Gaining entry in a limited-distribution world
For traditional retail pharmacies, one of the biggest roadblocks to entry into the specialty arena is the limited availability of many complex medicines. More and more of these high-ticket, high-touch drugs are entering the market via very restricted and exclusive networks as pharmaceutical manufacturers increasingly demand that the pharmacies dispensing those medicines demonstrate advanced clinical, documentation and patient-support capabilities, including the ability to improve adherence rates, conduct risk evaluation and mitigation strategies, and manage and monitor patient outcomes.
"We’ve seen significant growth in limited-distribution drugs," noted Atheer Kaddis, Diplomat’s SVP sales and business development. What’s more, he said, "pharmaceutical companies also are taking some products that were available through an open channel and now driving them into a limited-distribution channel" in search of a higher-touch service model.
Kaddis called the move to limit distribution "a significant threat to retailers, and even to the hospital outpatient pharmacies working with us."
Thus, one of the serious challenges faced by retail pharmacies, said CEO Phil Hagerman, is that "even if they [have] a specialty pharmacy [of] their own, they’re not going to have access to these limited-distribution drugs. In order to get access … you have to get there early and often."
That was a lesson driven home for Diplomat some five years ago. Hagerman said: "We were talking to pharmaceutical companies at drug launch time. We’d say, ‘We’re a big partner for you, and we’ll manage some of this [distribution] for you and be part of your network.’ But we [found] it was often too late. By then, they had decisions made already."
Diplomat now works with pharmaceutical companies very early in the development process to gain full access to some limited-distribution networks for promising specialty medications, often by the time those products are in "late phase 2 or early phase 3" of a new drug’s clinical trials, said the company’s chief executive.
"We focus a lot on the pipeline," agreed Cheryl Allen, VP business development and industry relations. Working closely with the clinical services team headed by VP clinical services Gary Rice, she said, "we … look [out at the pharmaceutical pipeline] about 18 months out."
"We also work with pharmaceutical partners for products already on the market," Allen added. In that capacity, Diplomat provides expertise to a drug company that’s considering moving one of its products from an open-to a limited-distribution network or learn more about "the patient’s needs as they work through the journey" of specialty care, Allen explained.
The need for that expertise is particularly acute among smaller, start-up companies, Hagerman added. "Big pharmaceutical companies have their processes and plans pretty well in place, but a lot of these new drugs are coming to market from the small biotech sector, and some of these companies have never commercialized a product before."
Said Jennifer Cretu, VP information technology and marketing: "Diseases are more complex; costs are rising; regulations are increasing. So the management of our inventory is of absolute importance."
RSN: Enabling specialty at retail
The urgency behind Diplomat’s launch of its Retail Specialty Network isn’t hard to fathom. As the growth momentum in pharmaceuticals shifts from traditionally developed drugs to more complex and expensive specialty and biotech products, traditional pharmacies without access to these specialized medicines — and the patients who depend on them — find themselves stranded in a receding market like boats at low tide. And the loss of patent protection and market exclusivity for many of the biggest-selling blockbuster drugs that used to drive top-line sales has accelerated the trend.
"The chains have seen a tremendous fattening of traditional growth," said Diplomat CEO Phil Hagerman. "The generic wave … helps support margins, but doesn’t drive top-line growth. And the industry has come to realize that if you don’t put a stake in the ground around specialty, you’re going to lose that business. Specialty is growing at 20% to 24% a year, where traditional pharmaceuticals now is growing at 2% to 4%."
What’s more, said Atheer Kaddis, SVP sales and business development, a pharmaceutical maker can use direct or indirect means to limit distribution of high-touch drugs and freeze traditional community pharmacies out of the picture. "You don’t necessarily have to create a limited-distribution panel," he said. "You can create barriers to reporting that are so high that indirectly you lock out the retail pharmacies."
"It’s not just the performance measures they’re looking at," he added. "It’s the actual volume and type of data that has to be reported: turnaround times, prior-authorization success, side-effect management and success, compliance and persistence programs that require you to exceed 90% medication possession ratios. So now you have managed care and PBMs locking out retail pharmacies, and pharmaceutical companies, saying, ‘Are you contracted with these PBMs and payers?’ And the retail pharmacy has to say, ‘No, we’re not anymore. We’re locked out.’ So it’s a Catch-22."
All these challenges point to one essential factor that keeps most retail pharmacy operators — excluding the few big chains with their own specialty pharmacy divisions — from competing on their own in the rapidly expanding specialty pharmacy arena: the prohibitive cost of entry.
Enter Diplomat. In 2009, the company launched its Retail Specialty Network to allow retail pharmacy chains and independents to gain entry to the specialty arena. How? By partnering with an experienced specialty pharmacy that can provide the back-end resources, the patient support and the close collaboration with pharmaceutical suppliers and managed care plans that retailers need to compete in specialty pharmacy.
"The most important challenge a retailer has here is not that they lose a high-cost biologic drug," Hagerman added. "The most important thing we do for them is protect their market basket."
"A mass merchandiser with a pharmacy department may have a patient on six or seven drugs plus one complex biological. But the market basket is over $200 every time the patient walks through the door. And if that merchandiser doesn’t have that complex medication, that patient can walk out and go to a competitor," Hagerman said.
