Pharmaceutical Commerce - November/December 2011 - (Page 18)

Supply Chain Logistics Traditional Pharmaceutical Specialty Drugs Rheumatoid Arthritis 1.3 million US adults Multiple Sclerosis 300,000 US adults Hereditary Angioedema 6000 in US Specialty Drugs are Generating a New Paradigm: Commercial Innovation < continued from page 1 High Cholesterol Market 102 million US adults, 35 million high risk for heart disease Statins – solid, oral tablets, e.g. Lipitor, Crestor, Vytorin Top Therapies • Monoclonal Antibodies – IV, e.g. Remicaid, • Monoclonal Antibodies – selfinjection, e.g. Humira, Enbrel $30,000 • Manage with prior authorizations and step edits • Some manufacturer rebates Rheumatologists – 5000 • Hospital, clinic, office infusion • Specialty Pharmacy • Limited retail • Interferon Betas – selfinjection, e.g. Avonex, Rebif • Copaxone – self-injection • Tysabri – IV $35,000 • Manage with prior authorizations and step edits • Some manufacturer rebates Neurologists – 13,000 C1 inhibitor – IV, e.g. Cinryze Cost (per year) Payers $1000 • Manage with tiered co-pays • Heavy manufacturer rebates $350,000 • Manage with prior authorizations and step edits • No manufacturer rebates Cardiologists – 16,000 handling is used 62% of the time. Other criteria less frequently used are limited distribution, requires assessment of response, treats rare disease, requires monitoring of side effects, self-administered injectables, officeadministered injectables or infusions, and requires patient administration training. Generally, a specialty drug is a high cost therapy with a challenging regimen. These two factors make the patient outcome both expensive and risky, which creates the need for tighter control of utilization. Fig. 1 compares different specialty drugs with the poster child of oral solid therapies: the statins. Whether or not payers, providers, channels or manufacturers call a drug “specialty” is less important than actually understanding when a drug requires a fundamental approach that is different from what we have done before. Specialty flavors Market success with specialty drugs requires that we approach each product, indication, dosing and administration regimen, and site of care as unique. In fact a number of specialty drugs are “pipelines within products”, having multiple indications treating numerous diseases. Within the category of specialty drugs, there are major differences based on the dosage and site of care. One type of specialty drug is a product administered via infusion in a physician office, clinic or hospital outpatient clinic. The drugs are purchased by the provider from a Physicians Site of Care/ Dispensing Primary Care – 350,000 • 55,000 retail pharmacies • High-volume mail pharmacies • Hospital, clinic, office infusion Hospital, clinic, office infusion • Specialty Pharmacy • Limited retail specialty distributor or full-line wholesaler. The provider reimbursement is typically based on the drug’s Average Sale Price (ASP). This process is referred to as “buy and bill.” Patient cost share is managed under the patient’s health insurance medical benefit. The critical period for a buy-and-bill drug is immediately after launch, prior to assignment of an HCPCS code and while the drug is new to payers. During this period the risk is greatest that physicians will lose confidence in the ability to get reimbursed and get therapy initiated. Recently, payers have instituted “white bag” and “brown bag” acquisition models for buy and bill drugs to give them more visibility and tighter control of drug utilization. In a white bag model, product is shipped to the site of care by a specialty pharmacy provider (SPP). The SPP buys the drug and handles reimbursement with the payer. In a brown bag model, product is shipped to the patient by an SPP, and the patient must transport it to the site of care. Providers are pushing back against these models because they add new burdens for inventory management, care coordination and unreimbursed activities. Another common type of specialty drug is a patient-administered injection. The drugs are written as prescriptions, just like traditional pharmaceuticals. The drugs are dispensed at retail pharmacies or shipped to the patient from specialty pharmacies. Dispensing locations acquire product from full-line wholesale or direct from manufacturers. Pharmacy reimbursement is typically based on the drug’s average wholesale price (AWP). Patient cost share is managed under the patient’s health insurance pharmacy benefit. The critical period for a self-injectable drug is immediately after launch, when access to product and payer coverage is new to physicians and patients. It’s during this period that a difficult therapyinitiation process will cause physicians to shy away from use of the drug. An emerging challenge is specialty oral therapies for very small patient populations. Many recently launched and future pipeline specialty drugs are oral and the patient populations are getting smaller. A small patient population for a specialty oral drug means that retail pharmacy may not be a well-suited channel. Patient market research indicates that brick-and-mortar pharmacy is more convenient and preferred over mail service pharmacy, so an SPP-only network may not be ideal. What if the physicians want to dispense the oral therapies in their offices? The typical oral specialty channel configuration may not support this scenario. Understanding the intricacies of specialty drugs is fundamental. Opportunities for innovation exist because each drug, each regimen, each disease state, each indication, continued on page 30> Key Factors Disease state determines the sites of care Impacts to Channel and Service Strategy • What sites of administration / consumption are implied by the sites of care? • How do drugs flow to the sites of administration / consumption? • Will the drug regimen be complex for the sites of administration / consumption? • What services are required to meet the provider and patient needs? • How will payers utilize dispensing channels to manage drug costs? • How will money flowing into the distribution and dispensing channels impact product marketability? • What services are needed to help providers and patients navigate payer utilization controls? • What is the optimal number of distribution and dispensing points? • What is the optimal service provider configuration? ABOUT THE AUTHORS Ron Krawczyk Ron is a Managing Partner at Blue Fin Group (; Atlanta), a consulting organization specializing in commercial practices for the life sciences globally. He is an internationally recognized thought leader in the areas of pharmaceutical, biotech, generic and medical device sales and commercial operations. Prior to Blue Fin, Ron was Vice President, Business Operations at Johnson & Johnson, and has over 25 years experience in life sciences. He has a Bachelor of Science degree in Mathematics and Science from the University of Windsor, Windsor, Ontario, Canada. Jennifer Hamilton Jennifer is a Principal Consultant at Blue Fin. She is an experienced pharmaceutical industry executive with expertise in healthcare commerce, supply chain, commercial operations, customer service and operations, and finance and accounting. Prior work includes a wide variety of domestic and international positions within the Rhone-Poulenc Rorer, Aventis Pharmaceuticals and Sanofi-aventis organizations over a period of more than 10 years. Jennifer has a Bachelor of Science degree, with a major in Accounting, from Lehigh University. Jason Bogroff Jason is a Principal Consultant at Blue Fin, specializing in business intelligence and supply chain solutions. His experience includes channel and service strategy, channel data management, B2B eCommerce, sales operations, customer service and trade operations. He received a Master of Science degree in technology management from University of Pennsylvania Engineering and Wharton Business Schools, and his Bachelor of Science degree with high honors in chemical engineering from Michigan State University. Drug cost and alternate therapies influence the payer utilization controls Patient population influences the channel and services footprints REMS elements influence drug access Manufacturer capabilities and capacities influence the need for distribution and service providers • What level of control over the physical flow of drug is required? • Are unique services needed for REMS compliance? • Is a third party logistics provider (3PL) required? • What distribution and dispensing functions can be performed by the manufacturer? • What services can be provided by the manufacturer? 18 November | December 2011

Table of Contents for the Digital Edition of Pharmaceutical Commerce - November/December 2011

Pharmaceutical Commerce - November/December 2011
Top News
Brand Marketing & Communications
Supply Chain/Logistics
Information Technology
Manufacturing & Packaging
Legal & Regulatory
Meetings and Editorial Index

Pharmaceutical Commerce - November/December 2011