Retail giant Amazon has officially joined the pharmaceutical distribution sector with its purchase of PillPack, an online pharmacy that ships drugs packaged in presorted doses to patients all over the United States. Amazon also announced a major collaboration with Berkshire Hathaway and JPMorgan Chase to build an independent, nonprofit healthcare company with the goal of increasing patient satisfaction and reducing costs.
Taken together, these three companies represent a key set of stakeholders that cuts across the marketplace for health insurance and services. They are positioned to capture the imagination of the business community given their respective positions of influence and power and established reputations for success and innovation.
Regardless of their pedigrees, however, these healthcare disrupters must navigate the same regulatory framework that other stakeholders confront, including insurers, third party administrators and benefit and case managers to achieve optimal patient care and outcomes.
In their bid to examine ways to lower the cost of drugs for chronic conditions, combined with the purchase of PillPack, Amazon poses a potential threat in the form of direct competition with corner drug stores nationwide.
While Amazon’s larger pharmacy-distribution strategy could take years to unfold, it’s important to be aware of its possible impact across the drug supply chain, especially for healthcare consumers who are the most affected by rising drug costs. About six in ten Americans take at least one prescription medicine, and about one in four take more than three. High costs often drive consumers to stop taking their prescriptions or cut pills in half to make them last longer.
Some experts believe the PillPack deal will not radically change the pharmacy landscape, but the acquisition signals that Amazon may build on this foothold to become a dominant player in the market. Others believe that many consumers will still opt to have their prescriptions filled at a brick-and-mortar pharmacy, rather than relying on the mail to receive critical medications.
One aspect that is not up for debate: Amazon’s PillPack deal will not offer a specialty drug solution at a time when specialty drugs are drawing greater focus. This is important given that the total prescription dispensing revenues from specialty drugs at retail, mail, long-term care, and specialty pharmacies reached $138 billion in 2017, and accounted for one-third of the U.S. pharmacy industry’s total prescription dispensing revenues.
Specialty drugs are high-cost oral or injectable medications used to treat complex chronic conditions. High-touch patient care management is usually required to control side effects and ensure compliance for chronic conditions such as cancer, rheumatoid arthritis, hemophilia and hepatitis C. Some estimate that specialty pharmacy costs may account for 40 percent of total drug spending by 2020.
The Challenge of Specialty Drugs
Specialty drugs are higher in cost than typical prescriptions, require more focused value and are critical for the patients who take them. They are also more complex than most prescription medications. In some cases, they can be taken orally, but often must be injected or infused and may have special administration, storage, and delivery requirements that might go beyond the capabilities of Amazon or other pharmaceutical distribution operations.
The specialty marketplace will continue to see significant growth in revenue and overall pharmaceutical utilization, which is driving nearly every stakeholder in the market to develop solutions or capabilities to support these therapies.
In addition to high cost, another major challenge associated with a specialty drug is that it may be ‘first-of-its kind’ in a therapeutic area. It may also require a complex treatment regimen or toxicity that requires regular patient monitoring. Another key challenge is that specialty products continue to become more targeted and their target patient populations are smaller, particularly as more gene-based and cellular therapies come to market. What’s more, each drug has a different profile and may require a customized cadence for checking on patients, and flexibility in patient communication, such as phone calls, text messages, or web-based apps, based on patient preference.
The purchase of PillPack is not expected to help Amazon penetrate the higher-touch business of dispensing specialty pharmaceuticals. What’s more, the largest specialty pharmacies are all owned or co-owned by a pharmacy benefit manager and account for a majority of prescription revenues from pharmacy-dispensed specialty drugs.
Strategies for Driving Down Specialty Drug Costs
A primary goal for stakeholders is to find strategies designed to curb the costs of specialty drugs and gain access to customizable solutions. This is where effective specialty pharmacy drug management provided by a specialty-focused pharmaceutical management company serving commercial, Medicare and Medicaid segments, can play a critical role.
Specialty pharmacy partners can provide transparency -- and a clearer picture of the total cost of care. These experts help stakeholders, including employer groups and hospital and health systems, move toward a more value-based use of prescription drugs, so that health plans cover more of the cost of the most-effective and price-competitive medications.
Furthermore, specialty pharmacy partners play a key role in optimizing patient care. Expect the trend of value-based contracting to continue to grow as payers increasingly hold both providers and pharmaceutical manufacturers accountable for choosing the right combination of drug regimens and treatment protocols to deliver the best possible outcomes at the lowest total cost of care.
Specialty pharmacy management, including Limited Distribution Drugs (LDD) and carve-outs, can be tailored to the needs of the organization, tackling what will continue to be the biggest driver of pharmacy drug spend in the future.
What to Look for in A Specialty Drug Partner
The most effective specialty pharmacy partners use a high touch service model that includes patient/plan member and/or caregiver education, assisting with care coordination and high deductibles/co-insurance/co-pay costs by utilizing patient assistance programs and other drug savings programs. They also coordinate and collaborate with the patient/plan member, physician, pharmacist and payer throughout the patient’s course of therapy.
The focus should be on providing critical services that ensure drug safety, payment within approved terms, and managing the increasingly complex interactions from prescription to outcome measurement. It’s also important to find a partner that utilizes competitive strategies surrounding value-based service and pricing.
Because 30 percent of prescriptions never get filled, the right specialty-focused pharmaceutical management company could foster more discussion about a patient's drug options and the drugs' cost, impact and efficacy. These partners deliver transparency by collaborating with clients, patients and payers to save money and reduce costs. They help stakeholders navigate the complex world of drug pricing and high cost specialty drugs and create effective solutions that curb costs.
Other key factors: the specialty drug partner offers full service or la carte services and limited distribution products – an enormous driver of drug spend for employer groups. They also help curb costs by offering an integrated process with manufacturer’s discounts, formulary rebate management, and aggressive discounts through a specialty pharmacy network.
An extensive network of specialty, long-term care and retail pharmacies -- along with manufacturer’s discounts and rebates -- is the best approach for getting the best price possible. Furthermore, the right specialty-focused pharmaceutical management company provides bargaining power and strives to negotiate lower prices with drug makers to save seniors and other patients approximately 50 percent a year on their prescription drug and related medical costs.
Looking Ahead
The growth in specialty pharmacy—as a percentage of all drugs and with far greater costs per prescription—will only exacerbate the shift and growth in drug costs. The need for patient/plan member engagement, higher “value-added” and “service-oriented” specialty pharmacy management partners that leverage communications, telemedicine and analytical technologies is becoming evident across the healthcare landscape.
The good news is that specialty drugs have the potential to save and change lives, especially for those living with a serious illness. That potential is lost, however, if a patient/plan member is unable to access the drug. Significantly, specialty pharmacies can help boost outcomes by improving medication adherence.
This is vital given that specialty drugs are the highest growing cost factor in pharmaceuticals. Every effort should be considered to drive down costs, including efficient distribution channels and partnering with a specialty-focused pharmaceutical management company that is positioned to help drive down costs while protecting patient/plan member quality of care.
In today’s value-based care environment, where drug efficacy is top of mind for every stakeholder, the best specialty drug partner adds the most value by putting the patient first.
Dea Belazi is the president and CEO of AscellaHealth
