April 25, 2024

Specialty medications treat conditions affecting less than 5% of the population but represent over 50% of pharmacy spending. Consequently, plan sponsors need to understand the financial implications of specialty medications and how they can manage these costs.

The specialty medication sector anticipates significant growth, with up to two-thirds of newly approved drugs over the next five years expected to be specialty medications. These drugs often provide treatments for previously untreatable conditions, leading to increased utilization and consequently, higher spending. As access to these advanced therapies increases, so do the financial implications for plan sponsors.

What are specialty medications?

There is no technical definition of a specialty medicine. However, these medications are designed to treat complex, chronic, or rare conditions such as cancer, rheumatoid arthritis, multiple sclerosis and more. These drugs often provide treatments for previously untreatable conditions, leading to increased utilization and consequently, higher spending.

Why do specialty medications cost so much?

Specialty drugs often require special handling, administration, or monitoring, which contributes to their high costs. Several factors drive these expenses:

  • Advanced scientific research and expensive development processes.
  • Extensive and rigorous clinical trials.
  • Targeting specific or rare conditions, which limits competition.
  • Costs associated with manufacturing, storage and distribution.

These factors, combined with their vital role in improving patient quality of life, place specialty medications at a higher pricing spectrum.

Strategies for Plan Sponsors to Manage Specialty Medication Costs

Strategic Contracting and Rebates

Effective contracts can stabilize pricing and potentially lower prices. This can help provide a predictable cost framework. Simultaneously, maximizing rebates from manufacturers through your prescription benefit manager (PBM) is crucial. By combining these two strategies, plan sponsors can better manage the financial impacts of specialty medications.

Formulary and Utilization Management

Implementing clinical edits ensures the safe and appropriate use of specialty drugs. Prior authorization, quantity limits and step therapy protocols, when managed by competent PBMs, can optimize utilization and control costs. Innovative Rx Strategies supports plan sponsors by evaluating PBMs and their programs — and providing recommendations on the best options for optimizing utilization and spend.

Promotion of Biosimilars

Encouraging the use of FDA-approved biosimilars, which are cost-effective alternatives to brand-name biologics, can significantly reduce expenses. One strategy plan sponsors should consider is altering formulary designs. Preferring biosimilars whenever they are available for specialty medications can provide substantial savings.

Disease Management and Patient Education Programs

These programs enhance medication adherence by educating patients on effective disease management, leading to better health outcomes and reduced need for costly treatments.

Leveraging Data Analytics

Advanced data analytics can monitor drug utilization patterns and patient outcomes, identifying cost drivers and potential areas for improvement. This insight allows for more informed decision-making and efficient resource allocation. Innovative Rx Strategies offers granular medical claims surveillance to provide a clear picture of current and future risk.


Specialty medicines are already a significant pharmacy cost driver, and we expect that impact to grow. It is crucial that plan sponsors being to adopt strategies to control costs. This will ensure they can balance the growing financial burden of specialty medications with ensuring that patients have access to critical therapies. If you have any additional questions about specialty drugs or cost control, don’t hesitate to reach out to one of our pharmacy benefits consultants.

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