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Click the title above for a link to open the Pharmaceutical Commerce August 2024 issue in an interactive PDF format.

Pharmaceutical Commerce - August 2024 Issue (PDF)

 now puts us into Q3 of 2024, and a notable pivot by the magazine to exploring an area of the pharma business engine that often falls under the proverbial radar: inventory management.

Shifting the topic into the spotlight, we present a deep dive this month into Big Pharma inventory performance. 

Editor Nicholas Saraceno sits down with Matthew Bardell

, managing director of nVentic, a specialist inventory optimization company that for seven years now, has been gathering relevant data and compiling it all into an “Inventory Trends Benchmarking Report.” The analysis provides a glimpse into what is taking place with the inventory levels of some of the largest drug manufacturers. Bardell notes that pharma giants such as Pfizer are tapping cash influxes (from COVID-19 products, for example) to buy new companies—and when those acquisitions occur, the result is a significant impact on the "days inventory outstanding" value, a key measure of how efficiently and effectively a company is operating. In those cases, Bardell adds, inventories are normally marked up to reflect fair value until it's "run through the books over a period of time.”

In other coverage this month, Editor Emeritus Nicholas Basta details the 

, even amid various industry undercurrents, such as reimbursement policy and drug importation wranglings and increasing manufacturer direct-to-patient actions in prescription drug distribution and delivery. Leading the wholesaler charge, of course, continues to be the industry’s Big 3 of McKesson, Cencora, and Cardinal Health. A natural key to their success, Basta says, has been the companies' ability to also dabble in other aspects of the healthcare ecosystem, whether that be by having their own specialty pharmacy or tackling clinical trial services head-on.

fifth installment of his “Who Moved My Prescription?” series

, Bill Roth of IntegriChain explores a multitude of factors that are contributing to a wave of pharmacy store closings across the US, including economic pressures, changes in consumer behaviors, and more. And in her latest look at healthcare reform, Amy Niles of the PAN Foundation 

 that will take effect in 2025, one being the Part D cap—people enrolled in Part D plans (both traditional and Medicare Advantage) will not have to pay more than $2,000 in out-of-pocket costs for their prescription medications.

That's just a sampling of our content offerings this month. As always, thanks for reading.

— Mike Hennessy Jr., President and CEO, MJH Life Sciences

The August issue of Pharmaceutical Commerce explores an area of the pharma business engine that can often fall under the radar: inventory management and optimization. 

Taking Inventory 

’s parent company—prides itself on valuing career development and learning. This is presented in various forms, including internal trainings for professional skill development, but also in encouraging employees to continuously educate themselves on the people and topics they cover.

Personally, I thoroughly enjoy taking advantage of the latter by attending webinars hosted by leaders and experts in the pharmaceutical industry, specifically pertaining to topics that our readership would benefit most from. Fitting that bill, I thought, was a recent webinar I attended titled “Solving the pharmaceutical supply chain challenges.”

It was moderated by Sreedhar Patnala, general manager, Systech, who was joined by IDC's Simon Ellis, group VP of global supply chain practice, and Michael Townsend, research director, life sciences commercialization strategies. Systech is a provider of digital identification and traceability solutions, while IDC is a market intelligence firm. The presentation referenced several forces at play that are impacting trends within the life science industry, including:

Global political and economic uncertainty

The rise of patient centricity and precision medicine

The convergence of life sciences and healthcare value chains

Talent shortage and workforce development

While most agree that mitigating risk is an absolute necessity for the supply chain, Ellis noted that there are various ways companies can tackle risk beyond just regulatory compliance-centered track-and-trace initiatives. For example, efforts in outbound supply chain traceability or cold chain monitoring can help drive critical cost reduction and brand protection goals (read full webinar writeup 

Indeed, more food for thought to add to my educational library.

Nicholas Saraceno is Pharmaceutical Commerce's Editor. He can be reached at nsaraceno@mjhlifesciences.com.

Ongoing education on the people and topics we cover is critical—with one recent  webinar I attended a fitting example.  

A Journey of the Mind  

Do you live in a pharmacy desert? It’s got nothing to do with climate change, unless you mean the economic climate. A pharmacy desert is a geographic area—a neighborhood, town, or county where some or even all of the pharmacies have closed, leaving residents to travel long distances to fill a prescription or get advice on use of medicines and other health-related issues.

There was a time when chain pharmacies bragged about the number of stores they were opening, and pharmacy deserts were a problem in a few rural areas. That has changed. More than 7,000 US pharmacies have closed since 2019;

 on average, one pharmacy closes every day across the country.

Urban areas, rural areas—even whole counties—are seeing pharmacies disappear. And with them goes access to drugs, vaccines, health advice, and more. More than 40% of all US counties are considered pharmacy deserts, per research from drug marketplace GoodRx.

Lack of access to a pharmacy means that people who take maintenance medications for complex conditions are more likely to stop taking them. That costs the US healthcare system a lot of money—an estimated 16% of total US healthcare spend.

 Lower adherence to medication regimens leads to a higher incidence of acute care episodes (i.e., diabetic ketoacidosis) and ultimately a higher incidence of complications from chronic conditions, resulting in higher healthcare costs. Since the contributing economic factors are typically worse in poor urban and rural areas, these closures impact poor communities disproportionately.

The list of factors driving the wave of pharmacy closures is a long one. Many are related to the economy. These include:

Labor cost inflation for pharmacists and physician assistants.

Economic pressure on consumers and their subsequent pullback.

Competition for non-pharmacy items from big box/online stores.

Theft, partly in response to economic conditions.

But by far, the biggest factor has been relentless pressure by pharmacy benefit managers (PBMs) to lower reimbursement for prescription drugs. PBMs select which pharmacies will be in-network for insurers. The three largest PBMs—ExpressScripts, owned by Cigna; CVS Caremark, owned by CVS Health; and OptumRx, owned by the same company as UnitedHealthcare—control a majority of the market. Patients pay less when they buy their medicines at in-network pharmacies. PBMs also set the reimbursement pharmacies get for dispensing a prescription. As PBMs have consolidated, they’ve used their market power to lower reimbursements to the point that 80% of the time reimbursement to the pharmacy is less than it paid to stock the medicine.

