Drugs classified by insurers as "specialty drugs" share common traits such as high cost, relatively small treated populations and/or special handling requirements. Products in this tier are subject to higher co-payments than other drugs.

Types of Drugs

Specialty drugs can include biologics, expensive cancer therapies, most injected or infused products, orphan drugs (for rare disorders) and other drugs with high cost or special handling requirements.

Medicare Part B

Medicare does not differentiate between specialty drugs and other therapies. The 20% co-payment applies to all Part B drugs. For the most part, only drugs that are administered in the physician office (injected or infused) fit into Part B's strict coverage rules.

Medicare Part D

Medicare Part D is administered by private insurers, subject to federal laws, regulations and oversight. Part D plans can create a specialty drug tier and impose higher co-payments (often 20-35%) to these products. The federal government, however, sets a cost threshold that drugs must exceed in order to be placed into the specialty drug tier ($600.00 in 2010). Beneficiaries can appeal assignment of their drugs to the specialty drug tier.

Impact

The annual cost of most Medicare specialty drugs puts patients over the Part D out-of-pocket maximum regardless of the co-payment level. Patients in plans with a specialty drug tier will pay the same several thousand dollars in annual drug costs as other patients, but over a much shorter time period.

Medicare Supplements

Medicare supplements (Medigap plans) do not cover costs associated with Part D coverage. Employer retiree health plans, however, may offer coverage that assists with Part D deductibles and co-insurance for specialty drugs.

Source:

Government report on Medicare specialty drugs

Medicare specialty drug data

More Information:

Part D plan finder