Specialty drugs or specialty pharmaceuticals are a recent designation of pharmaceuticals classified as high-cost, high complexity and/or high touch. Specialty drugs are often biologics—"drugs derived from living cells" that are injectable or infused (although some are oral medications). They are used to treat complex or rare chronic conditions such as cancer, rheumatoid arthritis, hemophilia, H.I.V. psoriasis, inflammatory bowel disease and hepatitis C. In 1990 there were 10 specialty drugs on the market, around five years later nearly 30, by 2008 200, and by 2015 300.

Drugs can be defined as specialty because of their high price. Medicare defines any drug with a negotiated price of $670 per month or more as a specialty drug. These drugs are placed in a specialty tier requiring a higher patient cost sharing. Drugs are also identified as specialty when there is a special handling requirement or the drug is only available via a limited distributions network. By 2015 "specialty medications accounted for one-third of all spending on drugs in the United States, up from 19 percent in 2004 and heading toward 50 percent in the next 10 years", according to IMS Health.

According to a 2010 article in Forbes, specialty drugs for rare diseases became more expensive "than anyone imagined" and their success came "at a time when the traditional drug business of selling medicines to the masses" was "in decline". In 2015 analysis by The Wall Street Journal suggested the large premium was due to the perceived value of rare disease treatments which usually are very expensive when compared to treatments for more common diseases.

Definition and common characteristics

Medications must be either identified as high cost, high complexity or high touch to be classified as a specialty medication by Magellan Rx Management. Specialty pharmaceuticals are defined as "high-cost oral or injectable medications used to treat complex chronic conditions". According to a 2013 article in the Journal of Managed Care & Specialty Pharmacy, on the increasingly important role of specialty drugs in the treatment of chronic conditions and their cost, drugs are most typically defined as specialty because they are expensive. Other criteria used to define a drug as specialty include "biologic drugs, the need to inject or infuse the drug, the requirement for special handling, or drug availability only via a limited distribution network". The price of specialty drugs compared to non-specialty drugs is very high, "more than $1,000 per 30-day supply".

Specialty drugs cover over forty therapeutic categories and special disease states with over 500 drugs.

Vogenberg claims that there is no standard definition of a specialty drug which is one of the reasons they are difficult to manage. "[T]hose pharmaceuticals that usually require special handling, administration, unique inventory management, and a high level of patient monitoring and support to consumers with specific chronic conditions, acute events, or complex therapies, and provides comprehensive patient education services and coordination with the patient and prescriber."

High cost Drugs are most typically defined as specialty because they are expensive. They are high cost "both in total and on a per-patient basis". High-cost medications are typically priced at more than $1,000 per 30-day supply. The Medicare Part D program "defines a specialty drug as one that costs more than $600 per month". Most of the prescriptions filled by Pennsylvania-licensed Philidor Rx Services, a specialty online mail-order pharmacy, which mainly sold Valeant Pharmaceuticals International Inc expensive drugs directly to patients and handled insurance claims on the customers' behalf, such as Solodyn, Jublia, and Tretinoin, would be considered specialty drugs.

High complexity Specialty drugs are more complex to manufacture. They are "highly complex medications, typically biology-based, that structurally mimic compounds found within the body". Specialty drugs are often biologics—"drugs derived from living cells"—but biologics are "not always deemed to be specialty drugs". Biologics "may be produced by biotechnology methods and other cutting-edge technologies. Gene-based and cellular biologics, for example, often are at the forefront of biomedical research, and may be used to treat a variety of medical conditions for which no other treatments are available."

According to the U.S. Food and Drug Administration (FDA) biologics, or

High touch Some specialty drugs can be oral medications or self-administered injectables. Others may be professionally administered or injectables/infusions. High-touch patient care management is usually required to control side effects and ensure compliance. Specialized handling and distribution are also necessary to ensure appropriate medication administration. Specialty drugs patient care management is meant to be both high technology and high touch care, or patient-centered care with "more face-to-face time, more personal connections". Patient-centered care is defined by the Institute of Medicine as "care that is respectful of and responsive to individual patient preferences, needs and values".

Specialty drugs may be "difficult for patients to take without ongoing clinical support".

Limited availability Specialty drugs might have special requirements for handling procedures and administration including the necessity of having controlled environments such as highly specific temperature controls to ensure product integrity. They are often only available via a limited distributions network such as a special pharmacy. Specialty drugs may be "challenging for providers to manage".

Rare and complex diseases

Specialty drugs may be taken "by relatively small patient populations presenting with complex medical conditions".

History

"Specialty pharmacies have their roots in the 1970s, when they began delivering temperature-controlled drugs to treat cancer, HIV, infertility and hemophilia."

