Specialty in Retail: What Does It Take to Participate?

A retailer’s decision to get involved in the specialty pharmacy marketplace should be an informed one that encompasses careful research and a full understanding of all of the stakeholder requirements.

How does the industry define the provision of specialty products in “retail”? It is a definition that varies widely and depends on who is answering the question. Unfortunately, some antiquated industry practices and inconsistencies also contribute to the uncertainty. We will explore what it takes to participate in the growing specialty marketplace, but also review some industry inadequacies and challenges.

It seems that every week I get a few more calls from organizations wanting to participate in the growing frontier known as “specialty.” I ask them, “So you want to get into specialty…why do you want to participate? Why now? What is your current footprint or business model? And most importantly, are you willing to FULLY finance your potential market entrance?” After reviewing things at a high level, there is less than a 25% interest level in taking the next step to actually participate. But why? Doesn’t the drug pipeline primarily consist of biotech products? The answer is a very strong YES.

Unfortunately for some, it is becoming harder and harder to survive doing traditional pharm-acy. I define traditional pharmacy as focusing on a few branded products and the ever-increasing list of $4 generics, and maybe some greeting card, OTC product, candy, or cigarette sales (a BIG kudos to CVS Health and others for pulling tobacco sales out of their business, something I personally hope is a trend that we as an industry embrace and follow). And getting into specialty is tough, too. Mistakes can be very costly and can negatively impact even existing business lines.

So, why is it so tough to get into specialty? One word: expectations. There are very high expectations from the stakeholders who make the decisions and/or allow participation. Thus, the stakeholders also set the actual “barriers to entry.”

Payers typically want their membership to have:

• A safe supply chain and distribution solution purchasing directly from manufacturers or a tier 1 wholesaler that meets the pedigree requirements of the Healthcare Distribution Management Association, Verified-Accredited Wholesale Distributors, and others.
• High-quality services and accreditation from URAC, the Accreditation Commission for Health Care (ACHC), and others; continuous quality improvement programs; performance metric—monitoring capabilities; customer satisfaction surveys; redundancy; error-tracking; and issue-resolution tracking.
• National pharmacy licensure to cover remote membership/employees in all 50 states plus Washington, DC.
• Consistent services and network of providers: Payers typically want a network that will meet the access and service needs of their individual organization. Not all products are available from any 1 specialty pharmacy, so most payers have preferred pharmacies by disease category, location, or product. They want a similar experience for their membership at all of their contracted specialty pharmacies.
• Data: Performance data, clinical data/outcomes, MD information, and pricing trends are entry-level requirements for most specialty networks.
• Dedicated services: This would include toll-free telephone and fax numbers, clinical programs, and full-time employees.
• A fair price: Pharmaceutical manufacturers want safe, high-quality, consistent services at fair market value rates.

Physicians/offices have their individual wants and needs, too. They typically include:

• Office efficiencies: Less office work to get a patient on the prescription.
• Reimbursement information: Is the patient covered? What is their cost?
• Copay assistance support: A patient who can’t afford the medication won’t start or stay on it long.
• Easy product access: Options for the patient that allow consistency, safety, and clinical services.
• Patient education: Some offices provide educational support, while others let the specialty pharmacies provide services.
• Communication: Offices want to know if the patient is able to get the drug, if the patient is getting the drug, that their patients have been helped, when patients are having side effects/dropping off therapy, or if the patient has reimbursement issues. All of the stakeholders want positive outcomes, appropriate utilization, and an easy process.
• Data: Increasingly, offices are asking specialty pharmacies for “report cards” specific to their patients being serviced.

The Evolution of Specialty Pharmacies

Specialty pharmacies evolved over the last 20 years because of the inadequacies in the marketplace and the need to properly service the patient and coordinate with all the stakeholders. It has grown from a cottage industry to a best-in-class solution that meets the majority of the stakeholder needs.

Successful specialty pharmacies have invested and continue to invest in the ever-evolving specialty industry. These investment areas include but are not limited to:

• A separate facility, National Association of Boards of Pharmacy number, or retail class of trade from the traditional pharmacy, usually depending on state requirements
• Facility licensure in all US states and Washington, DC
• Pharmacist-in-charge licensure in all the required states
• The latest and greatest specialty-specific software (most traditional pharmacy platforms are inadequate for most specialty services and programs)
• Accreditation (URAC, ACHC, Verified Internet Pharmacy Practice Sites, others)
• Consultant support
• Clinical programs by disease category or product
• Specialty training (by the National Association of Specialty Pharmacy, pharma, consultants, or self-training)
• Field sales force: sales reps, registered nurses, registered pharmacists
• Marketing materials
• Electronic connectivity to third-party participants (501c3s, data aggregators, manufacturers, third-party logistics providers, hubs, others)
• Clean rooms (up to the latest USP 797/FDA standards)
• Financial plan: A business plan and pro forma that captures all the dynamics
• Redundancy: A full backup plan, generator, information technology backup, hot site, insurance
• And the most important investment, your time to coordinate all of the activities

