The Shift to Specialty Drugs and its Commercial Implications

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With the continued focus on value and outcomes in today’s new pharmaceutical world, many companies are changing their R&D strategy away from mass-produced, PCP drugs towards specialty drugs that treat chronic, serious or life-threatening conditions (such as cancer, HIV, Multiple Sclerosis or Hepatitis C.) Why is that? By combing through traditional and new sources of data (e.g. EHR, lab tests), Pharma companies are seeking to find underserved niches of the population where they can make an impact – and charge a premium price for these new, innovative products.

In 2013, retail, mail and specialty pharmacies dispensed approximately $63B in specialty drugs, representing a total of 22% of industry revenues. In the future, these drugs will be the biggest drivers of branded drug spend growth; spending is expected to increase 30% over the next five years. By 2018, specialty drugs are anticipated to be nearly half of the top 100 selling medications on the market. So clearly, these types of drugs are on the rise.

Once commercialized, one factor to consider is how to actually market these types of drugs. Of course, companies have specialty sales forces; however, finding the actual patient pools can be a challenge. Again, with the newer data sets (EMR, lab tests, mobile, social media) becoming available coupled with the more traditional Rx-based data that can be used as proxies for patients, sales analytics and marketing groups must think in new and creative ways to reach both these patients and doctors. As one example, some companies are building websites and mobile apps around specific disease states to support positive outcomes – of which their specialty drug is just one part of a greater holistic solution. Patients can participate in user groups, find answers to questions, get wellness recommendations and even participate in fun challenges that lead towards a healthier lifestyle, such as more frequent exercising. Besides HIPAA concerns, companies that develop these tools must also be prepared to address adverse event reporting management.

Another factor that drug companies must take into consideration is the actual distribution of the drug. Specialty Pharmacies (SPs) provide the means to support the patient well beyond a traditional retail pharmacy. They typically provide expertise in disease counseling, drug use, refill reminders, and reimbursement issues – all of which support the best treatment outcomes. In fact, with the rise of FDA mandated REMS (Risk Evaluation and Management Strategy) programs that may be applied to specialty drugs, ensuring that patients get the proper testing and follow the correct drug use protocols are all the more important and it is a function that SPs are well equipped to handle.

Finally, as in all cases in today’s new values based model, cost may be an issue. Despite the fact that the drug may be addressing an unmet need, many of these treatments can cost thousands of dollars a month. Payers are beginning to push back – waiting for a second drug to enter the playing field, negotiating for a lower contract price, or placing it in a higher copay/coinsurance tier. According to the Kaiser Family Foundation, the percentage of employer-sponsored plans using specialty tiers increased from 14% in 2012 to 23% in 2013.

Pharmaceutical companies can attempt to mitigate these cost controls by providing discount programs (like copay cards/coupons and patient assistance programs). That said – this isn’t something that payers and PBMs support, as it appears to be a workaround to incent use. So, the jury is still out on how Pharma drug pricing and patient access will meet payer price control and utilization expectations; it’s a very hot topic right now.

It’s clear that with many drugs reaching their patent cliff and the rise of generics, Pharma companies want to continue to innovate and grow. Specialty drugs may be the answer and where the investment dollars appear to be flowing. From a patient perspective with an unmet need, this is wonderful news. Getting all the key players – Pharma, payers, PBMs and the government – to agree on how to pay for these new products remains the outstanding question.

Download this case study to find out how Bayer successfully launched specialty drugs to the market.