Blog: Issues Facing Specialty Pharmacies

By Michelle Hoffmann, PhD

Over the last few months, the future of specialty pharmacy has come up during conversation with a remarkably broad spectrum of our clients - large and small cap manufacturers, as well as investors. The issue has been pretty hard to ignore especially since late 2015’s revelations about the way select pharma manufacturers are using specialty pharmacy. As of the end of January, Valeant severed ties with Philidor Rx Services, the specialty pharmacy that almost exclusively dispensed its high priced dermatology drugs. Clearly, employers, PBMs, and insurance companies – never mind a public and a national legislature focused on rising drug prices – will increase scrutiny and demand better regulation of the so called “captive specialty pharmacy” segment. But although the segment is surrounded by controversy, specialty pharmacies are not going away. What’s more likely is an equilibration where drugs that should be sold through retail channels, move back to that segment. However, the complex, innovative drugs, around which the sector was originally established, will remain under the control of specialty pharmacies.As a result, the specialty pharmacy sector remains an attractive opportunity, with overall sales of new specialty pharmacy drugs projected to more than triple in size by 2020. With increasing numbers of patients on complex specialty therapeutics, the strains on the system are very real and multiple actors are rushing in to win in this rapidly growing market and provide the necessary services that improve patient management.

To understand how some actors may win in this environment, we should consider the rising importance of specialty pharmacy limited distribution networks (LDNs). Although closed distribution networks have recently gotten a terrible bashing in the press (thanks to Martin Shkreli), limited distribution will only become more important as drugs become more complex and patient populations more niche. Manufacturers need timely access to outcomes and persistence data, especially in the case of complex therapies that have monitoring requirements and/or are part of Risk Evaluation and Mitigation Strategy (REMS). In addition, better resolution of patient data may induce manufacturers to tighten distribution networks, even to the consternation of their end users.

So while there may be some upheaval as the model shifts back towards true specialty drugs, the importance of specialty pharmacy, the data they can bring to the table, and the complexity of their offerings are only likely to increase in the future.