Adding the financial stress of the above economic factors to PBM-imposed hardships is what has driven a wave of pharmacy closures across the country, creating pharmacy deserts in the process.

One of the most obvious fixes for this problem would be for the FTC and DOJ to take action against PBMs for using their market power to deny pharmacies, particularly out-of-network pharmacies, reasonable reimbursement for the medicines they sell.

In addition, PBMs should be required to be transparent in reporting the rebates and other payments they receive from drug manufacturers in exchange for placing their products on formularies, and to explain where those rebates go.

The bottom line is that if nothing is done to stop PBM policies from driving pharmacies out of business, even you could find yourself living in a pharmacy desert. 

Michael Abrams is a managing partner at Numerof & Associates.

1. Murphy, T.; Pananjady, K. As Pharmacies Shutter, Some Western States, Black and Latino communities are Left Behind. 

https://apnews.com/article/pharmacy-closure-drugstore-cvs-walgreens-rite-aid-91967f18c0c059415b98fcf67ad0f84e

2. Le Coz, E. High Drug Prices and Pharmacy Deserts: Protesters Blame Drug Middlemen, Demand Regulation. 

https://www.usatoday.com/story/news/investigations/2024/05/17/pbm-practices-spark-outrage-and-protests-outside-express-scripts/73732395007/

3. Pisikian, K. How Pharmacy Deserts Impact Communities. March 30, 2022. GoodRx Health. 

https://www.goodrx.com/hcp-articles/providers/pharmacy-deserts

4. Watanabe, J.H.; McInnis, T.; Hirsch, J.D. Cost of Prescription Drug-Related Morbidity and Mortality. 

https://pubmed.ncbi.nlm.nih.gov/29577766/

5. Knox, R.P.; Gagneja, D.; Kraschel, K.L. Independent Pharmacies Gain Unanimous Victory in Recent US Supreme Court Case. 

https://jamanetwork.com/journals/jama-health-forum/fullarticle/2777061

A lack of access could shut out patients in need of maintenance drugs for complex conditions.

Pharmacy Deserts are Becoming a National Problem

Last year, while brainstorming future editorial content for 2024, a question crossed my mind: Was there a specific report that explored the inventory levels of Big Pharma companies?

For seven years now, nVentic—whose goal is to help its manufacturing clients improve inventory performance—has been gathering relevant data and compiling it all into what it calls its “Inventory Trends Benchmarking Report."

exclusive, we sat down with Bardell—the lead behind the benchmarks—to discuss the thought process into designing the report, its results, and what the storyline for 2025 will be.

 Could you further elaborate on nVentic, including the types of services it provides?

 nVentic is really a specialist inventory optimization company. We provide both technology and services to help mostly large to very large organizations better optimize their inventories. Our perception is that most organizations have not really taken advantage of all of the opportunities available to them through inventory optimization. We believe that there's a large opportunity in this area for plenty of organizations, not just in the healthcare sector, but further abroad.

We also provide broader supply chain and procurement services, but our key focus area has always been inventory optimization.

 What is the purpose of this yearly report? Could you describe the process that designing such an outline entails?

Benchmarks are great conversation starters; as human beings, we're always interested in comparing ourselves to others.

Because we identified seven years ago that the pharmaceutical sector is a key sector for us, we thought, why not do some benchmarking and use it as a conversation starter with some of the different companies? I don't think we originally set off with the intention of making it a yearly occurrence, but we got a lot of reaction to the report right from the start. We're now at a stage where people contact us asking when the new one is coming out. It continues to serve its initial purpose to give people interested in the sector a view of what's happening with inventory levels at the biggest manufacturers.

It’s also got a certain momentum and interest, so we're happy to keep providing it for people. In terms of the process, a lot of it is just crunching numbers. We're going through quarterly reports, annual reports, press releases, collating the data, running some basic analysis on it.

We also look at what the companies themselves are saying about their inventories—it doesn't always get much of a mention. It's not always a high priority for companies, but they'll be some that say something about their inventory levels. And besides that, we're looking at what's going on in the bigger picture for them and what's going on in the industry.

Is business booming? Are sales taking off? Are costs under pressure? Are there new things? Is there a global pandemic affecting anyone? And if so, what difference is that making? It takes a certain effort to pull all of that information together and synthesize and analyze it and then summarize—in a short format—the key trends that we see year on year.

 What were some of findings that you found most notable?

 Well, I think the main thing this year is how much inventories have grown. We started seven years ago thinking that these companies have a lot of inventory—it's only gone up since then, so it's interesting to me that there's a constant sort of upward trend on this one.

Individual companies tell their own story. For example, Pfizer, pre-pandemic, had a lot of DIO (days inventory outstanding), and then such was the success of its vaccine; not only did the company's revenue double, but it had a proportionate effect on its DIO,which came way down. Over 2023, the company had to make an enormous write off—over $6 billion worth of COVID-19 related treatments (Paxlovid and Comirnaty) written off that they can no longer use.

When the pandemic came along, these companies suddenly faced unlimited demand for these products, and no one knew how long it was going to carry on. It was extremely difficult, and I think people generally are happy that these companies could suddenly develop a vaccine and start cranking it out at the speed that they did; so financially, these billions of dollars written off needed to be put into the perspective of the additional revenue they made from it. It just shows you the impact of sudden swings in demand. That’s occurring in this example of Pfizer, but also at many other companies at a much smaller level. There's never perfect knowledge of the future, and you're always going to have some waste generated.

Manufacturers like Pfizer are using a lot of the cash that they generated from COVID vaccines and treatments to buy new companies, and when acquisitions happen, you also see a big impact on DIO because inventories are normally marked up to reflect fair value until that's run through the books over a period of time. You can pick different companies in the report and each one has its own story to tell, just like Pfizer does.

 What are the main drivers of this rise in inventory levels?

