Cost-Effectiveness Analysis Shows Specialty Drugs Offer Value Despite High Cost

Charles Bankhead

March 2015, Vol 5, No 2 - Practice Management


Despite substantially higher costs, specialty drugs can offer value comparable with that of traditional medications under certain circumstances, according to a recent cost-effectiveness analysis covering 12 years of FDA drug approvals (Chambers JD, et al. Health Aff [Millwood]. 2014;33:1751-1760).

Specialty drugs, many of which are cancer drugs, offered larger health gains and improved survival but at an average cost per quality-adjusted life-year (QALY) of more than 15 times greater than the traditional drugs in the same class.

Three times as many specialty drugs had a cost per QALY in excess of $150,000. Even so, the overall cost-effectiveness was comparable for specialty and traditional drugs.

“Payers have not yet found the formula for managing specialty drugs,” concluded the investigators, led by James D. Chambers, PhD, MPharm, MSc, Assistant Professor at Tufts Medical Center Institute for Clinical Research and Health Policy Studies, Boston. “Insurers should continue to experiment with a combination of existing formulary management tools and novel strategies to maximize patient access to specialty drugs while minimizing their cost.”

In recent years, many of the drugs approved by the FDA are classified as specialty or “large-molecule” agents. Specialty drugs have represented therapeutic advances for a variety of conditions, especially in cancer. However, the high cost of these medications has attracted considerable attention.

Dr Chambers and colleagues evaluated FDA drug approvals of new molecular entities (NMEs) from 1999 to 2011. They focused on incremental health improvements and incremental costs associated with specialty drugs after their introduction to the marketplace.

The team calculated QALYs for each agent to determine incremental health benefit. Incremental cost was derived from the difference in cost between the specialty drugs and the existing treatment options. Incremental costs included direct drug costs and related costs (hospitalization and other health resource utilization).

Drugs were classified as specialty or traditional on the basis of inclusion (or exclusion) on the specialty drug lists of CVS Caremark and Express Scripts.

Dr Chambers and colleagues identified 279 NMEs approved by the FDA during the study period. Overall, 154 (55.2%) of the approvals involved specialty drugs.

The illness categories represented by the drugs included 25 for cancer (22 specialty drugs), 16 for infectious disease (12 specialty drugs), 14 for circulatory disease (4 specialty drugs), 11 for endocrine disease (2 specialty drugs), 11 for musculoskeletal and rheumatologic conditions (8 specialty drugs), and 10 for neuropsychiatric and neurologic conditions (1 specialty drug).

Quality and Cost

The median incremental QALY gain across all 102 drugs was 0.031, equivalent to 1.5 weeks of quality-adjusted survival gain. The mean QALY gain was 0.17.

Specialty drugs had a median QALY gain of 0.183 versus 0.002 for traditional drugs (P <.01) and mean gains of 0.25 and 0.08, respectively.

Approximately 33% of the drugs (15 specialty and 17 traditional drugs) were less effective or no more effective than the existing care. In addition, 14 specialty drugs and 2 traditional drugs were associated with ?0.5 QALYs gained, or 6 months of quality-adjusted life expectancy.

For all 102 drugs included in the analysis, the median additional cost over existing care was $2950, with a mean of $42,561.

Specialty drugs were associated with a median additional cost of $12,238 compared with $784 for traditional drugs. The mean values were $72,917 and $3237, respectively.

Specialty drugs accounted for 13 of the leading 15 drugs in QALY gains and all 15 of the drugs associated with the largest additional costs. Furthermore, 26% of specialty drugs versus 9% of traditional drugs exceeded a cost per QALY gained of $150,000.

“Our study suggests that many new specialty and traditional drugs offer relatively modest benefits over preexisting care,” the researchers wrote.

“Many of the drugs that have offered the largest clinical advancements have been specialty drugs,” they added. “However, the incremental costs for specialty drugs have exceeded the incremental costs of more conventional novel treatments. Nevertheless, specialty drugs can offer good value for various complex and burdensome diseases.”