A view from the Center

Deloitte's Life Sciences & Health Care Blog

The specialty pharmacy elephant

If you want to talk about growing health care costs in the US, specialty pharmaceuticals (i.e., high cost drugs used to treat conditions like cancer, rheumatoid arthritis, or Hepatitis C) is one topic which gets people excited for multiple reasons:

  1. Pharmacy spending in employer insurance benefits has ballooned up to 19 percent of total health care costs (excluding drug spending under the medical benefit);
  2. US spending on pharmaceuticals is projected to grow 34 percent between 2015 and 2020, driven by specialty drug costs; and
  3. Forty two percent of the late-stage drug pipeline is for specialty drugs.

Right now, specialty pharmacy issues remind me of the story of the Six Blind Men and the Elephant – each man can only get a sense of the part of the animal in front of him and, therefore, each comes away with a completely different take. Like the elephant, everyone has a different view of the high costs of specialty drugs depending on his or her vantage point.

If we can’t all agree on what this elephant is and how to manage it, the risk is that the industry will face increasing government regulation or intervention. We already know that 76 percent of consumers say the top health care issue for the President and Congress is to address high cost medications. Additionally, several of the presidential candidates have already come out and discussed this issue in their campaigns.

Of course, the actual elephant in the room is the patient and his or her experience with our complex health care system. If a patient is struggling with a complex disease that may change his or her life, we don’t want to leave him or her struggling to pay for the medication or the treatments while confused and unclear about whom they should listen to and where to find the best information.

As health care becomes more consumer centric, our research continues to show that one size doesn’t fit everyone as you look to engage consumers and drive behavior change. It does point to three things that continue to grow in importance:

  1. Partnering with providers;
  2. Tapping online resources; and
  3. Increasingly relying on technology.

These trends are important especially for patients with complex conditions, but there are other areas where the industry can improve. For example, while a lot of our focus is on cost management through formulary, copays, and utilization management, we spend a lot less time thinking about the patient journey and how that varies by age, gender, condition, geography, and other attributes.

On the surface, some of the topics you’ll hear to address these opportunities are consumer experience management, value-based care, digital solutions, and technology transformation. While these are all important strategic approaches, we find several common elements when doing a deeper dive. As pharmacy embraces these tactics, it will create opportunities to build sustainable differentiation:

  1. Analytics: Using data from multiple sources (pharmacy, medical, lab, patient reported) to develop insights and predictive models to create personalized interventions to improve the customer experience, identify risks, and support population health management;
  2. Care Management: Expansion of services “beyond the pill” to help improve clinical outcomes and consumer experience through care coordination between providers and pharmacies and embracing the role of the caregiver; and
  3. Integration: Approaching the patient experience in a holistic way that integrates the physician and other stakeholders using health information technology (HIT) and digital technology to make health care less complex and help patients to achieve their goals.

Allowing our current financial paradigms to create a stalemate in the industry, hurting consumers and pushing the role to the government is not the answer. Collectively, we have to figure out how to create and share value that both inspires and rewards innovation while clearly linking value to reimbursement.


Author bio

George Van Antwerp is a managing director within the Strategy & Operations practice of Deloitte Consulting LLP. He focuses on pharmacy strategy and the convergence of specialty pharmacy across payers, providers, and life sciences.