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

Pharmaceutical Commerce - February 2024 Issue (PDF)

’s inaugural issue of the new year is our 

 that captures a roundtable-type discussion where executives with third-party logistics providers, otherwise known as 3PLs, present their views on the new dynamics and future trends influencing this essential link of the supply chain. Responsible for the movement and distribution of pharmaceutical products, there are several important areas these experts are focused on heading into 2024. One is what Jim Saponaro, president of life sciences, DHL Supply Chain, describes to Editor Nicholas Saraceno as a “need to have more inventory placed in greater proximity to patient populations.” This emphasis, he points out, has resulted in the rising number of multi-client facilities.

The "inventory" Saponaro refers to is the supply of prescription drugs, where sales are estimated to total $1.6 trillion by 2028, according to various forecasts. Speaking of which, in an 

 at current and prospective Rx drug outputs, Saraceno outlines the factors, past and to come, that have and will contribute to the trajectory of this market, including the COVID-19 pandemic.

Rounding out our feature coverage this month is an update on the 

, where Micah Litow of Kalderos and Rob Philo of Philanthros Consulting describe its latest impact on commercial contracts, including how duplicate rebates have caused revenue leakage for manufacturers. Understanding drug pricing—and the associated agreements—is no simple feat, and a reason why Accenture’s Abhishek Sinha, in a 

, suggests that a balancing act is necessary, especially if the goals of profitability and drug access are top of mind.

When it comes to the Medicare Part D part of the equation, the PAN Foundation’s Amy Niles notes that the Inflation Reduction Act (IRA) has helped bring much-needed change, with the introduction of new reform known as the federal Low-Income Subsidy, or “

” program, which has been in effect as of Jan. 1. Essentially, Niles says, this program signifies that “more patients who struggle to afford the healthcare costs related to their Rx drugs will benefit.”

Meanwhile, in his latest “Commercialization Corner” installment, Bill Roth of IntegriChain continues his “

” series, this month providing an analysis of the two main new pharmacy models, along with industry perspectives of each.

There is plenty of content to sift through, so please enjoy. And as always, we look forward to receiving your thoughts on how we can continue to improve your viewing experience.

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

The February issue is centered around third-party logistics providers, including  new dynamics and future trends that affect this key supply chain link.

The Value of 3PLs 

As Mike Hennessy Jr. alludes to in his "Publisher's Note," the February installment of 

 marks our first issue for 2024. As the old adage goes, time does fly when you’re having fun, and there truly is plenty to be excited about as we look ahead through the year.

The publication’s redesign, as many readers know, went live in the December 2023 issue. However, what many may be unaware of is that it was actually built off the back of our new and expanded editorial calendar, which has undergone quite a few updates over last year’s version (see 

These differences can be summarized by one word: organization. The 2024 calendar is powered by three main buckets of coverage: supply chain and logistics, patient services, and trade and channel.

The third item, trade and channel, can be defined as "the flow of money and key financial relationships in the pharmaceutical supply chain," described as such in a Kaiser Family Foundation report (

) that although almost 20 years old, I believe still presents the most accurate and simplest description.

Speaking of this bucket, being that I chose to focus on the recent Access Insights show in this month’s “Conference Connect” (see the next page), I figured that this was as great a time as ever to segue to another conference that the 

 team attended in December, Informa’s Trade & Channel Strategies in Philadelphia. Associate Editor Donald Tracy and I were on hand to cover sessions revolving around:

A Drug Supply Chain Security Act (DSCSA) update

Ways to enable holistic hub and providers services

We even had the opportunity to conduct video interviews with various subject matter experts (SMEs) who were scheduled speakers at the show. They included Cheryl Allen, founding partner, Curatio Scientia; Bill Trombetta, PhD, professor emeritus, healthcare strategy & marketing, St. Joseph’s University; Spencer Miller, director, market access, trade and payer, Bayer; Paul Chen, senior director, trade and channel, Lexicon Pharmaceuticals; and Douglas Bock, partner, Archbow Consulting. Readers can view and listen to these SME insights, along with the rest of our conference coverage at 

Nicholas Saraceno is Pharmaceutical Commerce's Editor. He can be reached at

Pharma Commerce's new style is built off of the back of our new and improved editorial calendar. 

New Year, New Aspirations

It is unbelievable to realize that we are already halfway through Q1 of 2024. It feels like yesterday that the 

 team was in Orlando, Fla., attending the Access Insights Conference, an event dedicated to data-driven trends and strategies in drug access and commercialization that is co-hosted by IntegriChain and Blue Fin Group.

 it’s worth digging deeper. The conference—one in which 

 was the preferred media partner and given exclusive access—covered a multitude of topics, such as:

Biosimilars and specialty generics impact on sites of care

Each session featured its share of spirited discussion, but a topic that has been continuing to gain momentum is that of biosimilars. In his session “How Biosimilars and Generics Will Find Success in the Various Sites of Care,” Bruce Phelan, a partner for IntegriChain’s consulting business, Blue Fin Group, presented a potential outlook on how these drugs will perform in the retail, specialty, and clinic spaces, while also presenting a preview of new biosimilars, specialty generics, and reference products.

