Report finds increase in specialty drug trend, spend

The specialty market continues to gain momentum, according to Pharmaceutical Strategies Group's 2024 State of Specialty Spend & Trend Report, which is sponsored by Walmart.

Commenting on the report, Aleata Postell, head of Walmart Specialty Pharmacy said, “Despite downward pressure by biosimilars and generic specialty medications, specialty drug spend and trend increased in 2023. Patients who use specialty medications continue to rise, coupled with a pipeline heavily weighted towards specialty drugs, the specialty segment is a vital and essential component to overall health care. The insights and data in this report help to sharpen our pharmacy strategy and reinforce our commitment to managing costs while delivering the highest possible health outcomes.” 

Postell added, “The 2024 State of Specialty Spend & Trend Report leverages both pharmacy and medical spend data to confirm that the specialty market continues to gain momentum. Biosimilars continue to gain traction with large increases in the biosimilars for Lucentis and Remicade. Humira remains the top specialty medication by spend with Skyrizi gaining ground moving from No. 6 to No. 3.” 

[Read more: Report: Specialty drug trend, costs will continue to rise]

Key findings:

Specialty spend and trend continue to increase:

• Specialty drug trend was 14% on a gross basis, which was reduced to 13.4% net of rebates for drugs covered under the pharmacy benefit. The 2023 trend represents an increase compared to 2022 but falls within the 10- 15% range we have seen consistently in our years of producing this report. Rebates had a smaller impact on trend in 2023 compared to 2022, likely due to differences in brand versus generic drug mix—less utilization of rebatable drugs lowers the impact of rebates.
• Although biosimilars and specialty generics are putting some downward pressure on spend and trend, these effects have been offset by an influx of FDA approvals for branded specialty drugs, expanded indications for existing specialty drugs and high cost trend for some of the top specialty drugs (e.g., Stelara and Dupixent).
• In the early years of this report, claim utilization accounted for the vast majority of specialty drug trend. Claim utilization continues to be the leading driver of trend, accounting for 8% of the 14% 2023 trend. However, cost per claim also is playing a substantial role in specialty drug trend, representing 5.5% of the 2023 trend. Together, these findings indicate that more people are using specialty drugs, and those drugs are becoming more expensive.  The increased role of cost per claim is likely due to: 
•  More high-cost therapies entering the market 
•  Expanded indications for existing expensive specialty medications 
•  Shifts between the medical benefit and pharmacy benefit channels. It’s also important to note that the absolute and relative contributions of claim utilization and cost per claim will vary between plans based on factors such as utilization management strategies used and the degree to which the plan design is rebate-centric.

[Read more: Retailers build out their specialty pharmacy offerings]

Increasing number of specialty drug utilizers :

• The percentage of members taking at least one specialty drug continues to rise, increasing from 5.3% in 2021 to 5.6% in 2022 to 5.9% in 2023. Although this increase may appear small, even a slight increase in the percentage of members taking specialty drugs can have substantial cost implications on a PMPY basis.

Shift to pharmacy benefit continues: 

• In 2023, 63.8% of specialty spend was through the pharmacy benefit, up from 62.8% in 2022 and 60.2% in 2021. Spend within the medical benefit decreased to 36.2% in 2023. Within the medical benefit, the percentage of spend within each medical channel remained steady over the 3-year time period. The continued shift of spending from medical to pharmacy stems from several factors. While specialty drugs previously tended to have various special requirements for transport, storage, and administration and were for more rare and complex conditions, many now have fewer special requirements and treat more common conditions.
• The result is that many of the new high-cost specialty drugs have entered the market fall under the pharmacy benefit, including some drugs previously billed under medical that now have self-administered formulations available through pharmacy in categories such as asthma and inflammatory conditions. Additionally, plan sponsors continue to implement strategies to shift administration to the pharmacy benefit to maximize rebates and optimize utilization management, which can be more robust within pharmacy.

Top categories for specialty drug spend undergo little change:  

• The top 3 categories—inflammatory disorder, oncology and multiple sclerosis—have remained the same since our inaugural report for 2016. The inflammatory disorder category ranked first, representing 38% of 2023 specialty drug spend, followed by oncology (25%) and multiple sclerosis (5%). The skin immunosuppressant category showed a large cost PMPY trend, likely due to the category containing many highly rebated drugs and often having PBM restrictions on utilization management changes. This category also had a large utilization trend, likely due to continued growth in use of Dupixent driven by expanded indications and direct-to-consumer advertising. The multiple sclerosis and eye disorders categories demonstrated declining cost PMPY and cost per claim trends. These effects are largely due to biosimilar competition, as biosimilars have gained market share and/or driven down the price of the innovator drugs in these categories. Over time, it is possible these biosimilars-related effects may also occur in the inflammatory disorder category as Humira biosimilars gain traction and Stelara biosimilars enter the market in 2025.

Biosimilars market share continues to grow: 

• Biosimilars first entered the market nearly a decade ago, but it took several years for them to have a meaningful impact on specialty drug spending. In the early years, most of the effect of biosimilars came from competition driving down the prices of innovator drugs rather than shifting utilization away from those drugs. More recently, market share began to shift to biosimilars, and biosimilar market share is now growing steadily year over year. 
• From 2022 to 2023, the total market share of biosimilars increased from 23.6% to 29.3% if including the Humira (adalimumab) market basket and from 42.4% to 54.4% if excluding the Humira market basket. Amjevita, the first biosimilar for Humira, launched in the United States at the end of January 2023. Others followed in July of 2023, and by the end of 2023, there were 9 Humira biosimilars available. Uptake of Humira biosimilars has been slow since their launch, in large part because the largest PBMs kept brand Humira in a preferred position and added its biosimilars at parity on their formularies, offering no incentive for members on brand Humira to switch to a biosimilar. 
• Through Q1 of 2024, brand Humira still maintained 96% market share in the U.S. That started to change in Q2 of 2024 as PBMs began shifting their strategies, with some even excluding brand Humira, which will lead to higher Humira biosimilar utilization in 2024 and beyond.

Trend Forecast: What to expect: 

• Based on a comprehensive evaluation of expected events (e.g., entrance of biosimilars and specialty generics, entrance of new therapies and expanded indications for existing drugs) across the top 20 categories of specialty drug spend, we project the PMPY trend for specialty drugs to continue in the low double digits (around 14% year over year) for the next 3 years—the implication is that PMPY costs will increase almost 50% from 2023 to 2026.