Manufacturer Considerations for Designing a Distribution Strategy for Specialty Products


As health care costs continue to increase, and with high-cost specialty products making up a significant portion of the pipeline, the role of the Specialty Pharmacy (SP) continues to grow and influence health care decisions across multiple stakeholders.

As health care costs continue to increase, and with high-cost specialty products making up a significant portion of the pipeline, the role of the Specialty Pharmacy (SP) continues to grow and influence health care decisions across multiple stakeholders.

Increasing health care costs are a continuing challenge for all stakeholders within the health care landscape. Payers’ efforts to reduce costs and keep their premiums competitive in order to maintain profitability also put pressure on providers and patients. Providers are facing declining reimbursement and rising costs as they work to keep their doors open, while patients are facing increased cost shares for drugs and services—particularly for high-cost specialty products. Adding to the stakeholder challenges is the continued development of highly complex, high-cost specialty therapies. While the innovation and promise of these therapies is groundbreaking and exciting, the rising cost of specialty drugs continues to put pressure on all stakeholders.

The need to control health care costs and the specific handling requirements of many specialty products underscore the need for more targeted management of these products. The development of SPs has met that need in the marketplace, and SPs continue to be a significant player in terms of the management and distribution of these products.

In addition to increasing health care costs and the increased use of high-cost specialty products, additional trends contribute to the rise (and anticipated growth) of SP. These trends include:

  • Increased launch of high-cost, low-demand products
  • Increased use of biologic products with special storage and distribution needs
  • Increased Risk Evaluation and Mitigation Strategy (REMS) requirements of biologics
  • Increased need to monitor and track patient compliance
  • Continued stakeholder consolidation

Table 1 provides additional detail on each of these trends.

Table 1 Specialty Pharmacy Trends



SP Impact

High-cost, low-demand products

Biologics continue to have a rising price tag; however, for many specialty products, the relative patient demand is decreasing due to advances in personalized medicine that allow further segmentation of patients. This trend is only going to increase, making retail pharmacies less likely to stock these medications regularly, and thus creating a need for an alternative distribution option.

The SP model is built to address the high-cost, low-demand needs by being able to stock and ship based on payer requirements and patient needs. Additionally, SPs can support payers in their efforts to ensure the right patient is getting the right product.

Complexity of biologic products

Due to the development and manufacturing processes and nature of biologics, they often require specific storage requirements, which may impede the ability of a retail pharmacy to store them. Additionally, the high cost of products increases the negative impact for a pharmacy if the product goes unused.

The SP storage and delivery capabilities are designed to help accommodate storage and delivery issues that a more traditional retail pharmacy may not be willing or able to tackle.

Increasing REMS requirements

Given the complexity of these products and the lower number of patients on which clinical trials are based, the FDA is increasingly placing REMS requirements on newly-approved products, which may include distribution and monitoring requirements.

An SP can be utilized as a partner in monitoring REMS requirements and reporting back on a variety of data points, including patient outcomes. Depending on the requirements of the REMS, employing a limited number of SPs may also improve the overall compliance process.

Need to monitor patient compliance

Compliance is a top concern for both cost and clinical reasons across stakeholders. Patient compliance ensures limited wasted product and optimal patient outcomes.

The SP offerings around tracking, monitoring, and reporting patient compliance provide important value for all stakeholders.

Pharmacy stakeholder consolidation

The continued trend of SPs merging with pharmacy benefit managers

and retail pharmacies improves the “one-stop-shop” value story of SPs.

The consolidation affords payers and manufacturers opportunities to develop relationships with one entity that offers services across pharmacy and patient needs

REMS = Risk Evaluation and Mitigation Strategy; SP = Specialty Pharmacy

Stakeholder Perspectives and SPs’ Value

The broader health care trends have played a significant role in the expanding use of SPs; however, stakeholder needs have also increased the use and market presence of SPs.

Payers: As health care costs have continued to increase, managed care payers are continually seeking additional options to better manage costs and utilization. While this is a constant focus, the counterbalance is keeping their administrative costs low. Therefore, SPs offer their product management and patient adherence services to help fill the gaps of the payers, while meeting the needs of reduced costs. Additionally, given the high costs and complexity, drug wastage can be a significant cost for payers; SPs’ inventory management and delivery methods help reduce that concern, thus also meeting a payer need. (See Figure 1 for additional insights from payers.)

Figure 1 Private Payer Insights on Infused and Specialty Therapies

Providers: Providers’ views on SPs vary; SPs can offer provider offices certain services that reduce their administrative burden. For example, SPs often assist in the process of completing any required prior authorization processes and collect patient cost-share. In addition, for infused therapies, specialty pharmacies eliminate any risk associated with therapies not being reimbursed or patient cost-share not being collected, and eliminate the need for capital to maintain inventory. However, lower reimbursement for physician services has pushed providers to focus more on their finances, and the use of SPs eliminates revenue from the buy-and-bill process of infused drugs or the potential for additional revenue from in-office dispensing.