Between 2023 and 2028, patent exclusivity for innovator products totaling $250 billion in sales is set to expire; combine that with the fact that biologics are considered the fastest-growing class of medicines in the US, and the door is wide open for exciting developments in the biosimilars space.

Regarding the former, a prime example is AbbVie’s branded form of adalimumab, Humira. The drug is used by many to treat inflammatory conditions such as rheumatoid arthritis and psoriatic arthritis, and had its exclusivity expire last year, which meant that adalimumab biosimilars are free to hit the market, as some already have. During the session, Phelan referenced Celltrion’s Yuflyma, which was approved by the FDA in May 2023 as the ninth adalimumab biosimilar, becoming commercially available two months later. However, as the industry also knows, timing is everything. Humira’s patent technically expired in 2016, but as a result of patent litigation, competing players in the space such as Amgen—whose biosimilar to Humira, Amjevita, was originally approved by the FDA that same year—had to end up waiting until January 2023 to launch.

Amjevita’s US 2023 Q2 and Q3 earnings were $19 million and $23 million, respectively, but on the international scale, sales totaled $131 million and $129 million for those same periods, respectively, providing some food for thought.

For continuing coverage of our “Conference Connect” series, you can always visit 

pharmaceuticalcommerce.com/latest-conference

Pharma Commerce travels to Orlando for a pulse-check on this fast-evolving landscape in patient care.  

Access Insights and Information Abound

As a result of the Inflation Reduction Act (IRA), 2024 brings much needed change to the Medicare Part D benefit—helping to lower out-of-pocket (OOP) costs for prescription medications for many. One important change is the removal of the 5% catastrophic cost-sharing obligation, which went into effect Jan. 1. This means, for the first time, Medicare Part D beneficiaries will no longer have unlimited financial liability for their OOP prescription drug costs through the catastrophic phase. Instead, these beneficiaries now face a cap of about $3,250 in OOP costs for their drugs, which is especially beneficial for those who need access to expensive treatments.

While this change improves affordability for many, the new reform with the biggest potential to help low-income beneficiaries is the expansion of the federal Low-Income Subsidy, or "Extra Help," program. This reform, which also went into effect Jan. 1, means that more patients who struggle to afford the healthcare costs related to their Rx drugs will benefit.

Run by the Social Security Administration (SSA), the Medicare Extra Help program helps those enrolled in Medicare Part D who have very limited income and assets to pay for the monthly premiums, annual deductibles, and copays related to their Rx medications.

Historically, there have been two programs within Extra Help—the full and partial programs, each based on income levels. The change enacted into law through the IRA means that the partial program no longer exists; individuals with income up to 150% of the federal poverty level with limited resources may now be eligible for full benefits under the program.

People who qualify for Extra Help will not pay deductibles; premiums for Part D drug plans; any more than $11.20 in 2024 for each brand-name drug the plan covers ($4.50 for generic medications); and a Part D late enrollment penalty, if applicable.

The benefit to each person in this program can be significant—valued at more than $5,000 per year.

Some individuals, such as dual-eligible (enrolled in Medicare and Medicaid); people receiving supplemental security income (SSI); and individuals qualifying for a Medicare savings program are automatically enrolled in the Extra Help program.

Others must meet strict eligibility requirements. Overall, in order to be eligible for Extra Help one must meet the income and resources limit, and live in one of the 50 states or the District of Columbia. For example, a person may be eligible if their combined savings, investments, and real estate are not worth more than $34,360, if married and living with a spouse, or $17,220 if not currently married or living with a spouse. With regard to assets, the SSA will review one’s checking and savings accounts, real estate beyond one’s primary home, and disbursements from retirement accounts, stocks, and bonds.

Individuals who believe they may be eligible can contact the SSA online at 

A recent national poll conducted by the PAN Foundation found that most US adults have either never heard of the Extra Help program or don’t know what it is. Key findings include:

Overall, 44% of respondents have never heard of Extra Help. Nearly half who have incomes under $50,000 (47%) have also never heard of the program.

25% have heard of Extra Help but don't know what it actually is.

33% don’t know which agency administers the program.

59% are not aware of what income eligibility level it expanded to in 2024.

These findings reinforce that additional education and outreach is needed.

Today, almost one in three Part D enrollees, or more than 13 million people, receive Extra Help. However, it is estimated that at least three million more people may be eligible.

Healthcare providers, financial navigators, case workers, community-based organizations, and patient groups have an obligation to do all we can to elevate awareness about this important resource. 

Amy Niles is chief advocacy and engagement officer at PAN Foundation.

And the need to boost awareness of this critical healthcare resource.

A Look at the Medicare 'Extra Help' Program

In my last column, I described the macro environment and the drivers that are causing retail pharmacy to splinter into new models. This issue’s column will explore the models themselves, the momentum behind them, and how the patient, prescribers, legacy pharmacies, and payers think about them.

Out of the gate, it’s helpful to consider how a traditional retail pharmacy views its business by the units and dollars, as both provide insight as to how pharmacy looks at its own model operationally and financially.

