With the ramping up of new drug launches and generally better business conditions for US life sciences, hiring in pharma sales has also been on the rise, and now it appears that will carry over into contract sales organizations. A new venture, Spectra Biopharma Selling Solutions (Kennesaw, GA), is being set up by a pair of industry veterans as a subsidiary of The Medical Affairs Co., which itself is a leading provider of contract personnel in medical affairs and medical science liaisons (MSLs).

The Spectra founders are Brion Brandes, a former executive at Quintiles Commercial, and Lynda Parker, who has had leadership roles at Quintiles and inVentiv Health. (Those two companies are among the leaders in the CSO space in the US.) The news is all the more encouraging for pharma rep talent, because another of the leading CSO companies, PDI, recently sold off its CSO business to Publicis Touchpoint, to concentrate on commercialization of medical diagnostics technologies.

In an interview with Pharmaceutical Commerce, Brandes cites three factors that he feels will differentiate Spectra from others: a focus on small- to medium-size emerging biopharma companies, who are often looking at the complexity of developing an in-house sales force as an impediment to an eventual Big Pharma buyout; the potential to engage in risk-based contractual arrangements with clients, which would necessitate Spectra putting capital into play; and the close relationship with The Medical Affairs Co., thereby offering some clients a continuity of service from clinical to commercial. “We’ll take on a Big Pharma client—there are opportunities there—but by concentrating with a laser focus on a limited set of smaller clients, we feel we’ll be in a better position to serve them,” he says. There are no signed-up clients as yet, but as Brandes notes, “We’re only a week old and we’ve got multiple proposals in the works.”

The shared-risk arrangement is intriguing but challenging. Other CSOs in the past have attempted such efforts, necessitating the self-funding of a sales team in return for a bigger share of revenues, but the practice is not widespread. Brandes says that the company will have access to private capital and other sources that could support this model. He also notes that many investment firms that closely track emerging biotechs encourage them to develop a full-blown commercial operations practice, but behind the scenes some of them also discourage it as a distraction and impediment to getting to a buyout stage—making an outsourced option attractive. “Above all, a CSO arrangement provides flexibility to the client, to be able to ramp up or down operations at certain stages in the product life cycle.”

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New subsidiary of The Medical Affairs Co. hopes to fill gaps in CSO offerings

Spectra Selling Solutions: a new player in contract sales organizations

According to Trialcard, PAs are increasing at 20% per year; leading to more abandoned prescriptions (data from Avalere Health and CoverMyMeds). Credit: Trialcard

Market forces are driving pharma manufacturers and patients closer together—and now the pharma industry has a pathway with which to do this. The relationships are growing while pharma contends with regulatory constraints and the competing desires of other parts of the healthcare ecosystem—notably, physicians and pharmacies—to retain patient loyalty. For many, the pathway is being established through hub providers, organizations that are often independent third parties, and which provide access to financial support for high-cost specialty products, counseling and support for the patient journey, and highly valued data on outcomes and results valued by payers.

Hub providers (see box) mostly work as fee-for-service agents of pharma manufacturers—set up carefully to meet state and federal restrictions on improper financial inducements. In effect, since the manufacturers are spending money to improve outcomes and the patient experience, they are indirectly supporting overall healthcare while competing in the marketplace, a “virtuous circle,” as one industry participant puts it.

Connecting patients with the manufacturers of the therapies they use isn’t a radical idea; industry consultants have been talking about “consumer driven healthcare” and “patient centricity” for years. But what started as a fairly exotic approach to addressing patient needs after a prescription was written has blossomed into a vital service that accompanies most new product launches. And while the bulk of hub services are still directed at specialty products, especially those for chronic care and which might require complex administration such as infusion or diagnostic-therapeutic combinations, the hub model is expanding to drugs in a lower price range (roughly $500-1000 per month, in contrast to the drugs that can cost tens of thousands monthly), including oral solids. The concept of “hub lite” is now spreading through the industry. Competing against generic offerings, and showing better health outcomes through better adherence to therapy, are justifying the effort.

“The good old days of blockbuster product introductions pushed out to the world are long gone,” says Robert Appleby, president of H.D. Smith Specialty Solutions, a specialty distributor and hub provider. “We’re filling key gaps in the healthcare continuum with services that create a better patient engagement while providing the ROI that our pharma clients are looking for.”

The hub services business has grown in step with the evolution of limited or exclusive distribution agreements between manufacturers, distributors and specialty pharmacies. Typically, a manufacturer will set up a limited distribution network involving a set number of specialty pharmacies that are equipped to handle the requirements of the drug therapy (this can include requirements that FDA imposes on the manufacturer for REMS—risk evaluation and mitigation strategies—under which the manufacturer trains providers and pharmacies in the drug’s use). Manufacturers can set up an internal hub to centralize management of this network, or outsource it to a services provider.

Providing follow-on support to patients on a therapy has been a traditional role of pharmacies, and there has been some friction between the specialty pharmacy (SP) community and hub providers in recent years, but according to the hub providers, that has settled down considerably. “We’re working better together than in the past,” says Jan Nielsen, VP at Sonexus, a Cardinal Health Specialty unit. “Manufacturers understand the set of services that SPs do fantastically well in patient follow-up. However, not all SPs have the same capabilities. We can be there for the softer services that patients might need, such as transportation, copay programs, reimbursement support from foundations and the like.” She also points out that with lower-cost pharmaceuticals, the margin that represents the pharmacy’s fees is smaller, limiting the follow-on services the pharmacy can justify.

The foot soldiers in hub services: Case managers at call centers. Credit: Cardinal Health

Nielsen also draws attention to an advisory opinion issued by the HHS Office of Inspector General last August that emphasizes the value of a separation between manufacturers or SPs, and the services of a hub provider which, in this case, looked at the legality of free drug programs. According to the opinion (No. 15-11),* such programs are not inducements when the prescriber or manufacturer does not generate revenue by providing the drug, has limits on how much drug is dispensed to a patient to drive appropriate utilization, ensures that government healthcare programs are not billed, and is issued when at least a five-day delay is occurring between the time of prescribing and the benefit adjudication. “These free-drug programs are very valuable to patients, but they can be costly to implement across multiple SPs. We consolidate the program in a highly documented process, and reduce risk for the manufacturer.”

“We advise our pharma clients to get everyone—patient reimbursement providers, SPs and us in the same room, and coordinate patient contact,” says Nareda Mills, SVP of Ashfield clinical services. “An SP, for example, might start an adherence program with a patient not realizing that the manufacturer is already supporting such a program with the patient; patients get confused when they’re being called by one party about benefit verification, another about refills and another about an in-home nurse visit. At the end of the day, the manufacturer should call the shots.”

Ashfield is one of the organizations that doesn’t characterize itself as a hub provider, even though it provides many of the services expected from a hub, with the exception of benefit investigation and verification. Across its organization in the US (the company is a subsidiary of Ireland’s United Drug) there are clinical and commercial services, a behavioral sciences unit (for patient adherence programs), in-home nursing support, adverse-event reporting and multiple call centers.

Data Flows from Service Providers to the Manufacturer

LiquidHub retrieves data from wholesalers, hubs and specialty pharmacies, normalizes it and presents a comprehensive view to the manufacturer, who uses the LiquidAnalytics platform (with Tableau, a visualization tool from Tableau Software). “SRF” is “service request form,” an enhanced prescription request. Credit: LiquidHub

Specialty pharmacy-manufacturer relationships took some hard knocks last year, the result of the controversy surrounding Valeant Pharmaceuticals’ relationship with what has been called a “captive” SP, Philidor (which has since gone out of business). While Valeant is under investigation in several federal and state jurisdictions, it has not been charged with a crime. However, the practices at Philidor, including substituting higher-cost Valeant products for generic prescriptions it was handling, and sharing employees between the drugmaker and the pharmacy, raised serious concerns among payers. Valeant cut ties with Philidor (which it was bidding to acquire outright) and later struck a novel agreement with Walgreens to distribute its drugs directly through that chain. In late February, Valeant announced that an internal review committee found that $58 million in transfers of products to Philidor were improperly recorded as sales (which, in some contexts, could be considered a version of so-called “channel stuffing”) in 2014, necessitating a restatement of earnings for 2014 and 2015. “We have made mistakes in the past and our focus today is on executing our business plan and rebuilding trust,” said Howard Schiller, interim CEO.

