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Specialty drug market success requires patient-focused and therapy-specific channel and services strategies
With specialty drugs there is no margin for error when it comes to execution. Specialty drugs have fewer patients, fewer physicians and higher costs than traditional oral solid therapies. This has created a situation where many specialty drugs are underperforming because physicians have lost confidence in the ability to get patients started on therapy. Once this state of affairs occurs it is difficult to overcome.
For specialty drugs, payer requirements for prior authorizations, step edits, cost-sharing and detailed documentation are the nature of the game. Whether these payer cost- and utilization-management tactics become positive or negative factors is influenced by a specialty drug’s channel and services strategies. Too often channels and services for a specialty drug are an afterthought.
Market success for specialty drugs depends on flawless execution of attracting a patient to a therapy, initiating the patient on therapy and ensuring completion of the regimen. This is enabled by channel and services strategies aligned with the patient journey and with the needs of providers and payers.
What makes these drugs unique? How are they different from typical blockbuster oral solids that most of us know?
When is a drug considered specialty?
Ask an independent specialty pharmacist what makes a drug a specialty drug and you’ll often hear, “specialty is all about cost.” The pharmacist will take a bottle of Gleevec (imatinib, Novartis) off the shelf, “This drug is treated as a specialty drug yet patients take it just like any other oral solid therapy. It’s considered a specialty drug because it costs $40,000 per year.” The pharmacist will then pick up a bottle of warfarin. “Warfarin is a drug that requires high-touch monitoring and support, yet it’s not classified as specialty. If any drug should be specialty it’s warfarin, but it’s not because it’s available as a generic and low cost.”
FIG. 1. CHARACTERISTICS OF BRANDED/SPECIALTY THERAPIES
Cost is the most frequent specialty drug criteria used by payers. According to the latest EMD Serono Specialty Digest, 80% of payers use high cost (at least $15,000 per year) as a criterion for classification as specialty. Special handling is used 62% of the time. Other criteria less frequently used are limited distribution, requires assessment of response, treats rare disease, requires monitoring of side effects, self-administered injectables, office-administered injectables or infusions, and requires patient administration training.
Generally, a specialty drug is a high cost therapy with a challenging regimen. These two factors make the patient outcome both expensive and risky, which creates the need for tighter control of utilization. Fig. 1 compares different specialty drugs with the poster child of oral solid therapies: the statins. Whether or not payers, providers, channels or manufacturers call a drug “specialty” is less important than actually understanding when a drug requires a fundamental approach that is different from what we have done before.
Market success with specialty drugs requires that we approach each product, indication, dosing and administration regimen, and site of care as unique. In fact a number of specialty drugs are “pipelines within products”, having multiple indications treating numerous diseases. Within the category of specialty drugs, there are major differences based on the dosage and site of care.
One type of specialty drug is a product administered via infusion in a physician office, clinic or hospital outpatient clinic. The drugs are purchased by the provider from a specialty distributor or full-line wholesaler. The provider reimbursement is typically based on the drug’s Average Sale Price (ASP). This process is referred to as “buy and bill.” Patient cost share is managed under the patient’s health insurance medical benefit. The critical period for a buy-and-bill drug is immediately after launch, prior to assignment of an HCPCS code and while the drug is new to payers. During this period the risk is greatest that physicians will lose confidence in the ability to get reimbursed and get therapy initiated.
Recently, payers have instituted “white bag” and “brown bag” acquisition models for buy and bill drugs to give them more visibility and tighter control of drug utilization. In a white bag model, product is shipped to the site of care by a specialty pharmacy provider (SPP). The SPP buys the drug and handles reimbursement with the payer. In a brown bag model, product is shipped to the patient by an SPP, and the patient must transport it to the site of care. Providers are pushing back against these models because they add new burdens for inventory management, care coordination and unreimbursed activities.
Another common type of specialty drug is a patient-administered injection. The drugs are written as prescriptions, just like traditional pharmaceuticals. The drugs are dispensed at retail pharmacies or shipped to the patient from specialty pharmacies. Dispensing locations acquire product from full-line wholesale or direct from manufacturers. Pharmacy reimbursement is typically based on the drug’s average wholesale price (AWP). Patient cost share is managed under the patient’s health insurance pharmacy benefit. The critical period for a self-injectable drug is immediately after launch, when access to product and payer coverage is new to physicians and patients. It’s during this period that a difficult therapy-initiation process will cause physicians to shy away from use of the drug.