By the dollars, roughly 85% of the revenue volume for a traditional retail pharmacy is branded dollars, while 15% is generics. As reimbursement values are somewhat standard across the retail pharmacy landscape, the relative profit of the business depends upon how the retailer buys its brands and generics.

Most retail pharmacies buy their brands and generics through pharmaceutical full-line wholesalers on a bundled model.

To achieve an aggressive cost-less—4.5% to 6% on brands, these pharmacies pay a 10% to 15% premium for generics. National chains that are members of the purchasing alliances, such as Red Oak, Walgreens Boots Alliance Development (WBAD), and Clarus One buy generics at an advantage of 10% to 15% below what smaller retailers buy but pay a higher cost-less—3.5% to 4% for brands. This exacerbates the frustration from large national chains, as they see a greater loss on brands than their smaller counterparts but have perhaps forgotten or don’t understand how advantageous their generic purchasing can be given the ultimate dollars. With the exception for Medicaid, retail pharmacies are reimbursed under a bundled model as well, with the basic concept of breaking even on brands while being strongly incented to favor generics over brands. So, when a pharmacy indicates they are losing on brands, that’s not entirely true because they’re being compensated in aggregate across the product mix.

By the units, the plot thickens. Ninety-two percent of the units/prescriptions are generics, and 8% are brands. Of the 8% that are brands, roughly 80% of these are driven by the top-50 prescription products. This leaves well over 2,000 branded prescription products accounting for less than 2% of the overall units flowing out of pharmacy. Given that these are slower moving, new, or somewhat novel brands with the relative low volume, the pharmacy is not structured to optimally service these products operationally. As a result, any issues with finding the product, helping the patient with access and affordability, and any patient services required result in too high of a cost to serve to offset the intended break-even on the brands.

This problem is of key concern to branded manufacturers launching ew products. And as mentioned in my 

, if a generic is available in the drug class, it is easier and more profitable for the pharmacy and patient, as it aligns to the pharmacies’ primary workflows and economics.

Enter the two main new models for pharmacy: unique direct, exclusive, limited distribution models for brands, and cash pay for generics.

Brand products that are suited for direct, exclusive, limited distribution models are likely to fall in the 2% of pharmacy units. This is the situation where connecting a prescription to a pharmacy that is capable and willing to properly process and dispense becomes necessary to ensure an optimal patient journey. Similar to how our industry has configured specialty pharmacy, our industry has been developing new options to work in exclusive and limited pharmacy models that work very well with tech-enabled hubs such as Asembia and PhilRx. This was how Biohaven launched Nurtec: it used this contemporary strategy to incubate early sales and then evolve to a more traditional model once demand was more established.

The direct model has been around for decades, but has experienced extremely limited uptake as new models for pharmacy—such as home delivery—hadn’t been fully built out or adopted by consumers. With the growth of the cash pay and lifestyle pharmacies, this is changing. Out of the gate on Jan. 4 of this year, Lilly launched its direct-to-consumer model, Lilly Direct, for its obesity drug, Zepbound. From articles related to the topic, the drivers appear to be three-fold:

The manufacturer feels it is competing with the contemporary models of the cash pharmacies such as Ro that manage the patient to choose the Lilly or Novo Nordisk options and even their own compounded semaglutide.

The patient may struggle with insurance coverage that can be both spotty and bring high out-of-pocket cost sharing.

The traditional retail pharmacies struggle to not lose money on these prescriptions for all the reasons described.

While Lilly’s program is not entirely new—as others such as Pfizer and AstraZeneca have deployed similar options for Lipitor and Nexium, respectively—what is different is that Lilly launched this model for a new and novel blockbuster therapy, and is directly competing with a payer-pharmacy-wholesale channel that struggles to support these types of products. In summary, it’s a great analog for how brands struggle to come to market and the degree to which innovation is being considered to ensure patients have both access to product and the proper support from their pharmacy.

This brings us back to the cash pay market, which has grown from 4% in 2018 to almost 10% by the end of 2023. The momentum has been so profound that CVS Health and Cigna announced and launched their own cash pay models, True Cost and Clear Network, respectively. To date, the products that the cash pharmacies have focused on are generics, but it appears more brands may be on the way. As traditional retail pharmacies struggle with brands economically and operationally, the manufacturer is left with little options to innovate.

Another example of the pursuit of a branded cash pay model in 2023 was for Yusimry by Coherus Pharmaceuticals. As a biosimilar to Humira (adalimumab), the company turned to Mark Cuban’s Cost Plus Drug Company. On the surface, most people we connected with in the industry didn’t understand the move. The product would price at approximately $4,500 annually, which seems high for a patient, but peeling back the onion on the state-of-the-state for high-deductible plans might offer some insight. It appears that Coherus may not have been able to secure product coverage and was forced to the cash market, but then turned and assumed that there are patients on a branded drug in the class that perhaps couldn’t meet their deductible. Thus, this cash option was cheaper than using insurance.

As these are just examples of what is transpiring, 2024 will be a landmark year to watch for sure. With each use of a new pharmacy channel comes another crack in what our industry considers the “traditional retail pharmacy model,” causing the patient to reconsider their pharmacy options.

