Spike in CalPERS’ Rx Spending Driven by Specialty Drug Costs

CalPERS' specialty drug costs increased by 32% and accounted for nearly a quarter of the agency's total prescription drug spending in 2014, according to a report presented Tuesday to the fund's Pension and Health Benefits Committee, the Los Angeles Times reports (Terhune, Los Angeles Times, 12/15).

Background

Prices for specialty drugs for the treatment of serious or chronic conditions have soared in recent years.

For example, specialty drugs represent 3% of brand-name drugs dispensed nationwide over the past five years, but they account for 73% of prescription drug spending growth, according to an Assembly Committee on Health analysis (California Healthline, 7/9).

Details of Rx Spending

Overall, CalPERS spent $1.86 billion on prescription drugs last year, up by 7.5% from 2013.

The number of prescriptions drug orders dropped by 0.5% between 2013 and 2014, but spending increased because of a spike in costs per order. Specifically, the average cost per prescription increased by 8.1% to $94.38.

The report attributed the higher costs to a "lack of price control in the U.S., limited competition, high cost generics and a continued 'pipeline' of new drugs coming to market" (Ortiz, "The State Worker," Sacramento Bee, 12/15).

Specialty drugs, which made up less than 1% of all prescriptions, accounted for nearly 25% -- or $438 million -- of CalPERS' total drug costs.

According to the Times, new drugs for hepatitis C -- as well as those for rheumatoid arthritis, cancer and multiple sclerosis -- drove the increase in specialty drug spending.

For example, the report found that CalPERS spent $43.9 million on Sovaldi and $16.5 million on Harvoni and Olysio, all of which are used to treat hepatitis C (Los Angeles Times, 12/15).

Gilead Sciences' Sovaldi cost $1,000 per pill or about $84,000 for full treatment course, while Harvoni cost $94,500 per patient for a 12-week treatment (California Healthline, 12/2).

Kathy Donneson, chief of CalPERS' health plan administration division, said the agency is exploring options for controlling prescription drug spending, noting, "We are under pressure" to "keep pharmacy trend[s] from blowing through the roof as we look at" future premiums (Los Angeles Times, 12/15).