Rise of specialty drugs creates demand for specialty pharmacy in retail
While the boom in generic drugs now looks set to wane, another segment of the pharmaceutical industry is rapidly rising and presenting new growth opportunities for pharmacy retailers: specialty drugs.
Unlike primary care medications that have become blockbusters, specialty drugs — used to treat complex and chronic conditions like cancers and autoimmune disorders — derive their high sales numbers not from treating diseases that affect large patient populations, but by treating relatively small populations while selling for a high price. For example, according to IMS Health, Alexion Pharmaceuticals’ Soliris (eculizumab), used to treat the rare disease paroxysmal nocturnal hemoglobinuria, costs $410,000 per year.
Recent trends indicate that the growth of specialty is already accelerating. Of the top 15 drugs in the United States as measured by 2012 sales, seven of them are specialty drugs, according to IMS. In total, according to the analytics firm, $325.8 billion were spent on medications in the United States in 2012, of which 26.7% went to specialty drugs. According to pharmacy benefit manager Express Scripts, specialty drug spending is expected to grow by 67% through 2015. Specialty drugs also lead spending on newly launched branded drugs; of the $10.8 billion spent on new branded drugs last year, $7 billion went to specialty pharmaceuticals, according to IMS. And according to Drug Channels, a blog maintained by Pembroke Consulting president Adam Fein, 6-of-the-10 best-selling drugs by 2018 will be specialty drugs, compared with three in 2010 and five in 2012.
More companies are developing specialty drugs because that’s where the money is. According to the Pharmaceutical Research and Manufacturers of America, there were 907 biologics under development, including 30 antisense therapies used for infections and genetic diseases, 69 cell therapies, 46 gene therapies, 338 monoclonal antibodies and 93 recombinant proteins. Of these, there were 338 cancer therapies and 71 drugs for autoimmune disorders. And IMS’ numbers also indicate that specialty pharmacy is taking up a growing portion of new drug development. Of the 39 new drugs approved by the FDA last year, 30 were specialty drugs.
Along with the rise of specialty drugs comes a need for specialty pharmacy, as well as services like medication therapy management and pharmacy counseling for recently discharged hospital patients.
Many of the specialty drugs under development or already available — particularly drugs for organ transplants, HIV and, increasingly, for cancer — are available as tablets and capsules. But most of them, particularly the biologics, are injectables. These drugs carry a multitude of special handling requirements: They must be refrigerated and often can’t even be shaken. To address the training needs to handle these medications, the Specialty Pharmacy Certification Board is offering the Certified Specialty Pharmacist examination starting this month; the exam includes four domains focused on intake, clinical management, fulfillment and outcomes.
Another challenge comes in the form of limited-distribution networks. The purpose of these is simple enough: They allow drug companies to avoid wasting money by distributing expensive drugs for small patient populations in small amounts while also keeping the supply chain clean. However, they often leave out independent and chain retailers, even for drugs that they could be dispensing. For example, Genentech and Astellas Pharma announced in July that they would set up a limited-distribution network for the cancer pill Tarceva (erlotinib) and stop distributing the drug through retail pharmacies.
With these changes, specialty pharmacies have been transformed into major national companies. A notable example is Flint, Mich.-based Diplomat Specialty Pharmacy, which Inc. magazine recently ranked as the third fastest-growing private healthcare company in the country in its annual Inc. 5000 list. Fein ranked Diplomat at the top of his list of the 12 fastest-growing private specialty pharmacies, compiled from Inc.’s list, with 2012 sales of $1.1 billion and a 199% three-year growth rate. The second largest was Phoenix-based Avella Specialty Pharmacy, with $494 billion in sales and a three-year growth rate of 379%. Average 2012 sales for the 12 pharmacies were $197.6 million, with 352% three-year growth.
Most dispensing of specialty drugs is not through drug stores. According to IMS, of the more than $92 billion in specialty drugs dispensed through retail and institutional channels in the 12 months ended in June, almost $76 billion went through mail-order and institutions. But retailers are not being left out.
As IMS VP industry relations Doug Long said, specialty therapy classes, such as HIV and immune-suppressant drugs for organ transplant patients, are already dispensed primarily through retail.
Walgreens and Kroger have fortified their presence in the specialty space through respective acquisitions of Bio-Scrip and Axium Healthcare Pharmacy, while CVS Caremark, Rite Aid and Costco also have established specialty businesses. Hy-Vee has partnered with Amber Pharmacy in a joint venture called Hy-Vee Pharmacy Solutions. Meanwhile, since 2009, Diplomat has partnered with retailers through its Retail Specialty Network, handling back-end resources, patient support and supplier collaboration for retailers; Fred’s Super Dollar is among the retailers partnering with Diplomat.
Specialty drugs are a trend where one can either get on the bandwagon or get left behind. The years of experience pharmacists already have in services like adherence counseling and medication therapy management mean that pharmacy retailers have a key role to play in specialty — just as long as they’re prepared for it.