Bill Roth is the SVP of IntegriChain’s consulting business, which includes Blue Fin Group, a strategy consulting company he started in 2001, and the IntegriChain advisory services business.

An analysis of the two main new models for pharmacy—unique direct—to-consumer for brands and cash pay for generics—and what members of industry think about them.

Who Moved My Prescription? Part II

Evaluate, a consulting and data intelligence provider for the life sciences sector, releases a variety of reports through the course of a year, and 2023 was no different. In fact, in its annual “World Preview 2023: Pharma’s Age of Uncertainty” report,

 the firm cites that prescription drug sales on a global scale are anticipated to grow at a compound annual growth rate (CAGR) of 5.9% from 2022 to 2028, reaching a value of nearly $1.6 trillion (see Figure 1 below).

Interestingly, 2022’s “World Preview” predicted a CAGR of 6.1% from 2021 to 2028, and with the most recent updated figures, they are now coming in at 5.7%, suggesting a fairly consistent forecast. Evaluate notes that the slight change in these valuations—which are based on sell-side analyst estimates that feature forecasts for a combination of R&D and existing products—could be due to the passage of the Inflation Reduction Act (IRA) in the US. The legislation is powered by the Medicare Drug Price Negotiation Program and Medicare Part D prescription drug plan reforms.

These numbers are also expected to be driven by advances in cancer, neurology, and obesity. The top 10 global Rx sales producers by 2028 will include a few newcomers, indicated by an asterisk in the list ahead. According to Evaluate, the top 10 are predicted to bring in more than $160 billion combined: Roche, Merck & Co. AbbVie, Johnson & Johnson, Pfizer, Novartis AstraZeneca, Sanofi, Novo Nordisk*, and Eli Lilly*.

COVID-19-centered shifts have been factored in as well. In 2022, according to Evaluate, sales of SARS-CoV-2-related products exceeded $100 billion, but were sliced by more than half by 2023. Revenue is projected to decline further by 2028, totaling $30 billion.

Since the start of the decade, there is no doubt that the pandemic resulted in a spike in healthcare spending, especially in the US. In fact, an analysis from 

 noted that domestic healthcare spending in 2022 reached $4.5 trillion, representing a 4.1% spike.

 This increase, however, was on par with previous years that led up to the pandemic (the 2016-2019 timeframe, which averaged 4.4% growth in spending), and 0.9% greater than that of 2021. The breakdown also attributed slower healthcare spending growth to the conclusion of the federal government’s COVID relief payments, which logically boosted health spending at the start of the pandemic in March 2020.

Subject matter experts in the space are noting that even with the data they have available, it is difficult to predict the ebbs and flows of healthcare spending, where Rx spending is a component.

 Micah Hartman, a statistician in the Centers for Medicare and Medicaid Services’ Office of the Actuary noted that “[T]rends are expected to be driven more by health-specific factors such as medical-specific price inflation, the utilization and intensity of medical care, and the demographic impacts associated with the continuing enrollment of the baby boomers in Medicare.”

1. World Preview 2023: Pharma’s Age of Uncertainty. Evaluate Ltd. August 15, 2023.

2. Ford C. What’s Next for Biopharma Under the Inflation Reduction Act. 

https://www.pharmaceuticalcommerce.com/view/what-s-next-for-biopharma-under-the-inflation-reduction-act

3. Goldman M. US health spending hit $4.5 trillion last year. 

https://www.axios.com/2023/12/14/health-spending-united-states-2022

A dive into this market reveals that the latest numbers yield promising results—a global value of a worldwide $1.6 trillion—but it will continue to be attributed to past, present, and future healthcare spending. 

The Path for Prescription Drug Sales 

Third-party logistics (3PL) providers are often called upon by pharmaceutical manufacturers to help address the challenges surrounding the movement and distribution of medicines; their importance in helping to simplify the pharma supply chain does not go unnoticed. 

 set out to examine the most relevant trends affecting pharma 3PLs heading into 2024, and explores their impact for the future, specifically over the course of the next decade.

To that end, in separate conversations, we spoke with a selection of key opinion leaders representing various 3PLs that work with biopharma manufacturers.

, President, Life Sciences, DHL Supply Chain

, President, Channel Management, EVERSANA

This following roundtable-style discussion has been edited for length and clarity.

 Could you provide a general overview of how the 3PL process works?

 In the complex world of pharmaceuticals and healthcare, manufacturers often turn to logistics partners to streamline their supply chain. A strong 3PL partner offers best-in-class service in distribution, managed transportation, and value-added services. A manufacturer leverages the infrastructure, knowledge, and capital of the 3PL so that the manufacturer can focus on its own core competency of discovering drugs, designing medical devices, and developing new consumer health products for the global population.

3PL has been part of the pharmaceutical industry for decades. Since its inception, the pharmaceutical 3PL space has evolved with technology, integration points, and services to meet the growing requirements for products supported and the changing landscape of distribution channels available to manufacturers.

