HDA Research Foundation releases specialty-pharmaceutical distribution report

Oncology represents half of the dollar volume of HDA-member sales


HDA Foundation is to be applauded for producing some data and trends around the more dynamic part of pharma distribution: the movement of specialty products, which now constitute 43% of US pharma sales (according to IQVIA data). But the report, Specialty Pharmaceutical Distribution; Facts, Figures and Trends, raises almost as many questions as it answers, leaving many gaps in an understanding of what is going on in this sector of the industry. A key limitation is that the respondents polled are only those who handle specialty products exclusively and are HDA members—amounting to all of four companies (not named).

The highlights:
• Oncology products accounted for the bulk of specialty distributor sales volume by therapeutic area. The report further reports that “this category experienced a slight decrease to 49.2% in 2017 from 50.6% in 2016,” while noting that “distributors reported they expected the autoimmune/immune, central nervous system, inflammatory and ophthalmology therapeutic areas to rise in importance.”
• Each individual, surveyed specialty distributor served 28,263 healthcare provider accounts and more than 43,853 unique ship-to points. Independent physician-owned clinics made up most of these ship-to points — more than 18,000 outlets on average.
• Specialty distributors received more than 4,400 orders daily from their provider customers and picked 7,300 lines per day, with a nearly 99% fill rate. Time from order to delivery at provider averaged 1.4 days.
• Nearly 1% of specialty pharmaceutical product units were returned in 2017, with “damaged in transit” or “overstocked product” the most commonly mentioned reasons for returns.
• Of the survey respondents, 75% noted experiencing shortages of more than 11 products over the previous 12 months. These events were communicated to providers via email or Web portal, among other methods.

The biggest question left unanswered is how much of overall specialty distribution flows through these companies. Unlike the Foundation’s annual Factbook, which proudly notes how HDA members handle 92% of all US pharmaceutical distribution, this report lacks overall sales data. (The Factbook reported that wholesalers handled $82 billion of specialty sales in 2017—which is roughly 42% of specialty sales that year, while also noting that specialty distribution was excluded from the Factbook data.)

While oncology represents roughly half of the specialty distributors’ sales volume, oncology as a category of specialty represents only 26% of all specialty sales. This indicates two things: products for autoimmune, HIV/AIDS, viral hepatitis and other specialty conditions are flowing through other channels (and a prominent one is probably conventional wholesaling); and also that the specialty distributors are a key support function for community oncology, given the thousands to ship-to points they supply.

Another unexplored area is how much of specialty distribution is direct-to-provider or -patient, something that is known to exist but is still relatively poorly understood. All of the specialty distributors in the HDA report provide 3PL services (and third-party logistics, as traditionally understood, does not involve ownership of the products being handled), and so the specialty distributors could be handling DTP shipments even without taking ownership of the products. But this analysis leaves out many non-HDA members, who also provide 3PL services for manufacturers.

Something that is probably going to be more prominent in coming months, as various parties in Washington grill those infamous “middlemen” who are supposed to be ripping off patients by charging inordinate fees for products, is the issue of exclusive distribution. The Foundation report notes that the number of specialty products that specialty distributors handle exclusively has risen from 30 to 49 between 2016-2017. Exclusive distribution, and exclusive dispensing via specialty pharmacies, has been ta touchy topic for the industry, and is likely to be looked at more closely in the coming year.

A final nugget to be had from the Foundation report is what seems to be relatively poor management of the pharma cold chain. Most specialty products (by sales volume) are biologics, and essentially all biologics need to be kept refrigerated. Yet, according to polling data in the report, only 5.6% of manufacturers require temperature monitoring during shipment—and only 1.5% of such shipments actually have temperature monitoring. This does not necessarily give evidence that high-value specialty products are being spoiled in transit—the industry is good at figuring out which shipping lanes could experience temperature fluctuations, and thus avoid those situations—but it is worrisome.

The 2018 Specialty Pharmaceutical Distribution: Facts, Figures and Trends edition was made possible through the sponsorship of Genentech (Roche Group), Value Drug Co., Amneal Biosciences, Bristol-Myers Squibb Co. and Takeda Pharmaceuticals America, Inc. It is available as a complimentary download through the HDA website.