For years, it seemed that most retailers and chains, minus the big-box players, were not very interested in or motivated to participate in the specialty marketplace. However, due to the number of specialty products in the pipeline and the declining number of branded products, many are now attempting to participate. More than a dozen chains and many other independent retailers are now actively participating in specialty, with a wide variety of specialty solutions. But specialty is “special” and it requires a well thought out strategy to be successful. Some of these retailers have been very successful, while others that jumped in without a well thought out business plan have yet to see a positive return on investment. There are many specialty products that are very well suited for the local retail market; having the right growth strategy can make all the difference.

Limited Distribution Networks

Even if you take all the proper steps to build your specialty pharmacy, you still may not be able to participate fully. Some specialty products are only available through limited distribution networks. This trend will continue. Manufacturers limit access to products for several reasons. Payers also limit access to certain products for the reasons mentioned earlier. Often, smaller pharmacies do not fully understand what is actually required to successfully launch a specialty product in the US marketplace and are disgruntled when they do not have access to a product and have to turn a patient away. Some reasons for the limited networks include, but are not limited to:

• Limited supply of product: Biotech products are often very expensive to produce, with long manufacturing schedules/times. Forecasting volume can be challenging. Getting more product into the channel can be a costly venture. Every entity that touches product ultimately adds cost to the channel.
• Returns: These usually increase in open channel models.
• Early approval: If the FDA fast-tracks a product, there may not be enough to go around.
• FDA/Risk Evaluation and Mitigation Strategies (REMS): Some products have FDA-mandated REMS requirements, such as the use of a hub, a limit on the number of pharmacies that can offer the product, data reporting requirements, or clinical/enhanced safety programs.
• Internal Resources: Larger companies have greater infrastructure and resources for managing the supply chain, and smaller companies have limited resources. It can cost $90,000 to add a specialty pharmacy to a network.
• Payer access: Manufacturers want to make sure their product has payer coverage. Most specialty pharmacies and pharmacy benefit managers directly contract with payers versus participating in a retail network.
• Clinical services: Specialty pharmacies provide a consistency of service not traditionally found at most pharmacies. Enhanced adverse event reporting may require unique documentation and reporting of both solicited and unsolicited events.
• Data: Enhanced data is often required on sales, inventory, physician, payer coverage, performance metrics, and connectivity to third parties (hub, data aggregators, 501c3s, e-consent)
• Finance report: Most specialty pharmacies assist patients in finding co-pay assistance or alternative funding. This is usually a core competency utilized for most patients. Support may also include indigent enrollment into government assistance/Medicaid programs or coordination with other advocacy organizations.
• Inventory management: Manufacturers in some disease categories sell directly to the pharmacy. Some require electronic funds transfer or immediate payment along with inventory data reports and own-use restrictions.
• Nursing coordination/support: Some specialty products require home health care coordination, injection training, infusion at home, or a suite/site of care.
• Dedicated toll-free phone and fax lines: Due to the high level of coordination between the stakeholders, it is often best practice to have dedicated telephone lines and fax lines. This may also be a contractual requirement by the manufacturer.
• Storage/shipping: Some products require cold chain storage in validated and monitored refrigerators as well delivery of product in fully validated coolers.
• Accreditation: As payers increase their safety and quality requirements for participation in their networks (usually via URAC or ACHC), manufacturers also want their network to have these accreditations to add value to their network and increase the likelihood of coverage by the payers.

At the end of the day, all of the stakeholders want positive outcomes, appropriate utilization, and an easy process. Retailers are actively providing new and innovative solutions to the stakeholders. What was once a market of narrow preferred networks has evolved into a multichannel approach with many carve-outs. Each product is unique. Each disease category is unique. Each stakeholder has their own opinion on how to manage specialty patients.

As our population grows and new medications emerge from the pipeline, the opportunities for specialty will continue to grow dramatically. Participation requires investment, a strategy, and time. If you think you might want to participate in specialty, do the research, gain a full understanding of the financials, and build your business plan. SPT

About the Author

David M. Suchanek, RPh, is senior vice president of biotech and specialty services at D2 Pharma Consulting, LLC. He has served as vice president of biotechnology and pharmaceutical services at VCG & Associates and as vice president of operations, segment management, pharmaceutical account management, and trade relations at Curascript/Express Scripts.