Asembia Featured Session Highlights Factors That Will Influence the Future of Specialty Pharmacy

Caught in the middle of a maelstrom of change currently engulfing the health care industry, specialty pharmacy is emerging as a powerful force that will play a key role in the growing conversations regarding value in health care.

During the featured session at Asembia’s Specialty Pharmacy Summit 2018, “Specialty Industry Outlook: What’s Happened and What’s Ahead,” speakers Adam Fein, PhD, CEO of the Drug Channels Institute; Lisa Gill, managing director of J.P. Morgan Securities; and Doug Long, vice president of industry relations at IQVIA, delved into a number of developments and trends that will shape the future of specialty pharmacy and, concurrently, the health care industry as a whole.

“Pharmacy is becoming specialty pharmacy,” Fein said. “Judging by the size of this event, specialty is the pharmacy industry.”

Fein pointed to the current boom in specialty pharmacy accreditation as an example of the significant growth of the industry.

“Everybody wants to be a specialty pharmacy, and they want to prove that they are a specialty pharmacy. You can prove that by being an accredited specialty pharmacy,” he said.

In 2015, there were 381 locations with specialty accreditation by organization, Fein noted, which jumped to 781 in 2017. He predicted that by next year’s summit, the number of locations with specialty accreditation would near or exceed 1000. “Not only is specialty the future of the pharmacy industry; it’s also where pharmacies are going,” he said.

In terms of specialty drug dispensing revenue, Fein said that 6 of the top 15 specialty pharmacies are affiliated with the largest pharmacy benefit managers (PBMs) or are insurers with PBM capabilities.

“The world of oncology care is shifting from infused products to oral, patient-administered products. That is perfect for specialty pharmacy,” he noted. “Today, 6 out of 10 oncology practices own their own dispensing pharmacy. Physicians have gotten into the business of being pharmacies, which also means, by the way, that physicians have gotten into the business of complaining about PBMs.” An emerging area of concern that Fein discussed was co-pay accumulator adjustments, in which manufacturer patient support payments are not counted toward the patient’s deductible and maximum out-of-pocket obligations.

“This is a new benefit design change that specifically targets patients taking specialty pharmaceuticals,” he said.

Although total spending on medicine in the United States was $453 billion last year, growth was just 1.4% in 2017, according to the IQVIA Institute. However, Long said that specialty spending growth is outpacing traditional growth and is currently 43.4% of the total nondiscounted spend. Last year, specialty spend grew 9.3%, while traditional spend dropped 4.0%.

Fein noted that more than two-thirds of the growth in specialty spending is occurring because of usage, not unit cost. “Trying to control cost by trying to control utilization, I think, is a really short-sighted approach,” he said. “But it’s going to be a big issue.” Fein also discussed the movement of the industry toward vertical integration, in which insurers, PBMs, and specialty pharmacies are all owned by the same entity. He pointed to the potential deals between Express Scripts and Cigna, and CVS Health and Aetna. Fein said that vertical integration will strengthen medical and pharmacy benefit management, extend payer control, and increase channel concentration.

Gill said that the rationale around integrated models makes sense because combining medical, pharmacy, and lab data could identify opportunities, target interventions, and drive adherence. The benefits of the integrated model accrue directly to the health plan, she said, with the potential to lower medical costs by cutting back on overtreatment and wasteful spending, improving chronic care management, and reducing failures of care delivery.

With potential interventions on drug costs looming from Washington, DC, Gill said she doesn’t anticipate significant changes to current business models. She dismissed any proposals that involve drug reimportation.

“I think the difficulty with reimportation is, where are we going to reimport it from?” she said. “Are we going to take all the drugs from Canada and move them back to the [United States] because we feel that’s a neighboring country we feel safe around? I don’t really think that’s the answer.”

The IQVIA report, titled “Medicine Use and Spending in the US” found that overall medication spending increased by 0.6% in 2017 after off-invoice discounts and rebates, including spending on all types of medications. The report notes that spending on specialty medications is rapidly approaching half of overall medicine spending, while net spending on retail and mail-order pharmacy dis- tribution dropped 2.1% in 2017.

The specialty share of net spending across institutional and retail settings has grown from 24.7% in 2008 to 46.5% in 2017. List prices at pharmacies increased 58% over the past 5 years as out-of-pocket costs dropped 17%, which reflects the dynamics that drive how much patients pay for medications and how drug costs influence whether patients fill their prescriptions, according to the report’s authors.

“There was a record level of generic approvals last year, but did you know only 30% of those approvals actually launched?” Long said. “So you spend $10 million to get the product to the FDA...and you don’t launch because you’re not going to make any money if you’re the 10th, 11th...15th player on the market. I describe that market as the race to the bottom.”

The results of the study showed that specialty drugs comprise just 1.9% of total prescription volume but account for 37.4% of spending within the retail and mail-order distribution channels. In the nonretail setting, specialty drugs account for 60% of invoice spending and 2.3% of standard unit volumes, according to the study.

Among underlying trends in the pharmacy channel, Gill said that script volumes boosted by favorable demographics and the use of pharmacotherapy as a cost-effective treatment modality point to a favorable backdrop for PBMs. She went on to praise PBMs, despite the negative attention they have received in the media recently, stating PBMs are part of the solution to rising drug costs. “I am the standalone Wall Street analyst that believes in the PBM industry,” she said. “I truly believe PBMs add value. I think the market will continue to shift and change.”

With the ongoing shift toward value-based care, Gill said that reimbursement can be expected to be tied directly to health outcomes. In this environment, adherence and patient counseling services will become key differentiators among pharmacy providers, she said, and incentive structures will move from volume-based targets to outcome-based targets.

Earlier this year, Amazon, Berkshire Hathaway, and JPMorgan Chase announced plans to launch a new health care company in an effort to provide high-quality care while reducing costs. The new company will be independent and not constrained by profit-making incentives, according to a joint press release.

Instead, the initial focus will be on technology solutions that provide employees with streamlined care without profit-related constraints. Since that time, speculation has swirled around the potential of these powerhouses joining forces in an attempt to streamline health care in the United States.

The partnership is in its early stages, Gill said, but its initial goal is focused on 1 million employees across the 3 organizations. Discussions have been held around technological solutions to simplify high-quality, transparent care. The joint venture will eventually develop both short-term and generation plans.

She added that the partnership reinforces beliefs that the shift to value-based care and consumerism will be the focus of the industry moving forward.

“I will let you in on a secret. There is nothing to know at this point,” Gill said. “They’re trying to solve for something that’s very big. Like many innovators, they believe they can’t take the existing model. You have to look at it from a different perspective.”

Beyond the potential impact of the partnership, there remains the possibility of Amazon entering the pharmacy space, speculation of which sent shock waves through the industry. Gill said that Amazon has the potential to transform the industry but must address working with the Health Insurance Portability and Accountability Act and other regulations.

She specifically pointed to the Amazon Alexa devices as having the potential to influence patient care by helping with adherence reminders, scheduling physician visits, and telling patients when their prescription is ready, among other tasks.

“We don’t believe that Amazon is coming to pharmacy in the traditional way in the near term,” she said. Fein joked that the speculation around Amazon’s entry into the pharmacy space will not be going away anytime soon. “I will boldly come forth here and predict that Ama- zon may or may not change everything. We’ll see if that comes true,” he said.