PBM 101: Demystifying the Complex World of Specialty Drugs

Unless you work in the pharmacy benefit management (PBM) industry, it’s easy to assume that a “specialty drug” is simply a more expensive prescription. In reality, specialty medications sit in a separate category, with different rules and far bigger consequences for both member experience and a plan’s bottom line.

Today, these life-saving medications are one of the largest drivers of benefit costs, accounting for more than 50% of total pharmacy spend while serving just 2% of patients. And with new specialty approvals entering the market each year, this trend will only continue to drive up health care costs.

That’s why it’s essential for employers and plan sponsors to understand the complexities of the specialty pharmacy landscape. In this blog, we’ll explore what qualifies as a specialty medication, the role specialty pharmacies play and why a smart PBM strategy is one of the most important tools plans can have to manage specialty drug costs effectively.

What Is A Specialty Drug?

Specialty medications are a category of pharmaceuticals used to treat an array of different complex conditions, including cancer, multiple sclerosis, autoimmune disorders and other rare diseases. They’re often highly expensive, in part because many specialty drugs are used by a small subset of patients with rare diseases or chronic conditions. And with fewer patients who need these therapies, there’s typically less competition to bring these drugs to market, which can contribute to higher prices.

Moreover, this category of drugs also requires special handling and patient monitoring to ensure they’re used correctly and safely. For these reasons, specialty medications are commonly dispensed through specialty pharmacy networks that are equipped to provide additional clinical support.

The Role of Specialty Pharmacies

For most prescriptions, members can walk into a retail pharmacy and walk out with what they need. However, that’s not the case for specialty medications. Traditional retail pharmacies aren’t often equipped to support them due to strict storage requirements, temperature control and significantly more coordination than a standard prescription requires.

That’s why specialty pharmacies exist. Rather than simply dispensing the medication, specialty pharmacies provide personalized, high-touch support to help members stay on therapy. This often includes adherence programs, proactive side effect management and help navigating financial assistance, so cost doesn’t become a barrier to treatment.

And while specialty pharmacies manage the patient’s needs, there’s another layer that determines what happens before a prescription is ever filled: coverage rules, approvals and network access. That’s where PBMs come in.

How PBMs Manage Specialty Drugs

If specialty pharmacies handle the “high-touch” support, PBMs handle the “high-stakes” economics. Their role is to help plans manage specialty costs while maintaining access for members. Let’s look at some of the key functions PBMs use to make that happen:

• Formulary Management – PBMs create efficient formularies to guide utilization toward clinically effective options at the lowest net cost, by promoting generics and biosimilars where appropriate.
• Utilization Reviews – Because specialty therapies are both complex and expensive, PBMs use processes like prior authorization and step therapy to confirm medical necessity, before high-cost drugs are approved.
• Negotiating Rebates – PBMs negotiate rebates and discounts from drug manufacturers to be placed on formularies. When structured transparently, these savings can offset specialty costs and reduce overall plan spend. 
• Preferred Networks – PBMs often use preferred, lower-cost specialty pharmacy networks to secure better pricing, deliver more consistent care and support timely member access to medications.

Without a smart specialty strategy in place, the risk is clear: higher specialty spend and less visibility into what’s driving the trend.

Patient Impact

Beyond plan spend, specialty has a direct impact on patients. That’s why the right specialty pharmacy support matters, as it can streamline the path to therapy and reduce delays in receiving care, all of which leads to better health outcomes.

As illustrated in the real-life example, the right specialty pharmacy in place can be a lifesaving experience. Amanda has been a specialty pharmacist at Lumicera Health Services — the Navitus specialty pharmacy solution — since 2023. For the past two years she had direct experience with a specialty pharmacy as a caregiver for a cancer patient – her son. During his treatment, Lumicera helped coordinate benefits and approval steps for his medications, so they could move forward with the treatment plan promptly.

Check out Amanda’s story to learn how smart strategies can make a real difference in someone’s life: 2024 Drug Trend Report.

Cost, Value and The Importance of Transparency

PBM tools only matter if they lead to real results. But with specialty, results are hard to prove, as the biggest cost drivers sit behind layers of pricing, rebates and limited networks.

That’s why partnering with a PBM that prioritizes clarity is essential to navigating the complexities of the specialty landscape. Instead of guessing what’s driving trend, plans get visibility into specialty utilization, where savings are coming from and whether members are getting access to much-needed therapies.

As specialty costs continue to rise, the most expensive mistake a plan can make is trying to manage them in the dark. Navitus brings transparency to specialty, so you can see what’s driving trend and take full control of your pharmacy spending.

When pricing and outcomes are visible, value stops being a promise and becomes a measurable value.

Contact us at [email protected] to learn about our specialty management strategies.