Invisible Epidemic of Autoimmune Disease
As we continue to illuminate the hidden costs of the long-ignored epidemic of autoimmune disease (AIID), we must shine a light on the highest autoimmune cost: Specialty pharmaceuticals. Current data largely underestimate total AIID costs, and accurate numbers are few and far between. Through our own research, we estimate that autoimmune diseases cost the US healthcare system a total of $200-300 billion per year. This is far higher than the widely cited 2011 AARDA estimate of $100 billion (which is based on a 2001 estimate!).
As the invisible epidemic of AIIDs continues to grow, new diagnoses trigger increased utilization of specialty pharmaceuticals. Physicians prescribe so-called specialty medications to treat patients with complex or rare diseases. Diseases treated under the specialty umbrella include cancer, diabetes, HIV, and autoimmune (generally classified in claims data under inflammatory conditions, immunology, neurology, or rare diseases). Specialty drugs are expensive by definition! Specialty conditions make up only 2.5% of drug use, but they account for 52% of pharmacy spend. This is a significant cost for insurers, employers, payviders, and patients themselves (who face increasing co-pays or cost-sharing for the most expensive drugs).
What Are These High-Cost Specialty Pharmaceuticals?
Rheumatologists use the term DMARDs (Disease-Modifying Anti-Rheumatic Drugs) for conventional (non-biological) medications, which are mostly inexpensive generics, and bDMARDs (biological DMARDs) for biologics. Payers often use different terms, e.g., BDAIDs (Biologic Drugs for Autoimmune Diseases). Biopharma developers use the term biologics (drugs derived from biotechnology, i.e., genetic engineering), which includes MAbs (monoclonal antibodies), TNF-α and JAK inhibitors. bDMARDs are among the most expensive specialty drugs, which can cost as much as $50,000 – $100,000 annually. Non-specialty drugs are much less costly; many are older drugs with multiple generics in the market. Common non-specialty DMARDs for AIIDs include chemotherapy immunosuppressants (methotrexate, hydroxychloroquine, etc.), and corticosteroids (less used than in the 20th C, except as breakthrough drugs to treat flares).
Specialty Drugs: The Largest and Most Visible AIID Cost
Because payers bear most of the pharmacy and medical costs, these are the easiest statistics to find through claims data from plan member population sources (e.g., the chart above). Specialty prescription costs are easily the most visible and fastest-growing expenditure in diagnosed AIIDs.
Patients bear some of these costs, too, including drug co-pays, coinsurance or cost-sharing and off-formulary costs. Off-formulary meds are those not covered by specific plans, therefore a patient prescribed an off-formulary drug would pay full price out of pocket. Humira (adalimumab), the top specialty medication by gross spend, has an average monthly retail price of $9,158.60. Without insurance, a patient on Humira might pay $110,000 annually.
Luckily for patients, plan sponsors, including insurers, payviders, or employers, cover most of the large drug costs. However, coverage varies by payer and navigating plan coverage can be yet another onerous task that AIID patients must endure. Specialty patient’s drugs annually cost plan sponsors $38,000 on average, versus $492 for a non-specialty patient’s medications. Many plans have increased member copays for specialty meds, which causes some patients to not fill prescriptions or drop out of care. Unfortunately, that often leads to worsening disease, driving patients to emergency hospitalization or surgery, also large costs in payer plans.
Factors Driving Up Specialty Pharmaceutical Costs
- Increase in the autoimmune patient population (disease prevalence).
- High-cost (high-margin profit centers for hospitals) drug infusion centers.
- High list-price brand name (non-generic) drugs with little competition from biosimilars or other branded drugs.
- Poor coordination between primary physicians and the specialists who prescribe specialty medicines.
- Provider administrative costs of dealing with payers and pharmacy benefits managers (PBMs).
- Payers raise co-pays, shifting more costs to patients.
- Hard to match drugs to patients (few predictive biomarkers) leads to choosing initial medications through trial and error, based on cost, rather than the most effective treatment for the patient.
- Physicians often are pushed by payers (step therapy, prior authorizations, limited formulary choices) to choose cheaper drugs first. This drives up administrative costs, wastes physician’s time and delays treatment.
- However, even without payer constraints, matching drugs to patients is difficult. There are few biomarkers to assist choice. For example, Progentec offers the only test to determine if a patient will be a non-responder to anti-TNF bDMARDs.
- Once prescribed, biologicals have limitations other than costs.
- Only 30-50% of patients respond to the first-prescribed drug, needing additional drugs or switching, which requires repeat visits to specialists.
- In addition to cost, side effects often lead to low adherence. 25% of patients who start on an autoimmune drug discontinue use after 180 days, leading to poor health outcomes and higher future costs.
