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Company touts double-digit growth in 'niche' distribution
BDI Pharma (Columbia, SC) is seeking to expand its existing business in immunoglobulins, chemotherapy products and specialty injectables by offering an alternative pricing model: cost per unit, rather than a percentage of wholesale acquisition cost (WAC). Anthony Jackson, newly appointed COO of the company, says that the model doesn’t work for all pharma products, but that it can be used for many more types of pharmaceuticals than those currently in place.
As Jackson explains, most pharmaceuticals are distributed on a WAC cost plus a percentage; that percentage shows up as a bill to manufacturers in their fee-for-service (FFS) charge from the distributors. In many cases, product price increases automatically result in a higher FFS, “but the manufacturer isn’t paying for anything more in terms of added services,” he notes. BDI offers a cost based on the number of units sold, and has its own sales force, reimbursement-investigation and market-access programs; each of these (and other) services can be priced in a predictable manner. Not all drugs need such services, and one limitation is that BDI, while having a large and growing customer base, does not distribute to the tens of thousands of dispensing points that the bigger wholesalers do. "Not all drugs are designed to fit within [this] model, so we continue to seek out additional manufacturers with the right types of drug that will thrive in an alternative distribution environment," said Rick Schindewolf, CFO, in a press statement.
In truth, other distributors offer comparable pricing strategies, and one element of how a manufacturer can counter the price escalation is to build a set formula into its distribution agreements (which is something that, in turn, GPOs are imposing on manufacturers through GPO pricing contracts.) Ultimately, the manufacturer will set a balance between the hands-on services their drug requires, and the ability of the distributor to access the broadest possible market for that drug, at the lowest cost. But BDI’s venture into this strategy is yet more evidence of how specialty pharmaceuticals are forcing change on the drug-distribution system.