Adam Fein, PhD, of Drug Channels Institute, and Doug Long of IQVIA discussed trends in the specialty pharmacy market in the United States.
There is a battle going on for control of the specialty patient, according to Adam J. Fein, PhD, CEO, Drug Channels Institute. During a general session on day 2 of Asembia’s Specialty Pharmacy Summit, held May 2-5 in Las Vegas, Nevada, Fein and Doug Long, vice president, industry relations, IQVIA, discussed trends in the specialty pharmacy market in the United States.
Pharmacy benefit managers (PBMs) still dominate specialty dispensing. Of the top 5 specialty pharmacies by revenue in 2021, 4 are PBMs: CVS Health, Express Scripts, OptumRx, and Alliance Rx Walgreens Prime. Although, at the end of 2021, AllianceRx Walgreens Prime no longer had PBM ownership and starting June 2022, it will be known as AllianceRx Walgreens Pharmacy. These 4 specialty pharmacies had about two-thirds of specialty drug dispensing revenues in 2021.
The reason why so few dominate the space is a result of strategies in the industry. “Manufacturers have limited the number of specialty pharmacies that they allow their products to go through,” Fein said. “For the most part, they have limited them to pharmacies that are owned by payers or PBMs.”
When manufacturers limit their products to independent pharmacies, they get acquired by PBMs, he added.
In addition, payers are limiting where patients can go, and often they send patients to the specialty pharmacy owned by their PBM, which has created “quite a lot of market access challenges for the hospitals.”
A big driver of specialty pharmacy profits has been the 340B program, but there has been a massive change, Fein said. As of April, more than half of the pharmacy locations in the United States were 340B-contracted pharmacies. Between those pharmacies and the 340B hospitals and other entities, there are 160,000 relationships in 340B.
“And you might think, ‘well, that's a lot of diversity,’” Fein said, but 73% of those relationships are held by 5 companies: CVS Health, Walgreens, Walmart, Express Scripts, and OptumRx. And collectively, those 5 companies earn about $3.2 billion in gross profits from 340B, he said.
However, recently 16 manufacturers pulled back from 340B pricing from contract pharmacy networks. One of the most dramatic effects has been the drop in the rate of growth of 340B. Over the last 4 years, the growth in value of 340B purchases for mail pharmacies had been averaging more than 50% annually. However, after the manufacturers made this change, the growth rate of new purchases was –20%.
“We haven't seen the full impact of this yet, but this is going to have a big impact on contracting,” Fein said.
Emerging profit drivers for specialty pharmacy include:
Finally, Fein looked at the vertical integration happening in the market. Although there has been consolidation in the last 3 to 5 years, there is also some deconsolidation as companies find vertical integration “is not a panacea and is a lot harder than it looks.”
Centene and Prime Therapeutics have both pulled away from the pharmacy business and Humana has backed away from some vertical integration efforts, Fein noted. But what may have gone under the radar during the pandemic is that hospitals and health systems have been on a “massive vertical integration kick,” buying up a lot of doctors’ practices.
In the last 2 years, there have been more than 50,000 physicians who have moved from independent practices to practices owned by hospitals, and this has happened particularly in areas with 340B pricing, Fein said.
What hospitals and health systems have started doing is steering patients to their own specialty pharmacies, and this is happening more in health systems with larger specialty pharmacies.
Vertically aligned channels pose new market access risks for new products coming to market, new companies trying to enter the market, and new pharmacies trying to get into the market, Fein said in conclusion.
“We saw a little bit of a pause on some of these things during the pandemic,” he said. “But I think now…we're gonna be bringing it all back. So, it's going to be a very, very challenging and highly competitive world.”
In the second half of the session, Long gave a presentation that expanded a bit on his keynote at the Academy of Managed Care Pharmacy annual meeting. He reminded the audience that for years, specialty medicines have been closing in on traditional medicines for share of sales. In February 2022, the split was 49.9% specialty and 50.1% traditional. He expected the numbers from March or April would show specialty had overtaken traditional.
The only reason specialty isn’t yet the majority of sales is because of the introduction of COVID-19 vaccines, which are considered traditional medicines.
Reviewing specialty medicine spending growth by disease class, Long noted that diabetes was the only traditional class that is still growing strongly, with a 217% net spending growth from 2011 to 2021. In comparison, specialty had a few classes: autoimmune up 459%, oncology up 326%, HIV up 219%, and multiple sclerosis up 211%.
Oncology biosimilars have driven a dramatic growth in biosimilars, and there is the potential for savings from biosimilars to exceed $100 billion over the next 5 years. Echoing what Fein presented, Long noted that the adalimumab biosimilars will be the first time there is a biosimilar on the pharmacy benefit side.
Humira, the adalimumab originator product, is the top-selling drug in the United States, and there are 3 other drugs in the top 10 with expected biosimilar competition coming. There are already 2 etancercept biosimilars approved, although they won’t be able to come to market until 2029 due to patent litigation. Enbrel, the etancercept originator product was number 8 on the list of the top 10.
Also in the top 10 were ustekinumab (Stelara) at number 4 and pembrolizumab (Keytruda) at number 5, which Sonia Oskouei, PharmD, vice president, biosimilars, Cardinal Health, highlighted during another session at Asembia, because these therapies have biosimilars in the pipeline.
“We have reached kind of fertile ground with biosimilars, and the future is bright,” Long said.