A new decade presents an opportunity for reflection. For Healthcare Distribution Alliance and our pharmaceutical distributor members, 2020 finds us reexamining the value our industry provides to the larger health care
ecosystem while reassessing our priorities and anticipating what is around the corner.
HDA captured the state of our industry, and what the future may hold, through a report commissioned last year, “The Role of Distributors in the US Health Care Industry.”
Distributors are the backbone of the U.S. health care system, handling 92% of all pharmaceutical sales and connecting 1,300 manufacturers to more than 180,000 dispensers. Our core services — delivering medications safely, reliably and efficiently; streamlining inventory management; and managing financial risk — support trading partners and, ultimately, enable patient access to critical treatments. Altogether, distributors are reducing operating expenses for the entire health care system, generating between $33 billion and $53 billion in cost savings annually.
Beyond these functions, distributors boost manufacturers and pharmacies through value-added services. From supporting independent pharmacies through franchising programs, consulting and technology services as well as providing access to over-the-counter medications to investing in generic sourcing programs that help reduce medicine costs and establishing hub services to benefit manufacturers, providers and patients, HDA member companies are providing additional savings while enabling trading partners to focus on what they do best for the benefit of patients nationwide.
Distributors are leading innovation on the front lines of health care transformation, and HDA members are constantly adapting to provide value to their supply chain partners as the marketplace evolves. “The Role of Distributors” report forecasts the future role of wholesalers, which will likely be influenced by the continued growth of the specialty pharmaceutical segment, the expansion of value-added services and drug pricing policies.
Specifically, four scenarios could affect distributors and the pharmaceutical supply chain:
• A potential overhaul of the pharmaceutical pricing infrastructure might put distributors in a unique position to expand on their role as industry intermediaries.
• Technology advances leading to an increase in personalized medicines may threaten distributors’ ability to aggregate orders but might also offer an opportunity for the industry to expand their delivery capabilities and offer additional third-party services.
• The emergence of innovative last-mile delivery services would allow distributors, as logistics experts, to strengthen their bonds with pharmacy customers by creating patient delivery systems with extra precision.
• As more data flow throughout the pharmaceutical supply chain — for example, unprecedented amounts will be exchanged by the time the Drug Supply Chain Security Act (DSCSA) is fully implemented in 2023 — distributors could create further efficiencies in the health care system by serving as “stewards” of these data.
As we consider these scenarios, we must also look to the immediate priorities that will drive our agenda in the next year and beyond. Several legislative and regulatory priorities will inform HDA plans for 2020.
Addressing drug pricing and importation policies
Health care affordability will continue to be a focus over the next year, resuming 2019 efforts by legislators and the White House to address the cost of medicines in the U.S. From the Trump administration’s International Pricing Index (IPI) Model for Medicare Part B Drugs, to the now-withdrawn rule on prescription drug rebates and congressional proposals requiring the government to negotiate drug prices — HDA lent its perspective to the debate.
No matter where this policy discussion leads, there is little doubt that any affordability proposal enacted would fundamentally change “business as usual” for the pharmaceutical supply chain. Given the distribution industry’s commitment to ensuring access to safe and affordable health care, HDA will remain actively engaged on this issue, educating policy makers on HDA members’ important contributions.
At the same time, HDA will reiterate its opposition to health care affordability policies that permit prescription drug importation, which we believe would threaten patient safety and jeopardize DSCSA implementation without meaningful cost reductions. Further, an analysis of federal importation policies conducted last year by the HDA Research Foundation found that they fail to provide comprehensive guidance and funding to meet current federal safety and quality standards, and lead to at least $1.1 billion in unforeseen costs for the health care system, regulators and patients.
The alliance looks forward to engaging with the Department of Health and Human Services and the Food and Drug Administration as rules are introduced related to the “Safe Importation Action Plan” the agencies announced last year. HDA also will also be following this issue closely in the states, as importation laws have been enacted in such states as Florida and Vermont.
Mitigating the opioid crisis
HDA will continue to communicate the role of pharmaceutical distributors, while recommending comprehensive policy solutions and engaging with other health care stakeholders to help address the nation’s opioid epidemic.
Still, it will take collaborative efforts among regulatory and supply chain stakeholders to mitigate this crisis. HDA members stand ready to comply with important provisions the Drug Enforcement Administration is implementing as part of the SUPPORT for Patients and Communities Act, which strengthened coordination, information collection and communication with registrants. HDA also welcomes the actions taken by the DEA last year to reduce opioid production quotas.
While progress has been achieved, there still is work to be done. Echoing the findings of the Department of Justice Office of the Inspector General’s report regarding DEA’s oversight of the opioid epidemic, HDA renews its call for the agency to finalize much-needed guidance on suspicious orders reporting, which would help curb this issue.
At the state level, legislatures are continuing to pursue taxes on opioid distribution and increased licensure fees to pay for the unforeseen costs of the crisis. Such policies put the distribution industry in a difficult position — and may hinder patient access to critically needed medicines. Last year saw states, such as New York and Minnesota, enacting such policies, and with many more states expected to consider them in 2020, HDA will work with lawmakers to pursue sustainable solutions for industry and patients alike.
Beyond legislative solutions, Allied Against Opioid Abuse (AAOA), a collaborative initiative founded by HDA in 2018 that has grown to nearly 20 national partners, will pursue activities with the goal of educating individuals about their rights, risks and responsibilities associated with prescription opioids.
Last year, AAOA focused on ensuring the safe use, storage and disposal of opioids by launching two consumer-focused tool kits with HealthyWomen and the National Consumers League, as well as releasing two patient education videos featuring providers from the Cleveland Clinic, among other projects.
In 2020, AAOA will resume collaborative efforts with partners in the pharmacy community by continuing to disseminate the Pharmacy Toolkit, which encourages pharmacists to engage in important conversations with patients and providers on responsible opioid use. Learn more about AAOA’s efforts at www.AgainstOpioidAbuse.org.
DSCSA implementation is a great example of how the distribution industry’s collaborative spirit and logistics expertise benefit the entire supply chain. As the final completion date of November 2023 comes into focus, we expect there will be a flurry of activity by industry and the FDA to reach the final milestones.
Late last year, HDA requested that the FDA institute a one-year period of enforcement discretion related to the November 2019 saleable returns requirements, which was granted. HDA and its members will make the most of this enforcement discretion by supporting efforts to establish a Verification Router Service network to comply with the requirement.
Also on distributors’ radar are the dispenser requirements that will go into effect later this year. We encourage the pharmacy community to engage with distributors to learn more about DSCSA expectations. HDA also offers a range of educational resources; this fall, we will once again host our popular Traceability Seminar in Washington, D.C.
While the road ahead will almost certainly bring challenges and opportunities, pharmaceutical distributors will continue to transform to meet the needs of manufacturers, providers and the patients they serve — both today and in the future.
HDA is capturing the industry’s many contributions and value through an initiative called Health Delivered, bringing to life how distributors serve the larger health care system. For stories and resources, visit www.HealthDelivered.org.
John Gray, is the president, CEO at Healthcare Distribution Alliance.