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HDMA's fourth edition polling its members and manufacturers, on trends in specialty distribution
Despite (or perhaps because of) the intensifying focus on specialty pharmaceuticals, the field remains amorphous, with differing perspectives on what constitutes these specialties, how specialty pharmacies operate, and how reimbursement flows through the network. The Healthcare Distribution Management, through its Center for Healthcare Supply Chain Research, offers invaluable guidance on at least how the distribution part of the field operates. The center’s newest edition of Specialty Pharmaceuticals: Facts, Figures and Trends pulls together much of these data, based on polling of members and manufacturers, and a wide swath of secondary research.
Based on IMS Health data, specialty pharmaceuticals currently constitute a $77.5-billion market, roughly a quarter of the overall market, but growing at more than double (8.8%) the rate. Specialty pharmaceuticals themselves are usually defined as having four or more of these traits:
Although the field is dominated by oncology products, a wide range of types of dispensing locations are a hallmark of the market. The center’s polling identifies the split between large distributors (generally, those with more than $1 billion in sales) and “niche” distributors. The former handle more clinics and independent practices; the latter handle more specialty pharmacies and retail pharmacies (Table).
Although most distributors act as traditional wholesalers, buying product and shipping it to customers, there are numerous alternative arrangements, including fee-for-service ones, where the distributor does not take ownership. Reimbursement is complicated first by the fact that many products (especially oncolytics) are provided to doctors under a “buy and bill” arrangement, where the physician or healthcare provider buys the product directly, and then bills payers. This scenario in turn has led to “brown bagging” and “white bagging”: the former being the practice of shipping the drug directly to the patient or pharmacy (thus cutting the hospital or clinician out of the reimbursement process); the latter being the practice of delivering patient-specific formulations from a specialty pharmacy to the point of dispensing (such as a clinic). Brown-bagging makes the patient responsible for bringing the drug to a healthcare provider—which puts the drug quality at risk. But for white-bagging, “numerous issues for providers and payers remain unresolved, such as drug wastage, which puts in doubt the future of white-bagging as a broadly accepted supply chain and reimbursement model,” according to the report.
A hallmark of specialty distribution is surrounding the delivery of the products with ancillary services, ranging from patient assistance programs, to education, navigating preauthorization requirements with payers, customer call centers, and basic logistics. And within those services are ones provided specifically to manufacturers, including designing and executing marketing campaigns, online and print-based cataloging, and setting up advisory boards. According to the study, fully two-thirds of all specialty manufacturers have at least one exclusive distribution arrangement, which puts this portfolio, and how well performance is achieved, as a competitive advantage for distributors to pursue.
On an even more critical level, many specialty pharmaceuticals are marketed under Risk Evaluation and Mitigation Strategies (REMS) programs, which obligate the manufacturer to receive and report (to FDA) how well the dispensing of the drug and the monitoring of patients is proceeding.
For manufacturers, REMS (which originated in the 2007 FDA Amendments Act—Pharmaceutical Commerce, May/June 2011, p. 26) represent a way to get a provisional commercialization approval from FDA; a drug with significant risks (say, a serious side effect for some patients) can be approved as long as the manufacturer follows up with patient surveys or monitoring. REMS underwent a modification in 2012; those programs that only required the publication and distribution of a medication guide were generally excluded from the program. The remainder have significant requirements for both manufacturers and distributors.
The most far-reaching REMS are those with “elements to assure safe use” (ETASU). And ETASU can comprise registration of distributors, pharmacists and doctors; patient enrollment in registries; provision for (and validation of) supplemental medical measures; and other risk-control activities. Manufacturers depend on their distribution partners to collect these data, and the distributors, in turn, depend on healthcare providers. According to the center, as of June 2012, 37 drugs required ETASU.
Cold chain services
In the logistics arena, both large and niche distributors commonly use refrigerated storage, and insulated and/or refrigerated shipping containers to deliver products. According to the center’s poll of manufacturers, FedEx Air and UPS Air are running pretty much neck-and-neck among carriers, with the US Postal Service a distant third (Fig. 1). However, a key line item in Fig. 1 is “LTL/Common carrier”: Will manufacturers (and customers) continue to be willing to utilize general freight delivery for these products? The question puts the tradeoff between paying more for high-tech packaging (which could withstand the vagaries of general package delivery) against paying more for dedicated cold-chain shipping systems.
The report was produced with the support of: CuraScript Specialty Distribution; Genentech; H. D. Smith Foundation; Health Coalition, Inc.; Intellogics; McKesson Specialty Health; Pharmacy First; Sensitech; and Takeda Pharmaceuticals. Copies are available for purchase from the Center for Healthcare Supply Chain Research, www.hcsupplychainresearch.org.