 There are a variety of reasons. We normally start with what the companies are saying themselves—plenty of them made reference in 2023 to what they call an increase in channel inventory, by which they mean their customers had received a lot of stock that they hadn't used, so sales for the manufacturers didn't come through as expected. Pharmaceutical manufacturers have long production lead times compared to a lot of industries. That means you can't react as quickly to sudden changes in demand. The fact that there was perhaps an unexpected surplus of inventory in the wholesale and distribution parts of the market had a knock-on effect with the manufacturers in 2023. Sales are a little bit down, but production is mostly done in advance based on the forecast.


Being that scrapping 4% of inventory each year equals a little more than 1% of revenue (on average, a prediction), what can be done to begin reducing unneeded portions, thereby reversing these Big Pharma inventory levels?

 Each company has its own particular situation and challenges and priorities, so I can only speak from experience. The supply chain teams who are responsible for managing inventory understand that some of the forecasts used are on the optimistic side and will generate excesses; they're often trying to act as a brake on that. But because it's a high-margin, revenue-driven industry, it's quite difficult to have your voice heard against the people who are saying, "look, this new medicine we're bringing out, it's going to be a top seller, it will completely transform our top line."

It's quite difficult to make yourself heard against those sorts of voices. There are two ways of counteracting that really. One is simply disclosure of how much inventory is scrapped each year. This is something that we've been working on with the Sustainable Medicines Partnership (SMP), a non-profit organization comprising a collaboration of 48 organizations. Whether the manufacturers themselves, along with parts of the [National Health Service] in the UK and other organizations interested in the healthcare supply chain, such as nVentic or charitable organizations in the US that look at donating unused medicines, as well as various industry bodies, people are looking at different ways of reducing waste in the broader sense in the industry.

Inventory waste is what we're talking about here—it consists of products that are surplus to demand and that end up being destroyed. The SMP also looks at other things like sustainable packaging and carbon accounting. One of the things that we are passionate about is creating greater visibility around this. That 4% figure is an estimate based on what little information we can get. Some companies are very clear, and report exactly what was written off each year, but many don't, and differing accounting protocols can make numbers hard to compare.

We think it's probably good enough for an estimate and then what we at the SMP would like to do is encourage companies to report this type of waste as part of their ESG reporting, so that there's greater visibility created across the industry in terms of how much actually completely goes to waste in this respect.

The second way of reducing scrapped inventory is to better use inventory science to reduce the excesses in the first place. This is our primary focus at nVentic.

 What would you say to companies who might feel that they don’t want to reduce inventories because they don’t want to risk shortages?

 This is where the difference between inventory optimization and inventory reduction comes in. Sometimes, companies will just pursue inventory reduction because they want to free up working capital. Inventory optimization is about finding the best possible balance between running short and having so much that you end up discarding some.

It’s not a zero-sum game. At the end of the day, both the FDA and the European Union—most countries of the world—publish medicine shortage reports on a regular basis. Medicine shortages exist. If you look at individual companies on our benchmark report, they've got an average of seven months worth of stock.

So shortages aren't caused because they don't have enough stock overall but because they don't have enough of the right stock. In other words, having an average of seven months stock on hand doesn't mean you have seven months of everything; you can run out of some completely while having 14 months of more of others.

For critical-to-life medicines, companies will already be applying something like a 99.5% fill rate. They may well even have complete redundancy in stocks for their most critical items as well. All of that is the right thing to do, but even then, it's still a matter of finding the right balance between those and some of our less critical items. Because manufacturing capacity is a finite resource; cash is a finite resource; time is a finite resource.

If you're busy producing too much of something that you don't need, then that's time and effort that you could perhaps better be applying to manufacturing things that are needed. So inventory optimization is not risking shortages to deliver reduction, it is addressing the common root causes of inventory shortages and excesses to deliver both future stockouts and less inventory written off.

Obviously, put like that, it's very simplistic. The real key comes in the huge volumes of data flowing through these organizations and the ability to really understand what the data is telling us in terms of how we can further optimize—that's where the incremental gains are to be made.

 What do you believe the main headline will be once 2025 rolls around?

 To be honest, I don't anticipate any major changes. The biggest conclusion I've taken from doing the report with nVentic is that this is not a priority for these companies. Of course, that’s not to say that inventory isn’t a very high priority for them. It's absolutely essential to what they do. They've got large teams of very skillful people doing nothing but trying to get these levels as good as possible, and that will continue to be the case.

What I mean is that at a strategic level, few companies seem to have a major ambition to prioritize inventory optimization. The attention is on M&A, R&D, and what’s coming, so I don't really see anything changing in that respect. 

A conversation with Matthew Bardell, managing director, nVentic, about a perhaps overlooked but useful strategic component of company performance and overall business benchmarks: inventory optimization.

An Examination of Big Pharma Inventories

The drug pricing reforms introduced by the Inflation Reduction Act of 2022 (IRA) are expected to significantly impact pharmaceutical companies’ revenues and profitability. The IRA requires the US Department of Health and Human Services to negotiate drug prices, introduces penalties for drug price increases greater than inflation, and makes manufacturers responsible for 20% of catastrophic care costs for Part D patients whose spending exceeds the $2,000 out-of-pocket (OOP) cap.

The USC Schaeffer Center for Health Policy and Economics reports that “taken together, these provisions have been estimated to lead to an approximately 31% decrease in US pharmaceutical revenues through 2039 and result in 135 fewer new drug approvals.” Similarly, an analysis from 5POINT10 predicts a more than 20% hit to the operating income of global biopharma (even more in the US).

Despite the challenges created by the IRA, brand leaders must keep their focus on the day-to-day work of helping patients access—and pay for—their medications. So, what does the IRA mean for patient access leaders, pharma brand managers, and patient service owners? I recently moderated a panel on the topic with three industry experts whose insights I’m sharing here.

According to Sarah Butler, chief commercial officer at ADVI Health, four key areas will be affected, and manufacturers will need to adjust their strategies going forward.

