In its infancy, specialty pharmacy truly was a niche industry serving a limited number of patients with a small number of high-cost, low-volume, chronic or complex conditions, such as hemophilia and Gaucher’s disease. Specialty pharmacies came into existence as a result of unmet needs. As more drugs derived from biotechnology with higher-than-average prescription prices became available for patients to administer or inject themselves, and as insurers sought to manage access and expenses for patients with chronic conditions, specialty pharmacies began to do more than dispense medications. They dispensed care.
Specialty pharmacies facilitate completion of insurance paperwork on behalf of patients and prescribers to obtain authorization and secure reimbursement for these life-saving therapies. They coordinate insurance benefits to reduce or eliminate the potentially enormous patient out-of-pocket costs. Specialty pharmacies are able to keep specialty drugs in stock while most retail pharmacies cannot. In this way, they intervene for patients who need immediate access to therapies to prevent serious health complications. They also coordinate referrals from hospital discharge planners and deliver medications to the patients’ homes to allow therapy to begin immediately upon hospital discharge. In addition, specialty pharmacies offer condition-specific comprehensive, coordinated patient care management programs to ensure optimal therapeutic and cost-effective outcomes.
Since the early 1990s, specialty drugs — and therefore specialty pharmacies — have emerged as the fastest-growing segment of the pharmacy channel. Drivers of specialty pharmacy growth include increased number of treatments for specialty conditions, a burgeoning pipeline of specialty medications, an aging baby boomer population, increasing life expectancies, and a higher prevalence of specialty conditions.
The specialty pharmacy industry — trends, challenges, opportunities
As specialty drug development and costs continue to increase, several ongoing and emerging trends present opportunities and challenges and will likely have a substantial impact on the specialty pharmacy industry and the members of the National Association of Specialty Pharmacy. The industry will continue to evolve by keeping pace with innovation, market dynamics, and legislative and regulatory changes. Impending trends, challenges and opportunities are highlighted below.
• Declining reimbursement rates and direct and indirect remuneration (DIR) fees. Though the specialty pharmacy industry has grown substantially, labor and drug costs have increased, and reimbursements from health insurers and pharmacy benefit managers continue to decrease. Another challenge faced by the industry is DIR fees. Medicare Part D plan sponsors and their PBMs collect retroactive clawback charges from specialty pharmacy providers and other pharmacies. These fees are collected months after the pharmacy has dispensed the drug and after a beneficiary has purchased the drug. Centers for Medicare and Medicaid Services (CMS) data shows that such fees on pharmacies grew more than 45,000% between 2010 and 2017.
• Limited distribution networks restrict the distribution channel for a specialty drug to one or a very small number of pharmacies. This strategy has advantages and disadvantages. It may help ensure the safe distribution of high-risk drugs to small patient populations, but it limits competition among specialty pharmacies and also creates access challenges for patients and health care providers.
• Managed care access and carve-outs. Health plans and payers continue to limit access to pharmacy network participation, as well as carve out and channel specialty drugs. Patients are forced to use specific specialty pharmacies, which can result in patients receiving medications from multiple pharmacies and not the pharmacy of their choosing or their physician’s. This can result in confusion and challenges for both patients and health care providers who struggle to navigate complex health care benefits.
Though the industry faces many challenges, there are also many opportunities and advances that will improve the quality of patient care.
• Growth of the specialty pharmacy industry. Since the 1990s the number of specialty drugs available has increased exponentially and dominated new drug developments. This increase has been fueled not only by approvals in more common “specialty” diseases, such as cancer and hepatitis, but in rare or orphan diseases as well. We are beginning to see an increasing focus on specialty drug development for the treatment of diseases and conditions that were historically managed by small molecule therapies — e.g., Alzheimer’s disease, allergy, heart failure, stroke. In the next five years oncology, autoimmune and diabetes will drive therapeutic growth. Though specialty medicines were only 2.2% of prescription volume in 2018, revenue grew at 5.7% and at a 4.2% compound annual growth rate (CAGR) since 2013. It is projected that by the year 2020, specialty medications will account for 50% of the nation’s drug spend.
