How Are Employers Tackling Rising Specialty Drug Costs?

How Are Employers Tackling Rising Specialty Drug Costs?

The escalating expense of specialty drugs, critical for treating complex conditions such as cancer and rare diseases, has emerged as a pressing issue for employers and health plans across the healthcare landscape, demanding urgent and innovative solutions. With these medications accounting for a substantial slice of pharmacy benefit costs, benefits leaders face mounting pressure to devise strategies that curb financial strain without compromising patient access. A recent survey encapsulated in the 2025 Trends in Specialty Drug Benefits Report by the Pharmaceutical Strategies Group (PSG), involving 231 benefits leaders from employers, health plans, and unions, paints a vivid picture of this challenge. The data reveals a sharp uptick in concern, with 84% of respondents prioritizing the management of these costs and overall care expenditure—a significant rise from 75% just a year ago. This growing urgency underscores the need for innovative approaches to balance affordability with the necessity of delivering life-changing treatments to those in need.

Beyond the sheer financial burden, the complexity of specialty drugs adds layers of difficulty in ensuring their appropriate use while maintaining transparency in pricing and data access. Benefits leaders are increasingly focused on reducing out-of-pocket costs for members, a challenge compounded by gaps in integrated data that hinder comprehensive cost-of-care insights. As emerging therapies like biosimilars and novel cell and gene treatments enter the market, new opportunities and hurdles arise, demanding readiness and education. Meanwhile, specialized areas such as oncology require tailored solutions due to the intricate and costly nature of treatments, prompting a shift toward strategic partnerships and innovative delivery models to manage expenses effectively.

Current Challenges in Specialty Drug Cost Management

Escalating Costs and Financial Burden

The financial impact of specialty drugs has reached a critical point, driving a significant portion of healthcare spending and placing immense pressure on employers and health plans to find sustainable solutions. The sharp rise in costs has not only strained budgets but also heightened concerns about affordability for both organizations and their members. According to recent survey findings, the urgency to address this issue is palpable, with a vast majority of benefits leaders identifying cost management as their top priority. This focus stems from the recognition that unchecked expenditure on these medications could undermine broader healthcare budgets, forcing difficult trade-offs between access to cutting-edge treatments and fiscal responsibility. The challenge lies in crafting strategies that mitigate this burden without sacrificing the quality of care, a balancing act that requires both innovation and careful planning to ensure long-term viability.

A parallel concern is the burden of out-of-pocket expenses borne by members, which often deter adherence to necessary treatments and exacerbate health disparities. Benefits leaders are increasingly aware that high costs at the individual level can lead to delayed or foregone care, ultimately driving up long-term expenses through worsened health outcomes. This issue is particularly acute for specialty drugs, where even a single course of treatment can cost thousands of dollars. Addressing this requires not only systemic changes in pricing and coverage models but also a commitment to transparency that empowers members to make informed decisions. The push to reduce these costs reflects a broader goal of aligning financial incentives with patient well-being, ensuring that access to critical medications remains within reach for those who need them most.

Data and Utilization Obstacles

One of the most significant barriers to effective cost management is the lack of integrated data that provides a holistic view of total care expenditure across pharmacy and medical benefits. Without reliable, actionable insights, benefits leaders struggle to make informed decisions about where and how to allocate resources to maximize impact. This gap has widened compared to previous years, highlighting a systemic shortfall in the tools available for comprehensive analysis. The inability to seamlessly combine data from disparate sources often results in fragmented strategies that fail to address the full scope of specialty drug costs. Solving this issue demands investment in technology and collaboration across stakeholders to create a unified framework that supports data-driven decision-making and ultimately drives down expenses through targeted interventions.

Equally challenging is the task of curbing inappropriate utilization of specialty drugs without creating barriers to access for patients who genuinely need them. Overuse or misuse of these high-cost medications can inflate costs unnecessarily, yet overly restrictive measures risk delaying or denying essential care. Benefits leaders face the delicate task of implementing controls that ensure drugs are used as intended while preserving patient outcomes. Tools like prior authorization and step therapy are often deployed, but their application must be carefully calibrated to avoid unintended consequences. Striking this balance is critical, as the consequences of missteps can ripple through the healthcare system, affecting not only costs but also trust between providers, payers, and patients in the integrity of benefit structures.

