Introduction to Specialty Pharmaceutical DistributionThe transformation of specialty pharmaceutical distribution is improving patient care and outcomes
First, a Primer about Specialty Drugs
In previous blogs, we have mentioned that specialty pharmaceuticals are on the rise. Since 1990, the number of specialty drug approvals has increased dramatically. What characteristics are used to define if a pharmaceutical product is classified as a specialty drug? High cost, high complexity or high touch. As defined by Medicare, any drug for which the negotiated price equals or exceeds $670 per month is identified as specialty, due to the higher price. In addition, drugs are identified as “specialty” when specialized handling is required or in the instance in which a drug is only available via a limited distribution network.
In the past ten years or so, pharma companies have begun to shift away from developing blanket treatments for large patient populations, instead tailoring their offerings to specialty medications to help fulfill the unmet needs of niche market patients.
Today, one-third of all the spending on drugs in America is on specialty medications.
Why the transition away from small molecule drugs? First, the occurrence of patent cliffs, the abrupt deterioration in sales following patent expirations for medications that had formerly enjoyed generous market share. Secondly, the rise of generic drugs has encroached on the market share of many name brand products. Third, the level of commoditization has handed over control over drug prices. Drug products are especially sensitive to commoditization because after a patent expires, the product transforms from a proprietary profitable product to an undifferentiable commodity rapidly. These factors have combined to erode the level of profitability previously seen in the pharma industry.
Specialty Pharmaceutical Distribution
Today, it is common for each specialty pharmaceutical product to have its own go-to-market strategy. Because of the unique specialty drug product specifications, therapy regimens, drug product handling, storage and transportation requirements, pricing, reimbursement and other factors, drug distribution channels and methodologies are impacted and must be considered prior to product launch. Specialty drugs do not necessarily flow directly downstream to the patient via the dispensing pharmacist. Pharmacy benefit-controlled specialty drugs can be more tightly controlled in real time, improving the payers’ ability to track utilization.
In some instances, involving dispensation under the pharmacy benefit, specialty drugs are produced by specialty pharmaceutical manufacturers then sent to specialty distributors or large specialty pharmacies. From there, they may be distributed directly to patients or be sent to retail pharmacies. “White bag” or “brown bag” dispensing strategies may be utilized to eliminate the buy-and-bill process. In that process, healthcare providers are reimbursed for their specialty drug purchases under the medical benefit. Both “white bagging” and “brown bagging” involve office administration of specialty drug products. Outside of those two options, all the other specialty drug products are administered by a caregiver or the patient.
In the instance of administration of specialty pharmaceuticals under the medical benefit, distribution is simplified. Claims typically are reimbursed through the medical benefit. Specialty distributors and full-line wholesalers service clinics and physician offices who then handle the administration of the specialty pharmaceuticals to the patients. Specialty distributors are often subsidiaries of full-line wholesalers.
There are some specialty pharmacies which are large enough to acquire specialty drugs directly from pharmaceutical manufacturers. Specialty wholesalers (sometimes called specialty distributors) handle distribution to smaller specialty pharmacies and retail pharmacies. Most of the largest specialties pharmacies are now owned by either large retailers or pharmacy benefit managers (PBMs). Handling specialty pharmaceuticals can give pharmacies a definite competitive advantage as they can also offer services beyond what a typical retail pharmacist can provide.
Providing More Patient Support for Specialty Pharmaceuticals
When specialty pharmaceutical products entered the market, it became apparent to key players in the pharma industry including healthcare providers (HCPs), drug manufacturers and pharmacists that the new patients taking these new drugs would need more support for the therapies to be deemed successful. These complex, sensitive, highly fragile therapies require new distribution models to connect patients to these expensive therapies. While some specialty drugs can be oral medications or self-administered injectables, many others must be professionally administered often via injection or infusion. Often biologics and specialty pharmaceuticals are “high touch”. Patients receiving these therapies require a higher level of attention to ensure compliance with the therapy regimen and to help control side effects. The fragility of the specialty drugs usually requires specialized handling and distribution to ensure the quality of the medication and ensure the appropriate medication administration. This can include complex handling, cold chain storage and transportation in highly controlled environments such as specific temperature-controlled zones to protect product integrity.
For manufacturers, specialty pharmaceuticals have another delicate issue, a more complex route to reimbursement. Specialty drugs are subject to an expanding array of restrictions from payers, usually in the form of a Prior Authorization (PA) document which must be completed by the prescriber. Some companies involved with the distribution of specialty drugs recognized that they could provide a variety of services which would help to keep patients in compliance with the established treatment regimen, helping the manufacturers to secure payment.
In the world of prescription drug production, specialty pharmaceuticals are more complex and costly to manufacture.
These complicated drugs typically have some type of biologic-based component (living cells) that mimic compounds found within the human body. Often specialty drugs are biologics, however not all biologics are classified as specialty drugs. Biologics are sometimes referred to as “large molecule” drugs. Small molecule drugs are pharmaceuticals such as blood pressure medications, drugs that relieve pain, etc. Specialty pharmaceuticals are developed to treat specific Today, most drugs are chemically synthesized however biotechnology methods and other innovative technologies may be used to produce the biologic pharmaceuticals
The concept of patient-centric care dovetails with the popularity of specialty pharmaceuticals.
Today, nearly half of pharma spending in the United States can be attributed to specialty pharmaceuticals.
One of the newest outsourced service offerings is patient support and hub services. Outsourced hub providers specialize in providing service offerings to manufacturer clients based on the specialty pharma products offered. Early on, pharmaceutical distribution service providers realized the value offering some type of patient-support or patient advocacy services. Every leading drug wholesaler has a specialty pharma division and each wholesaler has been actively building out some type of patient support offering. Patient services are now considered to be standard offerings and are a “competitive driver”. As the lines between the pharma and healthcare industries have continued to blur, outsourcing opportunities and new variations of distribution and patient support hubs have arisen.
From Express Scripts to CVS Health, the American life sciences supply chain is pushing the health care and pharmaceutical industries together and pulling them apart, creating new dynamics designed to enhance patient care and fuel profitability in the pharmaceutical industry. Pharmaceutical companies operating in today’s crowded, complex drug market have new distribution challenges including reimbursement for costly, fragile drug products and the need to improve patient outcomes.
The wholesale distribution of specialty pharmacy is transitioning towards enabling improved patient education regarding specialty drug therapies and better risk management. It has been a slow, steady process but change is coming…..