10 Top Trends in Specialty Pharmacy
Randi Hernandez, MS, Associate Editor/Online | October 14, 2013
The introduction of personalized genomics, improvements in the design of diagnostic tools, and recent initiatives promoting increased patient data transparency have all contributed to the development of better, more targeted therapies in the treatment of chronic disease. But innovation typically comes at a price, and the mere existence of such sophisticated solutions does not certify their accessibility to all patients.
While it is estimated that the Affordable Care Act (ACA) will cover 24 million1
more patients when fully implemented, little is known about how many patients will begin treatment with specialty medications as a result of these legislative changes. Less is known about whether these patients will be able to afford specialty drugs, even after they are insured.
“The number of new lives that may be covered under the Affordable Care Act seems to present a moving target, and as most will agree, this number has fluctuated,” Kevin Alder, chief operating officer, Specialty Pharmacy Association of America (SPAARx), said in an interview with SpecialtyPharmacyTimes.com. “What we do see, with the advent of the use of genomic markers, the quality of overall patient care, and the discovery of innovative therapies, is an increase in the prescribing and utilization of specialty medications to improve overall patient outcomes.”
Spending on specialty drugs in the United States is projected to increase 67% by the end of 2015, and spending in 8 of the top 10 specialty therapy classes will continue to increase over the next 3 years, according to a 2013 analysis by Express Scripts.2
Prime Therapeutics estimates that by 2018, more than 50% of total drug spend will be on specialty medications.3
Increased innovation in the biopharmaceutical pipeline, greater medication utilization, and inflation have all been cited as major reasons for an increase in the specialty spend.
The following article examines the 10 major factors that contributed to the current boom in biologics, as well as the potential consequences of such rapid growth in specialty pharmacy.
1. Total Drug Spending Will Increase
Health care reform driven by the ACA will cause an increase in total drug spending as a larger number of Americans will be covered by health insurance.
As a result of the focus on drug development in the biotechnology sector, pharmacy revenues will be dominated by specialty drugs. Increased spending will also occur as a result of a shrinking Medicare Part D coverage gap, according to Adam J. Fein, PhD, president of Pembroke Consulting and chief executive officer of Drug Channels.4
The introduction of health insurance exchanges will also mean that more people will receive federal aid to help them purchase health insurance coverage.
A push toward value-based care will be implemented, and there will be a greater focus on rewarding providers for helping patients achieve positive health outcomes. In addition, health plans may avert providers from the use of expensive, newly developed treatment options that may have only a marginally higher success rate than alternatives—so even though drug spending is expected to increase, health plans may try to avoid paying for new therapies unless they are part of a clinical pathway or are deemed a “preferred” medication by the plan’s formulary committee.
Fein wrote in the 2012-2013 Economic Report on Retail, Mail, and Specialty Pharmacies
that health care reform could have a negative effect on pharmacies “due to the new pharmacy reimbursement metrics and the forthcoming publication of pricing data.” He also noted that the expansion of professional services surrounding medication therapy management could produce extra revenue.4
“Spending for specialty drugs continues to grow at 15% to 20% annually,” Fein told SpecialtyPharmacyTimes.com. “Specialty pharmacies will benefit from the expected overall growth in demand for prescription pharmaceuticals and the corresponding increase in drug spending.”
2. Drug Manufacturers Aim for a “Me-First” Strategy
Drug development strategy is moving from a “me-too” strategy to a “me-first” approach, as manufacturers turn their attention to rare diseases, orphan drugs, and medications showing a substantial benefit over existing treatments.
With the Orphan Drug Act, Congress sought to encourage research into treatments for rare diseases affecting a small population of patients that may not be economically advantageous because of the relatively low rate of return compared with the cost associated with drug development. Since the Act’s passage in 1983, government incentives, shortened trial periods, high rates of regulatory success, and extended exclusivity periods have made the development of orphan drugs more attractive to pharmaceutical companies.
