3PLs, Specialty Pharmaceuticals and Direct Drug Distribution

3PLs Handle Specialty Pharmaceuticals to Help Chronically Ill Patients

Yes, the Wall Street Journal is correct.  The pharmaceutical and health care industries are in the throes of massive change.  From a transformation to value-based health care and prescription drug pricing to the rise of biologics and specialty pharmaceuticals, the pharmaceutical supply chain seems to be continually changing, morphing to handle the new demands for quality patient care and specialized management of the innovative new fragile, but very costly drug therapies, biologics.

From drug manufacturers, pharmaceutical distributors to specialty pharmacies, health care providers and  chronically ill patients, the pharmaceutical market has been challenged to navigate the complications of the distribution of high cost, very sensitive drug products.  To aid in these efforts, the pharmaceutical industry has turned to third party logistics providers (3PLs) for their expertise, cutting edge technology and ability to serve a wide range of client needs.

First, let’s take a look at what specialty pharmaceuticals are and what is causing the new complexity in drug distribution channels.


What are Specialty Pharmaceuticals?

Although there currently is no standard specialty drug definition, to be considered specialty pharmaceuticals, medications typically must be identified as either highly complex, high cost or high touch (in terms of patient monitoring and support).   Often, but not always, specialty drugs are biologics, pharmaceutical products derived from a microorganism or from using human, plant or animal tissue, living or dead.  Because specialty drugs incorporate the use of biologic tissue, they usually require refrigeration, specialized temperature-controlled handling, storage and transportation or have other requirements due to fragility concerns.  The majority of biologics are injectables rather than pharmaceuticals in pill or capsule form.

In terms of complexity, specialty drugs are complicated to manufacture and develop.  This is because the drug development and manufacturing efforts may require biotechnology methods, gene-based and cellular biologics or other cutting-edge technologies.  Biologic specialty drugs are often highly sensitive to heat and may be especially susceptible to microbial contamination.  In contrast with the manufacturing methods involved with the production of small molecule conventional drug products, biologics may require utilization of aseptic principles from initial manufacturing steps.  The complexity of the handling, storage, manufacture and transportation of biologic specialty drugs makes them more expensive to develop and produce.

Biologic Specialty Pharmaceutical Products Include:

  • Vaccines
  • Blood and blood components
  • Allergenics
  • Somatic cells
  • Gene therapy
  • Tissues
  • Recombinant therapeutic proteins

High Touch Specialty Drug Products require more patient care management to ensure the safety and efficacy of the healthcare treatment program.  Often, patient-centered care is necessary because specialty drugs can be difficult for patients to administer correctly without continual support from a healthcare provider.  Another issue may be related to a specialty drug’s requirements for handling, storage and administration.  Some specialty drugs have very limited distribution and are only available via a healthcare provider or specialty pharmacy.

Patient education is very important when dealing with specialty drugs.  Usually very fragile, specialty pharmaceuticals often need temperature monitoring, specific temperature-controlled storage conditions and have specifications involving the level of agitation and proper reconstitution of the medication.  Healthcare providers or specialty pharmacists have the requisite skill and experience to handle and administer these delicate drug products.  This added level of care adds to the overall cost of specialty pharmaceuticals.

Specialty drug products are fueling most of the spending growth in developed markets worldwide.  According to IQVIA, in 2018, the specialty medicine market is estimated to be $318 billion, a 41% increase over the developed market spending up from $172 billion in 2013.  Specialty medicines include a diverse range of therapies which range from cancer, autoimmune diseases, antivirals, rare diseases, chronic health conditions and diseases and more. 

Because of the fragility and nature of biologic drugs and high cost of specialty pharmaceuticals, alternative sites of dispensing the drug products are often utilized including:

  • Infusion centers
  • Outpatient clinics
  • Specialty pharmacies


Specialty Pharmaceuticals and Direct Drug Distribution

In the pharmaceutical industry, there are currently multiple ways to get specialty pharmacy products and prescription drugs to market. Unlike the traditional pharmaceutical supply chain for prescription drugs, specialty pharmaceuticals are often brought to market through direct drug distribution.

Specialty direct drug distributors facilitate the movement of specialty drug products from the drug manufacturers to the practitioner’s office, specialty pharmacies or even directly to the patient.  In dealing with the distribution of costly specialty pharmaceuticals, managed care organizations (MCO) play a vital role in controlling the financial impact on payers.  Managed care organizations focus on controlling and minimizing the increase in spending on specialty pharmacy products while still providing quality health care to patients.  Because of the high cost of specialty pharmaceuticals, drug pricing and concerns regarding comparative effectiveness are major concerns.

With the expanded use of specialty pharmaceuticals by health care providers, increased specialty drug development efforts and technological advances, the flow of specialty pharmaceuticals is anticipated to continue for the foreseeable future. 

The direct distribution model has taken hold in the pharmaceutical industry.  This enables the manufacturers to connect their products directly to healthcare practitioners and even the patients.  In many cases, specialty pharmacies must compound or customize drug therapies for patients.  This opens the door for the specialty pharmacy to sell more services to patients, supporting their healthcare regimen.  In some cases, a specialty drug can be provided through only one or a very limited number of specialty pharmacies that are in business to serve local, regional or national markets.

Numerous chronic health conditions and diseases that affect the quality of life and health affairs of patients have been proven to benefit from treatment by specialty pharmaceuticals.  Many chronic diseases and health conditions do not have a wide range of therapies available.  This is especially true in the instance of rare diseases. 

