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Armada Health Care (Florham Park, NJ) was founded in 2004 to address what was then a newly evolving need: providing the services surrounding the dispensing of specialty pharmaceuticals. Over time, a large number of pharmacies and other healthcare services providers—local, regional and national—found that they could work better by coordinating the distribution, administration, reimbursement, and follow-on services for specialty pharmaceutical patients. Part GPO, part pharmacy and patient services company, Armada Health Care works both with specialty manufacturers to streamline the distribution of their high-touch products, and with a network of more than 600 specialty pharmacies, representing thousands of locations nationwide, for administration and reimbursement. Two experienced pharmacy executives, brothers Larry and Robert Irene, are the founders. Pharmaceutical Commerce sat down with Robert Irene, Armada president, to discuss Armada’s services and the specialty pharmaceutical market.
1. Armada Health Care occupies a rather unique position as a “specialty pharmacy group contracting organization” and “specialty channel management solution.” What do these terms mean, and how is Armada different from most group purchasing organizations (GPOs)?
Unlike conventional pharmaceutical distribution, specialty manufacturers set different channel management requirements that can include limited distribution, pharmacy certification to handle the product, clinical protocols that may be FDA-mandated, and extensive claim and pharmacy level data, just to name a few.
Armada has a two-pronged strategy designed to meet the needs of this market. First, we maintain close manufacturer relationships to identify and develop financial opportunities for our pharmacy members that may take the form of discounts, rebates, data reporting and, more frequently, fee-for-service based agreements. Secondly, we consult with our pharmaceutical manufacturer partners to develop tailored contracting programs that support their channel management strategies. In combination, Armada is the only organization in the segment to have taken the traditional group purchasing organization (GPO) model into the 21st century by developing unique contracts for specialty pharmacy products and services.
2. What is the history of Armada Health Care? How did this focus on specialty pharmacy evolve?
The founders of Armada have a 30+-year history of building successful healthcare companies. Two of their successful companies include a multi-state, closed-door long-term care pharmacy, and another was the nation’s largest long-term care pharmacy GPO. Through this GPO, we established a new class of trade, known as closed-door LTC pharmacy, and went on to deliver a full portfolio of manufacturer agreements and ancillary services, and that eventually dominated that marketplace. Then, almost eight years ago, and after a brief retirement, we were contacted by a small group of pharmacies focused on the specialty pharmacy market. These providers called on our expertise and talents to replicate what we had successfully done before, only now in the specialty pharmacy segment. We accepted the challenge and formed Armada Health Care. Armada’s first task was to create the new trade class for specialty pharmacy providers and begin to develop the new portfolio. The timing of the emergence of the specialty pharmacy market was perfect because of its differentiated, high-touch service characteristics, creating mutual benefit for both manufacturers and pharmacies.
Over the past decade, the challenges facing the specialty pharmacy segment have increased exponentially, typified by more complex drugs that serve increasingly complex patient populations. Specialty pharmacy formularies cover a broad spectrum, from self-injectables, to large molecule orals, to infusables. As the market continues to expand, and the need to access these products grows, Armada members now include an increasingly diverse cross-section of providers in the marketplace: specialty pharmacies, home infusion providers, physician offices, outpatient clinics and retail chain pharmacies.
3. What are the services that manufacturers of specialty pharmaceuticals need, which Armada is in a position to provide?
Manufacturers of specialty medications have come to see the unique value and role that specialty pharmacies provide in their brand management strategies. First, they know that they can rely on their specialty pharmacy partners to proficiently dispense their products coupled with disease-treatment management services that monitor and measure patient compliance and proactively support patients throughout all aspects of therapy. Armada knows how challenging this responsibility can be and has developed programs designed to support our membership and our manufacturer programs.
For example, Reach Rx - Online Therapy Management (OTM) is a state-of-the-art clinical management platform that allows any member pharmacy instant access to drug- and disease-specific care guidelines. Manufacturers appreciate both the accuracy and consistency of the information that helps patients start and remain on therapy. Another example is the ApproveRx program, which is designed to help healthcare professionals navigate payer administrative requirements that include complex prior-authorizations, as well as documentation of medical necessity, lab values, etc. ApproveRx even provides instant access to more than 10,000 of the most current individual prior-authorizations forms across hundreds of payer organizations nationally, eliminating costly administrative time wasted that can be better applied to patient care.
