Specialty Drugs and Why They're Treated Differently By Health Plans

Understanding Specialty Drugs and Your Health Insurance

Specialty drugs can be shockingly expensive. Image © Glow Images/Getty Images

A specialty drug is a drug that requires one or more of the following:

  • special handling and storage,
  • special monitoring for the patients using it,
  • ongoing patient support,
  • special education for the patients using it,
  • special skills to administer it,
  • complex compliance regimes that make taking the medication complicated,
  • special approval for health insurance coverage because it's so expensive.

Many specialty drugs are biologics.

Rather than a chemical compound made by mixing different chemicals together, a biologic is made within a living system like a bacterial cell, sometimes using recombinant DNA technology.

Specialty drugs are used to treat chronic and complex problems like multiple sclerosis, rheumatoid arthritis, psoriasis, hepatitis C, and some forms of cancer. They’re usually taken as a shot or an intravenous infusion, although a few are taken orally. Unlike more routine drugs, specialty drugs aren’t available at every pharmacy.

Specialty Drugs, Cost, & Your Health Insurance

Your health plan may cover specialty drugs differently than it covers other drugs on its drug formulary. For example, specialty drugs are frequently in their own special tier of a health plan’s drug formulary, the top or fourth tier.

Drugs on the first tier require the lowest cost-sharing from you; cost-sharing amounts increase progressively from tier to tier.

It’s not unusual for the fourth tier, or specialty drug tier, to require coinsurance rather than a copay so you share a greater part of the cost-burden. Learn more in “Copay Vs Coinsurance—What’s the Difference & Which Is Riskier?” In fact, many patients requiring specialty drugs will reach their health insurance out-of-pocket maximum each year they’re on the specialty drug.

Your health plan almost certainly requires specialty drugs to be pre-authorized before it will agree to pay for them. It may also require that you get a specialty drug from a designated specialty drug pharmacy other than your regular in-network pharmacy.

What really puts a drug on your health plan’s specialty drug list and makes it a fourth-tier drug while another drug is only a third-tier drug? Honestly, it’s the cost. Specialty drugs are very expensive.

For example, a single dose of Solvadi, a drug to treat hepatitis C, costs approximately $1,000. Even if a drug didn’t require special handling or have a complicated compliance regime, if that drug cost tens of thousands of dollars for a year of treatment, it would be on your health plan’s specialty drug list.

It’s easy to cringe when you see those prices, and it’s easy to be angry when you realize how much your share-of-cost for a specialty drug is. But, realize that most specialty drugs treat debilitating or even fatal diseases that had few satisfactory treatment options before. Yes, they’re exorbitantly expensive. But, when the alternative is dying from a previously incurable form of cancer, being crippled by rheumatoid arthritis, disabled by multiple sclerosis, or getting cirrhosis from hepatitis C, you start looking for a way to manage the cost.

Many of the manufacturers of specialty drugs have patient assistance programs in place to provide financial assistance to those who need the drugs but cannot possibly afford them. Some provide financial aid even to people who have health insurance that includes prescription coverage if their share-of-cost is large.

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