Distributing Specialty Pharmaceuticals: 2010 HDMA Facts, Figures, Trends

The specialty pharmaceutical business is arguably the most dynamic part of pharma today; the same impact is being felt in specialty distribution. According to data cited in the second annual survey/report from the Center for Healthcare Supply Chain Research, the research arm of HDMA (Arlington, VA), the market grew by 7.5% in 2009, reaching $144 billion worldwide ($64 billion in the US). A sampling of the data in this report follows.

The Center uses this definition of specialty pharmaceutical comprising four or more of these characteristics:

• Are typically have high cost (>$600 per month)

• Have complex treatment regimes

• Require special handling, storage and delivery

• Generally biologically derived products

• Dispensed for chronic or rare diseases

• Frequently have limited or exclusive distribution

• Used to treat therapeutic categories such as oncology, autoimmune, inflammatory, etc.

The difference between a traditional distributor and a specialty one is that the latter typically includes direct distribution to physician practices and clinics, while the former handles retail pharmacies and hospitals. The main client base for specialty distribution was 67% physician-owned/operated clinics, 12% hospital-owned/operated clinics, and 10% specialty pharmacies. Contract pricing was set by hospital or specialty GPOs 78% of the time in 2009; 14% by managed care; and 8% “other.”

Storage and delivery

Specialty distributors have 57% of their storage in ambient; the largest other category is refrigerated (41%), with some portion in freezers, and a few percentage points in cages or vaults. The average inventory kept on hand was 16 days in 2009—roughly half that of conventional products, and perhaps reflecting both the specialized storage conditions the products require, and the higher cost of purchasing them.

In transit, cold chain products are seeing a shift in product packaging: insulated boxes dropped from 100% to 75% between 2008 and 2009, while refrigerated boxes rose from 25% to 38%. Equally significantly, the percentage of shipments with temperature monitoring devices rose from 38% to 50%--reflecting the heightened industry and regulatory concern over maintaining safe shipping conditions (Pharmaceutical Commerce, April, p. 1).

Carrier choices

Manufacturers use traditional distributors (89% of the time), specialty distributors (89%), specialty pharmacies (67%) 3PLs (33%) and direct sales (11%) to get their products to market. Whether in moving product from the manufacturer DC to a distributor, or for specialty distributors moving product to their customers, the most frequently cited choice was FedEx Air. Table 1 shows mentions by both manufactures and distributors (it’s worth noting that nearly all of these parameters pertain to domestic delivery). Both company operated vehicles, and the US Postal Service, are declining as carrier choices.

The 2010 Specialty Pharmaceuticals: Facts, Figures and Trends report was sponsored by Ortho-McNeil Janssen, SenseAware (FedEx) and SpecialtyFirst, and is available for purchase at www.shophdma.org.