Developing a comprehensive pre-launch trade and distribution strategy for specialty products

Launch is arguably the most critical point in the life cycle of any pharmaceutical product, and a flawless launch execution—both in terms of strategy and tactics—is critical to the long-term success of a product. Although it is no secret that preparing for launch is complex and expensive, each launch is different, and there are certain considerations and questions that need to be addressed based on the product profile.

To successfully execute the launch of a specialty product in today’s marketplace, manufacturers need a structured approach to address critical questions and evaluate the needs and requirements of the product. When developing a trade and distribution strategy in preparation for launch, it is essential for manufacturers to clearly understand the primary fulfillment channels and develop a strategy that best aligns with the channels that are instrumental to commercial success.

Because of the complexity of specialty products, companies need to develop a framework for identifying, evaluating, and prioritizing potential fulfillment channels and trade partners; developing trade partner agreements; and executing and monitoring their trade launch strategy. A focus on specialty products and developing a comprehensive trade strategy in advance of launch is a crucial component of a successful launch. To develop that strategy, a company must first understand the definition of a specialty product.

Understanding specialty products

A specialty product is generally defined as an asset that possesses one or more of the following characteristics:

• Costs more than $500 a month
• Requires special handling (e.g., cold storage)
• Is administered incident to a physician visit (e.g., infused products)
• Requires patient education (e.g., self-administration instruction)
• Requires a risk evaluation and mitigation strategy (REMS).

Products that are commonly associated with a specialty drug classification include agents used in the management of oncology, anemia, HIV and AIDS, rheumatoid arthritis, multiple sclerosis, and hemophilia.

During the past few years, the growth of specialty products has significantly outpaced the growth of traditional small-molecule agents by a factor of three to four (see Table 1), and this trend is expected to continue well into 2009 and 2010. Specifically, oncology and HIV products will play key roles in the growth of the overall specialty category with anticipated growth projections of 11% to 12% and 13% to 14% respectively in 2009.

While growth potential is tied, in part, to the therapeutic area, the overall success of any specialty product is largely dependent on a well-thought-through trade and distribution strategy.

Developing a specialty product trade and distribution strategy

A well-designed trade and distribution strategy enables physicians and patients to secure timely and appropriate access to a specialty product. Conversely, a poorly designed trade and distribution strategy may lead to sub-optimal product performance due to physician and patient access constraints (e.g., lack of product availability, payer barriers).

To create an effective trade and distribution strategy for a specialty product, companies should take the following steps:

• Identify fulfillment channels
• Identify potential trade partners within each channel
• Prioritize trade partners
• Develop trade partner agreements.

Identifying fulfillment channels

Fulfillment channels have different processes for addressing cost, reimbursement complexities, handling requirements and access to patient follow-up, among other considerations. Manufacturers may select a number of potential fulfillment channels; however, there are four main channels that should be evaluated for specialty products:

• Physician buy-and-bill
• Retail
• Specialty pharmacy
• Specialty distributors.

Identifying appropriate specialty distribution channels requires manufacturers to systematically evaluate healthcare provider and patient requirements. In today’s reimbursement environment, physicians deal with a number of commercial payers, as well as the government. So, the economic considerations of administering a specialty product, as well as the physical movement of a product along the trade partner supply chain, must be considered when evaluating channels.

The physician buy-and-bill model (i.e., physicians taking possession of a product and being reimbursed for the drug and administrative time) has been a mainstay for oncologists and for those specialty products used in the management of their patients. In spite of the Medicare reimbursement landscape changes (for example, introducing average sales price (ASP + 6%), most large oncology practices have continued to purchase products for administration to their patients, and this distribution option remains an important fulfillment channel for therapeutic oncology and supportive care products. Even with the deluge of oral specialty products in late-stage development, less than 10% of oncology practices have built out dispensing pharmacies in their offices to retain control of the product fulfillment process and potentially positively affect patient adherence and compliance.

