Exploring specialty care drug prices

What’s the fastest-growing line item in employer healthcare budgets? It’s not surgeries or specialist care—although those definitely add up. It’s medication.

In 2024, pharmacy spending increased by an alarming $50 billion, accounting for 24% of all healthcare dollars. And, unfortunately, those numbers likely won’t come down anytime soon. Employers anticipate an 11 to 12% increase in their pharmacy costs in 2026.

Wondering what’s behind the sky-high drug price tags? Here’s a look at why pharmacy costs are climbing so quickly—and what it means for employers, patients, and the health system.

Why drug prices are so high (and rising)

While a single answer would be easier to take action on, drug pricing is complex. This means several factors influence the ever-growing cost of medication.

Growth in specialty drugs

Specialty drugs—such as high-cost treatments for cancer, autoimmune diseases, and rare conditions—now make up at least half of pharmaceutical spending. Plus, they’re growing at a rapid rate. The specialty pharmaceuticals market grew from $92.50 billion in 2023 to $129.23 billion in 2024. It’s expected to reach an eye-popping $965.54 billion by 2030.

While these medications are often necessary, they’re also expensive. Specialty drugs can cost anywhere from $2,000 per month per patient to hundreds of thousands of dollars per year.

And they aren’t just pricey—they’re prevalent. Across all market segments, specialty drug utilization increased by nearly 10% between 2023 and 2024. And these numbers will likely continue to balloon, especially as GLP-1 medications continue to increase in popularity. In 2025, 64% of large employers say GLP-1 drug coverage moderately or significantly impacted their prescription drug spending.

Limited competition

Competition is a powerful market force that can improve the affordability of medications. Yet, competition is often limited among medications for a couple of reasons:

• Patents: Patents give pharmaceutical companies exclusive rights to produce and sell drugs, and these patents aren’t short-lived (with the standard extending 20 years from the application date). Unfortunately, generic medications—which are often significantly more affordable—can only enter the market once patents expire. And, even then, some manufacturers might challenge or further delay the entry of generics.
• Lack of biosimilars: Biosimilars are highly similar (yet not quite identical) versions of particularly complex drugs. Much like generics, FDA-approved biosimilars are more cost-effective than complex biologic drugs and are also equally safe and effective. But, because of everything from doctor and patient hesitancy to complicated prior authorizations, they’ve seen low adoption—with a market share still below 20%.

Put simply, when manufacturers don’t need to compete to secure customers, there’s understandably no incentive to lower their prices.

Rising launch prices

The initial price a pharmaceutical company sets for a new drug when it enters the market is called the “launch price,” and it’s often established using a complicated mix of factors. Much like seemingly everything across the pharmaceutical industry, these numbers are rising sharply.

The median net launch price for 154 new drugs increased 51% between 2022 and 2024. This sends the snowball rolling down the hill, so to speak. When a drug enters the market at a high price, all future increases build on top of that already high starting point.

Additionally, employers, insurers, and patients often have little to no negotiating power over launch prices because there’s no competition when a drug is brand new. Their options are to get that necessary medication at the set price—or none at all.

Price increases on existing drugs

It’s not just brand-new drugs that are seeing major price hikes. Manufacturers can change the list price of their drugs at any time after launch.

That happens more frequently than you might think. From January 2022 to January 2023, more than 4,200 drugs had price increases. Even more alarming? 46% of those increases were larger than the rate of inflation.

Complex supply chain

Medications don’t go from the manufacturer to the patient. There are a lot of steps in between, and wholesalers, pharmacies, and insurance companies often add their own markups along the way. Each of those steps adds cost without adding any clinical value.

In fact, according to Berkeley Research Group, “half of every dollar spent on brand medicines goes to entities that play no role in the research, development, or manufacturing of those medicines.”

Some supply chain payments—like rebates and fees—are calculated as a percentage of a drug’s list price. Higher drug prices mean higher payments for wholesalers, pharmacies, and other intermediaries, so it’s better for them if they keep costs high.

The real-world impacts of high drug prices

Of course, inflated prescription costs have a significant impact on your healthcare budget—and often on your employees’ own bank accounts, too. But the ripple effects of escalating pharmacy spending extend far beyond dollars and cents.