As a result of the regulatory changes made to reduce the costs of developing such drugs and the incentives now being offered to companies willing to direct their attention to the treatment of rare diseases, orphan drugs have the potential to become the industry’s next blockbusters, according to Thomson Reuters’ report, “The Economic Power of Orphan Drugs.”5
Specialty drugs treating conditions with unmet needs are often faced with fewer barriers to approval, and efforts to expedite their journey through the pipeline have been facilitated by the FDA’s recent approval designations—Accelerated Approval, Fast Track, Priority Review, and Breakthrough Therapy.
One example is ibrutinib’s recent breakthrough therapy designation.6
Ibrutinib is a selective tyrosine kinase inhibitor that received an expedited designation for the treatment of chronic lymphocytic leukemia, mantle cell lymphoma with deletion of the short arm of chromosome 17, relapsed or refractory mantle cell lymphoma, and Waldenström’s macroglobulinemia. “Ibrutinib is a great example of how this type of legislation can accelerate the development of drugs so they can be administered to patients sooner,” Craig L. Tendler, MD, vice president, late development and global medical affairs for oncology, Janssen Oncology, said in a video for OncLiveTV
According to Dr. Tendler, this type of legislation path is a crucial win for drug developers, as existing evidence suggests that ibrutinib is superior to available therapies.
According to a recent study by Kantar Health, 60% of the ongoing pivotal trials for oncology agents are being conducted in indications with a target population of fewer than 12,500 patients—and more than 50% of oncology pipeline agents possess novel mechanisms of action and are vying to be first-in-class.8
Although a separate breakthrough designation request must be submitted for each indication, a request for a Breakthrough Therapy designation can be submitted for multiple indications of the same drug, according to the FDA. Additional indication approvals could further drive the overall usage of a specialty drug.
Speed to market isn’t the only metric that matters, however. “A Breakthrough designation doesn’t always mean the product gets approved ... sometimes it means that because you fail faster, you don’t waste money on programs that don’t pan out,” said Peter Pitts, a former head of communications for the FDA who is a board member of Context Matters and co-founder of the Center for Medicine in the Public Interest.9
3. More Effective Therapies Are Emerging
Market expansion is being driven by increased patient survival, and better survival rates are the result of more effective therapies.
Some of the specialty drugs that have come on the market have improved survival rates so markedly that conditions that were formally associated with high mortality rates are now associated with higher morbidity rates. Gleevec (imatinib mesylate), which was approved in 2001 to treat a rare cancer called chronic myeloid leukemia (CML), was the first oral oncolytic-targeted therapy released. It was the first treatment of its kind, working to fight cancer by turning off an enzyme that causes cells to multiply. It is one of the most effective therapies to treat CML, replacing many of the older treatments that were available.
The success of Gleevec was outlined in an article in the journal Blood10
: “Imatinib and the new Bcr-Abl tyrosine kinase inhibitors (TKIs) became the most successful class of targeted therapies ever developed in cancer, exceeding all projected survival expectations. With TKI therapy, the annual all-cause mortality in CML declined to 2%, versus a historical rate of 10-20%, and the estimated 10-year survival increased from less than 20% to above 80%.”
Agents in the pipeline to treat hepatitis C have also demonstrated increased efficacy. Interferon-free investigational agents in the pipeline reportedly have fewer side effects than prior interferon-based therapies and appear to produce significantly higher sustained virologic response (SVR) rates in clinical trials. As a result, drug costs to treat hepatitis C are predicted to quadruple over the next 3 years. According to Express Scripts, by the end of 2015, “Spending on medications for hepatitis C will exceed that of much more common conditions, including high blood pressure.”2
4. Cost Pressures Impact Health Plans
Cost pressures associated with specialty medications are causing a dramatic shift in health plan benefit design.
Many studies in 2013 revealed that a significant portion of spend on specialty drugs is not tracked through the pharmacy benefit and is hidden instead under the medical benefit. Because many infusible and injectable biologics require specialized handling, administration, and clinical monitoring, they are often given to patients in the outpatient hospital setting and are billed using the Healthcare Common Procedure Coding System. A study by Artemetrx estimated that specialty drug spend is underreported by as much as 10% to 15% due to this oversight. When accounting for medical claims data, total specialty spend by health plans is actually closer to 30%, rather than the 15% to 20% statistic quoted by numerous reports.2,11
Traditional utilization methods are meant to encourage generic utilization, but in the case of specialty medications, there are often very few or no alternative treatment options. Payers and benefit managers are also placing very expensive therapies in specialty tiers (usually tier 3 or 4 within a plan) and are shifting the cost of the drug to consumers via a coinsurance requirement. “Cost-sharing burdens are growing, because payers are moving expensive specialty medications to the fourth tier of benefit plans,” noted Fein. “About half of these drugs now face coinsurance, instead of flat copayments.”
Legislation to limit the total out-of-pocket dollar amount for specialty drugs has been proposed in many states, a move that the Academy of Managed Care Pharmacy wrote would “prevent health plans from designing an evidence-based pharmacy benefit that is also financially sustainable” in letters to multiple state legislators. Meanwhile, patient advocate groups support the cost limits, saying they allow patients increased access to pricey medications.
In response to fiscal pressures, payers may rely more heavily on prior authorization and utilization management tools, such as split fill for oral oncolytics and site-of-care optimization for injectables and infusibles. Although manufacturer-sponsored coupons and copay cards for “nonpreferred” specialty medications help reduce the overall drug cost to the patient, these initiatives circumvent the formulary tiering hierarchy constructed by payers. Because the cost savings from copay cards are not transferred back to sponsors, some health plans have begun blocking their use entirely. Payers may also begin to increasingly designate specific pharmacies as “preferred” providers in their quest to quell drug costs.
5. Oncology Practices Consolidate
Consolidation of oncology practices into large health systems is being driven by cost of drugs on the medical benefit and providers’ efforts to join an accountable care organization (ACO).
In 2005, the change in Medicare’s drug pricing of provider-administered specialty drugs from average wholesale price to average sales price meant that for many oncologists it was no longer financially feasible to administer injectable or infusible specialty drugs in their offices (Figure 1).
[Click image to enlarge]
“Economic pressures are encouraging physicians to become hospital employees, and for care to shift away from community practices to hospitals,” Fein asserted. “Both trends have negative consequences for the specialty distributors that sell to independent physician offices and clinics.”
“The cost of oncology products, whether in IV or oral form, is impacting the care landscape significantly,” said Eric Sredzinski, PharmD, AAHIVE, vice president, clinical affairs, Avella Specialty Pharmacy, in a SpecialtyPharmacyTimes.com interview
“It will be interesting to see, because if a capitation cost to manage patients with an ACO is provided, treating an oncology patient with a drug that could cost over $100,000 per year could really bend or break that model of cost-containment.”
This shift in care location will be further facilitated by hospitals’ ability to use the 340B Drug Discount program to manage specialty drugs, noted Fein, and may actually spark growth in the 340B program. “The out-of-control 340B Drug Discount program will put more pressure on the manufacturers and payers, because hospitals will aggressively try to use their 340B contract pharmacies for specialty products,” he explained.
6. The Specialty Blockbuster Drugs Are Coming
Expect to see a shift from blockbusters in primary care to specialty blockbusters.
“Tomorrow’s best-sellers are more likely to target smaller patient populations than have the blockbusters of the past,” said Fein. “The world is changing, so manufacturers’ commercial and channel strategies will be changing, too.” (Figure 2.)
[Click image to enlarge]
While Lipitor has been lauded as the biggest blockbuster drug of all time, garnering $141 billion since its launch, Humira, a specialty drug, is poised to surpass Lipitor in terms of total revenue. Forbes
contributor Simon King wrote, “Based on cumulative revenue performance for the subsequent 5 years of availability (ie, years 11 to 15 on the market), Humira is forecast to outperform Lipitor with global revenues of $69 billion versus $63 billion. Furthermore, Humira is forecast to record higher cumulative sales during this subsequent 5-year period, compared to its first 10 years of availability.”13
King’s prediction relies on the 2016 patent expiration date of Humira. “With Humira’s biologic status set to insulate the franchise from a steep generic-driven decline, it is likely that by 2020, AbbVie’s product will have broken more sales records [than Lipitor],” said King.
7. Biosimilars Face Challenges
Biosimilar treatments are gaining popularity in the European Union, but face challenges in the United States.
The biologics on the US market, as yet, lack any real competition in terms of price. Although in some cases there are handfuls of specialty therapies for some of the most common chronic conditions, most of these drugs are branded medications and are in competition with one another. As a result, they are typically priced in a similar manner.
The prospect of using biosimilar drugs in place of expensive branded biologics has been promising, especially since spend in the specialty category continues to rise each year. According to a report by Grant Thornton, between 2009 and 2019, nearly 21 biologics with an estimated market value of more than $50 billion will lose patent protection in the United States. Many of the drugs scheduled to lose patent protection are among the most expensive therapies in the autoimmune and oncology categories.14
One of the proposed specialty medication cost-cutting methods is the widespread adoption of biosimilars. There is, however, no unified regulatory framework for the use of biosimilars. Europe has the most defined guidelines compared with those of the United States, India, China, Japan, and Latin America. European Medicines Evaluation Agency (EMA) guidelines demand a “detailed demonstration of quality, safety, and efficacy of biosimilar products”—but they do not require a biosimilar product to be interchangeable with the branded version. Substitution is not a core principle of discussion in the EMA’s guidelines.
Despite the numerous challenges associated with launching biosimilars, such as interchangeability, biosimilar naming conventions, inference of lower quality, and recent state-specific substitution regulations, biosimilars are projected to produce a 20% discount from originator biologics.
Sharon Frazee, vice president of research analytics at Express Scripts, told SpecialtyPharmacyTimes.com
that the real issue is that “We really need to look at the biosimilar provision in the Affordable Care Act and try as a nation to make some changes or at least try to make it easier for people to actually invest in the development of biosimilars.”15
“Although the ACA establishes a pathway for biosimilars, essentially the provision mandates that a biosimilar manufacturer hand over their complete dossier and all of their intellectual property to the originator manufacturer to ensure that there will be no litigation down the road,” Frazee continued. “If you have to give up all of your intellectual property in order to get the provisions, pharmaceutical companies will be less likely to participate.”
In addition, the FDA has yet to provide thorough guidelines on when a drug may be considered “similar enough” to an originator product, and there is still uncertainty surrounding the manufacture, safety, and reimbursement of these products.
8. Specialty Organizations Are Proliferating
There has been an explosion in specialty pharmacy trade organizations and accreditation companies in the past 18 months.
Several different accrediting agencies have programs specific to specialty pharmacy. Four of the most well-known specialty pharmacy accreditation programs are from the Accreditation Commission for Health Care, URAC, The Joint Commission, and the Community Health Accreditation Program.
Two major specialty organizations have sprouted up in support of the industry—the Specialty Pharmacy Association of America (SPAARx), an organization formed by Armada Health Care, and the National Association of Specialty Pharmacy (NASP). Other organizations, such as the Pharmacy Benefit Management Institute (PBMI) and the Academy of Managed Care Pharmacy (AMCP), have started producing specialty-focused annual meetings or program offerings and have offered educational tracks specifically geared toward the practice of managing specialty drugs on medical and pharmacy benefits.
Although specialty pharmacy accreditation is not technically mandatory, many manufacturers will not enter into distribution contracts with specialty pharmacies unless those businesses are able to demonstrate proof of their capabilities—and for most request for proposals issued by payers and pharmaceutical manufacturers, accreditation is increasingly becoming a required component.
“The specialty market’s projected growth is drawing even more pharmacies into the business of dispensing specialty drugs,” Fein pointed out. “Unfortunately, the legacy pharmacy trade associations aren’t meeting the new market’s needs. This creates big opportunities for new organizations.”
9. PBM Consolidation Will Accelerate
Pharmacy benefit manager consolidations are expected to continue.
Pharmacy benefit manager (PBM) consolidations—such as Catamaran’s acquisition of competitor Restat, Express Scripts’ acquisition of Medco, and TPG’s deal for PBM EnvisionRx—are predicted to continue in the coming years.
Independent specialty pharmacies and smaller PBMs will likely be scooped up by the larger players, predicts Fein, and larger PBMs will have more negotiating power with pharmacies. “PBM consolidation will accelerate, driven by scale economies and bargaining power,” he said. “As the employer-sponsored insurance market shrinks, PBMs will be repositioning their business toward managed care and the exchanges.”
“The consolidation will not have a great impact short term on either management or distribution of specialty drugs,” commented F. Randy Vogenberg, PhD, principal of the Institute for Integrated Healthcare. “Over the longer term (3 to 4 years), the consolidation and changes taking place in the market will have more impact on patient management as well as who is doing the patient management,” he said. “For example, [there will be] more centralized versus community-based patient management as part of mainstream pharmacy capabilities.”
Some think that further PBM consolidation is a looming political problem and could cause some real concern among patients and the general public. In addition, it also may create some issues surrounding restraint of trade.
“On the integration side, are people really comfortable with 50% of their drugs coming from just a handful of providers?” said Rob Shelley, vice president, TRICAST, Inc. However, he noted, specialty pharmacies must try to glean as much patient data as they can from PBMs: “Integrated PBMs potentially can provide a wider frame of patient support because they have the full realm of client data.”
10. Retail Pharmacies Face Challenges
The “specialty by retail” model will continue to take shape as the larger chains enter the specialty pharmacy marketplace.
Retail pharmacies face significant challenges when entering the specialty pharmacy space. Product pricing information, inventory, and reporting demands for specialty drugs are often more stringent than for primary care medications, and reimbursement issues can introduce new challenges for members of the retail staff. Clinical programs to keep patients compliant with high-cost specialty drugs are also not typically part of a retail pharmacy’s strategy. In addition, manufacturers often limit the number of pharmacies authorized to dispense their specialty drugs through the use of a limited distribution model.
In response to these access hurdles, many retail pharmacies have been looking to specialty pharmacies to help them expand their offerings. Companies such as Diplomat Specialty Pharmacy and the Community Specialty Pharmacy Network support retail community pharmacy’s dispensing of specialty drugs by providing contracting, clinical support, and other services.
However, some question the ability of retail pharmacies to meet the needs of specialty patients. “Retail pharmacies lack the requisite services and technology infrastructure to compete for the business of dispensing specialty drugs with limited networks,” Fein said. “That’s why larger pharmacies and wholesalers are offering to provide back-end clinical services and care management.”
The role of specialty pharmacies will continue to evolve, and this could mean more involvement with retail pharmacies. “With increased utilization of specialty pharmacy medications, it can be anticipated that access to innovative specialty pharmacy medications will be streamlined for greater patient care and access,” noted SPAARx’s Alder. «
The White House Blog. The Affordable Care Act helps America's uninsured. www.whitehouse.gov/blog/2010/09/16/affordable-care-act-helps-america-s-uninsured. Accessed September 9, 2013.
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About the Author
Randi Hernandez, MS, is associate editor/online for SpecialtyPharmacyTimes.com and writes on trends, clinical updates, and news from the specialty pharmacy industry.
The website complements Specialty Pharmacy Times
, the bimonthly journal published by Pharmacy Times
, which features articles on the business and practice of specialty pharmacy authored by industry leaders and experts in their field.