Adam J. Fein, Ph.D.

		Given the evolving dynamics of specialty pharmaceutical dispensing, manufacturers will need to master the evolving retail channel. Compared with traditional products, specialty drugs require different contracts, more-sophisticated commercial strategies, and a modern approach to trade management.

		A majority of the specialty drugs dispensed to patients are sold via a specialty pharmacy. However, any licensed pharmacy is allowed to dispense a specialty drug as long as the product can be purchased from a manufacturer or through an authorized wholesale distribution channel. A pharmacy can designate itself a “specialty pharmacy” if its business focus is self-administered specialty pharmaceuticals that are covered under a patient’s pharmacy insurance benefit.

		Consequently, numerous pharmacies with specialty drug capabilities compete vigorously to dispense these expensive therapies. Pharmacies dispensing specialty drugs are operated by such organizations as retail pharmacy chains, health plans, pharmaceutical wholesalers, physician practices, pharmacy benefit managers, and independent specialty pharmacies. Despite this diversity, market share remains highly concentrated. Three companies—Express Scripts, CVS Caremark, and Walgreens&mdash;account for two-thirds of revenues from pharmacy-dispensed specialty drugs.

		Most pharmaceutical manufacturers limit the number of specialty pharmacies authorized to dispense their specialty products. Retail pharmacies currently have access to products that can be purchased from an authorized wholesale distribution channel. Unlike specialty products in a limited specialty pharmacy network, these products are in open distribution and can be dispensed by any licensed pharmacy. The projected growth in specialty drug dispensing is encouraging pharmacies to focus on these open distribution products, increasing competition for specialty pharmacy services.

		To compete for the business of dispensing specialty drugs with limited networks, retail pharmacies are using five basic approaches to develop the requisite services and technology infrastructure:

Build internal specialty pharmacy services.

 Kinney Drugs, the second-largest regional drugstore chain, recently launched Noble Health Associates, LLC to dispense specialty medications by mail. For example, regional chain Kerr Drug launched a subsidiary focused on specialty pharmacy and clinical services. What’s more, grocery chain Schnucks has opened five specialty-focused pharmacies within Schnucks stores and as stand-alone facilities within medical clinics and hospitals.

Create specialty-focused retail locations.

 The larger drugstore chains have designated certain stores for specialty products. CVS operates 31 CarePlus retail pharmacies, which focus on dispensing specialty medications. Walgreens has 700 HIV-specialized pharmacies that offer a broad range of patient services and dispense such HIV medications as Atripla, Truvada, and Norvir. HIV drugs constitute 10.5% of total specialty medication spending.

 As an alternative to building new specialty pharmacy capabilities, a retail chain can acquire a specialty pharmacy. Supermarket chain Kroger announced a merger with Axium Pharmacy, the third-largest private specialty pharmacy. Walgreens has become the third-largest specialty pharmacy by acquiring other specialty pharmacies.

Partner with an established specialty pharmacy

. A related strategy is partnering with a larger specialty pharmacy that can provide back-end clinical services and care management. For example, Fred’s, the nation’s largest regional drugstore chain, launched a partnership with Diplomat Specialty Pharmacy. Under the arrangement, Fred’s maintains its consumer relationships, while Diplomat handles such specialty pharmacy services as prior authorization, adherence calls, copay assistance, injection training coordination, and pharmacist consultations. Diplomat provides similar services for Target and Safeway.

Join a specialty network services alliance. 

Independent retail community pharmacies are also organizing into collaborative networks to penetrate the specialty market. Examples include the Armada Specialty Pharmacy Network, the Community Specialty Pharmacy Network, and Specialty First. These networks support retail community pharmacies that dispense specialty drugs by providing clinical support, contracting, data, and other services.

		To ensure a successful specialty product launch, manufacturers should understand these emerging changes to the specialty marketplace. Each new specialty product requires a customized go-to-market strategy that analyzes the tradeoffs in pharmacy vs. distributor fulfillment. These decisions will become even more complex as specialty dispensing channels change.

Dr. Fein is president of Pembroke Consulting, Inc., and CEO of Drug Channels Institute. This article is adapted from his new report, the 

2012—13 Economic Report on Retail, Mail, and Specialty Pharmacies

http://drugchannelsinstitute.com/products/industry_report/pharmacy/

Adam J. Fein, Ph.D.

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