How this is relevant to hub providers highlights the nature of their relationship. “We got some questions from clients as that situation played out,” says Loreen Brown, SVP, product strategy, at Lash Group, a unit of AmerisourceBergen Specialty Group. “But our answer is very simple: this is why a manufacturer should have a firewalled relationship with hub providers, to keep patient information separate. When we sit down with a manufacturer, we design a program and stick to it; manufacturers aren’t involved with adjudicating claims.”

Lash is arguably the largest dedicated hub services provider in the US, with 3,500 employees at five locations. Recent growth has necessitated the company’s move to a new, larger headquarters in Fort Mill, SC.

Another company expanding to accommodate rapid growth is TrialCard, best known for the innovative copay programs it has established in recent years. The company has now moved “up,” as it were, to providing full-fledged hub services; this “is a natural extension for us, since the financial elements of copay programs overlap with prior authorization [the requirement to seek pre-approval from a payer before a drug is dispensed] and copays themselves are addressing the cost-shifting going on from payer to patient,” says Scott Dulitz, VP, market access solutions, at the Cary, NC company. Dulitz makes the point that not only is TrialCard independent of SPs, but also any other part of the channel—specialty distributors or wholesalers as well. “Other companies, especially those attached to a PBM, have an economic stake in the manufacturers’ products which can lead to an inherent conflict of interest. We operate strictly as an agent of the manufacturer with a goal to lowering the barriers to access to a drug.” Recent growth at the company has been “explosive,” he says.

The situation between PBMs and manufacturers is also highlighted at H.D. Smith Specialty Solutions, which is promoting the hub lite model aggressively (the company also has a business unit, Smith Medical Partners, dedicated to the higher-cost products dispensed under a medical benefit rather than a pharmacy benefit). A couple years ago, H.D. Smith acquired TripleFin, a company focused on copay programs and free drug trials. Thomas Doyle, EVP, commercial solutions, at H.D. Smith, says that copays are more effective when managed as part of a hub service; the key is to make use of the connection between the patient and the manufacturer to encourage adherence to therapy, and not “just throwing copay cards around and hoping for the best.” It used to be that copay programs were looked on primarily as a way to get around formulary tiers by PBMs (which raise copay costs depending on the tier that a drug is placed on); now, “the picture is coming into focus that the copay program helps patients get on therapy, and the follow-up services help keep the patient on therapy. We’re seeing a little less pushback from PBMs, because they realize that ultimately better adherence will mean lower healthcare costs for their insurance clients.”

Hub lite, in H.D. Smith’s view, means being more judicious about the range of services offered through the hub. “The traditional players in this space emphasize their large staffs at call centers and high-touch services,” says Appleby. “We’re engaged with automating parts of the benefit verification process, which those traditional firms have no incentive to economize. We’re also using predictive systems to be more selective about the level of support needed to keep patients on therapy; by segmenting the patient population, we can address patient needs appropriately.” Costs can also be reduced by not immediately defaulting to a specialized nurse for patient coaching; rather, it’s done where it’s needed. He adds that in many cases, a brand team comes into H.D. Smith with certain expectations of how much patient support is needed; with the predictive analytics and with testing those expectations, the support program could be streamlined, saving costs. “We want to have a true partnership with our manufacturer clients,” he concludes.

The other extreme—high touch, “white glove” service is exemplified by Dohmen Life Science Services, which has aggregated a set of acquisitions over the past few years to provide what Dr. Eric Floyd, chief science officer at DLSS, calls “bench to bedside” service. The company has a clinical services unit that works with developers of therapies for orphan and ultra-orphan diseases, and a patient access unit that interfaces directly with patients. The idea is to provide a continuity of service from drug development to commercialization, with follow-on services to maintain adherence. Ideally, this is performed under an exclusive distribution agreement; DLSS would be the sole source of the drug, and would provide a full range of services, including in-home nursing support. (A legacy component of DLSS, which used to be known as DDN Logistics, provides national 3PL services for DLSS clients but not for the orphan and ultra-orphan services.) The company has a closed-door pharmacy to enable prescriptions to be filled.

Wendy White, SVP, rare disease, notes that many rare diseases have complex therapeutic regimens, and patients often face extremely difficult living situations. The “wraparound, white glove” services that DLSS provides pays off for drug sponsors in higher adherence and better outcomes; with some ultra-orphan diseases, keeping each patient on therapy has significant impact on the drug’s commercial success. All this is done under a direct-to-patient model; DLSS never takes title of the drug but acts only as the manufacturer’s agent. “Because we’re in such close contact with patients, we can collect the data that manufacturers want to justify the drug’s use to payers,” she says.

New kinds of connectivity and data collection are coursing through the hub environment these days; significantly, some hub providers are following DLSS in providing clinical trial support leading up to commercialization.

Sonexus’ Nielsen says that the business unit has benefited from a relationship with a technology innovation center at the parent, Cardinal Specialty Solutions, to develop an electronic benefits-verification process, and has been working with two partner firms, CoverMyMeds and iAssist, to create a generic platform containing most or all of a drug company’s products (85 manufacturers have signed on so far). “This makes the physician’s work a lot easier, because not only does it take care of the enrollment, but it provides guidance on first-line, second-line and subsequent drugs that might be part of a manufacturer’s portfolio, details that the physician might be unaware of across multiple formularies,” she says. “The system is accurate, fast and will save money in the cost of healthcare.” Sonexus has representation on a workgroup within the National Council of Prescription Drug Programs (NCPDP), which is advancing standards in electronic prior authorizations.

Sonexus is also bringing out a mobile app (which is rebranded for each manufacturer’s program) to enable real-time connectivity between patients and the manufacturer, who can poll patients on therapy progress, side effects and the like. “We started this as an extension of our adherence services, but it’s become very valuable in the clinical trials we’re working on with clients,” she says.

At Lash Group, an analytics-based program called MyCare Commitment provides segmentation on patients based on their adherence issues. “This kind of analysis isn’t new to the industry, but our version generates great data about the drug’s use, allowing us to customize patient support more efficiently,” Brown says.

Most hub providers tout their ability to assemble data from a variety of SPs, and from the patients themselves, to report outcomes back to the manufacturer. However, the intense need for reliable data, coupled with the capabilities of new software systems, is driving part of that business toward dedicated IT firms who process the hub and SP data themselves and report them to the manufacturer. This setup has been the driver of the dramatic success of LiquidHub, which uses the 

latest technology in master data management

 to standardize what gets reported, and to do this quickly, generating weekly or even daily reports, says John Foley, partner at the firm. The company handles the data flow for some $20 billion in specialty pharmaceutical revenue, including most of the top pharma firms. “A big problem for hubs and SPs alike is keeping track of patients as they move from one pharmacy to another, or one payer to another,” he says. To address this, LiquidHub has developed a “tokenization” process that gives each patient a numerical code; the code follows the patient wherever he or she might go—but does this in a de-identified, HIPAA-compliant manner. “A hub might process 100 scripts, but the pharmacies might report only 50 fills; what happened to the other patients?” he asks. “The reality is that they might be counted as new patients when they’ve simply moved from one pharmacy to another.”

http://oig.hhs.gov/fraud/docs/advisoryopinions/2015/AdvOpn15-11.pdf

For most of this decade, and in some cases longer, a growing group of companies has been providing what are commonly called hub services; yet many in the field resist that identifier. Part of this is history: some hub providers started as patient call centers; some started as operators of copay and financial assistance providers, and some as reimbursement and benefit-investigation firms for patients. And in some cases, the companies feel that calling themselves a “hub” is a straitjacket limiting the perception of their offerings (such as organizations that also do contract sales). It is also a fact that numerous pharma companies have staffed up an internal hub service—something of a risk since the restricted patient health information (PHI) needs to be firewalled from the rest of the company. And then there are specialty pharmacies, who offer some of the same services that hub providers do.