Pre-IRA, the market incentivized biopharma companies to launch a drug first in a smaller population, such as rare disease, because they could continue to earn revenue on the drug while conducting ongoing R&D to expand to additional indications. Now, companies have to make difficult decisions to choose which indication is launched first because once the molecule is on the market, the clock starts ticking to be selected for IRA negotiation.

Because manufacturers need to consider how to delay getting on the list as much as possible, looking at volume projections is more important than ever. Even with a medium- or lower-priced drug, if the volume is high, the drug can appear on the IRA negotiation list sooner than you might think. Market dynamics and the competitive environment also play a crucial role. For example, GLP-1s launched this year in weight loss and have completely impacted the order of drugs on the IRA negotiation list. Paying attention to those market dynamics while preparing for launch is critical.

Manufacturers are likely to launch new drugs in Europe or Asia first in order to develop the drug, conduct additional studies, and prepare to file for the indication that will have the greatest impact in the US. Restricting drug access in the US to potentially groundbreaking drugs is likely to cause a backlash among patient advocacy groups and other healthcare stakeholders.

In addition to changes in launch strategy that are likely to happen as a result of the IRA, brands are likely to face hard decisions around adjustments to copay assistance programs, hub eligibility criteria, the amount of free product they’re able to offer and where they go overall with the brand in order to continue providing support to patients who need it.

Data points to a potential reduction of as much as 40% in the number of FDA-approved drugs over the next 10 years—up to 139 therapies—as a result of the IRA. Some manufacturers may consolidate resources around fewer products and lower investments, while others could pursue assets they might not otherwise approve, and some may discontinue trials. Alexion, for example, has gone on the record and publicly discussed delaying some investments in R&D.

Manufacturers are also beginning to change their organizational structures and adjust engagement strategies to respond to IRA negotiation and create more alignment with their global pricing colleagues. Teams focused on government are getting larger.

Once the negotiated prices are announced in September before taking effect in 2025, the spillover effect on the commercial market will be significant, particularly with Part D, where pricing designs will likely become even more complex. It is important for manufacturers to know their places on the list and use projections to avoid any surprises in terms of submitting evidence packages to the Centers for Medicare & Medicaid Services.

When new laws directly impact patients, it is critical to educate them about how these regulations will affect their medication journey.

“It’s all about getting the information out to the patient, explaining it to them in ways they can understand it, and meeting them where they are—and not just the patient, but of course, caregivers as well,” said Richard Fahrer, oncology marketing director, patient solutions, at Pfizer.

Copay smoothing is one area Part D patients are likely to need help understanding. Designed to put a $2,000 OOP cap on medications and spread patient costs evenly over the course of the year to make monthly costs more predictable, guidance on this is evolving and still being released.

“For patients to be able to take advantage of the program, they need to understand how it works, how to enroll, and how to smooth out that copay,” noted Fahrer. “They’re also going to need to make sure they make their payments on time, because if they opt-in to copay smoothing and then miss payments, they risk being dropped from the program and expected to pay a lump sum.” Interestingly, in a post-webinar conversation with an attendee, Fahrer learned that at least one independent patient assistance charity is suggesting that patients who expect to gain charitable support should not sign up for smoothing as it could disrupt the charity’s qualification and approval processes.

Making that information available to both patients and caregivers, in multiple languages wherever possible, and also educating prescribing physicians, practice managers, reimbursement specialists, and other patient advocates—as well as internally within the pharma manufacturer—is also critical.

In addition, hub services vendors have an opportunity to act as an intermediary to enroll patients in the copay smoothing program “because that’s going to be a little bit tricky in 2025,” explains Butler. Since patients aren’t able to enroll at the pharmacy counter and need to do so via paper, phone, or online application, the process needs to be as easy as possible.

Payers are poised to buckle down and do all they can to shrink their risk around the IRA impact. According to Don Sawyer, senior vice president of market access at Stemline Therapeutics, “The negotiations are going to get much more extreme and they’re going to leverage everything they possibly can do.

In the absence of information, payers “are going to backstop themselves, and who’s going to be there to backstop them is who has always been there to backstop them, the manufacturers,” added Sawyer. Payers are also likely to raise premiums, potentially reduce the number of Part D options, and use a more restrictive benefit design with existing plans.

In anticipation of the IRA and expected reduction in hub, patient assistance programs, and affordability program budgets, manufacturers should be looking to streamline their patient support operations. Leveraging artificial intelligence, electronic benefit verifications, more sophisticated benefits support, and blended staffing models all can help brands do more with less without shortchanging patients. 

Chris Dowd is Senior Vice President, Market Development, at ConnectiveRx.

What does the legislation mean for patient access leaders, pharma brand       managers, and patient service owners? Industry experts weigh in.


The IRA’s Impact on Patient Hub, Access, and Affordability Programs

Specialty pharmacies and other patient service providers that pioneered the specialty pharmaceutical product market initially focused on extraordinary service and patient support, curating capabilities for specialty drug therapies. This included supporting the unique requirements of specialty drug therapies and the needs of their patients—prescription delivery has provided express services, such as for cold chain, and patients were called monthly to start the refill process. Pharmacists, nurses, social workers, and other healthcare professionals (HCPs) were available to support patients’ clinical needs. These entities had reimbursement experts who could navigate complicated insurance coverage and were adept at finding patient assistance support. The capabilities of the specialty product service providers grew in parallel with the development of new, complex therapies that required those capabilities.

Specialty pharmacies and other patient service provider services, like the drug therapies they support, continue to evolve. In today’s healthcare landscape, specialty pharmacies, manufacturers, and other stakeholders are increasingly leveraging technology—including artificial intelligence (AI)-enabled innovations—to enhance patient and caregiver support, particularly for patients on specialty pharmaceutical drugs. This segment of patients often requires intensive monitoring, personalized support, and adherence to complex treatment regimens. AI-enabled technology offers unique opportunities to meet these needs effectively by providing personalized care, predictive analytics, and real-time interventions, thereby improving medication adherence and enhancing overall patient outcomes.

