Specialty drugs are high-cost medications used to treat complex, chronic conditions like cancer and multiple sclerosis.
What are specialty drugs?
Specialty drugs sometimes require special handling and administration such as injection or infusion.
They may be obtained through pharmacies when self-administered or clinical settings when they need to be injected and monitored. They are likely to need special approval to order. In some cases you may have to order them through a specialty pharmacy.
$301 billion was spent in 2021 on specialty drugs. Specialty drugs represented 50% of total drug spending in 2021. Less than 2% of the population uses specialty drugs.
The costs of specialty drugs are often high, but these drugs have life-changing potential and can be effective in treating or managing serious conditions.
♦ Specialty drugs are used to treat complex, chronic conditions like cancer, rheumatoid arthritis and multiple sclerosis.
It not uncommon to see costs of $2,000 or more per month.
♦ The AARP Public Policy Institute reported that in 2020 the average annual cost of one specialty drug was $84,442. The median U.S. household income was $67,521 in 2020.
Does insurance cover specialty drugs?
Specialty drugs may be covered by insurance under either the pharmacy or medical benefit. This will depend on how they are administered or how your health plan covers them.
♦ Those that are self-administered drugs are typically covered by pharmacy benefits, as opposed to more traditional specialty drugs that are either infusions or injections and require administration by a health care professional. The latter is covered under medical benefits.
♦ More than 80 percent of cancer medication costs are billed through the medical benefit.
• Spending is increasing at a higher rate for specialty drugs covered by insurance under the pharmacy benefit compared to the medical benefit. This is because the number of oral and self-injectable specialty medications has been increasing.
♦ Not all specialty drugs are covered by every health insurance plan. If the drug is self-administered and not on your plan’s formulary you have to pay all costs. You can request an exception. But, if the cost is very high your insurer will be reluctant to approve it.
Plans that do cover specialty drugs require hefty coinsurance. Roughly half of all Silver plans offered at the Marketplace require 40% or more in coinsurance.
Medicare prescription plans run 25% to 33% depending on the plan. Medicare drug prices are a little more confusing because of the "donut hole" and catastrophic spending levels having different coinsurance requirements. But Medicare beneficiaries will receive relief in the form of an out-of-pocket cap. That doesn't take effect until 2025.
♦ Specialty drugs could be covered under your prescription benefits or under your medical benefits. The distinction has to do with the location that you receive the drug.
• If you take the drug at home (self-administered) it would normally be covered under your plan’s prescription benefits. If you have to go to a doctor’s office or outpatient facility it will most likely be covered as a medical benefit.
Obamacare and specialty drugs
♦ Starting in 2014, with the start of the Affordable Care Act, all non-grandfathered plans now have to count out-of-pocket costs for covered prescription drugs toward meeting any out-of-pocket maximum.
What this means, if you have very high copays for specialty drugs you can get some relief as long as your out-of-pocket maximum is not excessive.
• The passage of the Affordable Care Act in 2010, gave momentum to the movement toward a new class of drugs called biosimilars. The thought being that biosimilar drugs may help cut costs in much the same way as generics.
Biosimilars it is hoped will be less costly imitations of specialty drugs known as biological drugs or biologics, which are used to treat a range of diseases including cancer, rheumatoid arthritis, diabetes and anemia.
Assistance paying for expensive drugs
Appeal – if your plan does not cover your drug ask for an exception. If the drug is denied don’t give-up, you have the right to appeal.
A high percentage of appeals are successful. Very good documentation, especially of the need, is the key to succeeding. Learn more about appeals.
♦ If you are taking an expensive drug, even if it is not a specialty drug, you should check with the drug manufacturer to see if they have any programs available to assist.
Some pharmaceutical companies have Patient Assistance Programs (PAPs) that offer low-cost or free drugs to people with low incomes.
• Savings-type coupons are now popular.
AstraZeneca promoted its expensive cholesterol drug Crestor by this method, reducing the cost for many people to only $3 per month for period up to a year.
Medicaid and the Children’s Health Insurance Program (CHIP)
These programs provide free or low-cost health coverage to millions of Americans.
Medicaid is a program that pays for medical assistance for individuals and families with low incomes and relatively few assets. It is funded jointly by states and the federal government.
It is administered by the states. Although pharmacy coverage is an optional benefit under federal Medicaid law, all States currently provide coverage for outpatient prescription drugs.
Each state has different rules about eligibility and applying for Medicaid. How prescriptions are handled will depend upon your state. You should contact your state Medicaid agency.
CHIP provides low-cost health coverage to children in families that earn too much money to qualify for Medicaid. The program is funded jointly by states and the federal government.
Each state program has its own rules about who qualifies for CHIP. You can apply any time of during the year, and find out if you qualify. If you apply for Medicaid coverage to your state agency, you’ll also find out if your children qualify for CHIP.
To locate the Medicaid and CHIP agencies in your state, search at Medicare.gov.
• Select: Other Insurance Programs and click Find.
♦ There are a number of organizations and charities that may be able to help. Many provide assistance for specific ailments such as leukemia and cancer. Search online using Google or Yahoo for your illness, medicine or treatment name.
There are a number of website promising to help find assistance with paying prescription costs. Approach these sites with extreme caution.
• We have not be able to verify which really do help and which just collect personal information.