 defines it, a hub provider has five essential elements, and few key indicators:

It provides patient onboarding after a scrip is written

It can perform benefit investigation/benefit verification, and helps patients connect with charitable foundations and other sources of financial support

It “triages” the prescription to the specialty pharmacy (SP) best situated (geographically and as part of the manufacturer’s designated network of SPs)

It provides ongoing contact with the patient (usually through a call center, but including in-home nursing support where justified), and manages adherence programs and patient counseling

It is funded by pharma manufacturers, usually on a fee-for-service basis

It can arrange for “nonstandard” patient support, such as transportation to or from a health center or doctor’s office

It can provide quick-start services to get patients on therapy even while reimbursement is being worked out (or even free drug)

It reports data on the performance of multiple pharmacies, itself and patient outcomes directly to the manufacturer

All this being said, the dominant hub service providers for specialty pharmaceuticals remain the mail-order pharmacies that are adjuncts of pharmacy benefit managers (such as Express Scripts’ Accredo, Caremark or Optum), and major wholesalers that have a specialty division.

Connectivity with patients drives pharma growth

Hub Services Special Report 2016

Human blood—which consists primarily of red blood cells (roughly 45% by volume) and plasma (roughly 55% by volume)—has unparalleled healing properties. With the help of plasma-fractionation techniques and several innovative processes, human blood is used to produce plasma-derived therapies that are being used to treat an expanding list of debilitating, chronic and life-threatening disorders.

Immunoglobulin (IG) is used to help patients suffering from primary and secondary immunodeficiency disorders and to combat viral and bacterial infections. Today, intravenous IG (IVIG) is also being considered for a range of neurological diseases including multiple sclerosis, neuropathic pain, chronic fatigue syndrome and post-polio syndrome. Last fall, the Sutter Institute of Medical Research (Sacramento, CA) published a study indicating value in IVIG for Alzheimer’s; if that study is confirmed, a huge new therapeutic market could open up.

Albumin is used to treat patients who have experienced trauma (such as surgery), to address some liver conditions and cardiopulmonary disease; albumin is also being studied to treat stroke, cirrhosis, Alzheimer’s disease, malaria and sepsis.

Coagulation factor concentrates (specifically known as clotting factors, such as factor VIIa, factor VIII, factor IX and others) save lives by stopping or preventing internal and external bleeding in patients with rare coagulation-related disorders such as hemophilia A, hemophilia B, von Willebrand disease and others.

Today, the global plasma industry has annual sales of more than $14 billion, according to Patrick Robert, president of The Marketing Research Bureau, Inc. (MRB). Worldwide demand for the primary plasma-derived therapies is on a steady growth path, with projections of 10+% annual growth according to several market-research firms. In past years, demand for albumin was the driver; this was succeeded by factor VIII, but recombinant-DNA production techniques have met most of that demand. Now, IG is the driver.

“Currently, nine products have FDA approval for approximately six indications; however, the medical community has identified more than 200 indications that benefit from IVIG, so it’s obvious that off-label use is increasing,” says Neil Herson, president of ASD Healthcare, an AmerisourceBergen company.

Several trends continue to shape the landscape in blood/plasma-derived therapies, creating new distribution and reimbursement challenges and opportunities for all stakeholders: (1) The shift away from IVIG to subcutaneous infusion of immunoglobulin (SCIG); and (2) the commercialization of recombinant coagulation factors for the treatment of hemophilia. Similarly, volatility in the supply of human blood and plasma, bottlenecks in the manufacturing industry, supply disruptions in both source materials and finished products, and growing worldwide demand are a constant backdrop in this specialty pharmaceutical sector.

“With the plasma market, we’ve traditionally seen some type of supply disruption every three to five years,” says Travis Poe, VP and GM of specialty distributor, McKesson Plasma and Biologics. “Due to the small number of manufacturers and the long lead time between plasma collection and getting product on the market, any manufacturing issue or recall hits the marketplace hard.” He adds, “Demand can shift quickly to other manufacturers, however they may not be able to necessarily ramp up production.” This is exacerbated by the fact that for some therapies, the duration between collection of plasma and shipment of plasma-derived products can take up to 12 months.

“In previous decades, blood-borne diseases and manufacturing challenges created supply disruptions. Today, the market has largely stabilized. Patients typically receive their lifesaving therapeutics when and where they need it,” adds Herson of ASD Healthcare. A major factor for this stability in the US is paid donors at plasmapheresis centers in the US (“source” plasma); in Europe, plasma supply is evenly split between donated source plasma and “recovered” plasma from blood donations. US source plasma supply nearly doubled between 2004 and 2012 while recovered plasma was relatively flat, according to MRB.

Nonetheless, some in the industry are waiting for the proverbial shoe to drop. “Despite the fact that the industry has been relatively stable for the past six or seven years, many feel we are due for some type of supply disruption because it’s been so long,” says Poe of McKesson.

“Today, the annual cost of therapy using a plasma-derived therapeutic protein product can easily exceed $200,000,” says Robert of MRB, due to several factors that are emblematic of this sector:

The cost to process plasma is high—much higher, comparatively speaking, than the cost of raw materials and compounds used to produce traditional pharma products. Significant costs arise from both the collection of plasma and the manufacturing processes involved, both of which are highly regulated at every step to safeguard the purity of plasma-derived products against transfusion-transmittable pathogens

Plasma-derived therapies are mainly used to 

, with patient populations that typically number from the hundreds to the hundreds of thousands—but not into the millions. This means that the therapies must be priced accordingly to help manufacturers recoup costs; and, opportunities for economies of scale are often not available.

Today, the lion’s share of plasma fractionation in the US is carried out by three companies: CSL Behring, Grifols and Baxalta (which was recently spun off from Baxter and has agreed to be purchased by Shire), and to a lesser extent by Kedrion, Biotest and Octapharma Plasma, which, collectively, operate close to 500 plasma-collection centers across the US. According to the latest data published by MRB, in 2013, the collective production of the largest plasma fractionators was nearly 42 million liters. By 2020, production is expected to reach nearly 47 million liters (with nameplate capacity of around 55 million liters). Demand for plasma is expected to grow from 2013 levels of around 36 million liters, to 50 million liters by 2020.

“Because of the inherent volatility in this market, products must be allocated, as needed, to help hospital and other treatment sites manage inventory fluctuations,” notes Poe of McKesson. “Many hospitals—which typically don’t have a regularly scheduled base of hemophilia patients—still need to keep 40–60 days of plasma inventory on hand at all times (in all assay sizes). But the cost to maintain an inventory of hemophilia therapies is very high, so keeping that much inventory on hand poses risks, in terms of potential wasted costs and expiration issues related to the limited shelf life of the product.” He continues, “Nonetheless, they must have these lifesaving products on hand, to support surgeries and patients with hemophilia who may show up at any time.”

Because of the small size of the overall plasma-production infrastructure, and the volatile nature of demand, specialty distributors play a big part in ensuring access to not just individual patients, but to hospitals, outpatient clinics and physicians’ offices. “Appropriate allocation of products among facilities is essential, yet remains challenging due to the various discrete entities that regulate plasma around the world,” says Herson of ASD Healthcare.

“Advocacy groups have noted that only about a third of pharmacy and therapeutics committees had developed locally defined protocols for prioritizing IVIG indications, which essentially means more than 100 different protocols exist across the nation,” says Herson. To rectify this, ASD Healthcare has sponsored an advisory board comprised of globally recognized specialists across multiple medical disciplines. The advisory board has created a set of guidelines that aim to build consensus—across the country and at any facility or provider level—for IVIG prioritization, especially in event of supply disruption.

