Understanding specialty drugs

The specialty drugs phenomenon has introduced an entire new range of terminology into the drug plan conversation.

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drug-costs-benefits-prescriptionRecognizing that specialty drugs will put increasing cost pressures on drug plans, it’s important that you understand the terminology being used so you can have informed conversations with your clients.

You need to offer them potential strategies to mitigate these rising costs so they can continue to offer sustainable drug plans to their employees.

What makes specialty drugs special?
Specialty drugs are medications that are most commonly used to treat complex, chronic, rare, and difficult-to-manage conditions such as multiple sclerosis, rheumatoid arthritis, cancer, and Hepatitis C.

There is no “standard” definition for specialty drugs. While definitions vary, the presence of two or more of the following generally indicates that a drug is a specialty pharmaceutical:

  • Special manufacturing techniques (e.g., using bacteria or viruses to produce the drug)
  • Special handling (e.g., requiring refrigeration while the drug is being distributed)
  • Special administration (e.g., IV infusion or subcutaneous injection)
  • Generally used by a small percentage of the population
  • Cost of a typical annual treatment is $10,000 or greater per claimant
  • Typically prescribed by a specialist physician (not a family doctor)

There are three terms you will often hear: biologics, subsequent entry biologics (SEBs) and rare disease/orphan drugs. There has been confusion about what these terms mean – and they have often been used interchangeably with “specialty drugs,” even though not all of the drugs that fall under these categories may actually be specialty drugs.


A large proportion of specialty drugs are biologics. These are “innovator” drugs, developed under patent by one drug company. Rather than being made chemically (like conventional brand name and generic drugs), they are made with living cells.

The first generation of biologics included insulin and vaccines. More recently, new biologics produced using the latest genetic science include monoclonal antibodies and proteins such as Remicade® and Humira®.

Subsequent Entry Biologics (SEBs)

A SEB is a biologic drug that is similar, but not identical, to an innovator biologic drug (the “reference drug”), and enters the market after the innovator drug’s patent has expired.

SEBs are not identical to their innovator products because their characteristics cannot be precisely duplicated during the manufacturing process. Therefore, SEBs may have unique efficacy and safety profiles and may not be considered equivalent to the innovator drug.

As more biologic drugs begin to come off patent, we will see more SEBs come to market. SEBs typically cost less than the reference drug – for example, the SEB Inflectra™ costs approximately 30% less than its reference drug Remicade® when dosing and indications are the same.

Rare disease/orphan drugs

These drugs target diseases that affect a very small proportion of the population (a threshold that is commonly used is 5 in 10,000 people). Examples of rare diseases include cystic fibrosis (treated with Kalydeco®) and the blood disease paroxysmal nocturnal haemoglobinuria (treated with Soliris®). Between 6,000 and 8,000 rare diseases are thought to exist.

Canada’s Orphan Drug Regulatory Framework is pending approval by Health Canada. This framework is designed to significantly speed up the approval of rare disease drugs here in Canada, where approvals have significantly lagged behind the US and Europe.

The last several years clearly show the trend toward specialty drugs is shifting into high gear and its potential to impact drug plan costs is unparalleled. That’s why it’s important that you act now. Have a conversation with your insurance carriers today about putting specialty drugs strategies in place that will help your clients effectively manage the cost pressures to come.

Transcontinental Media G.P.