Evolution of technology-enabled engagement tools

The development of technology-enabled patient engagement solutions has revolutionized the management of specialty drug therapies. These solutions encompass a variety of digital tools and platforms tailored to support patients with complex medical conditions and treatments. For instance, mobile applications, remote monitoring devices, and virtual consultations have become integral in delivering personalized care and improving treatment adherence among patients on specialty drugs.

Telehealth services, in particular, have played a pivotal role in ensuring continuous care delivery, enabling patients to consult HCPs remotely and receive timely support and education. The COVID-19 pandemic further accelerated the adoption of telehealth, highlighting its efficacy in maintaining patient engagement and adherence to treatment protocols.

The integration of AI in digital patient engagement is transforming how specialty pharmacies and other patient services providers interact with and support patients. As healthcare continues to embrace technological advancements, AI-enabled solutions are emerging as powerful tools to enhance patient-reported outcome measures (PROMs) and overall patient engagement. Examples include:

While traditional telephonic interviews offer personalized patient interaction, AI can augment this process by automating initial patient outreach and follow-ups. AI-driven voice recognition systems can handle routine queries, schedule calls and deliveries, and collect preliminary data, reserving human intervention for more complex issues. This hybrid approach can optimize resources and ensure consistent patient engagement.

. AI chatbots and natural language processing algorithms are revolutionizing text-based communication. These tools can provide real-time responses to patient inquiries, deliver medication reminders, and collect PROMs through automated surveys. AI can analyze patient responses to identify patterns and predict potential issues, enabling proactive interventions. Email communication can be enhanced with AI by personalizing content and optimizing delivery times to improve engagement rates.

.Voice-activated AI assistants such as Alexa and Siri offer hands-free interaction, making healthcare more accessible. These devices can be programmed to remind patients to take their medications, schedule follow-up appointments, and provide health information. With advancements in voice recognition technology, AI can offer personalized support and collect PROMs through conversational interfaces, making the process seamless for patients.

. Telehealth has gained significant traction, and AI can further enhance video consultations. AI algorithms can analyze video interactions to provide real-time feedback to patient service providers, ensuring that patient concerns are adequately addressed. Additionally, AI can transcribe and summarize consultations, reducing administrative burden and improving the accuracy of patient records. This level of engagement can significantly improve patient satisfaction and health outcomes.

. Wearable devices and remote monitoring tools are invaluable in chronic disease management. AI can process the vast amounts of data generated by these devices, offering insights into patient health trends and identifying anomalies that may require intervention. By continuously monitoring patients, AI can provide real-time feedback and support, reducing hospital readmissions and improving overall health outcomes.

. By incorporating game-like elements into health management apps, AI can motivate patients to adhere to their treatment plans. AI algorithms can personalize the experience, adjusting the difficulty and rewards based on patient behavior and preferences. This approach can make managing chronic conditions more engaging and less burdensome.

The future of AI-enabled patient engagement in patient support services is promising. As AI technology continues to evolve, we can expect even more sophisticated and personalized engagement solutions. Predictive analytics will play a crucial role, allowing HCPs to anticipate patient needs and tailor interventions accordingly. Integration with electronic health records (EHRs) will become more seamless, ensuring that all patient interactions are informed by comprehensive health data.

Over the next several years, AI-driven patient engagement is likely to become more ubiquitous, with widespread adoption across healthcare settings. The combination of AI with advanced digital tools will not only improve patient experiences but also enhance clinical outcomes, making healthcare more efficient and effective.

Clinical decision support and patient engagement

Technology can enhance those two elements through comprehensive patient assessments, benefits workups, and appropriate drug selection. Real-time PRO data availability and pharmacist involvement in data collection improve clinical decisions and patient outcomes.

Leveraging tech for patient engagement and PRO data

Patient engagement and the collection of PROs data are pivotal in modern healthcare. The Academy of Managed Care Pharmacy (AMCP) has highlighted the need to expand PRO data collection. Evolving technology and interoperability support more effective collection of validated PRO data.

Optimizing workflows for PRO data collection

Structuring workflows to collect PRO data at clinically relevant time points is crucial. This approach ensures that the data collected is meaningful and can be used to make informed clinical decisions. To support this, EHR and other longitudinal patient management systems may require modifications to facilitate PRO data collection and sharing. Ideally, PRO data should be available to the patient’s healthcare team in real time, providing a comprehensive view of health status.

Enhancing EHR systems and interoperability

For effective PRO data collection, system interoperability is essential. This ensures that data remains portable if patients change payers or care providers. Participants in the AMCP forum recommended leveraging pharmacists and other healthcare stakeholders to facilitate PRO data collection. Specifically, pharmacists—who are often involved in direct patient care—can integrate PRO questions into their workflow processes and enter the data into EHR systems. Community pharmacists, specialty pharmacists, and health-system pharmacists are all well-positioned to play significant roles in this process. For example, community pharmacists involved in drug therapy management, specialty pharmacists conducting disease activity assessments, and health-system pharmacists with access to shared EHR systems can all contribute to comprehensive PRO data collection.

EHR systems should be designed to gather appropriate data and ensure it is accessible to the relevant individuals to support informed decision-making. This involves integrating clinical decision support tools that can enhance various aspects of patient care.

Considerations in evaluating tech-enabled engagement

Pharmacies and patient service providers are evolving digital patient engagement capabilities, and future expectations will differ significantly from today. Important considerations include:

. Understanding challenges faced by patients on specialty drugs, such as complex regimens and medication adherence.

. Building a multidisciplinary team with clinical expertise and technological proficiency. Engaging patients and collaborating with HCPs ensures seamless tech integration.

. Aligning processes with patient needs and organizational goals. Mapping treatment pathways and personalizing digital interventions are crucial.

. Assessing technological infrastructure, data security, EHR integration, and software development processes. Deciding between buying, partnering, or building solutions is key.

. Monitoring key performance indicators (KPIs), collecting feedback, and refining digital tools and strategies.

. Defining KPIs and conducting ROI analysis to measure success and value of technology-enabled solutions.

