Health Premium Hikes Tied to Costly Specialty Drugs

December 6, 2006

Expected health insurance premium increases of between 8 and 13 percent in Massachusetts are being driven more than ever by the costs of expensive specialty drugs, according to officials from some of the state’s major health insurers.

“Virtually every health plan in the (United States) is focusing on these drugs as an emerging challenge,” said Matthew Connell, senior director of pharmacy services for Blue Cross and Blue Shield of Massachusetts, which has 3 million members.

Specialty drugs — some of which can cost $200,000 per year, per patient — accounted for 5 percent, or about $450 million, of Blue Cross’s medical expenses last year.

Nationally, they accounted for 19 percent, or about $40 billion, of pharmaceutical spending, according to Express Scripts, which manages prescription programs. By 2009, that is expected to reach $90 billion, more than a quarter of all drug expenditures in the U.S., as more of the drugs are developed and approved.

“The specialty drug slice of the pie is growing fast. It’s only about half of 1 percent of all pharmacy (prescriptions), but it accounts for as much as 13 percent of pharmacy costs,” Connell told The Boston Globe.

Specialty drugs are defined as biotechnology treatments that involve genetic engineering, cancer medications that must be administered in medical facilities, unique treatments for extremely rare diseases, and other high-cost remedies.

Executives at Blue Cross, Tufts Health Plan and Fallon Health Plan said they expect premium increases of between 8 and 13 percent in January.

Insurers have pinned increases over the past few years on the rising costs of traditional prescription drugs, higher costs from doctors, and imaging technology. This year is the first time they have cited specialty drugs.

“This has been a small part of overall pharmaceutical spending, but it’s growing much more rapidly than the rest,” said Paul B. Ginsburg, president of the Center for Studying Health System Change.

One example of an expensive specialty drug is Cerezyme, made by Cambridge-based Genzyme Corp. It is used to treat Gaucher disease, a genetic disorder that causes enlarged internal organs and affects only about 4,500 people worldwide. Cerezyme costs $200,000 annually per patient and last year generated sales of $932 million, most of which was covered by insurance companies.

Dan Quinn, a Genzyme spokesman, said because specialty drugs are used to treat so few people, they are not a major contributor to rising costs.

The prices for specialty drugs, however, are rising faster than other treatments. Blue Cross said that last year in Massachusetts it paid for 14,901 prescriptions for Enbrel, at an average cost of $1,867. For the first six months of this year, that increased to 7,817 prescriptions at an average cost of $2,024.

Enbrel, marketed by Amgen Inc. and Wyeth, is a treatment for rheumatoid arthritis, psoriasis, and other conditions.

Insurers are making efforts to control the use and cost of specialty drugs. Tufts requires doctors to obtain permission before prescribing them. The insurer also bars use not approved by the Food and Drug Administration.

At Harvard Pilgrim Health Care, high-cost drugs are delivered directly to doctors’ offices to cut out the retail markup, and Harvard Pilgrim works with a limited number of suppliers to negotiate better prices, said Neil Minkoff, medical director of network services and pharmacy.


Information from: The Boston Globe,

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