According to The American Journal of Managed Care, in 1990 there were 10 specialty drugs on the market. According to the National Center for Biotechnology Information, by the mid-1990s, there were fewer than 30 specialty drugs on the market, but by 2008 that number had increased to 200.

Specialty drugs may also be designated as orphan drugs or ultra-orphan drugs under the U. S. Orphan Drug Act of 1983. This was enacted to facilitate development of orphan drugs—drugs for rare diseases such as Huntington's disease, myoclonus, amyotrophic lateral sclerosis, Tourette syndrome and muscular dystrophy which affect small numbers of individuals residing in the United States.

Not all specialty drugs are orphan drugs. According to Thomson Reuters in their 2012 publication "The Economic Power of Orphan Drugs", there has been increased investing in orphan drug research and development partly since the U.S. Congress enacted the Orphan Drug Act, giving an extra monopoly for drugs for "orphan diseases" that affected fewer than 200,000 people in the country. Similar acts came into existence in other regions of the world, many driven by "high-profile philanthropic funding". According to a 2010 article in Forbes, prior to 1983 drug companies largely ignored rare diseases and focused on drugs that affected millions of patients.

The term specialty drugs was used as early as 1988 in a New York Times article about Eastman Kodak Company's acquisition of the New York-based Sterling Drug Inc., maker of specialty drugs along with many and diverse other products. When Shire Pharmaceuticals acquired BioChem Pharma in 2000 they created a specialty pharmaceuticals company. By 2001 Shire was one of the fastest growing specialty pharmaceutical companies in the world.

By 2001 CVS's specialty pharmacy ProCare was the "largest integrated retail/mail provider of specialty pharmacy services" in the United States. It was consolidated with their pharmacy benefit management company PharmaCare in 2002. In their 2001 annual report, CVS anticipated that the "$16 billion specialty pharmacy market" would grow at "an even faster rate than traditional pharmacy due in large part to the robust pipeline of biotechnology drugs". By 2014 CVS Caremark, Express Scripts and Walgreens represented more than 50% of the specialty drug market in the United States.

When an increasing number of oral oncology agents first entered the market between 2000 and 2010, most cancer care was provided in a community oncology practices. By 2008 many other drugs had been developed to treat cancer, and drug development had grown into a multibillion-dollar industry.

In 2003 the Medicare Prescription Drug, Improvement, and Modernization Act, was enacted—the largest overhaul of Medicare in the public health program's 38-year history—included Medicare Part D an entitlement benefit for prescription drugs, through tax breaks and subsidies. In 2004 the U. S. Centers for Medicare and Medicaid Services (CMS) prepared a report on final guidance regarding access to drug coverage enacted under in which they included the specialty drugs tier in the prescription drug formulary. At that time CMS guidelines included four tiers: tier 1 includes preferred generics, tier 2 includes preferred brands, tier 3 includes non-preferred brands and generics and tier 4 included specialty drugs. By January 1, 2006, the controversial Medicare Part D was put in effect. It was a massive expansion of the federal government's provision of prescription drug coverage to previously uninsured Americans, particularly seniors. In 2006 in the United States there was no standard nomenclature, so sellers could call the plan anything they wanted and cover whatever drugs they wanted.

By 2008 most prescription medication plans in the United States used specialty drug tiers, and some had a separate benefit tier for injectable drugs. Beneficiary cost sharing was higher for drugs in these tiers.

By 2011 in the United States a growing number of Medicare Part D health insurance plans—which normally include generic, preferred, and non-preferred tiers with an accompanying rate of cost-sharing or co-payment—had added an "additional tier for high-cost drugs which is referred to as a specialty tier".

By 2014 in the United States, in the new Health Insurance Marketplace—following the implementation of the U.S. Affordable Care Act, also known as Obamacare—most health plans had a four- or five-tier prescription drug formulary with specialty drugs in the highest of the tiers.

AARP

According to an AARP 2015 report, "All but 4 of the 46 therapeutic categories of specialty drug products had average annual retail price increases that exceeded the rate of general inflation in 2013. Price increases by therapeutic category ranged from 1.7 percent to 77.2 percent."

Risk evaluation and mitigation strategies (REMS)

On September 27, 2007 President George W. Bush amended the Food and Drug Administration Amendments Act of 2007 (FDAAA) to authorize the FDA to require Risk Evaluation and Mitigation Strategies (REMS) on medications if necessary to minimize the risks associated with some drugs". These medications were designated as specialty drugs and required specialty pharmacies. When the FDA approves a new drug they may require a REMS program which "may contain any combination of 5 criteria: Medication Guide, Communication Plan, Elements to Assure Safe Use, Implementation System, and Timetable for Submission of Assessments". "In 2010, 48% of all new molecular entities, and 60% of all new specialty drug approvals, required a REMS program." Risk-reduction mechanisms can include the "use of specialized distribution partners".

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