Impacts on employers

• Rising total healthcare spend: Pharmacy costs make up a big chunk of employer healthcare spending, so higher drug prices mean higher spending overall. Employers are projecting a 10% increase in healthcare costs in 2026.
• Unpredictable costs: When an employee needs a high-cost, specialty drug, it causes a sudden and significant increase in claims. This makes it a lot tougher to budget and forecast costs.
• Limited power to control costs: Employers usually have very little control or negotiating power (or none at all) for pharmacy spending compared to medical care, especially when treatment options are limited or not easily substituted.

Impacts on patients

• Higher out-of-pocket costs: Rising drug prices often mean higher copays, coinsurance, or deductibles—even for people with employer-sponsored coverage. In one report, the prices insurers make patients pay out-of-pocket for their medicines have steadily increased since 2016, and 26% of Americans are “very worried” about being able to afford prescription drug costs.
• Delayed, skipped, or narrow treatment options: Cost barriers can cause patients to delay starting treatment, skip doses, abandon prescriptions altogether, or feel limited to certain (or less-optimal) drugs. The American Hospital Association found that “nearly 30% of Americans say they haven’t taken their medication as prescribed due to high drug prices.”
• Increased financial stress: Especially for patients with chronic or complex conditions, long-term drug costs can create major financial strain (also known as financial toxicity). More than 60% of Americans see the cost of their prescription medications as a financial burden.

Impacts on healthcare systems

• Cost pressures on care decisions: High drug prices can force providers to prioritize cost over what’s best for the patient, which makes it harder for them to make confident, patient-centered care choices.
• Strapped healthcare resources: Pharmaceutical spending diverts funds and resources away from other critical areas, such as preventive care or patient support services.
• Unsustainable long-term spending: Continued growth in drug prices contributes to rising healthcare costs across the system, putting pressure on everybody—employers, payers, providers, and patients.

Policies and reforms aimed at controlling drug prices

The situation might sound hopeless, but change is already underway—and momentum is building. Here’s a look at some big moves that are happening at the federal, state, and market level to help make pharmacy costs more reasonable (and sustainable) moving forward. 

Federal

While federal reforms don’t eliminate high drug prices overnight, policymakers are taking important steps to rein in costs by increasing transparency, limiting excessive price increases, and introducing new pricing controls.

• Inflation Reduction Act: Enables Medicare drug price negotiation, caps Part D out-of-pocket costs at $2,000, and limits price increases for certain drugs to the rate of inflation.
• Drug Supply Chain Security Act: Strengthens oversight and transparency across the pharmaceutical supply chain to reduce inefficiencies and safety risks that can unnecessarily drive up costs.
• Health Care PRICE Transparency Act (proposed): If passed, it would require clearer disclosure of drug pricing and negotiated rates to improve transparency and competition in the pharmaceutical market.

State

At the state level, lawmakers are focusing on increasing transparency and oversight in the drug market, particularly around pricing practices that affect employers and patients.

• PBM oversight laws: All states have passed legislation to regulate pharmacy benefit managers (PBMs), which are third-party administrators that manage prescription drug benefits on behalf of health insurers and employers. States are increasing reporting and regulatory requirements in this area to shed more light on drug pricing and reimbursement practices.
• Drug price review efforts: Many states are monitoring or challenging excessive price increases for high-cost or essential medications.

Market-driven

Beyond direct government action, market-driven changes are also beginning to influence drug pricing and create new opportunities to slow the growth of pharmacy costs.

• Biosimilars and generics: Although they’ve been slower to gain traction, they’re experiencing an uptick. The greater adoption of these lower-cost alternatives is increasing competition and putting downward pressure on prices.
• Value-based care models: Drug payments are increasingly being tied to patient outcomes (rather than just volume or list price), particularly in high-cost areas like cancer care.

How Carrum Health can help

As an employer, you can’t necessarily control drug prices directly. But you can take steps to manage the total cost of care associated with high-cost treatments—especially for complex conditions like cancer.

Carrum Health helps you do exactly that by connecting employees to high-quality Centers of Excellence that deliver evidence-based care at a predictable cost.

By reducing variation in treatment pathways and avoiding unnecessary complications, Carrum helps improve outcomes and control your overall healthcare spending—even as drug prices continue to rise.