McKesson, through its consignment program, is able to help healthcare facilities reduce risk by providing a certain amount of hemophilia therapies to the hospital. “They don’t pay for it until they actually use it. We partner with each facility to manage their consignment inventory, and we swap out these products on a regular basis, typically staying six to nine months ahead of the expiration dates.”

Repro Med Systems’ infusion pump for subcutaneous immunoglobulin.

“To obtain enough raw materials for the commercial-scale production of plasma products, millions of liters of plasma must be collected annually from donors,” adds Robert of MRB. By way of example, one liter of plasma is required to produce just 4.5 grams of IVIG and 150–180 international units of coagulation factor VIII.

“One patient with hemophilia may require up to 1,200 plasma donations to produce one year’s supply of factor products—and that’s just one patient’s need,” adds Herson of ASD Healthcare. “When you consider the global need, it creates a completely new perspective on demand.”

Since the first recombinant forms of therapeutic human plasma proteins were introduced in the early 1990s, a growing number of recombinant plasma protein therapies have come to market. These include recombinant factor VIIa, albumin, antithrombin-III, C1 esterase inhibitor (C1-1NH) and thrombin. Additional recombinant proteins are being pursued, including recombinant von Willebrand factor, factor Xa, factor XIII, fibrinogen, alpha-1 antitrypsin, plasmin and others. In addition to eliminating the need for donated human plasma, “recombinant factor concentrates have never been known to transmit pathogens of any kind,” according to the Hemophilia Federation of America (see sidebar article at the bottom of this page).

“We are already seeing this trend drive down demand for human-plasma-derived coagulation factors in the US,” says MRB’s Robert, adding that he expects to see traditional plasma-derived coagulation factors continue to dominate the scene in developing nations, because they are cheaper than their recombinant alternatives.

“From the time of diagnosis, a patient requiring plasma-based therapies will be on a life-long infusible or injectable therapy that requires a number of support mechanisms for both patients and caregivers, to give them the best chance of a normal life,” says Rich Gaton, cofounder and president of specialty distributor BDI Pharma, Inc. (Columbia, SC).

In particular, there are many psychological challenges associated with having to infuse on a daily, weekly or monthly basis, and this can be especially daunting for pediatric patients and their parents. “These families require psycho/social support as well as financial assistance in order to access and continue therapy throughout the patient’s lifetime,” says Gaton.

As with so many other specialty drugs for chronic conditions, “having a fully integrated hub is essential to assist patients with benefits investigation, payer support, copay support, patient assistance (especially for indigent patients) and advocacy support,” notes Biju Chorinchath, senior director, immunology marketing for pharmaceutical manufacturer CSL Behring.

“Patients who fill the prescription with US Bioservices receive clinical assessments from the pharmacist and nurses, to ensure appropriate usage and adherence to the prescribed regimen,” adds says Joy Gilbert, VP of operations for US Bioservices, a part of AmerisourceBergen. “We’ve also found that our US Bioservices nurses who infuse IG patients in their homes or offer telephonic support help patients adapt quickly and stay adherent.”

Distribution is another important aspect of the commercialization success of any plasma-based product. “Traditional pick-pack-and-ship models are not effective due to just-in-time inventory demand and the level of detail and communication that is required for the dosing needs of the patient—especially when dealing with hemophilic factors,” says Gaton of BDI Pharma.

For many plasma-derived therapies, patients must receive infusions on a regular basis, monthly or even weekly, throughout their entire lives, so the site of care is a critical component when it comes to managing cost, access and adherence. When it’s a clinically appropriate option, the ability to receive infusions of IG or other plasma-derived therapies at home—using either traditional IVIG products with the help of an IV infusion nurse, or via self-administration using today’s newer subcutaneous IG products has obvious advantages.

Today, in the US, roughly 50% all IVIG is administered in hospitals, about 30% administered in doctors’ offices, and the remaining 20% is distributed by home care companies and administered at home. “Receiving infusions at home helps to reduce costs compared to hospital administration, and is often more convenient for the patient,” adds Chorinchath of CSL Behring.

Reimbursement will be different for home care than other settings, and whether the medication is covered under a medical or pharmacy benefit can also impact the patient’s options, says Gilbert of US Bioservices.

Under the medical benefit, the cost of the medication is bundled with the total care including nurses, the diagnostics, hospital costs and more. Coverage under the medical benefit includes the cost of the medication, nursing services, diagnostics and hospital costs. “This structure allows the health plan to better manage the total cost of care.” By contrast, “When the therapy is covered under the patient’s pharmacy benefit, PBMs are able to manage the drug costs at the NDC [drug cost] level, but this approach may limit the payer’s ability to integrate the utilization data to see the overall cost of these episodes of care and tie it to the overall cost management of the disease.”

As a result, Gilbert says, “Many commercial payers will drive patients to payer-owned providers, such as infusion clinics or specialty pharmacies, or will impose restrictions related to who might qualify for home care.” Additionally, she notes that Medicare has different requirements related to home care, which may limit Medicare patients from being served in the home setting.

US Bioservices is working with several health plans to manage patient site of care and optimize patient experience, adherence, and reduce costs. “We believe these actions will impact how coverage for home infusion of IVIG can be more effectively managed and potentially expanded,” says Gilbert. “We hope that expanded coverage for home infusion will become a reality for patients in the near future.”

Meanwhile, when IVIG is administered monthly (whether in a clinical setting or at home), it typically takes several hours to infuse the therapy. “Putting a tremendous volume of IG into the patient at a single time raises the IG serum levels very high, and then over the course of the month, the levels fall off and break through the infection threshold,” explains Andrew Sealfon, CEO of Repro Med Systems (Chester, NY), one of several manufacturers of infusion pumps for SCIG (see photo). “As a result, patients on IVIG often experience a predictable roller coaster of feeling good when IG levels are near a peak shortly after a monthly infusion, but then feeling tired and less energetic, and getting sick, as the serum levels fall through the breakthrough infection threshold.”

These peaks and valleys in IG serum concentration are to blame for a variety of adverse effects, ranging from serious conditions such as aseptic meningitis, thrombosis, and hemolysis, to less serious (but no less burdensome) side effects, such as muscle aches or exhaustion. These side effects often contribute to poor adherence levels, especially for patients who rely on the therapy for prophylaxis (rather than for acute treatment).

Using the right infusion needles is also essential to optimize the SCIG experience for the patient. “In the early days of SCIG, healthcare providers routinely reached for standard insulin needles,” says Sealfon, “but they are not ideal for pumping IG, which involves a larger volume of a thick, viscous drug.” The pumps from Repro Med Systems include specially designed longer needles that have low fluid resistance. “During the early years of development efforts related to SCIG, whenever problems arose in the clinical trials, researchers immediately assumed the drug was to blame, but it turns out the need to optimize the pump and needles and peripherals was critical in the success of SCIG use,” he adds.

Today, as an alternative to IV infusion, some patients are able to self-administer their IG at home, typically on a weekly basis, using subcutaneous infusion IG (SCIG). Today, there are at least five approved SCIG products on the market (from CSL Behring, Baxalta, Grifols and Kedrion Biopharma), and several others in development. “Studies are underway that could allow factor products to be infused subcutaneously, as well,” says Gaton of BDI Pharma.

Unlike the monthly administration schedule of IVIG, SCIG is typically administered in smaller doses throughout the month. “SCIG has been very good at eliminating the highs and lows in terms of IG levels and systemic side effects associated with IV administration, and has definitely eliminated the breakthrough level,” says Sealfon. As such, the availability of the SCIG option is considered to be a game changer for many patients. For instance, CSL Behring’s SCIG product Hizentra “enables patients to maintain steady-state IG levels with lower peaks and higher trough serum levels than monthly IVIG,” says Chorinchath.

In addition to these clinical benefits, SCIG allows patients to administer their therapy independently at home (using a programmable infusion pump, after some initial training) thereby eliminating the need for home infusion nursing support and the need for transportation to a hospital or office for treatment. Home infusion also helps to reduce the risk of nosocomial (hospital-acquired) infections for these immune-compromised patients, and benefits patients in rural areas.