An emerging challenge is specialty oral therapies for very small patient populations. Many recently launched and future pipeline specialty drugs are oral and the patient populations are getting smaller. A small patient population for a specialty oral drug means that retail pharmacy may not be a well-suited channel. Patient market research indicates that brick-and-mortar pharmacy is more convenient and preferred over mail service pharmacy, so an SPP-only network may not be ideal. What if the physicians want to dispense the oral therapies in their offices? The typical oral specialty channel configuration may not support this scenario.
Understanding the intricacies of specialty drugs is fundamental. Opportunities for innovation exist because each drug, each regimen, each disease state, each indication, and each group of specialty physicians and patients have unique needs, capabilities and requirements.
I [heart] Specialty
True innovation in our industry has historically been driven by the science behind the drugs. Commercial strategies and tactics have frequently leveraged a one-size-fits-all template that shaped approaches to patients (DTC), payers (rebates), physicians (share of voice) and channels (full-line wholesale to retail). Commercial innovation has not been common in the drug industry. For specialty drugs there is not a one-size-fits-all template. Specialty drugs have created a new paradigm for our industry: Commercial Innovation.
The most successful specialty drugs have innovative service strategies and channel configurations. Innovative services mean an optimal blend of centralized and field-based resources, and high-touch services that support key phases of the patient journey. Innovative channels mean that product flows to the point of use/dispensing in configurations aligned to provider needs and capabilities, and with no unproductive discounts that impact provider reimbursement and manufacturer profitability.
The process of service and channel innovation starts with intimate knowledge of the patient journey. The patient journey should identify opportunities to attract patients, acquire patients (prescriptions), convert patients (initiation), drive adherence (within the regimen and across multiple regimens) and retain patients in the franchise (if a multiple product portfolio exists). Then service and channel innovation must consider the unique product requirements and market dynamics. Market dynamics include payer utilization and cost management, provider clinical pathways and standards of care, and the perception of value by payers, providers, patients, and other stakeholders.
FIG. 2. THE PRESCRIBER-PAYER 'CHESSBOARD'
Next the overall chessboard (Fig. 2) of influence and control should be well understood. This includes the physical, financial and transactional flows from point of manufacture to the patient. Upon this foundation of understanding the critical decisions can be made about who to sell to and through, how to wrap it with services, and how to ensure coordination of all components.
FIG. 3. SPECIALTY CHANNEL STRATEGIES
Fig. 3 presents the key factors that influence channel and service strategy design. Don’t expect the channels, providers and payers to drive innovation for your specialty drugs — they expect it from you. If the manufacturer does not actively design the ideal channel and services strategy to deliver on the promise of meeting the needs of the patient, then the channels will develop a configuration, or numerous configurations, that may not support the product needs and marketability. It’s up to you to find the ideal channel and services strategy based on your product, indication, dosing and administration regimen, and site of care. The opportunity for innovation is why we love specialty drugs!
ABOUT THE AUTHORS
Ron is a Managing Partner at Blue Fin Group (www.consultbfg.com; Atlanta), a consulting organization specializing in commercial practices for the life sciences globally. He is an internationally recognized thought leader in the areas of pharmaceutical, biotech, generic and medical device sales and commercial operations. Prior to Blue Fin, Ron was Vice President, Business Operations at Johnson & Johnson, and has over 25 years experience in life sciences. He has a Bachelor of Science degree in Mathematics and Science from the University of Windsor, Windsor, Ontario Canada.
Jennifer is a Principal Consultant at Blue Fin. She is an experienced pharmaceutical industry executive with expertise in healthcare commerce, supply chain, commercial operations, customer service and operations, and finance and accounting. Prior work includes a wide variety of domestic and international positions within the Rhone-Poulenc Rorer, Aventis Pharmaceuticals and Sanofi-aventis organizations over a period of more than 10 years. Jennifer has a Bachelor of Science degree, with a major in Accounting, from Lehigh University.
Jason is a Principal Consultant at Blue Fin, specializing in business intelligence and supply chain solutions. His experience includes channel and service strategy, channel data management, B2B eCommerce, sales operations, customer service and trade operations. He received a Master of Science degree in technology management from University of Pennsylvania Engineering and Wharton Business Schools, and his Bachelor of Science degree with high honors in chemical engineering from Michigan State University.