Employers should prepare for surge in specialty drug costs, expert warns

Employers that offer health insurance to workers should brace for a surge in spending on new "specialty" medications, a University of Minnesota expert said Friday.

U pharmacy Prof. Stephen Schondelmeyer said that drug companies have a huge pipeline of promising pharmaceuticals that are scheduled to come to market in the coming years.

Medication budgets already have been stretched by the launch of expensive new treatments for hepatitis C, multiple sclerosis and other health problems, Schondelmeyer told more than 100 people gathered for a health care forum in Edina.

With more new medications ­coming, employers by 2023 will find they're spending more on medications than they do on care from ­physicians.

"I applaud the bringing of these drugs to the marketplace — I'm not saying we shouldn't treat this," Schondelmeyer said. "But we need to put into perspective the cost. … The cost structure is simply not ­sustainable."

The comments came during the eighth annual summit sponsored by the Minnesota Health Action Group, a coalition of more than 50 ­employers pushing for better value in the health care system.

For years, the group has operated a program that provides financial rewards to clinics that provide optimal care to patients with certain health conditions.

The annual summit highlights areas of concern for employers, and the cost of specialty pharmaceuticals has risen to the top of the list for many, said Carolyn Pare, the group's chief executive. The employer group is working with Schondelmeyer on a project that will give both employers tools for handling costs, while also pushing for policy changes.

"We aren't saying [drug companies] can't make money," Pare said in an interview. "But to do egregious pricing is just limiting access to people who really need the medication."

Over the past year, insurers and the companies they hire to manage pharmacy benefits have been making more noise about rising medication costs. This month, the Minnesota Council of Health Plans, which is a trade group for nonprofit insurers in the state, reported that drug costs in 2014 increased by 14.1 percent over the previous year — the biggest one-year jump since 2004.

But the pharmaceutical industry contends that even with new drugs in the pipeline, medication costs will continue to account for roughly the same share of overall medical spending. The industry argues that critics wrongly focus on list prices for medications, which are higher than the actual cost paid for drugs after factoring rebates and ­negotiated discounts.

"Spending on prescription medicines has been 10 percent consistently over time of national health care spending, and that share is going to be consistent through the next decade," said Holly Campbell, a spokeswoman for the PHARMA trade group, in an interview earlier this month.

Schondelmeyer argued ­Friday that the 10 percent figure doesn't include the cost of drugs administered in hospitals and doctor offices, where a growing number of costly specialty medications are used. As for rebates and discounts, Schondelmeyer said drug manufacturers should provide full information about these price cuts — including any rebates that might be going to pharmacy benefit manufacturers (PBMs) — so there's more transparency in the system.

What can employers do about all this? Schondelmeyer said in an interview that employers need to push for transparency on costs from PBMs, medical plans, pharmacies and specialty pharmacies.

"There's no simple answer," he said.

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck