Specialty Pharmacy

Featured Story October 11, 2007

Specialty Pharmacies Continue to Garner Greater Health Care Interest, Attention

Reprinted from SPECIALTY PHARMACY NEWS, a monthly newsletter designed to help health plans, PBMs, providers and employers manage costs more aggressively and deliver biotechs and injectables more effectively.

Although many specialty pharmacies have existed for decades, the industry has just begun to hit its stride. Interest in containing the burgeoning costs of specialty therapies is heating up, and with the combination of the traditional pharmaceutical pipeline drying up at the same time hundreds of specialty pharmaceuticals are poised to hit the market, attention is sure to intensify, contend many experts.

"If you think about the nature of the business, there is no question that the industry is clearly maturing," maintains Stan Blaylock, CEO of the Medmark unit of Walgreen Co. "It's much more competitive today as a result of consolidation."

"There is a greater interest in people paying attention" to specialty pharmacy, says James Hartert, M.D., chief medical officer at Prime Therapeutics LLC. He also notes that "most of the PBMs and large managed care organizations are developing specialty pharmacy capabilities, up to and including captive specialty pharmacies within their organizations."

So where may the industry be headed, and what will these companies need to do in order to survive?

Specialty Infusion Interest Will Continue

Although some specialty pharmacies have been acquiring home infusion companies for a number of years, the recent Walgreens purchase of heavy hitter OptionCare, Inc. ramped up interest in that area tremendously.

"The distinction between 'specialty pharmacy' and 'home infusion pharmacy' is diminishing given the pipeline," says Dave Willcutts, former CEO and now chairman of Ancillary Care Management, Inc.

"There is a blending of specialty and home infusion," agrees Dexter Braff, president of The Braff Group, a health care mergers and acquisitions company. "The boundaries between these continue to break down. We already have difficulty defining where things fit." Nevertheless, he says, distinguishing between the areas "doesn't really matter. What does matter is that you have the best, most effective model."

Companies may look to Walgreens' example to achieve this efficacy. With the OptionCare deal, says Willcutts, "Walgreens now has the capacity for a central distribution (mail order) service as well as local management in the home. They will be well positioned to manage any type of specialty drug today or ones that may be introduced in the future."

The pipeline certainly appears chock full of specialty entrants. Consulting firm BioMedical Insights, Inc. estimates that 95% of the 101 unique biopharmaceuticals in late-state development in the U.S. are infusibles and injectables.

"The drug pipeline is heavily weighted to specialty infusion products versus injectable therapies," says Willcutts. "A local presence will be critical to appropriately service these populations, and home infusion providers are best positioned to deliver this care."

According to Braff, the trend of private-equity groups investing in home infusion companies will continue "absolutely, without question."

Because of the strong connection between compliance and outcomes - both in terms of patient health and plan cost - in many of the specialty pharmacy disease states, health plans are understandably looking for competencies in this area.

"Robust patient care in the specialty setting is a must-have in terms of managing overall health care costs," says Tom Solberg, associate vice president of specialty pharmacy at Prime Therapeutics.

But just because this is a much-sought quality doesn't mean it's a given that specialty pharmacy providers actually can do this.

"The industry has billed itself as a much more high-touch form of pharmacy management," says Tim Watson, Pharm.D., principal at Pharmaceutical Strategies Group. "Yet the vast majority of interventions occurring today are mail based or telephonic..not necessarily the bastion of 'high touch' as I see it."

Blaylock agrees. "We have been hearing that some specialty pharmacy folks have fallen down on the service side. Some clinical support programs have been a lot of smoke and mirrors in the industry. The reality is that specialty pharmacy providers need to do these [programs] and couple them with cost savings and show these data to plans. We need to take the outcomes data, tie it back to claims data and show health plans that we are making a difference."

In order to achieve this focus, plans need to make sure that they look at specialty pharmacy data in not just the pharmacy benefit but also the medical benefit. A few years ago, some payers were trying to shift their specialty pharmacy coverage to the pharmacy benefit, but this is not an effective way to accurately track all of the data, experts say.

"One of the unique things about specialty pharmacy is that half or more than half of it is in the medical benefit," as opposed to the pharmacy benefit, says Solberg.

This means that specialty pharmacy providers need "a holistic approach to managing plans' overall drug spend," says Blaylock. "The pharmacy benefit needs to be much more aligned with the medical benefit."

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