Self-administration of SCIG also provides some safety and psychological advantages. “Visiting the hospital each month when their IG levels are at their lowest may predispose these individuals to infection and illnesses, and they are often sharing treatment rooms with seriously ill patients, which can be emotionally challenging,” says Amar Pabla, VP, nursing, clinics and pharmacovigilance for Innomar Strategies, a part of AmerisourceBergen. “We are often told by our patients that they feel that they have been given their life back with SC administration.”

Despite these benefits, at-home self-administration is not for everyone. “In addition to clinical considerations, some patients prefer the IV route because they value their nursing support team and often benefit from the social aspect of seeing friends they’ve made at each infusion,” says Gaton of BDI Pharma. “Patients who are anxious, aren’t willing or able to learn the proper self-infusion technique, or enjoy interacting with medical are not strong candidates for SCIG,” adds Gilbert of US Bioservices.

Self-administration has another potential downside. “To evaluate adherence and outcomes, the prescriber may have to depend on lab values to validate whether a patient is being compliant to therapy, since SC administration eliminates the need for regular nursing supervision and support,” says Gaton of BDI Pharma. “And payers ultimately want to see patients remain adherent to their therapy to lower the overall cost of care. While SC administration can reduce nursing costs, IV administration requires more observation, which can translate to a higher level of adherence, improved outcomes and reduce costs over the long term. From a payer perspective, we have yet to see a push toward SC over IV.”

When it comes to infused plasma-based therapies, the medication will either be covered under either the patient’s medical benefit or pharmacy benefit. “Specific pharmacy benefit managers (PBMs) often require the use of a particular infusion provider (carve-out). However, many times, this designated provider does not have a nursing team with infusion expertise, and may not service certain rural areas (thereby essentially ruling out home infusion of IVIG). “This poses access-related problems because the patient’s health condition may not allow for travel to a physician’s office,” says Gaton of BDI Pharma.

“When a patient’s insurance only covers treatment under the medical benefit, this requires providers to have the expertise to access payer policies specific to the particular treatment/drug, and to understand the proper authorizations and medical documentation required to determine whether the patient meets the outlined clinical criteria for the claim to be accepted as medical necessity,” says Gaton of BDI Pharma.

BDI operates a subsidiary patient-support service, Radius Specialty Solutions, which provides reimbursement guidance and ongoing patient support for specialty pharmaceuticals, including its range of IG products. Radius recently reviewed the reimbursement inequality between specialty drug reimbursement under the patient’s medical benefit versus pharmacy benefit for immunoglobulin and hemophilia factors for the top 10 diagnoses (figure). The data suggest that a patient’s out-of-pocket costs were much lower when the therapy was covered under the pharmacy benefit (which tends to rely on fixed-dollar copays), as opposed to coverage under the medical benefit (where coinsurance requirements tend to result in higher out-of-pocket expenses). In some cases, “A patient’s ability to pay directly impacts their adherence to therapy,” says Gaton.

To safeguard blood and plasma supplies against infectious agents and pathogens that could be transmitted to recipients, today’s blood-donation infrastructure and specialty pharmaceutical manufacturers employ a variety of tactics and technologies. Screening methods are in place for blood and plasma donors (including the routine use of Hep-C antibody testing and HIV antibody testing in blood- and plasma-collection facilities), and registries of ineligible donors are maintained. Drug manufacturers routinely use a variety of processes to kill viruses, such as dry heat, solvent-detergent treatment and pasteurization to kill pathogens, according to the American Society of Hematology, and then nanofiltration to clear inactivated viruses from the plasma or final manufactured product.

In late 2014, Cerus Corp. (Concord, CA) gained FDA approval for its Intercept Blood System; outside the US, more than 100 centers in 20 countries already employ it. Last month, it struck a multiyear agreement with American Red Cross to use this system for blood platelets and plasma; American Red Cross collects 40% of all blood donations in the US.

The Intercept Blood System uses a proprietary photochemical process involving ultraviolet light and a proprietary chemical, amotosalen, which interferes with nucleic acid synthesis in infectious pathogens and residual white blood cells found in blood components; the treated plasma is then purified to remove the chemical additive and its byproducts.

Global blood supply is under stress from a variety of endemic or epidemic viruses, such as Ebola, dengue fever and now Zika virus. Blood banks are required to continually prevent contamination of blood supplies. The key attribute of the Intercept system, according to the Cerus, is that it provides proactive inactivation of susceptible pathogens—whether or not there are current screening tests available at the time of blood collection.

Even though recombinant-DNA biologics are displacing traditional blood-sourced therapeutics, maintaining stable supplies is still a problem

Immunoglobulin (IG) drives the blood-plasma therapeutics market

		The biannual meeting of the Health and Personal Care Logistics Conference, to be held in Philadelphia, PA (March 15−17) has been announced. The meeting brings together logistics and supply chain managers from throughout the US life sciences industry, as well as healthcare products suppliers.

		In an opening session keynote, “Technology Trends: Separating Hype from Reality,” Jessica Brooks, marketing VP at J.B. Hunt, will examine the Uber effect on logistics, driverless cars and related developments. In another session, an IBM exec looks at digitization’s effect on supply chain management. In a related vein, an Eli Lilly exec will look at the ongoing efforts in the industry to prepare for implementation of the Drug Supply Chain and Security Act (DSCSA), as well as related international efforts.

		On the second day, a session includes three industry speakers addressing logistics trends in South and Central America, including supplier validation, temperature control and security. Other sessions cover industry security, case studies and legal/regulatory issues in Washington, DC.

		Pharmaceutical Commerce is a media sponsor of this event. Join us in Philadelphia, PA! More information is available at 

Future tech, serialization and South America

Agenda set for 2016 HPCLC Conference

		J. Knipper and Co. (Lakewood, NJ), the leading provider of drug sampling services in the US, is the executive sponsor of the upcoming “Rx Samples Management and Logistics Summit,” organized by Center for Business Intelligence on April 19—20 in Philadelphia, PA. The meeting is co-located with another CBI event, “Engaging in Communication with NPs and PAs,” and the two meetings will have shared sessions for part of the agenda.

		Detailing and sampling remain a staple of most brand strategies and is often considered to account for upwards of 50% or more of a brand’s promotional budget, notes Steve Gransden, chair of the meeting and marketing manager at Knipper. “It stands to reason that even moderate gains in the efficiencies of a brand’s sampling operation can often provide a very significant return.”

		Topics covered during the meeting will include the convergence of marketing toward HCPs and patients; the anatomy of an optimized sampling supply chain; eliminating gaps in a brand’s “circle of influence;” sampling at the mid-levels of health systems; and generating efficiencies while meeting sample-accountability requirements. Speakers representing such companies as Sanofi, Novo Nordisk, Boehringer Ingelheim, Daiichi Sankyo, J&J Ethicon and UPS will be on the agenda.

The anatomy of an optimized sampling supply chain

J. Knipper heads CBI conference on sampling management

3C! Packaging (Clayton, NC) has won certification from the Graphic Measures International (GMI) organization for its offset printing operations, a necessary step to becoming a certified supplier to Walgreens. Going forward, Walgreens’ private-label suppliers will be using 3C! for printed packaging of Walgreens private-branded pharmaceutical and healthcare products, which could show up in all of its 8,200 US pharmacies.

		The GMI certification is a different approach to quality assurance (at least for companies accustomed to FDA inspections), says Bill Harrison, QA director at 3C!. Its members are buyers of packaging, including a range of major retailers; those retailers use GMI to certify the vendors that they might use for printing. GMI conducts on-site surveys and tests print runs on various substrates as a step to the certification. Several categories were tested for compliance, including prepress, plating, press, post-press operations, quality control and training.

