A Healthesystems publication

Spring 2014

Specialty Pharmacy Emerges In Workers' Compensation

The increased use of specialty medications is projected to continue as more specialty drugs enter the market. The drugs can be used to treat a number of conditions seen in workers’ compensation. Payers will need to balance the patient benefits they offer with the high costs often associated with these products and proactively develop strategies to manage this growing trend.

It is common for new trends in the group health insurance market to migrate to workers’ compensation. One such trend is the growth of specialty pharmacy in workers’ compensation. Specialty medications are typically expensive and may require special handling, distribution, administration and patient management. They are often used to treat complex and rare conditions.

A Global Perspective

Spending on specialty drugs has been growing at a high rate in recent years. Although prescribed for only one in every 100 commercial health plan enrollees, specialty medications account for an estimated 12 to 16 percent of commercial prescription drug spending in the U.S.1 Total global spending on specialty drugs across all payers is expected to increase 30 percent in developed markets between 2012 and 2017.2 Driving this trend are several factors that include increased utilization, price inflation and an abundance of new medications in the pipeline.

Spending growth on innovative specialty medicines will be one of the single biggest cost concerns for healthcare systems in developed markets. Similar increases in spending on specialty drugs are likely to filter into workers’ compensation. Cost containment will be a priority as these medications can top several hundred thousand dollars annually for a single patient.3

Specialty drugs are used to treat injured workers for complex conditions ranging from cancer and multiple sclerosis to hepatitis, HIV and rheumatoid arthritis, among others. The potential benefits they offer should be considered in concert with their costs. In some cases, specialty drugs can provide significant benefits since they may offer the only effective treatment available. In other cases, less expensive but equally effective alternative therapies may offer a better choice.

The Abundant Medication Pipeline

The upward trend in specialty medications use will continue as more unique specialty drugs are launched. Pharmacy benefit managers (PBMs) and payers will need to closely monitor the medication pipeline so they can prepare properly for the introduction of these products. Consider the statistics – the FDA’s approval of specialty pharmaceuticals outnumbered those for traditional medications in the last two years. 

Currently, more than 5,000 total new medications are in the global drug pipeline;4 specialty pharmaceuticals account for more than half of the medications currently in late-stage development; over a third are biological products.5 There has been a commensurate decline in the number of new medicines entering the traditional sector.6 With fewer traditional drugs and more specialty drugs receiving approval, it makes sense that workers’ compensation will see an increase in specialty drug use.

Cost Influencers and Monitoring Challenges

Specialty medications can be categorized as self-administered agents, office-administered agents, or agents administered by home health agencies directly in the patient’s home. Self-administered agents are administered by the patient and typically include oral and self-injectable products. Office-administered agents generally apply to injectable and infusible medications.

Specialty drugs can be seen in pharmacy drug benefit data, and physician/hospital bill data — sometimes both. Administration of certain self-injectable biologic agents by rheumatologists in their office can increase payer costs because they are billed as part of a physician or hospital bill. This makes it more challenging for payers to manage utilization, as they may not have full visibility into a patient’s detailed drug regimen.


Many oncologists also prefer to dispense oral chemotherapeutic agents in the office leading to costly billing under the medical benefit.7 This type of dispensing — referred to as “buy and bill”/physician dispensing — leads to increased costs for the payer primarily due to the incentive for the physician to use it as a revenue source.8 Physician dispensing of specialty drugs may occasionally be appropriate for certain office-administered agents; however, it is recommended that self-injectable specialty products be managed through the PBM. This approach will provide insight and transparency into utilization and cost, and help payers more effectively manage specialty products.




1 -Tu HT, and Samuel DR, Research Brief: Limited Options to Manage Specialty Drug Spending, Center for Studying Health System Change, April 2012. http://www.hschange.com/CONTENT/1286/1286.pdf Accessed March 26, 2014.
2 -IMS Institute for Healthcare Informatics. The Global Use of Medicines: Outlook through 2017. http://www.imshealth.com/deployedfiles/imshealth/Global/Content/Corporate/IMS%20Health%20Institute/Reports/Global_Use_of_Meds_Outlook_2017/IIHI_Global_Use_of_Meds_Report_2013.pdf. Accessed February 28, 2014.
3 -Wall Street Journal. Rockoff JD. Drug makers see profit potential in rare diseases. January 30, 2013. Available at: http://online.wsj.com/news/articles/SB10001424127887323926104578273900197322758
4 -Pharma. The Biopharmaceutical Pipeline: Evolving Science, Hope for Patients. http://www.phrma.org/sites/default/files/2435/phrmapipelinereportfinal11713.pdf. Published January 17, 2013. Accessed February 28, 2014.
5 -IMS Institute for Healthcare Informatics. The Global Use of Medicines: Outlook through 2017. http://www.imshealth.com/deployedfiles/imshealth/Global/Content/Corporate/IMS%20Health%20Institute/Reports/Global_Use_of_Meds_Outlook_2017/IIHI_Global_Use_of_Meds_Report_2013.pdf. Accessed February 28, 2014.
6 -IMS Report Predicts Increased Spending on SpecialtyDrugs. Specialty Pharmacy Times, www.specialtypharmacytimes.com/news/IMS-Report-Predicts-Increased-Spending-on-Specialty-Drugs
7 -Drug Channels. Oral Oncology Channel Battle: Payers vs. Providers. http://www.drugchannels.net/2012/05/oral-oncology-channel-battle-payers-vs.html. Published May 22, 2012. Accessed February 28, 2014.
8 -Collins S, Specialty Pharmacy Management Will Become More Intense, Manage Care, October 2010. http://www.managedcaremag.com/archives/1010/1010.specialty_collins.html Accessed March 26, 2014.
Table of Contents