Strategic Responses to Rising Costs

Formulary and Utilization Management

In response to soaring expenses, there has been a notable increase in the adoption of formulary management across both pharmacy and medical benefits, signaling a shift toward more holistic oversight. Recent data indicates that 72% of plans now maintain a medical drug formulary, while 77% manage specialty formularies across both benefit types. This approach allows benefits leaders to prioritize cost-effective medications and align treatment options with clinical guidelines, ensuring that resources are allocated efficiently. By establishing clear criteria for inclusion, formularies help standardize care delivery and reduce variability in prescribing practices. However, the success of this strategy hinges on continuous updates to reflect the latest clinical evidence and market dynamics, a process that requires significant coordination and expertise to execute effectively.

Utilization management tools have also become a cornerstone of cost control, with widespread implementation of mechanisms such as prior authorization, used by 95% of respondents, and step therapy and quantity limits, each employed by 83%. These tools are designed to ensure that specialty drugs are prescribed only when medically necessary, preventing overuse while promoting adherence to evidence-based protocols. Yet, a disparity exists in their adoption, as larger employers are more likely to deploy these strategies compared to smaller ones with limited resources. Experts caution that while these mechanisms are effective in managing costs, they must be applied judiciously to avoid impeding access to critical treatments. The challenge lies in designing policies that are both robust enough to curb unnecessary spending and flexible enough to accommodate individual patient needs.

Innovative Delivery and Cost-Saving Models

A promising trend in cost management is the growth of site-of-care programs, which aim to shift drug administration from expensive settings like hospitals to more affordable options such as home infusion. Currently, 36% of surveyed benefits leaders have adopted these programs, redirecting treatments to lower-cost environments without compromising quality. This shift not only reduces overhead expenses associated with hospital-based care but also enhances patient convenience, potentially improving adherence. The move reflects a broader recognition that delivery settings play a significant role in overall cost structures, and optimizing them can yield substantial savings. As these programs gain traction, their impact on both financial outcomes and patient satisfaction will likely shape future strategies in specialty drug management.

Further bolstering this approach is the increasing use of mandatory arrangements within site-of-care programs, with 56% of respondents enforcing such policies, up from 46% in prior data. These mandates ensure that treatments are administered in designated, cost-effective locations unless clinical necessity dictates otherwise. This trend underscores a stronger commitment to cost containment, as benefits leaders seek to eliminate discretionary spending on high-cost care settings. However, the implementation of mandatory policies must be accompanied by clear communication and support to prevent disruptions in patient care. Balancing enforcement with flexibility remains key, as does evaluating the long-term effects of these arrangements on both cost savings and health outcomes to ensure they deliver the intended benefits without unintended drawbacks.

Emerging Trends and Future Preparedness

Biosimilars as a Cost-Effective Solution

The rise of biosimilars, which offer lower-cost alternatives to branded biologic drugs, represents a significant opportunity to alleviate the financial strain of specialty medications. Survey results show that 58% of benefits leaders have adopted a lowest net cost strategy, while 41% mandate biosimilars for new therapy patients. This shift is driven by the potential for substantial savings without sacrificing efficacy, as biosimilars are designed to be highly similar to their reference products. Their integration into benefit plans is seen as a pragmatic step toward affordability, particularly for chronic conditions requiring long-term treatment. As market competition grows, the availability and acceptance of biosimilars are expected to expand, potentially reshaping the landscape of specialty drug spending in meaningful ways over the coming years.

Health plans appear to be leading the charge in embracing biosimilars, often outpacing employers with proactive strategies such as preferred drug policies for high-cost treatments like adalimumab. This disparity highlights differences in resources and expertise, as health plans typically have greater capacity to navigate the complexities of biosimilar adoption. Employers, particularly smaller ones, may face hurdles in implementing similar mandates due to limited administrative bandwidth or lack of specialized knowledge. Bridging this gap requires targeted support, including education on the clinical and financial benefits of biosimilars, to ensure broader uptake. The momentum behind these alternatives signals a transformative shift, but sustained effort is needed to maximize their impact across diverse organizational contexts.