Manufacturers: From a manufacturer perspective, SPs represent a growing customer segment that can be utilized as a partnership opportunity. The SP business model can offer manufacturers immediate insight into patient compliance, side-effect tracking, and other data points that manufacturers may not have access to. Additionally, as manufacturers continue to seek ways to maximize controlled or closed distribution options, SPs are the gateway to ensuring the best model and partnerships for distribution.

Patients: For patients, SP services add additional support and, many times, provide 24-hour access to nurses who can answer clinical questions that the patient may have. In addition, SPs often have access to patient-support programs that can help patients find financial support for their out-of-pocket responsibilities.

Partnering With SPs

Manufacturers need to consider a variety of different factors when deciding which pharmacies they should partner with, including:

  • Expertise in a specific disease state: There are some disease states with a limited number of patients in which a niche SP that focuses on a particular disease state may be the best option for a manufacturer. A niche SP may be able to offer clinical services that others cannot, and some independent SPs offer services and cost-containment options for specific disease states. For specific orphan disease states, this will likely factor into manufacturer decision-making more than a disease state such as oncology, where essentially all specialty pharmacies have some level of expertise. Manufacturers should consider how SP affiliation and disease state knowledge will impact their decision-making.
  • Reach: Some SPs will operate at the national level and others at the regional level. These differences should be considered as a manufacturer understands where the providers, centers of excellence, and patients’ needs lie geographically.
  • Payer/SPs partnerships: Some of the largest payers and PBMs have acquired their own SP and require use of their SP network for reimbursement. (See Table 2.) If a manufacturer chooses to work with a single or independent SP, other SPs associated with commercial payers or pharmacy benefit managers will need to coordinate fulfillment of their patients’ prescriptions through the manufacturer-selected SP.
  • Quality of data reported back to manufacturer: This factor will be critical, especially at launch, where manufacturers want to understand their sales immediately and make strategic decisions based on this data.
  • Connectivity/integration with patient-support services: Most specialty therapies being launched today will offer some type of patient-support services. SPs and patient-support services should be either integrated or connected so information about patient compliance and shipments of drugs can be reported back and forth for patient and provider convenience, as well as manufacturer/payer information.

Table 2 Main PBM and Payer-owned Specialty Pharmacies

Payer-owned SP (Payer)

PBM-owned SP (PBM)

Cigna Tel-drug/Cigna Specialty Pharmacy (Cigna)

Accredo, HHS (Medco)1

Prescription Solutions/OptumRx (United)

Caremark (Caremark/CVS)

Aetna Specialty Pharmacy (Aetna)

CuraScript (Express Scripts)1

Wellcare Specialty (Wellcare)

Walgreens/Option Care/Med Mark (Walgreens)

Humana (Right Source Pharmacy)

1In July 2011, Express Script announced its plans to merge with Medco. The potential deal is being reviewed by the US Federal Trade Commission to ensure its compliance with anti-trust laws.

The Future of SPs

In addition to the existing pressures facing stakeholders, the forthcoming changes as a result of sweeping health care reform are expected to have a significant impact on decision-making across the health care industry. The goals of health care reform were to expand insurance access, reduce costs, and improve quality. As the significant provisions will take effect in 2014, the role of SPs is likely to continue to grow.

In 2014, new state-run health insurance exchanges will emerge in the marketplace. These insurance exchanges will facilitate access to health insurance plans for individuals and small employers. The plans that will be available through the exchanges are expected to be existing plans or similar to existing ones, and therefore will likely require the use of SP services. Additionally, as the delivery system changes and new forms of providing care—such as Accountable Care Organizations or free-standing clinics—gain traction, SPs are likely to play a role in managing and distributing products to those systems.

Lastly, through expanded Medicaid and state-run exchanges, more individuals will be in the health care system with the same or fewer resources per patient. As a result, the cost control and compliance offerings of SPs will continue to fill a gap across payers. SPs have filled an existing gap within the market based on technological advances and rising costs. They are likely to be a growing force as treatment decision-making becomes increasingly multi-faceted.

About the Authors

Sara Fernandez, PhD, is an associate director with Xcenda’s Reimbursement Strategy and Health Policy consulting practice. Dr. Fernandez specializes in payer policy research, strategic reimbursement assessments, and modeling tools to support the development of patient support programs. She received her Doctor of Philosophy in Biochemistry and Bachelor of Science in Chemistry from the University of Santiago de Compostela in Spain. Molly Burich is a manager with Xcenda’s Reimbursement Strategy and Health Policy consulting practice. Ms. Burich closely monitors ongoing legislative and regulatory changes, and provides impact analyses to guide manufacturers’ strategic reimbursement planning. She received a Master of Science in Public Service Management, with an emphasis in Public Policy, from DePaul University in Chicago, Illinois, and a Bachelor of Arts in political science from the University of Northern Colorado.

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