Technology-enabled patient engagement tools have reshaped care delivery for patients on specialty drugs, offering personalized support and improving adherence. By continuously optimizing these solutions, organizations can drive meaningful improvements in patient satisfaction, treatment adherence, and healthcare efficiency.

Cheryl Allen, BS Pharm, MBA, and Jon Hamrick, MBA, are both founding partners with Curatio Scientia Advisors. Allen is also a member of Pharmaceutical Commerce’s Editorial Advisory Board.

Why the integration of AI-enabled solutions has the potential to boost patient support and engagement across numerous patient care settings.


Enhancing Patient Access and Support Through Technology: A Comprehensive Assessment

On the surface, the US pharmaceutical supply chain is fairly quiet. Every day, some 10 million prescriptions are delivered to patients via clinics or pharmacies, usually through the efforts of the wholesaler sector. Wholesalers’ trade association, the Healthcare Distribution Alliance (HDA), says that its 39 members (up several from a couple years ago) are responsible for 95% of primary distribution—i.e., taking delivery from over 1,500 suppliers, and ownership of the drugs, to be distributed to some 300,000 locations around the country.

But underneath, there are some disquieting trends, and new responsibilities that the wholesaler community is taking on. Of gravest concern is the growing number of drug shortages, which has caught Congressional attention, as well as the ongoing efforts by FDA to reduce them. Another concern, interwoven with the responsibility for compliance with the Drug Supply Chain Security Act (DSCSA), is the intrusion of counterfeit products. DSCSA also figures in the ongoing efforts by several states to import drugs from abroad (specifically, Canada) as a cost-cutting measure; the difficulty of doing so while maintaining DSCSA compliance has most states flummoxed.

All these issues and more are keeping HDA, and its CEO Chip Davis, on their toes. “Coming out of the pandemic, it’s been generally recognized that wholesalers were well prepared to manage the extraordinary situation we were confronted with,” says Davis. “I became HDA CEO the same month (March 2020) that the pandemic restrictions took hold, and there were supply chain shortages all over the country. But we were able to keep pharmacy shelves stocked throughout, which was a measure of the wholesaler community’s resilience.” Going forward, he says, will require “more transparency” in the supply chain as shortages and regulations are addressed, and “more coordination” with public institutions for pandemic preparedness and other new challenges.

US drug distribution remains dominated by the Big 3—McKesson, Cencora, and Cardinal Health—and their financial statements are dominated by their primary drug distribution business. However, each of them has made forays into neighboring parts of the healthcare ecosystem. McKesson has its own specialty pharmacy, Biologics, to address specialty pharmaceutical delivery and dispensing. Cencora acquired a specialty logistics provider, World Courier, several years ago and has aligned that with clinical trial services, especially in the booming cellular and gene therapy space. Cardinal has made recent expansions to build out its “at-Home Solutions” business to provide medical products to patients in their homes; this also includes plans to build a new 350,000 square-foot distribution center in Greenville, SC. Each of the Big 3 has a substantial patient-support business, providing hub services for prescription authorizations, reimbursement, and adherence. Finally, as noted ahead, each also has a third-party logistics (3PL) service to deliver drugs without taking ownership of them.

The topic of drug shortages has been ongoing for years, but has recently garnered new attention from the pharmacy community and regulators.

The range of causes is almost as broad as the number of drugs available, going from the intense demand for GLP-1 weight-loss drugs (which has led to the presence of counterfeits, a boom in compounded semaglutide formulations, and patent litigation by GLP-1 patent owners), to an ongoing problem of producing carboplatin oncolytics at an Indian manufacturer.

According to data published by the American Society of Health-System Pharmacists (ASHP), there are currently 323 drugs in shortage in the US. But according to FDA’s annual Drug Shortages report, there were 123 documented shortages as of the end of 2023. Part of the gap between those two numbers is that ASHP-reported pharmacy shortages are reported as they are encountered at individual sites, and not as a measure of a nationwide shortage. FDA, in its annual report, noted that it had “resolved” 236 shortages through a combination of manufacturer support, regulatory discretion, and, in some cases, authorizing foreign deliveries.

An IQVIA report on shortages from last autumn noted that one of the issues that attracted attention a decade ago—the problem of sole-source providers of generics—is less of an issue today; while 17 drugs in shortage were single-source, so were nearly 100 with multiple sources of supply. “Single-source generic medicines are much less common today than they were in 2011, largely as a result of sustained efforts by the FDA and industry to increase generic approvals for previously single-source drugs,” it concludes.

Still, shortages persist. This is where HDA’s Davis notes that “more transparency” is a palliative. Wholesalers, with their thousands of distribution points, put their customers on allocation when notified of a shortage. Manufacturers are currently obligated to document upcoming supply disruptions; FDA and Capitol Hill legislators are making efforts to better predict new demand (the source of about half of shortages). S.2364 (the MAPS Act), currently in Senate committee, seeks to use data analytics to “map the entire United States pharmaceutical supply chain, from inception to distribution ... to identify supply chain vulnerabilities and other national security threats.” Notably, this would include not only finished products, but active pharmaceutical ingredients as well as “key starting materials.”

As of mid-summer, the wholesaler community (as should everyone else in the pharma supply chain) are focused on Nov. 27: the day when full DSCSA compliance comes into force. Although FDA has already given some regulatory discretion to small pharmacies (those with less than 25 full-time employees will have until 2026 to comply), it has also stated, multiple times, that it is not extending delay beyond Nov. 27.

In practice, DSCSA compliance means that trading partners will exchange data, on a unit-of-sale basis, for all pharmaceuticals being shipped from manufacturer to dispenser. This puts wholesalers squarely in the heart of the system, as they have to receive (and verify) data from the manufacturer, while conveying accurate information to their downstream partners. All this is to be done electronically, with items held in quarantine when the data can’t be confirmed.