Drawing on Diplomat’s expertise and back-end resources also allows a retailer to connect its pharmacy customers with a team of funding and insurance specialists whose job it is to link patients with sources of financing, charitable grants and co-pay assistance to help them shoulder the high out-of-pocket costs of specialty drug therapy.
As the behind-the-scenes specialty resource provider for retail pharmacies that participate in its programs, Diplomat also provides additional services that allow front-line retail pharmacists to offload other time-consuming duties that come with the specialty pharmacy turf. For instance, said VP operations Robert Fleckenstein, if a patient comes into the store with a new prescription that requires prior authorization, "we can help the patient through whatever insurance hurdles there may be."
Added Kaddis, "We’re trying to send the message that you can have specialty at retail." Managed health plans, payers and pharmaceutical companies, he said, should be aware that including retail pharmacies in a specialty network means offering patients "the benefits of convenience, and the ability of patients to interact with their pharmacists face-to-face, and yet still get the value of specialty intervention. We have made a commitment as a company to support various models of distribution of specialty pharmaceuticals. When specialty at retail is embraced by retailers, payers and manufacturers, we want to be there to provide support.
"And that can be a huge win-win for everyone involved," Kaddis noted. "It’s definitely a win for the patient, who can continue to get his or her traditional and also specialty medications at retail. It’s a win for the retailers because they keep that patient and that relationship. And it’s a win for managed care, because…they can still offer specialty drugs at retail and get that benefit for their patients."
For managed care, Diplomat offers broader focus
Any specialty pharmacy provider that wants to succeed in today’s healthcare arena has to align its capabilities with patients, prescribing physicians, hospitals and pharmaceutical manufacturers. But success also depends on delivering cost savings and high-touch patient care services to managed care and health plan payers that depend on it.
Diplomat does so holistically. The company now provides specialty medications as an exclusive or preferred provider for some 12 million members of health plans, and it does present itself to insurers and managed care operators as a source of competitive pricing and data-driven, highly efficient delivery on high-ticket specialty drugs. But Diplomat also works to engage payers and plans at a higher level, with a focus on bigger-picture cost savings that accrue to patients and their health plans over the long term.
The managed care industry’s obsession with the costs involved with covering patients who require specialty drug therapy is easy to understand. Said Atheer Kaddis, Diplomat’s SVP sales and business development, "their main focus right now is controlled utilization of product, and ensuring they’re getting competitive pricing from specialty pharmacies."
"It’s becoming the norm to see drugs that are $100,000 or $150,000 per patient per year in the specialty arena," Kaddis added. "So it’s a big area of focus for payers and managed care."
Nevertheless, managed care organizations should look at costs in a larger context to generate real long-term patient care savings, said VP clinical services Gary Rice. "Even though managed care may initially focus only on [dollar savings], when we start talking about the high-touch programs we offer and the way we can assist patients in their therapy so the investment in those products is optimized, a lot of managed care payers start to see the value equation," Rice said.
For instance, he noted, "in the worst-case scenario, you spend $8,000 a month on an oncolytic, and the patient takes it only half the time. So the disease progresses, and now the patient has to go on a different therapy. That’s more of a cost impact for that managed care organization than getting a 10% discount. So we’re trying to demonstrate responsible fiscal management through our high-touch programs."
Among those high-touch offerings: "We call every patient every month, not only to see how they’re doing, but to see how much product they have left," Rice explained. "And if they have more product than what they should, … we move that delivery to when they really need the product. Those are all cost savings for managed care."
In addition, Rice said, Diplomat’s technology and clinical support teams have been working over the past year "to create more clinical decision trees in our eNAV information technology platform that will allow us not only to manage the patient more efficiently, but also be better able to report those activities to managed care and pharmaceutical companies."
For example, he added, "every time we adjust an inventory for a patient we’re saving managed care costs. Today, I have to figure that out manually. Our goal in the future is to be able to run a report."
For one very small health plan, Rice added, "we were able to save that company more than $300,000 in costs in one year, just by adjusting [dispensing practices] to reduce excess inventory. And they were amazed."
A major focus for Rice’s clinical care team is improving quality and educating both its own clinical support team and those of its provider partners, including retail pharmacists that use Diplomat as their back-end specialty service provider. To that end, Diplomat’s senior director of education and quality, Jennifer Hagerman, drew on her experience as an educator and pharmacy school professor to launch Diplomat University as a fully staffed training tool and educational resource for employees.
"The goal was to implement a comprehensive, robust new-employee orientation program. And once we did that, we evolved into clinical, operational, systems and leadership training," Hagerman explained. "Our next initiative was taking it to our external partners."
Under her leadership, Diplomat also supports a full-year post-graduate pharmacy residency program, which is currently undergoing accreditation from the American Society of Health-System Pharmacists.
"We’ve been very successful … keeping them with our organization after completion of the program," she said.
CEO Phil Hagerman summed it up, saying, "Diplomat will continue to grow dramatically, both in terms of high dollar volume and core distribution, but also in terms of services." That includes both "services to pharmaceutical companies around data aggregation and outcomes information," as well as "services to health systems and health plans as they expand into the [accountable care organizations] and insurance exchanges that are coming with health reform." It also includes "services to our patients in terms of being able to offer them more than just distribution," he said.
"It might be hospital readmission management," Hagerman said, "or some other form of ancillary patient care service like disease management that helps keep patients with complex therapy out of the hospital."