Specialty pharmacy: A new class of trade?

November 6, 2006

Recent years have seen dramatic growth in the specialty pharmacy market, a segment of the industry addressing the needs of patients with chronic illnesses such as cancer and HIV. Sales of specialty medications-though expensive, often injectable, and typically requiring more patient education-have trended upward at more than 25% annually for the past five years. Industry experts forecast annual increases of more than 30% through the rest of this decade, according to Armada Health Care, a specialty pharmacy group purchasing organization in Short Hills, N.J.

Recent years have seen dramatic growth in the specialty pharmacy market, a segment of the industry addressing the needs of patients with chronic illnesses such as cancer and HIV. Sales of specialty medications-though expensive, often injectable, and typically requiring more patient education-have trended upward at more than 25% annually for the past five years. Industry experts forecast annual increases of more than 30% through the rest of this decade, according to Armada Health Care, a specialty pharmacy group purchasing organization in Short Hills, N.J.

Are manufacturers ready to acknowledge this growing trend and all of its accompanying changes? And, like the chains, clinics, and mail-order pharmacies before them, are they ready to view specialty pharmacies as a new class of trade and grant them discounts as a result?

Specialty pharmacy can be arduous territory for manufacturers. Research and development of specialty medications are costly for manufacturers, and the end-products serve only a small portion of the patient population. Specialty medications are estimated to cost $10,000 to $250,000 per patient per year. Because this specialty niche is meeting increasing market demands, drug manufacturers are very much embracing specialty pharmacy, claims Larry Irene, R.Ph., CEO of Armada.

Specialty pharmacies are poised for explosive growth. "Most of the leading drug manufacturers today are beginning to employ specialty pharmacy representatives or create such departments within their infrastructures," said Irene. "Clearly, specialty pharmacy is gaining exposure."

Controlling costs

One reason for the increased exposure may be that specialty pharmacies are managing the high costs of these meds with techniques such as pharmacy network management strategies. Coupled with mounting pressure on health insurers to keep costs down, specialty pharmacies are gaining wider acceptance among manufacturers, patients, and providers.

What must continue to occur in this market is more structure and organization, which, Irene claims, his company is helping to bring about. "Bringing structure to the current disorganization within this industry is how manufacturers will develop strategies for a specific trade class," he explained. "Naturally, manufacturers will follow a strategic plan laid out for them. Traditionally, consider hospitals, home health care, long-term care, and all the other trade classes associated with managed care; the contracting has always followed."

Bonelli is already seeing a willingness on the part of manufacturers to grant discounted contracts in recognition of specialty pharmacy's unique services-not merely market share gains but also enhanced patient compliance and persistence, patient education, and physician interaction. "Large, established pharma companies, as well as emerging biotech firms, have already executed contractual agreements [with specialty pharmacies]," contributing to enhanced efficacy, improved clinical outcomes and economic efficiencies, and reduced adverse reactions.

Educating the masses

One strategy Armada is pursuing is education. Manufacturers need "a clear understanding of what they are getting into," said Irene. Without that, he added, the contracting process could become frustrating and create some pushback. Once the market is clearly defined and manufacturers determine they are going to be in that market, strategies will evolve and incentives will follow.

Last month in Atlanta, Armada sponsored its second annual Specialty Pharmacy Summit, bringing together more than 100 of the nation's specialty pharmacies, manufacturers, and wholesalers. Through such educational venues, Irene hopes to build a strong networking community within the specialty pharmacy segment. "By forging stronger lines of communication and establishing defined guidelines, these stakeholders will help steer the future of specialty pharmacy as it continues to evolve."

THE AUTHOR is a writer based in Atlanta.