Call to Action

Background

The Midwest Business Group on Health (MBGH), a Chicago-based nonprofit coalition representing mid-size to jumbo self-funded public and private employers, first launched this toolkit in 2016 to support its members—primarily human resources and health benefits professionals—in navigating the complexities of health benefits and care services. The toolkit was initially updated in July 2024 and then again in mid-2025, incorporating the latest research, insights, and practical tools to better serve employers in a rapidly evolving healthcare environment.

Current Landscape

The pharmaceutical landscape is witnessing a surge in the availability of specialty drugs and biologics, particularly for rare, chronic, or previously untreatable conditions. This trend is fueled by a robust research pipeline, accelerated FDA approvals, and growing demands for price transparency. At the same time, escalating costs—often driven by intermediaries such as pharmacy benefit managers (PBMs), health plans, distributors, and wholesalers—are placing additional financial pressure on employers.

Employer Challenges

Employers face a complex dilemma: balancing the rising costs of specialty medications with the potential for these therapies to deliver better health outcomes, boost workforce productivity, and enhance overall quality of life for their covered populations. Crafting a holistic benefits strategy requires careful consideration of both the financial and human impacts of specialty drug coverage.

The Need for Informed Decision-Making

To effectively manage specialty drug spending and ensure value, employers must first gain a clear understanding of the current marketplace, the key stakeholders involved, the challenges they face, and the evolving role of specialty drugs. This foundational knowledge is essential for making informed, cost-effective decisions that align with organizational goals and employee needs.

Note: For the purposes of this toolkit, the term “specialty drugs” will represent the entire landscape of High-Cost and Ultra-High-Cost drugs and therapies inclusive of “biologic” drugs, cell and gene therapies, and orphan drugs.

Specialty Drug Trends: The Impact on Employers

Specialty Drug Spending: Escalation and Employer Impact

• Specialty drug spending continues to surge, now accounting for at least 50% of total pharmaceutical expenditures in the United States and is projected to exceed 55% in leading developed markets by 2028[1]. This trend is driven by the rapid introduction of high-cost therapies for complex and rare diseases, as well as expanded indications for broader patient populations. CaralonRx 2025.
• The specialty pharmaceuticals market grew from $92.5 billion in 2023 to $129.2 billion in 2024 and is forecasted to reach $965.5 billion globally by 2030, reflecting a compound annual growth rate (CAGR) of nearly 40%. CaralonRx 2025.
• Employers face increasing uncertainty and cost management challenges due to the unpredictable pricing and utilization of new specialty, niche, and rare disease drugs. The Inflation Reduction Act and plan design changes are influencing cost trends, but utilization of high-cost drugs—especially in oncology and immunology—remains the primary driver of rising spend. Milliman Study 2025.

Oncology and Pipeline Trends

• Cancer drugs remain the largest segment of the specialty pipeline, with oncology and immunology therapies forecasted to grow at CAGRs of 14–17% and 2–5%, respectively, through 2028. CaralonRx 2025.
• In 2024 alone, the FDA approved 50 new drugs, many of which are specialty therapies for cancer and rare diseases. Oncology is expected to see over 100 new treatments by 2028, contributing to a projected $224 billion increase in spending in this category. CaralonRx 2025 and Targeted Oncology 2025.

Expansion to Larger Patient Populations

• Specialty drugs are increasingly being approved for common conditions such as arthritis, migraine, and asthma, expanding their use beyond rare diseases and increasing the number of eligible patients. This trend amplifies the cost management burden for employers and payors as more employees become eligible for high-cost specialty treatments[1][2]. CaralonRx 2025 and Milliman Study 2025.

Biosimilars: Growing Savings, Slow Adoption

• Biosimilars have delivered $36 billion in savings since 2015, with $12.4 billion saved in 2023 alone[4]. Biosimilars are now priced, on average, more than 40% lower than their reference biologics at launch, and their competition has driven brand biologic prices down by over 33%. Accessible Meds 2025.
• Despite these savings, biosimilar adoption remains slower than anticipated, largely due to formulary and rebate barriers. The majority of brand biologics still do not face biosimilar competition, limiting the potential for further cost reductions. Accessible Meds 2025.

Diagnostic and Genetic Testing Trends

• There is a continued acceleration in the development and adoption of new diagnostic and genetic tests, particularly those supporting personalized and precision medicine approaches. Advances in genomics, AI-driven diagnostics, and point-of-care testing are enabling more precise drug dosing and delivery, further integrating diagnostics into specialty drug management.

Key Takeaways for Employers

• Plan sponsors must proactively monitor specialty drug trends and pipeline developments to anticipate cost impacts and optimize plan design. CaralonRx 2025 and Milliman Study 2025.
• Data analytics, member engagement, and strategic benefit design are essential tools for managing rising specialty drug costs.
• Biosimilars represent a significant opportunity for savings, but require policy and formulary changes to realize their full potential.
• Ongoing innovation in diagnostics will continue to shape specialty drug utilization and cost management strategies.