The specialty pharmacy market is projected to continue growing by 8% per year through 2025, largely driven by new-to-market drugs, which are anticipated to account for $62 billion of that expansion. And within this robust pipeline, numerous trends are fueling activity that’s shaping the future of specialty pharmacy.
For instance, the drug pipeline is expanding the scope of specialty, with conditions historically treated by traditional medications now seeing more specialty approvals for the same indication. Rare disease drug approvals have also accelerated in recent years, with half of orphan indication approvals since the passage of the 1983 Orphan Drug Act occurring over the past nine years.
Additionally, there is an ever-growing number of opportunities for specialty drugs to be managed under either the medical benefit or the pharmacy benefit—or, in some cases, both. This, in turn, reinforces the importance of cross-benefit visibility and fluidity. Today’s plan sponsors need a higher level of understanding about which medications can be billed where, as well as the associated economic implications. And they need the transparency and flexibility to shift them as needed to unlock an array of cost management strategies that can result in significant savings.
Beyond these macro trends, we see three specialty drug pipeline developments unfolding over the next few years that will have significant impact on plan sponsors. We also underscore some possible implications and actionable steps you can take to prepare for them.
1. Interchangeable biosimilars gain traction
Increased adoption of biosimilars—which are more affordable, clinically equivalent alternatives to expensive specialty medications—has the potential to fundamentally change the pharmaceutical market by lowering drug costs through more competition. In fact, biosimilars are estimated to be up to 35% less expensive than their branded reference products, and could help reduce drug costs in the U.S. by approximately $100 billion between 2020 and 2024.
Today, more than 90 biosimilars are in development, corresponding to 28 brand-name reference biologics. But among the 35 biosimilar products that have already been approved by the Food and Drug Administration (FDA), only 21 are currently available for use in the U.S. By comparison, 68 biosimilars are available in the European Union.
Biosimilar Availability in U.S and EU
However, interchangeable biosimilars offer an additional pathway to help drive greater competition in the U.S. For an interchangeable biosimilar to obtain FDA approval, it must meet the same standards required by other biosimilar medications, in addition to producing the same clinical results as its reference biologic in any patient. Plus, a patient must be able to switch back and forth between the interchangeable biosimilar and the reference biologic with no safety risks or decreased effectiveness.
In July 2021, the FDA approved the first interchangeable biosimilar: Semglee®, an insulin product for people with diabetes. Three months later, the first interchangeable biosimilar of the widely used rheumatoid arthritis drug, Humira®, was approved: Cyltezo®. And in March 2022, non-exclusive rights were granted to start marketing the first and only high-concentration, citrate-free biosimilar candidate for Humira in July 2023: AVT02.
Takeaway: Plan sponsors should maximize their ability to adapt to the expanding spectrum and evolving costs of specialty medications by ensuring their plan is designed to steer members towards the lowest net cost therapy. This can be achieved by leveraging the full range of formulary and utilization management tools, as well as a specialty three-tier plan design.
2. Gene and cell therapies expand to conditions with larger populations impacted
While the concept of gene and cell therapy has been around since the early 1970s, practical applications were only approved in the U.S. in 2017. Since then, eight of these unique, potentially curative therapies have been approved by the FDA to treat conditions that affect a relative few Americans.
To date, only two gene replacement therapies have been approved in the U.S.: Luxturna® and Zolgensma®. Luxturna is used to treat inherited retinal dystrophy, a rare condition causing blindness that affects approximately 1,500 patients in the U.S. And Zolgensma is used for the treatment of spinal muscular atrophy in infants, which affects approximately 4,000 patients in the U.S. Contrasting these relatively low prevalence figures are the unprecedented prices for each treatment: approximately $850,000 for Luxturna and $2.1 million for Zolgensma.
As the remarkable pace of innovation in gene and cell therapies continues to accelerate, applications are increasingly expanding to include conditions with larger populations impacted. For example, the current gene and cell therapy pipeline includes promising treatments for hemophilia A (affecting approximately 16,000 patients in the U.S.), Duchenne muscular dystrophy (affecting approximately 17,000 patients in the U.S.) and even prostate cancer (248,530 new cases in the U.S. for 2021 alone). While this is exciting news from a patient outcome standpoint, the expected high price tags for these new treatments can present some potential new cost management challenges that plan sponsors should begin getting ahead of now.
Prevalence Rate by Disease (K)
With more than 900 treatments currently in development, the $5.2 billion gene and cell therapy market is estimated to grow tenfold by 2031. In 2019, the FDA projected 10-20 approvals per year through 2025, but COVID-19 and various other factors disrupted that flow. The current general consensus is that 20 approvals overall by 2025 can be expected.
Takeaway: It’s critical that plan sponsors educate themselves about the gene and cell therapy pipeline. They should know what their coverage options are in order to make the most informed decisions appropriate for their population. Learning how to have a data-driven conversation on the subject is key, as are forecasting models and tools that can help address population risks and optimize affordability.
3. Increased drug competition and potentially huge advances in oncology innovation
Oncology innovation drove a record number of FDA approvals in recent years, as urgency to find new treatments continues to grow for the nearly two million cancer cases diagnosed in the U.S. each year. The total number of drugs in the R&D pipeline reached almost 3,500 in 2020, up 75% since 2015. And like previous years, cancer products topped the list of new FDA-approved therapies in 2021, with 16 approvals for various indications.
Drug Approvals in 2021
This trend is poised to continue in 2022, with the current cancer drug pipeline consisting of some highly anticipated therapies that represent different drug classes, significant changes in clinical practice and substantial market opportunities across a wide range of indications.
Several of these drugs—including adagrasib, mosunetuzumab and navitoclax—have the potential to become blockbuster oncological products and impose tough competition on current top sellers. Additionally, other novel treatments—like next-generation CAR-T therapies, bispecific antibodies and vaccines that use mRNA technology (similar to that in some COVID-19 vaccines and neoantigens)—could potentially deliver the next big advances in cancer care. But while these medications offer a great deal of hope, questions still remain about their long-term durability.
Takeaway: As more new drugs and existing drugs with new indications enter the market, plan sponsors need a customized clinical strategy that addresses their unique risk areas to manage the use of these high-cost oncology medications. For example, implementing an advanced utilization management program that leverages the most up-to-date, evidence-based clinical guidelines from peer-reviewed literature, professional societies and leading cancer physician experts can help ensure patients achieve optimal clinical and financial outcomes.