At the most basic level, a pharmaceutical 3PL provider works on behalf of a manufacturer to manage the storage (warehousing), order processing, distribution, and logistics (transportation) of pharmaceutical products. They can perform a myriad of services, including order to cash and revenue management services, quality management services, and both export and import activities to support every stage of the product movement. Often, 3PL providers will manage the product logistics post-manufacturing, from the dock of the manufacturing site to when it arrives in a port, to a truck to the distribution center, and then ultimately to a hospital, clinic, pharmacy, and wholesaler or distributor. Simply stated, the goal of the 3PL is to make the complexities of moving, storing, and distributing the product and shipping to the final mile seamless for the manufacturer, with the ultimate goal of ensuring the patient receives his or her needed medication.

 What factors should manufacturers consider when selecting a 3PL, and what array of services should a quality 3PL provide?

 It’s important to choose a 3PL that provides all the necessary services to support the specific distribution model of the manufacturer. This is accomplished by aligning and often exceeding compliance with regulatory authorities, operational automation, in-depth reporting technology, scalability, and a personal consultative approach for the manufacturer partner. The 3PL should be a true partner with diverse experience that can assist the manufacturer in achieving their goals. This begins with an implementation and client management team with industry experience that not only understands their client’s business, but one that can provide value through recommendations that enhance their client’s business. There are seven critical competencies to consider when evaluating a 3PL:

 Be assured that your 3PL is highly focused on accuracy and efficiency in order-to-cash and distribution operations. Utilizing state-of-the-art systems, exceptional training, and rigorous quality standards, a competent 3PL will perform at a high level from implementation through the life cycle of the manufacturer’s program.

When working with your 3PL, you should expect uninhibited access to your 3PL client management and the 3PL leadership team. Never should you ever feel like your program is secondary to another manufacturer’s program. Conversely, you should expect your 3PL to treat you as a priority and have a committed team that responds immediately, even when information or solutions to an issue are still in the works.

 Your 3PL must have the capacity, technology, and support team to adapt to your growing business needs. When you conduct site visits, look for open space in the facility. If none is visible, ask to see it. If there is no open space, there is a chance that the capacity to manage your business as it grows will be limited.

You should expect your data to be accurate and available in real time. Additionally, your reporting should be customized for your specific business. Your business differs from others, and your reporting should reflect what matters to you. Finally, your data should be easy to use and sharable on any device.

 Your 3PL must be adaptable, flexible, and willing to provide solutions that can be built to your specific needs without compromising rigorous adherence to regulatory requirements.

Your 3PL should have a long-term and consistent, positive track record with regulatory and governing bodies and should continuously monitor and update processes and procedures based on new laws, regulations, and requirements.

Drug Supply Chain Security Act (DSCSA) serialization and UDI rule readiness:

 The FDA requires identification and tracking of prescription drug products and medical devices from the point of manufacture through the healthcare supply chain. Your 3PL should demonstrate compliance with both the DSCSA and unique device identification system (UDI Rule) requirements (specific to your program). It must also be equipped to manage the possible exceptions and procedures to resolve them.

When manufacturers consider selecting a 3PL, two main factors come to mind. First is quality. It is important to carefully assess the quality systems and processes of a 3PL, and to ensure they are committed to quality and cGMP (current good manufacturing practice) compliance. The second factor is relationship and cultural alignment. Manufacturers spend a significant amount of time with their 3PL partner; therefore, building and maintaining a strong relationship with a partner that has a similar outlook on corporate culture and goals is essential to successful outcomes.

In addition, 3PLs should have a flexible consultative approach that allows them to consistently execute at a high level, deliver results, and foster trust. A good 3PL partner should provide its customers with industry-leading technology and services that cultivates the pharma company’s channel strategy. Services such as qualified cold chain storage and packaging, repackaging/relabeling, serialization, customer care, and the ability to obtain and/or maintain state board-of-pharmacy licenses on behalf of the pharmaceutical company are just a few examples of services offered by 3PL companies that add value to their customers.

 What valuable lessons did you learn during the COVID-19 pandemic that have helped improve efficiencies?

COVID-19 was hard for everyone in the industry, but from our 3PL perspective, the pandemic reinforced just how important the work we do is. Never before had there been so much responsibility for companies to distribute therapies or test kits for the public good, and we were proud to play a role during the pandemic.

COVID required us to reimagine some of our technology and look to make our processes even more efficient. COVID learnings identified that end-to-end supply chain review with proactive assessment of the stability of the supply chain is paramount to the ongoing success of manufacturers and continuity of products to customers and patients.

The pandemic highlighted challenges in just-in-time healthcare logistics. Global chains choked, revealing nearshoring and diversified sourcing as the best options going forward. The use of technology made a massive leap with many solutions for warehouse automation, such as automated guided vehicles (AGVs) and autonomous mobile robots (AMRs) coming online as a solution for the newly created labor challenges. Sustainability also became a vital thread, rewriting packaging, transport, and warehousing with an eye on resilience. We learned the hard way, but the future of healthcare logistics is more responsive, more agile, and better prepared to serve the needs of patients, regardless of future challenges.