Although retail pharmacies have traditionally been associated with small-molecule product fulfillment, evolving business models at companies like CVS Caremark and Walgreens have resulted in these organizations being able to offer a vast array of services for both small-molecule and specialty products. In addition to traditional retail pharmacy services, CVS Caremark offers specialty pharmacy services and pharmacy benefit management (PBM) capabilities, encompassing elements of product fulfillment and reimbursement. Walgreens, like CVS Caremark, has an extensive retail pharmacy network along with specialty pharmacy services (through Walgreens Specialty Pharmacy and the recent acquisition of McKesson’s specialty business). Walgreens also has PBM and infusion center capabilities. Retail pharmacies like CVS Caremark and Walgreens are no longer limited to serving the dispensing needs of small molecule manufacturers and should be evaluated as a potential specialty product-fulfillment channel accordingly.

Specialty pharmacies have experienced tremendous growth as both the number and cost of specialty products has continued to increase. In some respects, specialty pharmacies are serving as extensions to payers as health plans continue to shift prescription fulfillment of specialty products from the medical benefit to the specialty pharmacy channel. Health plans look to their specialty pharmacy networks for assistance with utilization management and drug-therapy management programs designed to ensure appropriate utilization and assistance with patient compliance and adherence—particularly for self-administered and oral specialty products.

There are a number of specialty pharmacy models, including pure-plays like BioScrip, Centric Health Resources, and Diplomat; health-plan-affiliated specialty pharmacies like Aetna Specialty, CIGNA Tel-Drug, and Wellpoint’s Precision Rx; and PBM-affiliated specialty pharmacies like CVS Caremark’s Caremark Specialty, Express Script’s Curascript/Priority, and Medco’s Accredo business. Specialty pharmacies serve as a vital resource to health plans and manufacturers, and given the various specialty-pharmacy business models and corresponding services, their potential role in a brand’s distribution network must be thoroughly evaluated.

Specialty distributors provide services for products that have unique requirements for handling, storage, and dispensing. Many specialty distributors operate as businesses within larger distributor organizations, such as AmerisourceBergen Specialty Group within AmerisourceBergen Corp., and focus their services on manufacturers with products requiring special handling needs or specific site of care destinations. Some specialty distributors offer manufacturers a portfolio of services—beyond product distribution—including specialty pharmacy capability, reimbursement support, physician and patient education, and other commercialization assistance programs like product messaging and market data. Depending on a given manufacturer’s specialty product needs, in relation to the organization’s broader portfolio and late-stage pipeline, specialty distributors can serve a variety of roles.

Identifying potential trade partners in each channel

Upon identifying the distribution channels for a specialty product, it is important to identify the potential trade partners within each chosen channel in order to match the product requirements with specialty trade-partner capabilities. An important first step in this process is to identify potential trade partners that are capable of delivering the product to the appropriate site of care. Other important questions that need to be addressed include the following:

• With whom should we partner?
• Which type of specialty partner best meets the fulfillment needs of our product?
• How many specialty partners do we need at launch, and will the number of specialty partners need to change over time?
• Will my current specialty-trading partner network (in the case of a manufacturer with in-line specialty products) sufficiently address our new product’s requirements?
• How will my product’s requirements affect my specialty trading-partner fee-for-service (FFS) agreements?

Prioritizing trade partners

Answers to the questions raised above will help brand teams and their managed markets and trade and distribution colleagues gain a better understanding of their product’s requirements and the potential list of specialty trade partners. Key considerations when selecting a specialty trading partner include:

• Geographic coverage
• Therapeutic expertise
• Payer relationships (e.g., health plan network)
• REMS capability
• Value-added services (e.g., reimbursement, marketing, data).

Developing a short list of potential trade partners that meet the criteria defined above is a logical next step in identifying a final list of partners. Geographic coverage and therapeutic expertise are two key elements for a specialty partner, and making sure that a product is available to a healthcare provider for the right patient at the right time is imperative. A specialty partner’s experience in a given therapeutic area, built upon years of work in specific areas, enables it to deliver value in the form of physician and patient education. This body of knowledge is an important factor that can assist with access and reimbursement hurdles and patient compliance and adherence.