Here are a few biologic specialty pharmaceuticals and the conditions they were designed to treat:

Verzenio™ (abemaciclib) for Metastatic Breast Cancer.  Approximately 154,000 people in the United States are being treated by health care providers for metastatic breast cancer, a disease that has expanded beyond the breast to additional organs such as liver, lungs, bones or brain.

Enbrel® and Orencia® are two of the specialty drugs used in the treatment of rheumatoid arthritis, the most common type of autoimmune arthritis.  Rheumatoid arthritis affects nearly 1.3 million American adults, nearly three-quarters of which are women.

Avonex® and Betaseron® are two of the biologic prescription drugs used to treat multiple sclerosis.  According to NCBI, nearly 400,000 Americans have been diagnosed with multiple sclerosis, however this number is only an estimate as there is not requirement for health care providers to report new cases of multiple sclerosis to a state or federal registry.  Approximately 200 new cases of MS are diagnosed by health care providers every week.  Multiple sclerosis is a chronic neurological disease the attacks the central nervous system.

Critical to the success of specialty drug distribution are third party logistics providers.  3PLs do not own the specialty drug products, but rather act as the agent of the owner.  Experienced in navigating complex pharmaceutical supply chain logistics networks, 3PLs handle the warehousing and transportation of the specialty drug products. Many third party logistics companies that service the pharmaceutical industry use advanced warehouse management software  and TMS and have experience in the handling and storage of temperature-controlled regulated goods and use of cold chain monitoring and tracking devices.  3PLs that handle specialty pharmaceutical goods receive the drug products, fulfill orders and manage payments.

How 3PLs Help Direct Drug Distribution of Specialty Pharmaceuticals

With key experience in the specialized handling, storage and transport of temperature controlled and fragile regulated goods, third party logistics providers can interface in a wide range of ways between manufacturers, health care providers and payers.  Third party logistics providers (3PLs) do not own the inventory but rather act as the agent for the inventory owner.  A 3PL arranges for the storage, transportation and logistics of the specialty drugs.  This typically includes receiving the goods into the warehouse, fulfilling orders and handling inventory management of the goods usually using a warehouse management system and other information technology systems.

In the pharmaceutical industry, there are 3PL specialty logistics and distribution operators that provide a wide range of services especially suited to delicate regulated specialty pharmaceuticals.  A 3PL that focuses on the specialty pharmaceuticals market often can

  • Combine and consolidate shipments from multiple clients to decrease transportation and freight costs
  • Utilize cold chain logistics information technology solutions for the monitoring and tracking of specialty pharmaceuticals. This can prevent costly damage and consequential product waste and also helps to  ensure drug product safety.
  • Eliminate touchpoints of handoff or transfers of conventional LTL delivery
  • Provide financial management services
  • Provide value-added services including repacking shipments to meet manufacturer requirements
  • Facilitate last mile delivery via an express carrier or internal last mile logistics service offering
  • Provide an on-site call center for physician outreach
  • Facilitate management of the complete sales and service process from initial online ordering to fulfillment; providing invoicing and customer service for returns and reverse logistics
  • Help to reduce number of products returned for credit due to damage during shipping
  • Collect, consolidate and store human tissue, blood and other samples in the necessary temperature- controlled conditions
  • Handle order-to-cash processes for drug manufacturers
  • Handle drop shipments
  • They may receive palletized goods that are then sent directly to wholesalers or break down the pallets into cartons or individual packages which are then delivered to hospitals and clinics
  • Manage a national distribution process on behalf of smaller drug makers
  • “Take title” (this essentially means that the 3PL is buying the product)
    • This enables drug manufacturer to benefit from dedicated specialty services in delivery and handling without having the appropriate licensing in place for national distribution.
    • This can be especially useful for emerging pharma companies that do not have all the necessary state licenses in place.


The specialty pharmaceuticals segment of the industry continues to drive revenue growth.  As noted by the Wall Street Journal, the revenue from biologic specialty drugs increased 70% in the five-year period which culminated in 2016 and now represent 25% of the total pharmaceutical market share.  Increasingly, specialty pharmaceuticals are fueling the integration of medical and pharmacy benefits.

From cancer to rheumatoid arthritis and multiple sclerosis, chronic health conditions and diseases are finding potent new therapies that improve the quality of life and extend patient lives using specialty drugs.  Biologic and specialty pharmaceuticals are expensive drugs, requiring expert handling, storage and transportation.  One specific segment, biologic drugs typically requires temperature-controlled handling, storage and transportation.  Highly sensitive, high cost and high touch, specialty pharmaceuticals are in demand and continue to have a major impact on drug development efforts.

To provide the needed specialized handling, storage, transportation and logistics for biologics and specialty pharmaceuticals, pharma companies have turned to 3PL providers for help.  In addition to these core services, 3PLs can provide a wide range of additional supportive services, ideal for smaller drug manufacturers eager to grow in a highly competitive pharmaceutical market.  In addition, 3Pls can aid in ensuring regulatory compliance.

Relying on a third party logistics provider can help companies across the pharmaceutical supply chain save on material handling and shipping costs, improve the flow and reduce costs associated with reverse logistics, enhance risk mitigation and supply chain management capabilities and provide cost savings and transportation insight.  In addition, with improved supply chain visibility, drug manufacturers and other pharmaceutical companies can save time and money and benefit from the custom solutions facilitated by 3PL operations.

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