Monday, December 04, 2006

Specialty drugs seen driving up premiums

Mass. health insurers say use rising rapidly
By Jeffrey Krasner, Globe Staff | December 4, 2006

The increasing use of expensive specialty drugs, including powerful treatments developed by Massachusetts biotechnology companies for rare diseases, is making health insurance more expensive for everyone, the state's major health insurers say.

The number of specialty drugs being developed is on the rise, and existing ones are being prescribed for a wider range of conditions. Some cost as much as $200,000 a year per patient.

"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, the state's largest health insurer with about 3 million members.

Last year, specialty drugs accounted for 5 percent -- or $450 million -- of Blue Cross's medical expenses . Nationwide, they accounted for 19 percent -- about $40 billion -- of pharmaceutical spending , according to Express Scripts, which manages prescription programs. By 2009, the figure is expected to reach $90 billion -- 28 percent of all drug expenditures in the United States.

The insurance industry describes specialty drugs as biotechnology treatments that involve genetic engineering, cancer medications that must be given to patients in doctors' offices or clinics, unique treatments for extremely rare diseases, and other high-cost remedies.

"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 said.

The sector is partly responsible for premium increases coming in January for members of Blue Cross, Tufts Health Plan, and Fallon Health Plan, according to insurance executives. Overall increases are expected to be between 8 percent and 13 percent. They have averaged more than 10 percent in each of the last seven years.

In the past, insurers have cited the rising price of traditional prescription drugs, higher costs from doctors, and high-tech imaging technology as reasons for premium increases. Until now, they have not included specialty drugs as a reason for the escalation.

"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, a research organization. "People in the insurance business have been telling me for a couple of years that this is going to be one of the big drivers of premium increases in the future."

Health insurers have encouraged the use of generic drugs instead of more expensive name-brand treatments . In 2000, spending nationwide was up more than 15 percent, according to the Centers for Medicare and Medicaid Services. In 2005, the increase was about 7 percent.

But government regulators generally do not approve generic versions of biotech treatments, and other specialty drugs are so new they are still under patent protection.

One specialty drug is Cerezyme , made by Genzyme Corp. and used to treat Gaucher disease. The genetic disorder causes enlarged internal organs and affects only about 4,500 people worldwide, but Cerezyme costs $200,000 annually for each patient. Last year, it generated sales of $932 million for the Cambridge biotechnology drug maker, and most of the cost was covered by insurance companies.

"These drugs are particularly challenging," said David Kreling , a professor of pharmacy marketing and economics at the University of Wisconsin-Madison. "Because they're biotech-sourced and have higher production costs and smaller markets, price per patient tends to be much higher than traditional drugs."

Dan Quinn, a Genzyme spokesman, said the company's products do not drive up healthcare costs overall. "It's such an incredibly small part of the spending, because the populations we treat are so small," he said. "If you look at the rarity of these diseases and the small number of people affected, it's not a major contributor to rising healthcare costs."

Neil Minkoff , medical director of network services and pharmacy at Harvard Pilgrim Health Care, said that expenses related to specialty drugs are under control at his company, but that could change as more of the treatments are made available.

"The pipeline in these drugs is very, very rich," Minkoff said. "We see numbers that there will be more than 300 new biotech drugs out there by 2010."

Harvard Pilgrim delivers high-cost drugs directly to doctors' offices -- cutting out the mark-up of retail pharmacies -- and oversees patients to ensure they follow prescribed drug regimens closely. In addition, Minkoff said, Harvard Pilgrim works with a limited number of suppliers, so it can negotiate better prices.

But the prices of specialty drugs are rising faster than other treatments. For instance, Blue Cross said that last year it paid for 14,901 prescriptions for Enbrel in Massachusetts, 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 drug giants Amgen Inc. and Wyeth, is a treatment for rheumatoid arthritis, psoriasis, and other conditions.

Connell said that specialty drugs now account for 10 percent of Blue Cross' total drug costs. "On average, it's a much higher per-claim cost," he said.

Tufts seeks to control use of specialty drugs by requiring doctors to obtain permission before prescribing treatments. The insurer also forbids "off-label" use not approved by the Food and Drug Administration.

"The specialty injectables are very good," said Dr. Allen J. Hinkle , chief medical officer of Tufts Health Plan. "We want our members to get them. But we need to figure out how to pay for these new, wonderful drugs."

Tim Hunt , a spokesman for Biogen Idec Inc., said the steep price of specialty drugs like the Cambridge company's multiple sclerosis treatments, Avonex and Tysabri, is justified. "Our patients crave relentless innovation, because they're dying," he said.

Jeffrey Krasner can be reached at

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