	3C!, privately held, designs and manufactures custom folding cartons, printed literature, inserts/outserts, labels/foils, and unit dose applications for pharmaceuticals and healthcare products.

Company is now a certified supplier for Walgreens

3C! Packaging wins certification for private-label print packaging

Global biopharma logistics spending ($billions)

Fig 1. Cold-chain logistics spending is forecast to

						grow to more than $16 billion by 2020

Global biopharma sales ($billions) trend 2014—2020

Fig 2. Sales of cold-chain drugs and biologics will outpace

						overall industry growth through 2020

Global clinical trials logistics spending, drugs and biologicals,

Fig 3. Clinical trials logistics spending is trending up,

						from a base of about $3 billion annual spending

		Preliminary data from Pharmaceutical Commerce’s annual Biopharma Cold Chain Sourcebook shows that managing the transportation of temperature-controlled products (refrigerated and frozen) will total $12.6 billion this year, continuing an 8—9%/yr growth rate that is roughly double that of pharma products overall (Fig. 1). The report, now in its seventh edition, pegs non-cold-chain pharma logistics costs at $78.8 billion and rising at the 4–5% growth rate of pharma volumes. By 2020, pharma cold-chain logistics will be worth $16.7 billion, and non-cold chain at $77.1 billion (Fig. 2).

		The global pharma industry today is roughly $1.1 trillion (Fig. 2), and between 2014 and 2020 is projected to rise by 41%. Within that, products that require refrigerated storage and transport are worth around $260 billion, and will rise 65% between 2014 and 2020, while non-refrigerated products are projected to rise by about 34%. The drivers, of course, are the continuing transition to biologically based products in new product introductions; additional drivers are the tightening requirements for life sciences shipments, combined with the growing internationalization of pharmaceutical trade. Biosimilars introductions are rising throughout the world (the first product was introduced in the US in 2015), and while this will cut into biopharma revenues, it is also expected to expand the market for biologics-based products.

		The doubling of pharma cold-chain logistics growth is attributable primarily to the shift to biologics and other specialty pharmaceuticals, many of which require refrigeration. Continued strong growth in insulin products and vaccines is also propelling growth, as is the broader adoption of all these products from developed economies to underdeveloped ones, especially in Asia.

		“If anything, our estimate of current and future spending is slightly under-calculated, because there is a small but growing trend for shipping ambient-temperature products in a monitored, controlled manner, which is a departure from past practices,” notes Nicholas Basta, editor-in-chief of Pharmaceutical Commerce. “Recent Good Distribution Practice (GDP) guidelines, to which the industry is gradually adopting, require control of even room-temperature product, which is essentially everything that is not refrigerated or frozen. With each passing year, the oversight of pharmaceutical and biologics shipping is getting tighter.”

		To perform its analysis, Pharmaceutical Commerce starts with the current lists of approved drugs, and what their labels say for storage and shipping conditions. Drugs in the pipeline are also evaluated to the extent possible. That fraction of approved drugs is then compared to measures of overall pharma sales (from organizations like IMS Health and Evaluate Pharma), and overall pharma logistics spend and volumes.

		Data are broken down according to shipping mode (air, ground, sea) and the spending proportions between transportation, packaging and instrumentation.

		In recent years, air carriers and third-party logistics firms (3PLs) have made substantial investments in capacity expressly for life sciences products (research materials, pharma and medical devices). UPS now has a global network of 50 facilities dedicated to healthcare logistics; FedEx has acquired Genco, a US 3PL, and TNT Express, a European-based courier company; similar undertakings have occurred at Kuehne+Nagel, Panalpina, DHL and others. Air carriers American Air Cargo and United have opened dedicated facilities at eastern-seaboard airports.

		Technology for cold chain is advancing: it is now commonplace to have real-time tracking of shipments (including temperature monitoring), and logistics providers can intervene to keep shipments safe and on-spec. There is a battle going on between bulk air-cargo container suppliers, such as Envirotainer and CSafe, and suppliers of single-use pallet shippers such as Sonoco ThermoSafe and Cold Chain Technologies. “Shipping options are multiplying, and smart pharma companies are making careful evaluations of cost vs performance in their choices,” says Basta.

		The Sourcebook also looks at the clinical logistics field (not differentiating between cold chain and ambient, as most trials use temperature controls in some part of the process). Trial initiations and the scale of trials will generate a logistics volume of around $3.2 billion in 2016 (Fig. 3). Based on estimates of future trial volume, location (many trials are now being conducted globally) and industry R&D spending, the Sourcebook forecasts logistics spending growth at about 2% per year, to about $3.4 billion in 2020.

	The Sourcebook will be available for purchase in April; send email to info@www.pharmaceuticalcommerce.com for details.

Pharmaceutical Commerce's annual Cold Chain Sourcebook projects 52% growth between 2014 and 2020

Pharmaceutical cold chain logistics is a $12.6-billion global industry

Originally designed for oncology products, the Flexi-Cap Protect packaging elements will be showcased at the upcoming Interphex Exhibition (New York, NY, April 26−28). In addition to the cap, which covers the closure and upper part of the container, a second cap is added to protect the bottom and lower part. Both caps are affixed to the container using a label, which can optionally be provided with an integrated foam layer to provide further protection against lateral impact. Consequently, the container’s surface is completely protected.

		The product’s original use was for cytostatics, oncology products for which unintentional exposure can have serious health consequences. Another important aspect of Flexi-Cap Protect is that its label and two caps are applied without heat, so that the medicine’s properties are not impaired. In addition, the upper cap offers space for imprinting warning notices, codes for track & trace systems, or integrating NFC inlays for interactive applications.

		Like the original Flexi-Cap, Flexi-Cap Protect comprises a film cap positioned over the closed container. The label is applied without covering the peel-open tab of the opening strip. Once the strip is opened, the bottom part of the cap, together with the label, remains attached to the container. Attempting to remove the rest of the cap destroys the label, eliminating the possibility of unnoticed illegal reuse. Flexi-Cap enables flexible use with different container types, forms and sizes.

		“Flexi-Cap Protect guards pharmaceutical manufacturers and medical professionals against possible contamination and, in the case of harsh cytostatics, physical harm,” said Gene Dul, president of Schreiner MediPharm US (Blauvelt, NY). “With both benefits, Schreiner MediPharm’s goal is the same: to reliably maintain the integrity of the primary packaging.”

Flexi-Cap Protect prevents breakage at both the tops and bottoms of vials

Schreiner introduced a double-capping feature to vials

		In this issue, we return to a topic we’ve covered annually since 2013: 

		A definition: hub services are usually third-party providers, funded by manufacturers themselves, delivering the range of services necessary to get patients onto specialized (and usually expensive) therapies, and keep them adherent. For a business sector that is experiencing “explosive” growth, according to one of its participants, it is remarkably underpublicized. Part of this is because other parts of the healthcare ecosystem, notably specialty pharmacies and patient-support call centers and even, in some instances, health systems themselves, are angling to offer the same services. Some manufacturers run their own hubs internally.

		Another part is the players themselves, who offer slightly differing sets of services (expediting “prior authorizations” in some cases, arranging in-home nursing services in others, etc.) and don’t want to be looked on as “just like” a competitor. We’ve been writing about this lack of coherence since the beginning; now, several years on, it doesn’t look as if the activity is going to form a strong self-identity any time soon.

		Be that as it may, we remain strong proponents of the concept, and the logic of organizing patient services this way. Here’s our rationale: it is widely recognized that specialty pharmaceuticals represent the growth of the biopharma industry in the developed world; they will represent 50% of revenue for the US industry in 2020 (if not sooner). Specialty pharmaceuticals, because of the complexity of their administration and their expense, require more follow-up and more medical attention than conventional oral solids (some of which themselves are specialties).

		Despite their value, abandonment or non-adherence of therapies is an ever-present problem; add to that the problems inherent in therapy areas such as rare diseases (where it can take years before a patient is correctly diagnosed); and therapies based on genomics and the still-nascent field of “precision” medicine.

