innovator biologic). Many of the innovator antibody drugs for which biosimilars are being developed had worldwide net sales of $7-16 B in 2016.
A biosimilar is considered bioequivalent when it is structurally an exact copy of the reference product, and thus therapeutically and functionally equivalent to that of a reference product. Minor glycosylation heterogeneity with little or no impact on therapeutic efficacy can be observed in bioequivalents. A bioequivalent can be a biosimilar but not all biosimilars are bioequivalents.
A biosimilar can be substituted for the innovator product provided it is approved as an interchangeable biosimilar product by FDA. Under applicable provisions, payers, PBMs, or specialty pharmacies can authorize and (or) initiate substitution. If the drug is interchangeable, it may be substituted for the reference product without the intervention of the healthcare provider who prescribed the reference product.
Several antibody biosimilars are already marketed in Europe. Most of these antibody biosimilars could enter the U.S. market in the near future, pending some crucial IP maneuverings.
Achieving remission or excellent response in a patient or patient subsets is imperative. Specialty drugs--biosimilars or not--that accomplish this goal will be the winners.
Cost cutting and price wars are not the answer.
A novel treatment paradigm that integrates precision medicine is essential matching an effective therapy for the individual patient.