According to data from the National Association of Insurance Commissioners, payer profit margins fell to 1.9% in the third quarter of 2024, a significant dip from pandemic-era highs. Initial predictions of a rebound in 2025 and beyond have been slow to pan out, with 2025 Q2 reports showing modest revenue growth for some plans and ongoing volatility and struggles to reset troubling others. Payer organizations are focused on several key challenges and figuring out how to navigate these complexities to position themselves for the future.
Standing out among those are medication-related pressures – from complex decision-making surrounding specialty drugs to the constant uncertainty posed by drug shortages – which can contribute to management inefficiencies. Payers need data and evidence-based strategies that help them balance cost, compliance, and quality care while also addressing processes and member needs around increasingly complex and /or sophisticated therapies and mitigating shortages.
Understanding payer challenges with specialty medications
As is widely known in the U.S. healthcare industry, even though less than 2% of the population is estimated to use specialty drugs, they are estimated to account for between 40%-50% of total pharmacy spending, depending on sources. And that amount is expected to keep growing – research shows that the specialty pharmaceuticals market grew from $92 billion in 2023 to $129 billion in 2024, and it is predicted to close in on $1 trillion by 2030.
As drug costs overall are trending toward outpacing other types of healthcare spend in this decade, drug cost management has become a critical need for plan sponsors, PBMs, and payers. Managing specialty drug spend is a key component of that.
Average annual costs to cover a specialty patient are 75 times higher than costs to cover a plan member on non-specialty medications. However, without plan coverage, many patients would struggle to afford these medications and be forced to choose between managing costs and receiving these often game-changing, life-sustaining, or even lifesaving treatments. PBMs and payers struggle to control costs with traditional formulary management of these medications, prior authorizations (PAs), and step therapy protocols. And all of these decisions can be affected by the basic conundrum that there is no standard definition of what a “specialty medication” is, as it can refer to special requirements for a drug’s:
- High cost
- Specialized handling or storage
- Complex administration needs
- Dosage
- Indications to treat complex, chronic, or rare conditions
Managing the unpredictability of drug shortages
Drug shortages are an ongoing problem in the U.S., continuously rising since 2017. According to the FDA, a total of 258 unique active ingredients (molecules), representing 1,961 unique prescription drugs, went into national shortage between 2018 and 2023. At the end of that five-year period, 75% of current shortages had been active for over a year, with 58% active two years or longer.
Shortages are difficult to predict and mitigate. They persist and may fluctuate as different trade and tariff agreements are pursued, with chemotherapies for pediatric patients often atop the list.
Payers and PBMs need to support therapeutic alternatives to improve both operational outcomes and member satisfaction. Better technology tools with access to real-time data are needed at the moment of prescribing as well as during the end-to-end drug management process to give visibility to whether a drug is in shortage, inform decisions as to appropriate alternatives, and enable more precise and configurable solutions to support efficient processes.
Organizing data to better manage complex drug coverage questions
Meeting these industry challenges and providing a quality, effective member experience relies on payer and PBM teams having centralized, evidence-based data to provide clear visibility into medication attributes, availability, health trends, and business outcomes.
When it comes to navigating complex drug decisions, a quality foundation in data infrastructure includes:
- Consolidation or centralization to organize data, in addition to strong data governance.
- Structuring, storing, and metadata tagging the data in order to refine claims processing, risk stratification, and predictive models.
- Payer-specific analytics for demonstrating interoperability capabilities. That means solutions should align across payers, PBMs, and providers.
- Investment in AI-supported claims processing, risk stratification, and predictive models to control costs. This could include enabling and innovating beyond robotic process automation (RPA) into AI-based services, including quality control; modeling for fraud, waste, and abuse; workflow efficiencies; and consistent clinical effectiveness.
- Drug management insights to help payers forecast shortages and manage specialty drugs.
Even with a strong data foundation and strategy, decision-making surrounding specialty medications and drug shortages requires additional resources and insights to help address their specific challenges.
Specialty drugs: What’s missing?
Specialty drugs need more stringent criteria of what classifies a drug as “special,” beyond just cost or complexities of therapy. Until a standardized, industry-wide definition exists, PBMs and payers will have to strive to align with partners and stakeholders on issues and trends surrounding specialty drugs. They will need datasets that allow them to articulate and categorize different complexities associated with the drugs, special handling needs, limited distribution channels, limited biosimilar equivalents, and more. These data would help them with disaster recovery, business continuity, risk modeling /mitigation, and channel management efforts.
Drug shortages: What’s needed?
On a national level, drugs are generally considered to be in shortage if they are designated so by key government or industry expert groups, which may or may not account for any localized availability challenges. In cases of both national and local shortages, the ability to quickly and appropriately identify therapeutic alternatives is key. Data identifiers that enable detailed formulary management, substitution comparisons, and understanding of indications are essential to payers and PBMs.
Medi-Span drug data supports alignment with regulations and stakeholders
To be efficient, effective, and able to scale member care decisions across these complex medication decisions, payers and PBMs should consider incorporating these recommended datasets that are evidence-based and support alignment with industry partners and stakeholders.
Medi-Span® drug data from Wolters Kluwer provides a number of solutions and datasets to support drug cost management, specialty drug management, and monitoring shortages. It’s proprietary Generic Product Identifier – or GPI – hierarchical drug coding structure allows a highly flexible and granular classification of drugs unmatched in the industry to support formulary management and therapeutic alternatives. Medi-Span solutions also include valuable datasets for specialty drugs and shortages, including drug pricing files, indications, and master conditions clinical database.
Specific to decisions around specialty drug coverage or mitigating drug shortages, Medi-Span assists payers with:
- Formulary optimization: Enables real-time analysis of therapeutic alternatives, tiering decisions, and cost comparisons.
- Cost containment: Provides the industry’s trusted pricing benchmarks to evaluate claims and identify outliers, fraud, or price inflation.
- Claim adjudication: Supplies normalized drug identifiers – including NDCs and the more flexible and granular Medi-Span proprietary GPI – for automated claim matching, pricing analysis, and benefit application.
- Clinical PA: Supports rule-based decision trees using clinical data to automate or streamline PAs.
- Regulatory compliance: Helps meet CMS and FDA regulations through timely drug status information and safety alert flags.
- Pharmacy care management: Supports reducing costs and improving outcomes for members with tools that expand care management beyond medication therapy management (MTM).
Medi-Span data – used consistently in clinical and commercial healthcare spaces – helps maintain alignment between stakeholders. Aligned data and trusted evidence can empower payer teams to build proactive strategies even when national standards and interoperability practices are unclear.
Data next steps: Navigating complexity with certainty
High-quality data can help payers drive efficiency, improve outcomes, and foster alignment to navigate complexities like specialty medications and shortages. Learn more in our eBook, “Navigating complexity with certainty.”
