Why Limited Distribution in Specialty Pharmacy?

When deciding to include a pharmacy in a distribution network, a manufacturer will look for factors that positively differentiate the pharmacy, as well as factors that will likely help the target patient population.

In many drug product releases, especially in the world of specialty pharmaceuticals, manufacturers will often limit the number of specialty pharmacies that can dispense their medications.

Pharmaceutical manufacturers will determine this distribution strategy based on product characteristics, education for the patient, market reach, and administration and dispensing characteristics.

On the surface one may view restricting access to a product counterproductive to the bottom line. However, by digging a bit deeper, the potential benefits and the reasons why manufacturers choose this route start becomes clearer.

All About the Patient

One of the hottest phrases in pharmacy and the pharmaceutical industry today is, “the patient journey.” Everyone involved in the health care of the patient wants to understand how the patient moves through the health care system. The process as well as the patient relationship with stakeholders along this pathway is referred to as the patient journey.

Pharmacy is a very important segment of that patient journey. Therefore, pharmacies and manufacturers want to impact the patient journey in the best possible way. By doing so, patients are more adherent to medication, more involved with their therapy, and more satisfied with their treatment. In turn manufacturers and pharmacies benefit as well.

When deciding to include a pharmacy in a distribution network, a manufacturer will look for factors that positively differentiate the pharmacy, as well as factors that will likely help the target patient population. For example, if a specialty pharmacy specializes in oncology products, that pharmacy may provide better medication adherence tracking, patient follow up, patient education programs, financial assistance programs, etc.

By contracting with a pharmacy that can better aid at producing positive outcomes for patients, the patient experiences better health outcomes. In other words, limiting a network to pharmacies that can provide high touch clinical care is preferred, over a larger network with pharmacies that are not as proficient at these services.

Show Me the Money

It is also important to understand the financial incentives to limit distribution. Adding one specialty pharmacy to a distribution network, can cost a manufacturer $90,000 or more. Therefore, it can be cost prohibitive for a pharmaceutical company to have a large network of contracted pharmacies.

Additionally, many payers view more than 12 or 13 pharmacies in a network like products available in open distribution. With more contracted pharmacies, payer reimbursement rates tend to go down and patient populations spread out and become diluted.

In a limited distribution model, the pharmaceutical manufacturer is able to control supply and better influence patient services. Such as Risk Evaluation and Mitigation Strategies, safety monitoring, and medication adherence.

Stand the Test

Although the practice of limited distribution is often debated, it is a practice that is continuing to grow within the industry. It is necessary for many pharmacies to differentiate themselves to earn limited or exclusive distribution contracts.

Accreditations are one step but are now mandatory for most payers. Therefore, pharmacies that can demonstrate expertise patient populations or disease states have an advantage. Showing a manufacturer that the pharmacy can execute medication safety programs or patient care and adherence programs to improve patient outcomes are imperative.

Manufacturers do not automatically include the big specialty pharmacy players for their distribution networks. Smaller pharmacies that can demonstrate this expertise are also able to earn those coveted contracts.

For example, by providing excellent services to patients who take an open distribution drug, can demonstrate the pharmacies ability to take on a limited distribution medication.

The limited distribution model does limit some specialty pharmacies and typically cuts out retail pharmacies as well. However, remember that it is the duty of a pharmacist to provide clinical care to patients in practice settings where pharmacists are more accessible and arguably more influential than other health care providers.

Therefore, the patient is better served by a pharmacy that can deliver specialized patient care, with pharmacists who are familiar with their unique disease states.

About the Author

Alex Toman attended Duquesne University, earning his Doctor of Pharmacy degree in 2011. Alex worked as a retail Pharmacist until 2015, at which time he transitioned into a clinical Pharmacist role within the specialty pharmacy industry. He is currently enrolled in the Masters of Science in Pharmacy Business Administration (MSPBA) program at the University of Pittsburgh, a 12-month, executive-style graduate education program designed for working professionals striving to be tomorrow’s leaders in the business of medicines.