• Drug pricing reform. Legislative and regulatory activity is under way to address the high cost of prescription drugs, including specialty drugs. Various policies under consideration would directly reduce drug costs at the point of sale — whether at the pharmacy counter or those directly provided to a specialty patient. For specialty patients, payment reform referred to as “pharmacy DIR reform” would bring immediate relief to specialty patients, reducing a senior’s co-pay costs on expensive therapies that do not have generic alternatives. Pharmacy DIR reform ensures all pharmacy price concessions are used by a plan to reduce a Medicare patient’s up-front cost. This reform also would promote quality and support specialty pharmacies’ continued ability to provide the high-touch, white glove support services needed to improve patient outcomes through drug management that patients and providers have come to expect from specialty pharmacies.
• Generics, biosimilars and orphan drugs. Historically, there have been very few generic options for specialty medications. However, substantial investments in the development of generic specialty medications are being made, and it is expected that within the next five years alternatives to significant specialty drugs will be available.
There are also many biosimilars in development, with potential blockbusters available in 2019 and 2020. Biosimilars are different than generics in that a generic must be chemically identical to its branded counterpart and contain the same active ingredients. Biosimilars are much larger molecules and derived from living cells, making them more challenging to develop and manufacture. The availability of both biosimilars and generics will have a substantial impact on health care in general, and their use remains a potential strategy to lower drug costs.
In 1983, the U.S. government passed the Orphan Drug Act to give drug companies certain financial benefits for developing orphan drugs that are safe and effective. An orphan drug is used to treat diseases that are rare and affect fewer than 200,000 people in the United States. There are over 7,000 known orphan diseases, and they affect more than 30 million Americans. As a result of the Orphan Drug Act, there are more than 560 orphan medications in the pipeline. With such a small patient population and the niche clinical expertise required to support patients, specialty pharmacies will play a key role in the management of patients with orphan diseases.
• Targeted therapies. One of the major trends in specialty pharmacy is managing targeted therapies. Nearly 70% of the specialty drugs in development have an identified biomarker associated with them. Biomarkers help providers match patients with the best therapy right from the start and help manufacturers demonstrate just how successful their drugs can be. Biomarkers and genomics are used to personalize treatment regimens and determine precisely which medications are best suited for the patient, resulting in superior clinical and cost-effective outcomes. Specialty pharmacy is perfectly positioned to serve as an invaluable resource to help identify the optimal targeted therapy and further demonstrate the value they deliver as medication therapy experts and why they are a critical member of the health care delivery team.
• Value-based contracting. Though managing the cost of specialty products has focused mainly on drug prices in the past, greater emphasis will be placed on value-based contracting moving forward. Value-based contracting seeks to link the price of a drug to clinical or economic performance. Prescribers, specialty pharmacies and payers (health plans and PBMs) recognize the importance of aligning reimbursement to value, as opposed to volume. Value and outcomes-based contracts between payers and pharmaceutical manufacturers are being developed for drugs that have quantifiable value and widely accepted outcomes metrics. Specialty pharmacies fulfill a key role in providing high-touch patient care and collecting data to support these agreements. This, in turn, provides physicians, payers and pharmaceutical manufacturers with information and insights that help to enhance clinical decision-making processes. Though value-based contracting requires a great deal of collaboration and some financial risk, the focus is on quality care and services and lower overall cost, as opposed to cost alone.
With all of this in mind, it is essential that we do not lose sight of the fact that the patient is at the center of all we do. Specialty pharmacies are vital members of the patient’s health care team and will continue to adapt and evolve as needed to provide the optimal model of care for patients living with chronic illnesses and complex medical conditions achieve superior clinical and economic outcomes, and expedite their access to care.
Sheila Arquette is the executive director at the National Association of Specialty Pharmacy.