University spending on specialty drugs continues to increase

Sharply rising prices and growing use of specialty drugs continued to impact the university's prescription drug plan in 2015.

The total cost of the prescription drug plan was $121.6 million in 2015, an increase of $15 million, or 14 percent over 2014. According to the 2015 Prescription Drug Plan Annual Report, it was the highest increase since the Benefits Office began managing the plan internally in 2003.

The drug plan plays a significant role in how much the university, employees and retirees pay for health care. About one out of every five dollars the university spends on health benefit programs goes toward prescription drugs.

The drug plan has successfully limited cost increases and the amount faculty, staff and retirees pay for the plan over time through best practices, aggressive contracts and the clinical expertise of faculty advisers.

U-M plan members contribute about 10 percent of the total plan cost through health benefit premiums and copays, less than half the national average of 24 percent reported by the Pharmacy Benefit Manager Institute.

The Benefits Office encourages employees and retirees to use the features of the drug plan to save on prescriptions, like using the NoviXus mail order pharmacy for long-term medications. Members can get started with NoviXus by calling 877-269-1160 or visiting

"Many organizations have been able to reduce the cost of prescriptions by partnering with mail order pharmacies," said Rich Holcomb, senior director for benefits. "Our employees who use NoviXus rate the service very highly. We hear how much they value the option to save time with online ordering and home delivery, and that NoviXus pharmacists are experienced, easy to reach and eager to help."

Even tightly managed plans like U-M's are facing enormous pressures from new high-cost specialty drugs and price inflation. The partnership with NoviXus is one part of the university's strategy to control costs and ensure that members have access to the medications they need.

Specialty drugs target complex, chronic conditions like rheumatoid arthritis, hepatitis C, multiple sclerosis and cancer. Drug companies have shifted research and development toward these conditions in response to increased competition among generic drugs. In many cases new specialty drugs represent life-changing treatment breakthroughs for serious conditions.

But because they tend to impact relatively few people, they are priced at a premium cost.

Specialty drugs made up less than 2 percent of the U-M drug plan's nearly one million claims in 2015. With a price tag of $41 million, they accounted for more than a third of the total spending.

"Our specialty drug costs rose by 34 percent in 2015, and these types of increases are projected to continue for the next several years at least," said Keith Bruhnsen, prescription drug plan manager and assistant director in the Benefits Office. "Based on the pipeline of new specialty drugs in development or on their way to market, our prescription drug costs will likely continue to increase.

"We do everything possible to negotiate the best pricing for our members, but it's important to look at ways we all can help reduce pharmacy costs across the board, like using the NoviXus mail order pharmacy and requesting generic drugs whenever possible."

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