		To a high degree, the successful commercialization of a specialty pharmaceutical depends on the quality of patient services introduced along with it. It’s time to think of a prescription for a specialty pharmaceutical not as a piece of paper, but as a commitment to a bundle of services including the medicine. Moreover, if you eyeball the overall system from a certain direction, you realize that the biopharma industry is funding a part of healthcare delivery—the services that keep patients on therapy, which improves outcomes, and which helps health systems looking for favorable performance ratings. Sure, keeping patients on therapy means more sales and more revenues for the drugmakers themselves; but the manner in which reimbursement is set up these days, with higher copays and deductibles and those prior-auth hurdles, the healthcare system creates barriers to better care.

		An equally intriguing development is “hub lite”: providing a scaled-down (and lower-cost) version of the full-bore hub service for drug products in lower price ranges, but which again serves to keep patients on therapy and to improve outcomes. Hub service providers are becoming adept at locating gaps in care or inefficiencies in healthcare delivery, and reinforcing those gaps with needed services. Another gap being filled is the enrollment and support of patients in clinical trials—once a hub provider is experienced in supporting a patient journey in the commercial realm, that expertise is proving valuable in the clinical research arena. Success in keeping enrolled patients engaged in the trial, and the ability to gather meaningful outcomes data are some of the benefits. A final validation of the activity is that it is being exported&mdash;some hub providers are making forays into international markets, addressing similar needs in other countries. We’re going to be tracking these developments and rooting for the success of these innovative organizations.

Specialty pharma becomes 'hub enabled'

Traditionally, pharma managers responsible for managed markets, government price and corporate finance have paid more attention to bellwether government drug programs such as Medicaid, Medicare and the Federal Supply Schedule. As the industry refocuses on more innovative, expensive specialty drugs and channel designs shift, however, manufacturers are growing increasingly concerned with the 340B Drug Discount Program. 340B drug pricing came into being with the Public Health Services Act of 1992 and lowers outpatient drug costs for specific classes of hospitals and clinics. The additional profit helps to subsidize care for indigent patients or, as stated in the statute, to “stretch scarce resources.”

Some definitions help to understand what is going on. The 340B program is administered by the Office of Pharmacy Affairs (OPA) within the Health Resources and Services Administration (HRSA), a part of HHS. OPA registers eligible healthcare providers, called “covered entities,” and applies formulas to drug prices to ensure a significant discount. Those drugs are to be used only by eligible patients, who have an ongoing relationship for medical care from the covered entity. Covered entities are restricted to nonprofit hospitals, and some have an HHS categorization as “disproportionate share hospitals,” meaning that they provide services to a relatively higher percentage of indigent, Medicaid or Medicare patients. Finally, there are a variety of business arrangements between covered entities and in-house or contract pharmacies that supply drugs to them; a common industry parlance is to speak of “parent-child” relationships between covered entities and contract pharmacies.

So what has changed? In a nutshell, the Affordable Care Act (ACA) has had a colossal impact as a result of the Medicaid expansion and the inclusion of many new types of providers, such as freestanding cancer and critical-access hospitals. The number of covered entities and contract pharmacies has swelled 30–40% annually since 2010. According to the Office of Pharmacy Affairs’ (OPA) 340B database, as of January 12, 2016, there were 34,586 covered entity sites including 14,073 disproportionate share hospitals. Also, since the HRSA liberalized the number of contract pharmacies that a covered entity can manage, the number of contract pharmacies has ballooned up to 40,185.

According to the Medicare Payment Advisory Commission, a private organization that reports to the US Congress, 340B spending had increased threefold between 2005 and 2013, when it was more than $7 billion. Covered entities saved some $3.2 billion in FY2013, and many people in industry are asking, are all these discounts being taken properly?

In parallel with the Medicaid and 340B expansion, the ACA increased the Medicaid unit rebate amounts that brand and generic manufacturers owe to the states. Additionally, ACA redefined the Average Manufacturer Price, which significantly increased the minimum mandatory 340B discount levels.

At a policy level, the expansion seems counterintuitive. The ACA was designed to reduce the levels of uninsured patients and unreimbursed care by healthcare providers. So why expand 340B at all? In fact, several recent healthcare economic analyses have shown that provider charitable-care levels remain at the historical 5% rate even as the number of uninsured patients has declined. The 2015 Government Accounting Office report on 340B purchases of oncology drugs indicated that within some disproportionate share hospitals, charitable care is no greater than in 340B-ineligible hospitals. Several industry and trade associations have fiercely criticized these reports, but there is clearly an intensifying public policy debate that has yet to be resolved.

To its credit, HRSA implemented a program-integrity initiative and in August 2015 released its long-anticipated mega-guidance, which clarifies previously fuzzy definitions such as “patient eligibility,” “diversion,” “record keeping” and “auditing.” The centerpiece of the program-integrity initiative included audits of covered entities (Table 1) and documentation of corrective action plans (CAPS). Between 2013 and 2015, HRSA audited 344 covered entities. In some cases, the same covered entity was audited in successive years if there was an adverse finding, which total to less than 1% of all covered entities over a three-year period. Nonetheless, 78% of the audits yielded in one or more adverse finding.

While some of the adverse findings such as an incorrect name or street address in HRSA OPA database are relatively benign, the disquieting results summarized in Table 2 indicate that nearly 50% of audited covered entities diverted products (i.e., purchased/prescribed discounted products incorrectly) and 22% benefited from duplicate discounts (i.e., purchased at the discounted 340B price and were paid a Medicaid rebate).

As a result of these findings, 57% of the audited covered entities had to repay manufacturers,* and nearly 10% resulted in termination of covered entities, specific sites or contract pharmacies from the program. To emphasize how rampant program abuse appears to be, only 35% of the covered entities were assessed no sanctions at all. Table 3 portrays a three-year summary of sanctions.

The fundamental question all program stakeholders are or should be asking themselves is to what extent is a small minority of audited covered entities representative of the vast unaudited majority. Assuming that the audits are a representative sample of all covered entities, the forecasted repayment rate would range between 50-64%. In other words, the revenue leakage risk for manufacturers with substantial 340B sales is clearly material and needs to be monitored from a margin erosion and compliance perspective.

The reality is that manufacturers have limited options to gain transparency due to data gaps, complexity and the resources required to reliably marry together direct and indirect sales, direct sales chargebacks and the HRS OPA database. Over the past few years, several manufacturers investigated covered entities for suspicious transactions only to find out later that their data was incorrect or incomplete.

Confronted by these challenges, many manufacturers are struggling to implement analytic solutions that can accurately monitor all inpatient and outpatient purchasing within participating hospitals, clinics and pharmacies. At a high level, manufacturers are seeking the following capabilities:

Crosswalk identifiers such as DEA, HIN, NPI and 340B IDs.

Aggregate sales, returns and chargebacks transactions at the child and parent level by wholesaler, including visibility to split billings.

Reconcile unmatched or orphaned transactions across the diverse datasets

Summarize all 340B-eligible and ineligible lines of business within a covered entity with drill-downs to specific inpatient, outpatient and contract pharmacy locations

Highlight suspicious levels of 340B sales or returns

Consider industry benchmarks and mitigating factors such as Medicaid exclusion status, class of trade, product characteristics and channel designs (e.g., buy and bill, specialty, and retail)

Guide the manufacturer to unified transactional details across datasets (indirect and sales, chargebacks, returns, etc.)

Prioritize suspicious activity for deeper investigation and audit support.

It is a common practice today for manufacturers and their trading partners to use EDI (Electronic Data Interchange) data to record transactions; the EDI 867 dataset, “Product Transfer and Resale,” is one of the more useful EDI interchanges. Fortunately, the 867 indirect sales data that manufacturers collect from their wholesalers, specialty distributors and specialty pharmacies on a daily or weekly basis can be leveraged to fill in visibility gaps. 867 data represent a complete history of all of the trade partner sales of a manufacturer’s product to its downstream customers including inpatient pharmacies, outpatient mail pharmacy or retail location. Although there is redaction within 867 reporting, all 340B transactions are at least partially visible in the 867 data.