 I learned several valuable lessons during the COVID-19 pandemic that remain with me and continue to improve efficiencies. One key lesson was the realization that extensive travel isn’t always necessary. While face-to-face meetings hold significant value, the pandemic highlighted the effectiveness of teleconferencing tools, leading to a more balanced approach to in-person meetings. Another lesson involved the importance of risk mitigation plans. The pandemic highlighted the need to have comprehensive strategies in place to ensure adequate staffing across all business functions. It also emphasized the critical role of a well-managed supply chain and the need to secure essential materials, such as packaging materials, in order to maintain seamless operations.

A detailed disaster recovery plan where the 3PL addresses plans of action for weather-related emergencies, social or political unrest, pandemics, and a host of other threats should be in place and readily viewable by the manufacturer partner. While many non-distribution personnel shifted to some type of remote work during the height of the pandemic, the most efficient work in 3PL distribution and order-to-cash operations happens when people are together, on-site. The training, work quality, and collaboration ability are better and more efficient.

When evaluating a 3PL, ask if the customer operations and client management team can physically interact and discuss business operations in person with the distribution operations and quality teams. This cuts down on email traffic, missed priorities, and mistaken tone or urgency for certain items, leading to better overall quality and responsiveness for the manufacturer client.

 With 2024 underway, which trends affecting the pharma industry will 3PLs be on the lookout for?

We believe that many pharmaceutical companies are turning to nearshoring for more throughput, but this has introduced a new challenge for manufacturers and contract manufacturing organizations who now need even more warehousing to create drugs and store finished product. As Rx moves to more discoveries to treat specialized population sets, we have seen the need to have more inventory placed in greater proximity to patient populations. This has driven a unique growth in multi-client facilities.

Retail drug chains are experiencing a significant decrease in on-site consumer/patient patronage, which consequently negatively affects the wholesale supplier. In response to the decrease in store traffic, many retail pharmacies are moving away from branded drugs and are transitioning from insurance to cash-pay models. As a result, the pharmaceutical industry will continue to see an increase in direct from-manufacturer-to-patient and direct-from-manufacturer-to-point-of-care service models. 3PLs with the ability to handle this transition will be well-prepared for the future state of branded drugs. Finally, across the industry, from medical devices to prescription drugs, serialization and product tracing will continue to make healthcare safer for patients. Competent 3PLs have systems in place to handle the tracing of both drug and medical device products.

Consolidation of vendors by the pharmaceutical industry is a trend we see playing out in 2024, with companies reducing the number of vendors for various aspects of the commercialization process and instead, turning to fewer partners who can do more. Aside from consolidation, supply chain disruptions [i.e., climate change impacting the lock’s water shortage in the Panama Canal and geopolitical conflicts impacting trade routes like the Suez Canal] will continue in 2024 and beyond. We are poised to assist and partner in mitigating these end-to-end disruptions through multiple service offerings and with deep partnerships that are focused exclusively on the pharmaceutical industry.

This industry is rapidly changing. High distribution service fees are forcing manufacturers, especially small manufacturers with "specialty lite" price points ($8,000-$20,000), to look at direct distribution models. A focus on drug pricing will keep manufacturers focused on cost. 3PLs that can offer a comprehensive set of services at competitive price points will help manufacturers win. Cell and gene technology and personalized medicine are areas that 3PLs will look to play a more extensive role, as they involve very complex cold chain requirements and innovative pricing mechanisms.

: How much of an impact do you anticipate 3PLs having over the course of the next decade?

 The focus of the healthcare supply chain is to get therapies to patients who need them and conduct business in a way that is compliant and ethical while showing fiduciary responsibility that increases gross-to-net margins for the companies and investors who support them. 3PLs are an essential piece of this puzzle and provide cost-effective, compliant, efficient, and safe avenues to get products to the patients who need them. Over the next 10 years, manufacturers will continue to see that value and will continue to trust the right 3PLs for their specific program requirements.

The need for 3PLs will only strengthen over the next decade as supply chains become even more complex across extended geographies and channels. Additionally, innovation and generative AI will accelerate the digitalization campaign at warp speed that manufacturers simply cannot keep pace with but 3PLs are better suited to invest in. Those manufacturers that partner with a world-class supply chain partner will find themselves with unlocked capital, freedom to scale and flex as needed in a very dynamic marketplace, and ultimately gain a competitive advantage over their peers due to the elasticity and resiliency they have built with their 3PL partner for life.

The need for 3PLs will continue to evolve as the needs of the pharmaceutical industry grow. I expect the continued push for higher levels of performance, effectiveness, and efficiency in the supply chain will be aided by the accelerating use of AI and autonomous mobile robots. It’s important to note that the number of products being developed and in need of a 3PL provider is not slowing, and providers that can deliver the highest levels of quality, understand manufacturer needs, and have a proven track record of delivering will be in a great position for future growth.

3PLs will have a significant impact on the pharma manufacturers and the overall channel in the years ahead. Manufacturers will continue to use 3PLs—especially emerging manufacturers due to the benefits and expertise that 3PLs bring to the table. As the industry continues to evolve, 3PLs service providers will player an even deeper role within the supply chain, adding services and support manufacturers need to succeed.

