HDMA Analyzes Evolving Specialty Distribution Business

With overall pharma sales volumes staying relatively flat, more attention is focusing on the specialty pharmaceutical sector, which is growing at least twice as fast, and which involves a host of add-on services not commonly encountered with non-specialty distribution.

There are three main players in this distribution process, according to a just-released study from the Center for Healthcare Supply Chain Research, the research foundation of HDMA (Arlington, VA):

• Conventional wholesaler/distributors, who take title to the product and deliver to hospitals, home health entities and retail pharmacies;
• Specialty distributors, who take title and deliver to physician practices, such as free-standing, physician-owned or —operated clinics;
• Specialty pharmacies, who do not take title, and most often distribute to providers for administration or directly to patients.

Most of the respondents were specialty distributors (67%); less than 1% were specialty pharmacies and the remainder conventional distributors.

About 81% of the products are branded, and the remainder generic, according to the survey results and the definition for “specialty pharmaceutical” applied by the Center: a product that has two or more of a group of characteristics, including cost ($600/month or more), the need for special handling, biologic origin, ongoing clinical monitoring, have restricted distribution, or addressing therapeutic needs like oncology, autoimmune diseases or hematology (among others).

Trending toward oral

According to the manufacturers surveyed, 69% of specialty pharmaceuticals are either injected or intravenous, 25% oral (tablets or capsules), although they note that the number of oral products is growing. Fig. 1 shows how the products are packaged, now and for products under development. Fully 60% of current products require refrigeration and, in turn, a cold chain system for delivery.

When it comes to actually transporting the products (Fig. 2), both manufacturers and distributors favor (in rough order) UPS Air, FedEx Air, UPS Ground, or LTL/common carrier. Interestingly, distributors make significant use of other modes, including couriers and the US Post Office. Another differentiator is the use of insurance; 27% of manufacturers “always” insure delivery, while 80% of distributors “never” do so.

Besides reliability of delivery and cost, specialty distributors will compete for business from manufacturers on the basis of supplementary services. Fig. 3 shows the types of services currently available. These are over and above what might be considered standard services, such as handling returns and chargebacks, and providing marketing services such as advertising or e-mail blasts to retailers.

On the financial side, the survey found that 82% of manufacturers offer patient assistance programs (PAPs), 73% copayment assistance, and 73% pre-authorization/benefits investigation. Group purchasing organizations (GPOs) also figure in the equation: 46% of product sales are contracted through a specialty, hospital or retail GPO. The report notes that AmerisourceBergen, McKesson and US Oncology have in-house GPOs, which help position them competitively toward the clinics that are their customers.

The Center’s report, “2009 Specialty Pharmaceuticals: Facts, Figures and Trends,” is available for purchase from HDMA (hcsupplychainresearch.org). PC