Specialty Pharmacy: The Short & Long View
The specialty pharmacy (“SP”) channel continues to grow with a large number of new products coming to market, but several market trends could have a significant impact on SPs and other related stakeholders. The Brooks Group has developed a summary of the impact of several of these changes on the specialty pharmacy channel below.
PBMs and Eliminating DIR fees
In mid-February, the “Improving Transparency and Accuracy in Medicare Part D Drug Spending Act,” (HR 1038), a bipartisan bill, was reintroduced after being tabled last year. The bill seeks to end direct and indirect remuneration (DIR) fees that are retroactively charged by pharmacy benefit managers (PBMs) to specialty pharmacies. Critics of DIR fees include the National Association of Specialty Pharmacy (NASP), who say DIR fees harm independent pharmacies, especially specialty pharmacies. In short, they argue that PBMs use DIR fees to retroactively charge unreasonable fees to specialty pharmacies based on metrics unrelated to the specialty line of business. The measures that impact these fees include statin adherence, for instance, a measure for cholesterol management that specialty pharmacies may not manage.
Meanwhile the Pharmaceutical Care Management Association (PCMA), on behalf of PBMs and backed with data from CMS research, say eliminating the fees would actually raise Medicare Part D premiums. The interpretation of that data is up for grabs, however, with NCPA arguing that DIR fees “push elderly beneficiaries into the Part D donut hole quicker,” which leads to the federal government covering their costs sooner.
We can expect more arguments before Congress, and possibly some changes to how DIR fees are calculated as early as this year.
Transparency is a Hot Special
Part of the criticism around DIR fees is in very name of HR 1038: transparency. The NCPA has been vocal about PBM price transparency as part of the problem of high specialty spend. When pharmacies do not know what the middleman (the PBM) is paying to drug manufacturers, they claim, it contributes not just to higher drug costs for patients but it also affects the viability of community pharmacies.
“These drug middlemen do not disclose their methodologies for determining reimbursements in pharmacy contracts, leaving small business health care providers working blind when it comes to proper planning and business management,” said NCPA president DeAnn Mullins in an op-ed published in Modern Medicine Network in late January.
As PBMs face heat in the specialty drug cost debate, one direction many hope this will lead us is toward a more value-based pricing world.
As discussed in our recent post on managed market trends, value-based contracting continues to be an area of interest for healthcare stakeholders. While payers led by CMS continue to experiment with different outcomes and quality-based contracts with providers, manufacturers such as Novartis are also exploring contracts to form true partnerships around care and medication management therapy, for instance, with skin in the game when therapies fail. The push for value-based contracting is also a push for evidence-based medicine, and for data sharing between manufacturers and payers, something that specialty pharmacies could be well suited to implement.
The Long View — Biosimilar Pressure
Since Novartis launched Zarxio, the first biosimilar on the US market, the specialty biologic market has been poised to absorb some shock from the burgeoning market. However, thus far the impact has been mild.
This is likely to change substantially as $67 billion of the biologics market faces the end of their patent exclusivity by 2020. To aid the adoption of biosimilars, the Supreme Court will clarify issues surrounding patent exclusivity that could shorten the notorious “patent dance” between reference product biologic manufacturers and biosimilar manufacturers trying to get to market. Regardless of which way the pendulum swings, this could make the business of biologic and biosimilar manufacturers more predictable and therefore more stable.
Additionally, the FDA’s recently published definitions of interchangeability could bring down the hurdle of provider adoption of biosimilars.
Specialty continues to be an area of high interest for all healthcare stakeholders and that is unlikely to change in the near future. However, we expect some upheaval in market shares between biologic and biosimilar products over the next few years. Manufacturers are continuing to adapt their contracting strategies to account for the impact of biosimilars and soften the expected impact on their market share. Meanwhile as public and political scrutiny of drug pricing continues, specialty manufacturers will be more likely to engage in alternative, value-based contracts to signal to their shareholders and to the public their confidence in their products.