Leading experts in the sector explore the value of third-party logistics providers when it comes to fortifying pharmaceutical supply chains. 

Peeking Behind the Curtain: The Current State of Pharma 3PLs and Future Outlook

In the pharmaceutical sector, pricing models are complex, involving multiple stakeholders, such as healthcare providers (HCPs), insurers, and government agencies. In addition, some may feel that contracts in this space are difficult to understand because they address multiple issues such as variable pricing structures, volume discounts, and rebate agreements. To add even more factors, there are research and development (R&D) costs, production expenses, regulatory requirements, and market competition to consider. In the end, both pricing and contracts require a balancing act to navigate between profitability and providing access to essential medications.

In order to understand the complexities of pharma pricing, it is important to be aware of the key stakeholders involved, along with the roles they play:

Responsible for setting the drug’s list price when it is introduced into the marketplace.


Transport drugs from manufacturers to pharmacies, ensuring a steady supply.


 Serve as the intermediary between pharmacies, plan sponsors,manufacturers, and drug wholesalers, working to reduce drug costs for their clients by securing rebates.


 Create and implement regulations that impact drug pricing and reimbursement payouts.


 Responsible for dispensation of drugs to retail customers.


In 2022, the Rand Corporation reported that US residents sometimes pay double, triple, or more for prescription drugs than 32 other countries.

 Drug pricing changes dramatically as the product moves through the supply chain. To further complicate the issue, some figures aren’t prices at all, but rather calculated values that are submitted to various government entities; these represent a weighted average of pricing a manufacturer receives for the drug. Drug manufacturers can apply a number of different pricing mechanisms based on their corporate objectives, the competition, and the marketplace. Some of the common strategies include:

Based on what the market perceives the value of a drug to be and is typically the best strategy for pharmaceuticals.


Determined by manufacturing, R&D, regulatory processing, overhead, and profit figures.


Driven by what competitors offer and how much discount a pharma manufacturer can afford to provide.


Based on benchmarking a drug with a similar product in the market.


 By offering prices lower than the competition, manufacturers gain market share and/or ensure a drug reaches a larger population more quickly.


 Manufacturers charge a high amount for an in-demand drug but then lower it over time.


 Initial prices are based on current trends and whether the drug or vaccine has a seasonal impact. Prices are adjusted to ensure that the manufacturer and stakeholders remain profitable.


 Prices are based on the purchase price between cross-company entities and then resold to third parties. The drugs are then marked up or down accordingly to account for the cost of purchase of the product, in order to arrive at a transfer price between those cross-company entities.

In addition to the numerous stakeholders involved and their influences on pricing, there are some key factors that impact the price setting of pharmaceutical drugs, including:

The rigorous process of research, clinical trials, and regulatory approvals are incredibly time-consuming and costly.


If a drug enjoys market monopoly due to a patent, the manufacturers can set a high price due to its exclusivity. On the other hand, generic drugs, which do not have patents, can help lower prices.


Insurance coverage or the lack thereof, along with negotiated discounts from drug manufacturers, impacts drug prices and ultimately out-of-pocket expenses for patients.


The work required to satisfy the regulatory requirements of US government agencies, including the FDA, ensures the quality and safety of drugs but also impacts the costs involved.


This process is called “international price referencing,” in which the cost of drugs in the US is compared to that in other countries. To offset the disparity of lower costs in non-US markets, some drug companies may raise prices stateside.

The future of drug access and affordability

These complicated pricing models are directly linked to a number of disruptors, forcing manufacturers to rethink healthcare technology. According to a report by PwC, pharma companies embracing the future are investing $1 billion or more to enhance their digital capabilities.

 Increased adoption of emerging technologies such as edge computing, artificial intelligence (AI), and machine learning (ML) are game changers for the industry. Edge computing improves end-to-end data analysis across the entire pharmaceutical supply chain, helping to reduce waste, improve accuracy, and enhance operational efficiency, thereby passing the cost benefit on to the patient. AI and ML technologies enable faster, more accurate, and more accessible drug discovery, development, clinical trials, and marketing processes.

When it comes to R&D, quantum computing tools can run multiple permutations and combinations of algorithms rather than having to reproduce models in a lab.

 This shortens the R&D phase of drug manufacturing, bringing pharmaceuticals to market faster and potentially reducing prices.

The digitization of healthcare technologies is impacting the life sciences industry across all levels of business operations, allowing manufacturers to leverage high volumes of data to support end-to-end business objectives from R&D to patient engagement. By accessing and analyzing data points at each stage of the process, organizations achieve full visibility of the drug throughout the entire supply chain. Additional benefits include improved decision-making capabilities, enhanced efficiency, greater flexibility, and increased product quality and control.

These advantages allow the industry to progress beyond a traditional cost-plus pricing model to an innovative and dynamic pricing model based on a drug’s performance in the marketplace. This patient-centric—rather than one-size-fits-all—approach balances the needs of the patient with the goals of the industry.