- Pharma manufacturers pay for post-marketing surveillance (PMS) and negotiate with plan formularies to block competition (especially biosimilars).
- Pharmacy benefit managers (PBMs) and other middlemen produce rent-seeking & higher administrative costs.
Specialty Drug Forecast
Recent Developments in Specialty Drug Costs
Generic medications cost significantly less than their name-brand alternatives. In the last 2 years, MS pharmaceutical costs have come down because 3 non-biologic drugs had generic competitors enter the market. As more and more autoimmune drugs drop name-brand exclusivity, and more competitors enter the market, costs could be significantly reduced.
Many pharmaceutical companies have used ingenious legal tactics to keep patent protection ongoing long past the expiration date of the original patent. For example, AbbeVie’s Humira (adalimumab) was approved in 2002 for RA and since for other AIIDs (ankylosing spondylitis, plaque psoriasis, Crohn’s & ulcerative colitis, etc.). By filing 132 additional patents, AbbeVie has kept Humira on-patent for far longer than it should be. The first biosimilar adalimumab competitors entered the EU market in 2018 and will enter the US market in 2023. AbbeVie will retain some patent protection until 2034, although see below for biosimilar competitors.
Biosimilars are generic equivalents to biologics, produced by competing manufacturers, unbranded, and not under patent protection. Such alternatives compete with more expensive branded drugs and increased use of biosimilars could produce an estimated 35% cost reduction. Despite the excitement surrounding biosimilars, they have had difficulty breaking into the market due to ingenious extensions of patent protections and drug rebating strategies from the name-brand biologics companies. For example, there are 7 FDA-approved Humira biosimilars, all expected to launch throughout 2023, ending the Humira monopoly and hopefully reducing this significant specialty drug cost.
Value-based care (VBC) initiatives are intended to reward healthcare providers for quality of care, rather than the quantity of visits and procedures they deliver, known as fee for service (FFS). One example is the recent CVS Transform RA Program. They utilize outcome-based contracts to allow drug reimbursement only if specific targets are achieved. Since response and retention is low for autoimmune drugs, this may waste less money on medications that do not work for the patient.
How Could Digital Health & Virtual Care Models Help With Specialty Drug Costs?
We believe that digitally enabled virtual care models can help address these high costs in the following ways:
- Faster access to specialty care earlier in disease progression when patients may respond to cheaper drugs. This means population analytics to find early-stage AIID patients and better medical education so primary clinicians are more alert to AIIDs in their differential diagnoses.
- Better longitudinal care to manage dosing. For example, dosing to patient weight, titrating doses based on response & side effects, and discontinuing meds when patients achieve robust remission.
- Better coordination of treatments and care between primary clinicians and specialists to limit polypharmacy (too many drugs prescribed).
- Development of more (there are only a few now) digital & blood biomarkers to better match drugs to patients and monitor their responses.
- Better monitoring of drug adherence, side-effects, flares, and prompt, appropriate use of breakthrough meds.
- Lifestyle interventions, such as diet, exercise and behavioral health support may help reduce the need for expensive drugs.
Authors: DrBonnie360, Ellen M Martin, & Ellie Duvall
We approach these thought leadership posts from our multi-lens perspectives.
- DrBonnie360: Digital/virtual health consultant, clinical dentist, Wall Street analyst, patient & advocate.
- Ellen M Martin: Consultant, editor, life science finance/IR/marcomm, autoimmune caretaker.
- Ellie Duvall: Digital health equity research intern, Physiological Sciences Undergraduate Student at UCLA.
Strategic Consulting & Professional Services
We provide professional consulting services to investment, emerging and established companies. Our work bridges silos and fills gaps to help our clients improve care for AIID patients and reduce costs. Informed by patient and caretaker perspectives, we urge investors & clients to integrate the best of digital, conventional and functional medicine into AIID care delivery.
- We help our clients leverage digital innovations into V1C for AIID patients.
- Our subject matter expertise includes: oral health, microbiome, autoimmune patient journeys, competitive landscape analysis, strategic positioning & messaging, digital health, and self-hacking.
- We have decades of experience in finance, marketing and communications for dozens of healthcare and life sciences organizations, emerging and established.
- Our backgrounds include clinical dentistry, osteology, biotech IR/PR, marcomm, content creation, strategic consulting, and autoimmune advocacy.
Contact us to help you map your market landscape and understand patients unmet needs. Also, we can help you clarify and articulate your company’s market position and differentiators. Long before COVID-19, we were facilitating virtual sessions. We also create compelling content: articles, blog posts, collateral, e-books, web copy and white papers. Our Autoimmune Connect/DrBonnie360 website showcases our own content.