A Deep-Dive into Specialty Pharma

A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.

Due to their complexity and cost, specialty drugs are typically not available through traditional retail pharmacies and may be dispensed through specialty pharmacies or healthcare providers directly. This is because they tend to require special handling, administration, monitoring, and patient support due to their high cost, unique delivery methods (such as injections or infusions), and specialized storage requirements. 

While one-off specialty treatments exist, these medications are often administered as a long-term therapy for chronic health conditions, with intended treatment for more than six months. 

From expensive to ultra-expensive

Specialty drugs tend to be among the most expensive medications on the market. In 2023, the Centers for Medicare and Medicaid Services (CMS) defined specialty drugs using a “Specialty-tier cost” (ingredient) threshold of $830 per 30-day supply. However, data from the AARP Research Policy Institute showed that the average annual cost for a specialty drug in 2020 was more than $84,000. By comparison, the median US household income is $65,712.

The cost of specialty drugs has rapidly increased in recent years, even outpacing inflation. 2020 saw the retail prices of 180 specialty drugs shoot up by 4.8% — while the general inflation rate that year was just 1.3%. 

In the ultra-expensive category, research from The Commonwealth Fund in 2020 places annual costs upwards of $100,000 — even approaching $750,000. For a few novel gene therapies, the cost for a one-time dose can exceed $1 to 2 million dollars. One such example is in the treatment of hemophilia A. The FDA-approved drug, Altuviiio, a once-weekly factor VIII replacement therapy, costs about $800,000 per year. On the other hand, Roctavian, a gene therapy requiring just one dose, may potentially cure the disease, at a cost exceeding $3M.

Several factors contribute to the high cost of specialty drugs. For starters, these medications tend to undergo extensive research, development and regulatory processes. Since specialty drugs are often used to treat complex or rare medical conditions, there may be a relatively small patient population. The limited market size means that the costs of developing, manufacturing, and distributing these drugs are spread over fewer patients, leading to higher per-patient costs. Finally, specialty drugs may require complex and expensive manufacturing processes and specialized facilities to ensure quality and consistency. 

Specialty drugs in focus

In 2023, nearly 80% of FDA-approved drugs were specialty drugs. Thanks to the Accelerated Approval Program, a regulatory pathway to expedite the approval of medications for serious or life-threatening conditions, a record number of new drugs were approved. However, while this program guarantees faster access to promising therapies — which can be a matter of life and death for many patients with serious health conditions — it lowers the overall standard of the FDA approval process, and there is a risk that drugs approved via the program may prove unsafe or ineffective in the long run.

Specialty drugs as a whole now account for 56% of drug spend, doubling from 28% in 2011. This growth is projected to continue as new drug approvals and expanded indications are meeting criteria for orphan and specialty treatments that are no longer a niche but the new standard of care. 

Commercial insurers have borne the brunt of rising costs, which could lead to soaring premiums in the coming years, especially as an aging population and the increasing prevalence of a number of chronic diseases lead to a greater demand for these medications. Specialty drugs are often placed in their own tier on payer and Pharmacy Benefit Managers (PBM) formularies and may explain market access strategies resulting in some Specialty drugs being left off some formularies.

Future market trends will be marked by the expansive roles of Pharmacy Benefit Managers (PBMs), the complexity of specialty drug distribution networks, and the intricacies of payer and PBM billing and benefit design, the increasing complexity of target populations, and challenges to transparency for monitoring and tracking. 

Innovative drug launches are bridging the gap between traditional and specialty drug utilization and spending, particularly with the emergence of targeted precision therapies for certain cancers. These often require molecular (biomarker) testing with co-approved companion diagnostics. Accurately monitoring and managing patients on specialty drugs requires identifying both the treatment and the molecular testing performed throughout the patient’s treatment journey. 

How PurpleLab unlocks in-depth specialty pharma insights

Increasingly, organizations relying on healthcare data must delve deep into specialty pharmacy data to determine if the right patients are being reached, if patients have access to the appropriate drug therapy, and if stakeholders are ensuring positive therapy outcomes. 

PurpleLab’s comprehensive approach to specialty drug data closely aligns with health organization and industry definitions of specialty drugs. Through rigorous clinical review and meticulous attention to the predominant specialty classes such as autoimmune disease, oncology, neurology, hematology, and rare diseases, PurpleLab ensures that its data accurately reflects the dynamic nature of the specialty drug market. 

PurpleLab offers access to specialty drug data from one of the top PBMs, covering approximately 25-35% of the market. This data coverage sets PurpleLab apart in the market. 

PurpleLab’s healthcare analytic platform compliments competitor and other vendor data by adding additional patients to the claim environment with pharmacy and medical, open, and closed specialty drug data, as well as specialty drug retail benefit (Rx) claims that are sometimes blocked to competitors. This augments client data sets and expands their reach, helping them identify new patients and providers, and achieving more in-depth insights. 

Enabling data-driven decision-making 

With one of the largest medical and pharmaceutical claims databases in the US, PurpleLab currently works with clinical researchers, pharmaceutical companies, and health economics and outcomes researchers (HEOR) to provide data to address critical needs across various aspects of their work.

Some of the primary use cases include:

• Facilitating the identification of eligible target patient populations for clinical trials, evaluating correct treatment protocols, and aiding in the selection of optimal investigators and sites. 
• Proving invaluable commercial insights into the patient and treatment journey, offering comprehensive analyses of patient and specialty drug prescription (Rx) and medical (MX) market access, identifying payer influence, treatment patterns, and referral patterns, as well as monitoring the progression of specialty drug therapy, adherence, safety, efficacy, and financial analysis, including patient out-of-pocket burden.
• Contributing to health evaluation outcomes research (HEOR) by assessing the total cost of care and reimbursement decisions, informing clinical guideline development, and facilitating shared decision-making processes. 
• Catering to life sciences/pharma and ad tech sectors by providing specialty drug data for tracking brand and competitor performance, as well as sizing patient populations utilizing specialty drugs. 

We’re committed to empowering stakeholders across the healthcare landscape to make informed decisions, contribute to improved patient outcomes, and drive innovation in specialty drug management and research. If you would like to learn more about our services and discover how real-world data can solve unmet needs in your healthcare organization, contact us today.