Constance A. Wilkinson, a Member of the Firm in the Litigation and Health Care and Life Sciences Practices in the firm's Washington, DC office, and Alan J. Arville, a Member of the Firm in the Health Care and Life Sciences practice, in the firm’s Washington, DC, office, were asked to respond to the following question: “What are the implications of the upward spiral occurring in the specialty drug cost trend?”

Following is an excerpt of their answer:

For a variety of reasons, the cost of specialty drugs represents an ever-increasing percentage of overall drug spending. Factors include the move toward personalized or better targeted medicine, where theoretically the business case can be made that better clinical outcomes in the particular population likely to respond to the drug can justify higher prices. The financial reality is that the strategy for recouping development costs of drugs indicated for much smaller patient populations (orphan and ultra-orphan drugs) is to drive pricing significantly higher. In this context, one high-priced drug or therapeutic class – Hepatitis C most notably - can significantly drive specialty spending growth. In fact, spending increased significantly in 2014, by more than the average for brand drugs, for all of the most significant therapeutic classes of specialty drugs – oncology, autoimmune, and multiple sclerosis therapies. And the trend can be expected to continue, given the prevalence of oncology therapies in late stages of development in the drug pipeline. …

The increasing cost of specialty drugs raises the spectre of jeopardizing the public policy goal of bending the cost curve of heath care. This underscores the importance of developing evidence of the beneficial health outcomes of specialty drugs or attendant reductions in other health care costs that supports the value proposition of the drug cost and permitting consideration of cost-effectiveness in coverage and reimbursement determinations.

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