A specialty partner’s ability to support REMS is another important consideration. A REMS may be required by FDA to make sure that the benefits of a drug outweigh the risks. The specific elements of a REMS (e.g., medication guide, communication plan) may vary from brand to brand; however, a specialty trading partner will likely play a critical role in both the implementation and ongoing management of the REMS.

Although prioritizing the short list of potential specialty partners may be challenging, it is a necessary step to identify service providers that offer a brand the most value and best opportunity for a successful launch. Ultimately, a product’s labeling, route of administration, and reimbursement status (i.e., medical or pharmacy) will inform some distribution partner options. However, with the evolving specialty market landscape, it is important to develop a robust fact base of all potential partners and services provided in order to make an informed decision.

Developing trade partner agreements

Trade partner agreements are contracts between manufacturers and service providers defining an exchange of services (from the service providers) to manufacturers in exchange for an agreed-upon fee. The fees paid by a manufacturer are established by the manufacturer and its trade partners and are not the focus of this article, but these fees do vary from manufacturer to manufacturer based on the specific needs and situation of a given brand or portfolio.

The service level provided by trade partners will vary based on manufacturer requirements; however, a typical list of services provided by trade partners may include the following:

• Pick, pack, and ship
• Cold storage/shipment
• Physician and patient education
• Channel data (e.g. Electronic Data Interchange [EDI] 867, 852 Data)
• Marketing support
• REMS implementation and management.

It is important for a brand team to collaborate with its trade colleagues to communicate the specific needs of a new specialty asset so the appropriate level of service is identified and contracted for with the appropriate specialty trade partners. This process should ideally begin during the early- to mid-Phase III clinical trial process, ensuring ample time to define the key trade-partner requirements, begin the internal and external processes necessary to determine appropriate partners, and finalize partner agreements in advance of launch.

Executing and monitoring trade launch strategy

Once a specialty product is launched, trading partner services become the backbone of a product’s commercial availability. Although the physical movement of a specialty product along the supply chain is of vital importance, other trade partner services (e.g., reimbursement support, data) play an equally important role in the overall fulfillment process. Developing a framework to objectively and routinely evaluate trading partner performance across key service-level metrics, included in the FFS agreement, is an important aspect of managing the overall manufacturer and trade partner relationship.

Approaches to reviewing trade partner service-level performance vary; however, many leading manufacturers have adopted scorecards that serve as an agreed-upon reference for manufacturer and trade-partner performance evaluation. Basic metrics that might be included on such scorecards could include both quantitative and qualitative measures:

• Time to fill (fulfillment metric)
• Inventory levels
• Data accuracy and timeliness of reporting
• Working relationship (issues and services).

Collaboration with trade partners is an integral component to successfully implementing a performance scorecard. Ongoing monitoring, reviewing, and, as appropriate, adjusting of metrics are important factors in the trade partner and manufacturer relationship.

As the specialty product market continues to grow, the potential opportunities and implications for manufacturers will continue to increase dramatically. Innovative specialty products addressing unmet medical needs provide tremendous value to the healthcare market, but these products are not inexpensive. As a result, they are on the radar screens of many leading payers to ensure they are used appropriately.

A manufacturer’s strategy for delivering its product to market and the partners it chooses play an important role in navigating the complex web of supply chain and reimbursement hurdles. In addition, selection of appropriate distribution channels is vital to ensuring that the full clinical and economic value of an asset is delivered to the market. Manufacturers must invest resources and time to identify the right kind of strategy because a one-size-fits-all distribution approach will no longer work in today’s evolving distribution market landscape. With a good approach, though, a product will arrive at the right site of care for the right patient. PC

ABOUT THE AUTHOR

Tony Lanzone is Vice President and head of the Trade and Distribution Practice at Campbell Alliance (8045 Arco Corporate Dr, Raleigh, NC 27617; tel: 919 844 7100). Campbell Alliance is a leading consulting firm for the pharma and biotech industries, with practice areas in brand management, business and clinical development, managed markets, sales, and trade and distribution, serving clients in the U.S., Europe and Japan.