Manufacturers know that a patient that waits an unreasonably long period of time to get an approval to start therapy may never start therapy. They also recognize the value of resolving patient financial hurdles by pursuing available patient assistance programs, another key feature of the ApproveRx system.
4. So, the relationship between Armada and specialty manufacturers is more than a price negotiation—but what about pricing itself? How does the negotiation with manufacturers proceed, and what would Armada like to see from manufacturers when the pricing negotiation commences?
There are numerous factors that go into the decision-making process related to pricing a drug in the market. If a product is a sole source in its category, a manufacturer will typically set its price and terms accordingly. As we’ve seen, many of these drugs come to market with significantly high prices, and manufacturers can preserve margins with little or no price point competition. When a product comes to market with competition, the dynamics begin to change, and brand teams know that pricing becomes more strategic. When there is choice, there is typically more contracting opportunity.
Manufacturers know this and yet, especially for specialty pharmacy products, have limited the amount of additional discounting they are willing to give up to the providers. GPOs have long been successful in procuring volume-based purchase contracts for non-specialty products. However, specialty pharmacy has taken a different path. Manufacturers of specialty pharmacy medications, especially in competitive categories, are looking for adherence and compliance to current drug regimens rather than the path of traditional GPO discounts as a model for increased sales.
As a result, performance incentives and fees for specific services have been more palatable than pure upfront discounts or rebates. They have also been very sensitive to preserving average selling price (ASP), because all discounts and rebates, etc. contribute to bringing down that number. So, if they are going to give up something, they would like to see a quid pro quo, so any rebates are more cost-justifiable.
Armada Health Care has been the leader in developing a completely new contracting model for the specialty pharmacy segment. (The traditional GPO contracting model doesn’t work for many of these products.) We realized that manufacturers were interested in much more than market share. Their brand management strategies called for tailored support services aligned to the unique needs of their products. For example, a number of these products have come to market with a REMS requirement from the FDA. Specialty pharmacies are well-positioned to provide the high-touch service and frontline face in the marketplace to support many of these requirements.
5. What is the future of specialty pharmacy? How will it deal with the universal pressure on cost control, the effects of healthcare reform, patient-centric care and the like?
Specialty pharmacy has tremendous upside based on several well-accepted market dynamics. First and foremost, the FDA pipeline is bursting with late-stage specialty products, each of which represents significant therapeutic breakthroughs in existing, as well as previously underserved, disease segments. As we’ve seen, many of these new therapies come to market at prices substantially above the earlier generation products that they are replacing.
Secondly, utilization rates are increasing related to two drivers that include a significant spike in the total number of patients on therapy fueled by more efficacious therapies. Recent product introductions in both the hepatitis C and multiple sclerosis categories are bringing previously failed-on-therapy and newly diagnosed patients to start therapy.
Lastly, we’ve seen price increases for many products in the specialty category. We agree with the industry reports that collectively forecast an aggregate trend rate in the 20+% range, for the next few years. That means that our member pharmacies are well-positioned to take advantage of this huge increase in demand and can expect significant growth rates in their businesses. Should healthcare reform be fully implemented, an additional one million-plus patients may be able to qualify for coverage of their specialty medications. These patients are not even included in the forecasts just discussed.
6. What is the future of Armada Health? What’s your personal perspective on where the company is going, and how you will guide it?
Among the national GPOs, Armada is unique in the industry. Because we are privately owned, we are nimble enough to develop with the market and large enough to help lead it. We are well-positioned to be totally aligned with the growing wants and needs of all the stakeholders we work with, including specialty pharmacy providers, manufacturers and distributors, prescribers, payers, and the patients. Our growing portfolio of manufacturer specialty programs are each individually tailored to meet the rapidly evolving demand for better channel management of these complex therapies. Our technology services expedite and simplify the prescribing and dispensing process and ensure open communications in step with the emergence of e-health. Our payer services are expanding rapidly to include customized specialty pharmacy solutions that help ensure appropriateness, compliance and cost containment. And, the patients are receiving best-in-class therapy management services all delivered in a seamless framework from our member pharmacies.