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Specialty drugs continue to be a growing component of the prescription drug market and the increase in their cost has fueled increases in overall prescription drug spending. These drugs are used to treat complex and chronic medical conditions such as cancer, hepatitis C, multiple sclerosis (MS), and rheumatoid arthritis. They typically require special handling, administration, and monitoring, adding to their cost.

Spending on non-specialty drugs has decreased in Michigan in recent years, yet total drug spending has increased because of increased spending on specialty drugs, especially with the release of new, high-cost MS and hepatitis C drugs. Treatments for these two conditions rely greatly on prescription drug medication that can save lives and improve patients’ quality of life. But, recent cost increases for drugs like these can often lead to high out-of-pocket costs. Generic drugs offer an alternative to costly branded drugs, with savings up to 80 percent for consumers. However, generics are not available for most specialty drugs.

The Rising Cost of Specialty Drugs in the United States examines overall specialty drug cost trends in the United States and Michigan, focusing on high-cost specialty drugs for MS patients, and explores policy implications. The analysis is based on prescription drug data for privately insured patients with prescription drug coverage. The Michigan data includes privately insured patients with prescription drug coverage through Blue Cross Blue Shield of Michigan (BCBSM). The national data is from Express Scripts Drug Trend Reports, 2011-2014, and is also limited to privately insured patients. Specialty drugs covered under a patient’s medical benefit are not included in this analysis (generally includes drugs administered in hospital or institutional settings).

Key findings include:

• From 2011 to 2014, specialty drug spending increased substantially as a proportion of total drug spending, both in Michigan (from 14 percent to 22 percent) and the United States (from 18 percent to 32 percent).
• While Michigan’s specialty drug costs did not grow as fast as the national average during this time period, Michigan spent more per member per year (PMPY) than the U.S. average in 2014 for seven of the top eight specialty drugs.
• In Michigan, higher PMPY spending on specialty drugs used to treat multiple sclerosis (MS), including Copaxone and Tecfidera, is explained in part by the higher MS prevalence rates in Midwestern states⁽¹⁾Regions in this brief used for MS prevalence data are defined by P. Dilokthornsakul et al.’s article, “Multiple sclerosis prevalence in the United States commercially insured population.” This definition was used as it provides the most current, region specific prevalence data available. MS prevalence data defines the following states as Midwestern states: North Dakota, South Dakota, Nebraska, Kansas, Minnesota, Iowa, Missouri, Wisconsin, Illinois, Michigan, Indiana, and Ohio., including Michigan, compared to the United States.
• Specialty drug price increases are also a factor in the escalating overall cost increases. For example, annual per patient spending in the United States for Copaxone, an MS drug, grew five-fold from its introduction in the mid-1990s to 2013 ($12,000 to $60,000, respectively). Most recently, annual per patient spending reached nearly $90,000.

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