Following a 12-month “stabilization” period (November 2023-November 2024) that the FDA provided to meet DSCSA mandates, the wholesaler community has tried to wrangle both its manufacturer suppliers and its pharmacy customers into compliance. Success is not yet complete. “We’re connected to and able to receive data from almost all of our ~500 manufacturing partners, and we’re seeing between 80% to 95% of our purchase orders have the data,” says Gregg Gorniak, VP of manufacturer operations and data services at Cencora. “However, ~25% of shipments from those manufacturers sending data are still coming in with missing or incomplete data. If that remains the case come Nov. 27, we wouldn’t be able to receive those products, or we’d need to wait until we get the data. That equates to a disruption of about 300k units a day.”

Cencora’s situation is likely to be above average among HDA members; HDA’s 2023-24 Factbook reported that 87% of manufacturers were sending the necessary data as of late 2023. Despite wholesalers’ best efforts—and the prodding from FDA—there will likely to be poorly documented shipments arriving from manufacturers after Nov. 27; a worst-case scenario would be that this will exacerbate the already painful drug-shortages situation.

Gorniak’s assessment highlights another issue—data that is sent, but is not complete. Industry experts, including the vendors of software systems for DSCSA compliance, have anticipated this: the situation calls for “exceptions management” to quickly resolve the inaccuracies. “Exceptions come in a multitude of types: technical errors, data errors, physical errors, etc.,” notes industry experts from NNIT, a pharma IT company that acquired DSCSA systems integrator Excelis Health. “A common thread across all exceptions with a trading partner is having the capabilities to capture and communicate needed details of their exception with the appropriate information. Emails have become the initial vehicle with varying degrees of the necessary information needed to align and resolve the exception."

Individual emails for each data exception is, in a word, a suboptimal solution. Various DSCSA solution providers, such as TraceLink, LSpedia, and rfXcel, offer modules that automate some aspects of exceptions management, such as checking syntax of the various codes needed.

A scramble similar to that of manufacturers—only worse—is expected for retail pharmacies and hospitals come Nov. 27. Their obligation is to verify the DSCSA data coming in with drug deliveries, and notify upstream partners and FDA of discrepancies. There is a general consensus that while the major chains, and major health systems, are more or less ready, there will be problems for smaller chains, hospitals, and independent pharmacies. As mentioned previously, many of these organizations will have a grace period after Nov. 27, but that period will end eventually.

“We’ve been supporting their onboarding and compliance by having their data available through our portal or by sending the data to them for well over 12 months,” says Cencora’s Gorniak. “In fact, we were the first major wholesaler that could do this. We continue to leverage our investment in analytics and relationships with the HDA to ensure we’re doing the ‘right’ thing for the patient come November and beyond.”

A less-recognized aspect of DSCSA is that it brings wholesalers and other participants in the pharma supply chain—specifically, 3PL providers under FDA licensure and qualification.

The major wholesalers each have their own 3PL businesses, as well as the major carriers such as UPS, FedEx, DHL, and others. FDA has been collecting submissions from wholesalers and 3PLs for several years, and has issued a proposed regulatory system that would involve “authorized organizations” to perform site inspections. However, a final set of rules is still pending, and FDA has indicated that this will be a multiyear rollout. The DSCSA rule will supersede licensure rules that many states have already established.

“The transition to the federal rules is expected to create some hurdles, as states with existing regulations, or those that lack regulations entirely, adapt to the new federal requirements,” according to a recent posting at IQVIA’s State Services business unit. “Further, this transition will likely not come without costs, and the road to compliance will involve financial implications and a need for robust operational infrastructure to meet the new standards.”

A quasi-regulatory program, well established in Europe but followed only partially in the US, is that of good distribution practices (GDPs). GDP, as described by an EU standard (2013/C 343/01), involves ensuring that drug products are stored and conveyed safely, with meaningful documentation of processes, and with designation of an “authorized person” who is both knowledgeable of, and responsible for, compliance within each supply chain participant. Most US manufacturers and wholesalers are GDP-compliant (even if there is not a regulatory system in place), but compliance falls off as 3PL contractors come into the supply chain.

HDA is stepping into this gap with a voluntary GDP compliance program, as organized by Chuck Forsaith, an HDA VP for its Pharmaceutical Cargo Security Coalition (PCSC). “For several years, many in the pharmaceutical supply chain have called for a program in the United States that adheres to the GDP standards of the European Medicines Agency,” he says. “This program is a natural extension of HDA’s mission, and I am proud that the PCSC is helping to lead the industry to create a new set of standards that ultimately enhance the safety and security of pharmaceutical products.”

Since its announcement in April, about 10 companies have started the application process, and one—DeSpir Logistics—is already involved in the details of accreditation. HDA has engaged with a UK firm, ASC Associates, to provide the training. Ultimately, says Forsaith, a library of resources will be made available to enable participants to keep current with industry practices.

The overall pharmaceutical delivery and dispensing system is intricate and controversial, with debates over the uncomfortably high prices of branded drugs, and uncomfortably low prices for some generics. Add to that the wrangling over federal reimbursement policies, the impact of pharmacy benefit managers, and the ongoing battle for drug importation from abroad, which would sidestep US distributors. At the same time, there is a bid for manufacturers to go direct-to-patient as exemplified by Eli Lilly’s Zepbound GLP-1 product; Lilly will even provide the physicians to write the prescription for the drug.

Nevertheless, US wholesalers have navigated these currents well, and their prospects remain positive. As Adam Fein, president of the Drug Channels Institute puts it: “Many people have predicted the demise of pharmaceutical distributors. But having studied the industry for longer than I care to admit, these businesses remain among the most resilient in the US healthcare system.”

— Nicholas Basta is Editor Emeritus and Founder of Pharmaceutical Commerce.

Even as pharma technology evolves, and payers argue over reimbursement 
practices throughout healthcare, drug wholesaling is a thriving business.


US Drug Wholesaling 2024: Staying the Course

On June 27, 2024, Walgreens announced that it was reviewing 2,100 of its 8,600 pharmacies in the US for performance and likely closing of 700 to 800 pharmacies. CVS—which reported that it had 9,939 stores in 2021—has closed almost 700 since then. The company now has 9,273 stores, and plans to close another 300 in 2024. Rite Aid, in 2021, had 2,447 stores and now has 1,704, according to the organization's latest reports.

