💊 Innovation Stifled: The Systemic Barriers to Improving Patient Access to Specialty Medications
Yet another story about how patients are caught in the intricate web of misaligned incentives in healthcare.
As someone who has had a chronic disease for years, I’ve had some poor experiences with the healthcare system. Specialty pharmacy is a whole new beast.
In April 2022, I was prescribed a new medication: a “specialty drug.” These tend to be high-cost medications you can only get from a specialty pharmacy – CVS doesn’t sell them. After a few months of back-and-forth with my medical team debating which medication would help me best, I thought I could finally breathe a sigh of relief.
Wrong. By the time I navigated the maze of prior authorizations and phone calls between my insurance, specialty pharmacy, and pharmacy benefits manager (PBM) multiple times over, it was the end of July when I received my first dose – a four-month delay for necessary medication.
And it hasn’t stopped there. Every two months, I have to allocate a few hours to call my specialty pharmacy and work through the complications that inevitably arise – a lost prior authorization, being redirected to the wrong manufacturer’s patient hotline, an order that was placed but never actually shipped to me. Many times, I question whether I will need to forego taking my medication this time around. Especially since this is a medication that is necessary for my health, the process is incredibly frustrating, and at times, straight-up terrifying.
It turns out that I’m not alone in this experience. Twitter and Reddit are full of posts about the convoluted experience of patients coordinating between their specialty pharmacy, insurance, pharmacy benefits manager (PBM), and copay assistance programs every time they need to get their medications.
Seeing these posts sent me on a months-long journey to understand the convoluted world of specialty drugs – and to see what could be done to solve the miserable patient experience.
First: what are specialty drugs?
Specialty drugs are high-cost medications that are used to treat complex, chronic, or rare conditions such as cancer, autoimmune diseases, and genetic disorders – such as chemotherapy drugs and Humira (which is used for a variety of autoimmune conditions). Patients are often dependent on these drugs to live a healthy life and these medications are usually taken for many years or even indefinitely. Specialty drugs often cannot be procured by standard retail pharmacies (like your local CVS and Walgreens). Instead, they are administered by specialty pharmacies that take care of any special handling, storage, administration, or monitoring that is required.
Specialty drugs pose a large financial burden on patients and our healthcare system as a whole. These medications are incredibly expensive, ranging from $2000 a month to upwards of $100,000 a year. As a category, these medications made up about 2% of prescriptions by volume but represented over 50% of total drug spending in 2021, totaling an overwhelming $301 billion. But despite all of the money in this space, the patient experience has remained a confusing labyrinth.
The Patient Experience
Step 1: Prior Authorization. When a patient is prescribed a specialty drug, their doctor often has to file a prior authorization with the patient’s insurance company, which allows the insurance company to review the case and determine whether the medication is “medically necessary and appropriate” for the patient. This process is often time-consuming and requires a lot of back and forth between the clinic and the insurance company, causing long delays for patients to access these medications.
Step 2: Specialty Pharmacy / Pharmacy Benefits Manager. Once the prior authorization is approved, the insurance company redirects the patient to its pharmacy benefits manager (PBM), a middleman between the insurer and drug manufacturers. The PBM then directs the patient to the specialty pharmacy of their insurer’s choice (and they won’t pay for the drug if the patient goes anywhere else). The specialty pharmacy will dispense the medication and send it to the patient or their doctor. Specialty pharmacy operations are often inefficient and experience delays due to administrative complexity, and this burden falls on the patient and their care team.
Step 3: Drug Manufacturer. Last but not least, because these drugs are so expensive, insurance companies also have higher cost-sharing for specialty drugs. This means that patients are required to pay for a larger percentage of their specialty medication than they would for a traditional prescription. In many cases, this can be prohibitive for patients given the high sticker price of the drug, so the pharmaceutical manufacturer (who profits from the patient using the drug) steps in with copay assistance programs, in which they pay the remainder of the drug cost on behalf of the patient. These programs are mostly available to patients on commercial insurance plans, but Medicare patients have less access to financial resources, leading to high out-of-pocket costs.
Throughout this process, patients have to navigate through a tangled web of healthcare entities, ultimately leading to high financial burdens and significant delays in receiving their medications. Patients sometimes drop off their medication altogether due to these access and affordability barriers. All of these contribute to poorer clinical outcomes for patients.
Insurers own PBMs and specialty pharmacies, and this vertical integration harms the patient experience.
In recent years, many insurers have acquired PBMs and specialty pharmacies – for example, Cigna acquired both Accredo (a specialty pharmacy) and ExpressScripts (a PBM) and Aetna directs its patients to CVS Specialty Pharmacy after it was acquired by CVS Health. In fact, 13 of the top 15 specialty pharmacies are owned by insurers or another large entity, who have exclusive contracts to send the patients on their plans to these subsidiary pharmacies.
The vertical integration of the insurer, PBM, and pharmacy is portrayed as helping patients by decreasing fragmentation in their care, reducing coordination delays, and lowering costs. In practice, vertical integration is a Trojan Horse. Despite the promise of improved efficiency, it actually serves to restrict patient options and limit competition, thereby contributing to poor patient experiences with specialty pharmacies.