Novel Therapies and Knowledge Gaps

Looking ahead, the emergence of novel cell and gene therapies poses a formidable challenge, with 73% of benefits leaders anticipating affordability issues within the next two to three years from 2025. These cutting-edge treatments, while offering groundbreaking potential for curing previously untreatable conditions, come with staggering price tags that could disrupt even the most robust benefit plans. The financial implications are profound, as a single treatment can result in high-cost claims that strain budgets and necessitate new risk management approaches. Preparing for this wave of innovation requires not only financial planning but also strategic partnerships with providers and payers to share the burden of costs. The urgency to address this looming issue is clear, as the pipeline of these therapies continues to grow at a rapid pace.

Compounding the challenge is a significant knowledge gap, with 69% of respondents reporting low to moderate understanding of the current pipeline for cell and gene therapies. Employers, in particular, lag behind health plans in their grasp of these developments, often due to fewer resources dedicated to horizon scanning and education. This lack of preparedness could leave organizations vulnerable to unexpected costs and inadequate coverage policies when these therapies become widely available. Addressing this gap calls for targeted initiatives to enhance awareness and build capacity, such as industry-wide training programs and collaboration with clinical experts. Without such efforts, the risk of being caught off guard by the financial and logistical demands of these therapies remains high, underscoring the need for proactive engagement starting now.

Specialized Focus Areas

Oncology Management and Partnerships

Oncology stands out as a particularly complex area within specialty drug management, given the high costs and intricate treatment regimens associated with cancer care. To navigate these challenges, 30% of benefits leaders have turned to oncology management vendors for support in ensuring clinical pathway adherence and providing patient assistance, while another 26% are considering this approach. These partnerships offer access to specialized expertise, helping to standardize care and optimize outcomes in a field where variability can drive up expenses significantly. By leveraging vendor capabilities, organizations can implement evidence-based protocols that balance cost control with the imperative to deliver high-quality care. This trend reflects a growing acknowledgment that managing oncology costs requires more than traditional tools—it demands a nuanced, collaborative approach tailored to the unique needs of cancer patients.

The increasing reliance on external partners also highlights the need for robust patient support systems, as oncology treatments often involve long-term care and significant emotional and financial burdens. Vendors can play a vital role in offering resources such as navigation services and counseling, which enhance the patient experience while helping to prevent costly complications or treatment interruptions. This focus on whole-person care aligns with broader goals of maintaining affordability without compromising outcomes. However, the success of these partnerships depends on careful selection of vendors and alignment of objectives to ensure that cost-saving measures do not undermine clinical quality. As more organizations explore this model, the lessons learned will likely inform strategies for managing other high-cost, complex conditions in the future.

Addressing Disparities in Strategy Adoption

A striking observation from recent findings is the disparity in strategy adoption between health plans and employers, particularly when comparing smaller and larger entities. Health plans often take the lead in implementing innovative cost-management measures, benefiting from greater resources and specialized knowledge to drive change. In contrast, smaller employers frequently struggle with limited budgets and administrative capacity, resulting in slower uptake of critical tools like utilization management or biosimilar mandates. This uneven landscape points to systemic inequities that can exacerbate cost challenges for organizations with fewer means, potentially widening gaps in care quality and financial stability. Addressing this issue requires a concerted effort to level the playing field through accessible solutions and support structures.

To bridge these disparities, tailored interventions are essential, such as industry programs that provide smaller employers with affordable access to expertise and technology. Collaborative initiatives between health plans and employers could also facilitate knowledge sharing and resource pooling, enabling more equitable progress in managing specialty drug costs. The focus must be on creating scalable strategies that account for varying organizational capacities, ensuring that all stakeholders can adopt effective measures without being hindered by structural constraints. By prioritizing inclusivity in solution design, the healthcare system can move toward a more unified approach to cost management, where size or resource availability does not dictate the ability to implement vital reforms. This commitment to equity will be crucial in sustaining long-term improvements across the board.

Subscribe to our weekly news digest.

Join now and become a part of our fast-growing community.

Invalid Email Address
Thanks for Subscribing!
We'll be sending you our best soon!
Something went wrong, please try again later