While independents are holding on at 19,400 stores, according to the National Community Pharmacy Association, as many as a third of them are either planning to close their pharmacies or converting to non-insurance cash-pay pharmacies and focusing on generics.

Several factors have contributed to the wave of pharmacy store closings across the US.

. Reduced reimbursement rates from insurance companies—mixed with rising labor costs, store theft, rising cost of goods, and the high cost of maintaining a brick-and-mortar presence—have made it difficult for many pharmacies to stay afloat.

What’s bad for one may be good for another. Companies such as Amazon Pharmacy; Mark Cuban Cost Plus Drugs; Alto Pharmacy; Capsule; lifestyle pharmacies such as Hims, Hers, Roman, and Lemonaid; cash pharmacies including Blueberry and Eagle; and multi-model pharmacies such as OneroRx and others have come forward to disrupt the world of high-volume, low-cost generic brick-and-mortar pharmacy.

The rise of these new forms of pharmacies and prescription services have changed consumer behavior and reduced foot traffic to physical pharmacy stores. This shift has been accelerated by the COVID-19 pandemic, as more people turned to online options for their medication needs.

Retail pharmacies have become very lazy over the last 20 years as they have outsourced their interactions with payers to pharmacy services administrative organizations and outsourced their sourcing of product to wholesalers. They are told not to pay attention to the losses on individual products and instead, focus on the all-in number. But that’s not working anymore. Otherwise, we wouldn’t be seeing these store closures.

In recent years, the phenomenon of “pharmacy deserts” has gained increasing attention. A pharmacy desert is an area where residents have limited access to pharmaceutical services and medications due to the absence of nearby pharmacies. This issue has been exacerbated by the closure of numerous pharmacy stores, particularly in rural and low-income urban areas.

The closure of pharmacy stores and the resulting pharmacy deserts have profound implications for public health and community well-being.

Residents in pharmacy deserts often struggle to obtain necessary medications. This lack of access can lead to poor health outcomes, particularly for individuals with chronic conditions such as diabetes, hypertension, and asthma.

 Pharmacy deserts disproportionately affect low-income and minority communities, exacerbating existing health disparities. These populations are already at higher risk for certain health conditions and may have fewer resources to seek alternative sources of medication.

 Limited access to pharmacies can lead to increased healthcare costs. When people cannot access their medications, they are more likely to experience complications that require emergency department visits or hospitalizations, placing additional strain on the healthcare system.

 Pharmacies often provide essential health services beyond medication dispensing, such as immunizations, health screenings, and consultations. The loss of these services can leave significant gaps in community healthcare, particularly in areas with limited access to other healthcare providers.

While the problem of pharmacy deserts is already receiving attention in several states, it doesn’t appear that states can prop up a business model in decline, no matter how savvy it is or how involved policymakers, healthcare providers, and community organizations may get.

. Community organizations and local governments can play a crucial role in identifying and addressing pharmacy deserts. Initiatives such as mobile pharmacies, community health clinics, and partnerships with local businesses can help provide alternative sources of medication and healthcare services.

. It may not be enough to shore up new forms of pharmacy for these geographies. Therefore, battle lines are drawing between brick-and-mortar and mail order/home delivery models. And recall that rural and low-income patients who are likely to be disproportionately affected may not practically be able to access these.

. Sorry, this isn’t real. It’s just the No. 1 response we hear from pharmaceutical manufacturers. It seems logical, but recall that these are the entities that have swelled national drug code blocks from 30 to more than 750 in the last 10 years, the ones that added direct and indirect remunerations to non-Medicare volume and even lowered rates for 2025. With that said, pharmacies believe they won something when National Average Drug Acquisition Cost (NADAC) was implemented for Medicaid, but it hasn’t been the silver bullet they were hoping for. It stemmed some losses but didn’t save pharmacy. From research that Blue Fin Group has conducted in the market in 2023 and 2024, payers are promoting to retailers that unprofitable prescriptions can be sent to the payers’ mail order businesses. So why would the payers solve it? Why not let retail implode and vertically stack the business back to mail order, which is exactly what the payers have been doing in specialty pharmacy with their business, especially in the areas of immunology, neurology, dermatology, and respiratory.

If you look up polypharmacy, the actual definition is a patient who’s on five or more medications. The way I’ve used the word throughout my career is a patient who has access to multiple pharmacies for their medications. It wouldn’t be hard to argue that our industry did this to itself with the rise of specialty pharmacy over the last 20 or so years. In the late 1990s, specialty products didn’t fit retail pharmacy. The products were too expensive, unit demand too little, and they came with costly education, prior authorization support, step edits, reauthorization, and very challenging patient economics. It took a new model of pharmacy to support this. I wonder if that’s what we’re seeing here now in the retail space.

The retail pharmacy market is essentially generics and top-100 brands, but everything else is splintering into direct-to-patient models or one-offs thinking that non-specialty products can be forced to work like specialty.

In a custom analysis, our firm Blue Fin Group has done of all the drug launches since the beginning of 2023, and the verdict at the moment is that despite all the attempts at digital pharmacy or any model that is an end-around to the pharmacy benefits manager model, none prove to be successful. But it is clear that we’re going the wrong direction. We are splintering care. We are creating an environment of mixed insurance and cash business. We are risking contra-indications and drug interactions, let alone adherence to therapies.

In summary, I wish I had better news to share. The reality is that retail pharmacy doesn’t know a way out of this situation. My personal assumption is that pharmacies will seek to improve their cost of goods sold by going direct when and where it makes sense. My firm sees the pharmacies trading data and inventory guarantees and becoming part of limited brick-and-mortar and home delivery networks that operate in concert with tech-enabled hubs. The hope is that these pharmacies would then return to profitability, solve for pharmacy deserts with their own mail order or home delivery models, and strike a balance of working with cash pay pharmacy models to find that new model.

Making sense of the accelerating trends and challenges—including store closings, pharmacy deserts, and the rise of polypharmacy.

Pharmaceutical Commerce - August 2024