If a patient doesn’t like their specialty pharmacy, they’re unfortunately stuck – they can either continually fight against the specialty pharmacy every time they need their medication, or switch to another pharmacy and pay tens of thousands of dollars in drug costs out of pocket. And specialty pharmacies have little incentive to improve their services – because of their exclusive contract with the insurer, they have a captive customer base and little competition from other pharmacies. The result is that 75% of specialty pharmacy revenue in the US is from the top four specialty pharmacies, all of which are owned by major PBMs and/or insurers.
Furthermore, the promised cost savings from vertical integration aren’t realized because no group is fully incentivized to cap drug prices. PBMs negotiate contracts with specialty drug manufacturers to receive rebates on specialty medications, where the profits from these rebates increase as a function of the drug’s cost. Specialty pharmacies also make higher profits on more expensive drugs, since they take a share of the total cost from every order they fulfill. In normal market dynamics, insurers would push to reduce the costs of medication, because their role is to cover those costs on behalf of patients. However, since insurers own the PBMs and specialty pharmacies, this vertically integrated entity is not driven to restrict specialty drug prices. This creates a flywheel of increasing costs, which, once again, is felt most acutely by the patient.
Private sector and digital health solutions are working to reform the incredibly broken specialty pharmacy space.
There are countless articles about improving specialty pharmacy through digital solutions, such as patient engagement portals that help facilitate patient care coordination and medication adherence. There are also many private-sector businesses looking to disrupt pharmacy more broadly, such as SmithRx (a tech-enabled PBM driving down patient costs) and TruePill (a platform that helps telehealth companies launch virtual pharmacy services).
One company making huge strides in specialty pharmacy is HouseRx, a technology-enabled startup partnering with specialty clinics to create “in-house” specialty pharmacies. This novel care delivery model, called “medically integrated dispensing,” allows patients to receive their specialty medications from the same place they receive their medical care.
HouseRx provides services and technology tools to help clinics manage their specialty pharmacy workflows end-to-end – filing prior authorizations, dispensing prescriptions, and mailing orders directly to patients. They foster collaboration between doctors, nurses, pharmacists, and pharmacy technicians (even staffing remote specialty pharmacists and pharmacy technicians to work with care teams) to improve coordination and patient access to specialty medications. HouseRx cites 10+ days faster time to therapy, 25% better adherence rates, and 50% better patient satisfaction scores compared to incumbent specialty pharmacies.
HouseRx is limited to working with patients covered by Medicare and Medicare Advantage plans, which are some of the sickest patients in our healthcare system. However, they’re unable to reach patients on specialty medications who are covered under commercial insurance plans, such as United, Aetna, Cigna, and others. This is because patients and providers need to opt-in to using HouseRx as their specialty pharmacy, but commercial insurers generally restrict patients to using their subsidiary specialty pharmacy. HouseRx can help patients on commercial insurance plans fill their first medication order to decrease their initial time to therapy, but then has to transfer these patients to their insurance-mandated specialty pharmacy shortly after.
In contrast, Medicare Part D (which covers most specialty medications) has provisions that prevent plans from restricting patient access “by limiting distribution through a subset of network pharmacies” – this means that patients covered under Medicare Part D have relative freedom to choose their specialty pharmacy, and can select HouseRx for themselves. Medicare (including Medicare Advantage) represents a pocket of the healthcare system where HouseRx’s model works because of such regulations that prevent anti-competitive practices by insurers and PBMs.
These solutions have significantly improved the patient experience, but there are still underlying, systemic issues hindering patient access to specialty drugs.
HouseRx, and other innovative private-sector specialty pharmacy solutions, are doing amazing work to improve access and affordability for specialty drugs. However, without federal and state legislation that restricts insurers from exclusive contracting with their subsidiary pharmacy, patients on commercial plans won’t be able to benefit from these services.
Better technology is necessary to improve workflows, infrastructure, and patient experience in healthcare. But technological innovations can’t truly solve problems in healthcare that are fundamentally due to misaligned financial incentives that are directly opposed to patient interests. When the underlying system is broken, changes in policy and other levers are required to solve the deeper-rooted issues.
There is hope, though – the recent Inflation Reduction Act allowed Medicare to negotiate drug prices with pharma companies starting in 2026 and is also capping the amount of out-of-pocket drug spending for Medicare Part D enrollees. The Federal Trade Commission is also launching a long-overdue inquiry into the anti-competitive practices of PBMs, which received 24,000 public comments in its first 4 months.
Ultimately, patients are the ones who are stuck in the middle of the maze, caught between the profit plays of the healthcare system’s more powerful players. Innovation around payment structures, incentive alignments, and changes to care delivery models are necessary to increase access and affordability to specialty medications. From there, we can build technology to make the patient experience more delightful – but it will only go so far if we don’t solve the deeper roots of the issue first.
Thanks to Allison Blake (HouseRx), Mina Iskarous (HouseRx), Shohini Gupta, Lucas Gelfond, Eli Cahan, Diva Sharma, Alyssa DeLouise, Sam Frasier, Khoi Le, and Ujwal Srivastava for their input and feedback on this article.
Originally published for Reboot in April 2023. A few edits were made before publication here.