340B Analytics Requires Master Data Management

To use 867 as a comprehensive 340B data source and crosswalk it to chargeback transactions requires addressing unique data management issues. For example, many Covered Entities comprise numerous campuses, facilities and locations including primary care and long-term care, infusion centers, inpatient pharmacies, and outpatient pharmacies. Maintaining an accurate, current database of all sites of care and parenting each properly are highly complex and resource-intensive processes because there is no universally adopted system of record inclusive of every purchaser.

Complicating matters, the use of contract pharmacies to fill prescriptions at an external retail, mail, or specialty pharmacy (i.e., non-buy-and-bill products) is expanding. Covered Entities will often contract with multiple pharmacy locations, and pharmacy stores often support more than one covered entity. As a result, manufacturers need to manage at least two types of parent relationships: one typically represents the ship-to hierarchy and the other the bill-hierarchy. Chart 1 provides an illustrative example of the necessary parent-child relationships that need to be maintained.

Without maintaining a hierarchy such as this example, manufacturers would be unable to understand the total product sales to “XYZ University System” and the percentages of 340B vs. non-340B sales/returns. Similarly, manufacturers want to understand the segment mix within the “Waldo’s chain pharmacy” and even down to a specific individual store. 340B analytics must be able to report not only what percentage of Waldo’s Store #4320 is 340B vs. non-340B but also what percentage is for XYZ University System, Hope Cancer Center, the Chemo-Infusion Center or another Covered Entity it contracts with.

As noted, visibility and accurate data analytics are vital. Once a manufacturer has visibility and the complete history, then it is in position to approach a covered entity to work towards a resolution. HRSA’s proposed mega-guidance of August 2015 specifies that only after the manufacturer can document its attempt to work in good faith with a covered entity can they file an audit request and audit work plan with HRSA. If the work plan is approved by HRSA, the manufacturer can hire an independent auditor to initiate an investigation and possible repayment.

Manufacturers should consider several other actions to drive accountability, visibility and confidence that 340B discounts are honored correctly, including:

If the level of 340B sales warrants, designate a clear owner within managed market operations for all 340B business issues. Often internal responsibilities are divided along functional lines with competing priorities (i.e., account management, contracts and pricing, government pricing/compliance).

Work with wholesalers and specialty distributors to standardize the identification of 340B transactions and billing transactions in both chargeback requests (EDI 844) and product resale reports (EDI 867). Both transactions should be submitted with either HIN or 340B IDs so as to clearly enumerate ship-to and bill-to locations. Ideally manufacturers should delineate this requirement in their distribution services agreements for both datasets.

More closely monitor and enforce distributor channel limitations on eligible classes of trade.

As manufacturers implement the analytic capabilities needed to monitor and audit the program, the level of program abuses, unintentional or otherwise, should abate over time, provided covered entities and contract pharmacies enact HRSA’s proposed mega-guidance.

David Weiss is director of solution engineering at IntegriChain. He has 25 years of broad experience in pharmaceutical/medtech channel, trade, contract and government price compliance, both as a consultant and solution provider. IntegriChain is a leading provider of data analytics for healthcare suppliers, including 13 of the top 15 biopharma manufacturers. IntegriChain tools and services improve channel collaboration and raise the efficiency of distribution process to reach customers and healthcare providers.

Discerning how and where products are discounted is an expensive headache for manufacturers

Use data analytics to monitor 340B discount drug pricing

Veeva Systems, founded in 2007, took the life sciences industry by storm as it introduced one of the first cloudbased customer relationship-management systems, Veeva CRM, and rode the wave of the industry’s adoption of iPads at the time. That software is now the market leader in the US; in the meantime, Veeva opened offices in Europe, Asia and Latin America, and grew to more than 1,300 employees. It had a successful IPO in 2013 and currently sports a market capitalization of around $3 billion. It now has four product lines: CRM, Vault (a platform to store documentation); Network (

); and OpenData, a customer reference data and data services solution.

Matt Wallach co-founded the company with another industry veteran, Peter Gassner (left, in photo). Pharmaceutical Commerce sat down with Matt to find out where Veeva is going, and what’s in store for life sciences IT. Here’s what he had to say.

1) It might sound like an old record being replayed at this point, but let’s go over the transformation that Veeva has accomplished in getting pharma companies into cloud computing. Are there still older, client-server based systems that Veeva is replacing? Has the pharma industry become fully comfortable with putting its data in the cloud?

When we launched Veeva in 2007, just before the first iPhone hit the market, the life sciences industry had not yet started to adopt cloud computing solutions in any meaningful way. Companies still utilized client-server and hosted IT systems to run all their major operations across commercial, medical, quality, clinical and regulatory. At the time, many legal, compliance and IT teams were wary of data security and validation in the cloud. An equal barrier to adoption was the fact that the cloud computing solutions available were not tailored to the specific requirements of the life sciences industry. Fortunately, so much has changed since those early days of cloud.

Over the last nine years, Veeva has helped to educate the industry about the advantages of cloud computing, even upending previously held viewpoints by demonstrating how these new solutions provide enhanced data security and streamline validation efforts. We made a conscious decision to “verticalize,” which I’ll explain in a minute. To that end, we recruited highly specialized industry experts and listened closely to all of our life sciences customers to develop technology solutions specifically and uniquely designed to meet their needs. The first enterprise-wide cloud computing projects at life sciences companies began in 2008 with the adoption of Veeva CRM for customer relationship management (CRM). These early customers quickly realized the tremendous benefits of modern cloud computing and word spread quickly. As Veeva gained success around the world, the door also opened for other great cloud

companies, such as salesforce.com, Workday and ServiceNow.

Today, most life sciences CIOs have a “cloud-first” strategy. Long gone are the fears of putting data and documents outside the firewall as companies have adopted cloud computing across the enterprise for CRM, data management, clinical trial management, content management, human resources, service management and others. The move to the cloud is not merely a trend…it is how companies operate today and will be well into the future.

2) A follow-on question: In looking at multiple cloud-based IT vendors, what differentiates them? What’s Veeva’s competitive advantage?

I’ve always said, “Just because it’s cloud doesn’t mean it’s good.” Once Veeva started to have broad success, many companies started to market their legacy solutions as “cloud,” “cloud-based” or “hybrid cloud,” but often these were cleverly disguised hosted solutions. One provider, in fact, had published a white paper on its website for weeks entitled “Why the Cloud Doesn’t Work for Life Sciences CRM,” but—all of a sudden—the company changed gears and announced their new cloud solution for life sciences CRM. Huh? We saw this type of suspect rebranding all the time, but none of these companies were successful delivering genuine cloud solutions.

Turns out that one of the most important things for a cloud solutions provider is its year of incorporation. If the provider started too early and already had a legacy client-server solution in place with its customers, the provider remained too dependent on this old model to change. Real cloud software is multitenant, so the technology providers that built multitenant solutions from the ground up during that first year were—and continue to be—the only ones that had a chance at success.

Veeva’s competitive advantage began with a core team of Silicon Valley engineers who truly understood multitenancy and cloud computing. My co-founders, Peter Gassner and Mitch Wallace, were early employees at salesforce.com and deeply understood how to build a company around multitenant software. From these technology roots, Veeva cultivated a rich team of life sciences experts who delivered breakthrough solutions that were faster, better and cheaper than the alternatives. And, because of the nature of cloud computing, all of our solutions were constantly upgraded—three times or more every year—so we were able to innovate faster than our competition.

Today, Veeva offers four product lines to the life sciences industry, all deeply tailored to meet the specific functional and compliance requirements of our customers. We also invest heavily to seamlessly connect our solutions, saving our customers tens of millions of dollars every year in integration costs.

3) Lately, Veeva has been promoting the concept of the “Industry Cloud.” How is that different from specific cloud-based offerings in CRM, document management, etc.?

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