It’s crucial for the US to find a way to achieve sustainable pricing models and simplify contracts. For sustainable pricing models to become a reality, the industry will need to embrace innovative payer-provider collaboration, adopt a positive approach to market competitiveness, focus on patient-centric outcomes, and further evolve the role of the pharmacist from the dispenser to an HCP. By leveraging end-to-end data visibility throughout the entire pharmaceutical supply chain, the industry can undertake a tangential shift to a patient-based approach that will ultimately benefit all stakeholders in the healthcare ecosystem. 

1. Mulcahy, A.; Whaley, C.; Gizaw, M.; Schwam, D.; Edenfield, N.; Becerra-Ornelas, A.U. International Prescription Drug Price Comparisons: Current Empirical Estimates and Comparisons with Previous Studies. RAND Corporation. 2021. 

https://www.rand.org/pubs/research_reports/RR2956.html

2. Next in Health Services 2024: Healthcare’s Big Squeeze and the Way Out. PwC. 2024. 

https://www.pwc.com/us/en/industries/health-industries/library/healthcare-trends.html

3. Bhardwaj, R. How Can Quantum Computing Technology Help In Pharmaceutical R&D? Roots Analysis. September 5, 2023. 

https://www.rootsanalysis.com/blog/quantum-computing-technology-in-pharma-research/

Abhishek Sinha is a business and integration architecture manager at Accenture.

In order to provide both profitability and medication access, a balancing act is required.

A Pharma Pricing and Agreements Primer in Today's Complex Landscape

The 340B drug pricing program has been a source of increasing revenue loss for manufacturers in recent years. As the program has grown, so too has the problem of duplicate rebates, which cause revenue leakage for manufacturers. This has inevitably resulted in higher prices for consumers, essentially undermining the initial purpose of the program. Some might even say that the 340B program today bears little resemblance to what Congress envisioned three decades ago.

Unfortunately, the Inflation Reduction Act (IRA)

 may create additional opportunities for duplicate discounts. While the legislation calling for Part B and Part D inflation rebates is designed to protect manufacturers from paying discounts already paid to 340B participants, the exclusion for 340B discounts in Part D cases won’t go into effect for several years.

In addition, the maximum fair price section of the IRA, which covers the price negotiated between manufacturers and the US Department of Health & Human Services, lacks duplicate discount protection, raising the risk of duplicate discounts at maximum fair prices.

The 340B drug pricing program was designed to solve a problem with how the Medicaid Drug Rebate Program (MDRP) was launched. Congress launched

 the MDRP in 1990, mandating that if a manufacturer wants a state Medicaid agency to pay for the drug, the manufacturer must agree to provide that state with a Medicaid rebate.

In the calculation of that rebate, there is what’s called the “best price provision” for branded drugs. If the manufacturer had a single sale at a very low price to an entity not excluded from the calculation of best price, that single transaction could set the best price. And the bigger the difference between the average manufacturer price and the best price, the bigger the rebate.

Prior to 1990, many manufacturers were voluntarily offering safety-net providers lower pricing. But in 1992, Congress created

 the 340B program, which made these rebates mandatory. Under the program, if a manufacturer wants to participate in Medicaid, it must offer these discounts to safety-net providers. During the first several years after 1992, the program was pretty small because not all the providers knew about it or understood how it would benefit them.

Over time, however, more and more entities learned how to use the 340B program and how they could benefit financially by buying a drug at a very low price and selling it at customary prices. In 2010, the program took off when the Health Resources and Services Administration (HRSA) allowed

 an unlimited number of contract pharmacies to participate. This led entities, such as chain pharmacies, to realize they also could financially benefit from 340B.

Pharmacy benefit managers (PBMs) often offer manufacturers contracts without 340B exclusion language, which forces manufacturers to either lobby for duplicate protection during negotiations or accept contracts that set precedents, which put manufacturers at a disadvantage in
future negotiations.

It’s also difficult for manufacturers to negotiate with PBMs due to lack of data. PBMs want to use data from the National Council for Prescription Drug Programs to determine 340B duplicate discount exclusions, but the data set is incomplete and could result in unnecessary revenue leakage.

To address the growing gross to net (GTN) gap caused by duplicate rebates, leading drug manufacturers now are adding contract language into their agreements with PBMs to limit commercial rebates on 340B dispenses.

A major challenge in managing drug discount programs is that payers and manufacturers don’t always know a drug’s 340B price; only providers know this information. Providers also realize that if payers had a better understanding on a transaction-by-transaction basis of a covered entity’s 340B utilization, then payers would reduce reimbursements.

Another challenge in preventing a duplicate discount is that commercial rebates are based upon a claim for reimbursement, while 340B is largely managed as a chargeback, which does not have the same identifiers that a claim does. Consequently, there is no ability to link up on a one-to-one basis with a claim a manufacturer might see from a PBM.

Manufacturers want to gain greater transparency by receiving claims data from covered entities. Transparency is a sensible goal, but when some stakeholders fear that transparency will lead to financial harm, it could be difficult to attain.


Duplicate rebates have resulted in revenue leakage for manufacturers.

Pharmaceutical Commerce - February 2024