The Biggest Trends in Specialty Pharmacy

Announcer (00:04): Welcome To 340B Insight from 340B Health. David Glendinning (00:14): Hello from Washington, DC and welcome back to 340B Insight, the podcast about the 340B Drug Pricing Program. I'm your host, David Glendinning, with 340B Health. On today's episode, we have Timothy Paine, previously the principal consultant with Blue Fin Group, and now the owner of EPU Healthcare Consulting. Tim is an expert on specialty pharmacy and its connections to 340B, and we wanted to speak with him about some of the latest trends in the growing specialty pharmacy world. (00:46): Tim spoke about the topic at the 340B Coalition Winter Conference earlier this year, and we caught up with him to discuss more. But first, let's do a quick recap of some of the latest news about 340B. The pharmaceutical company Astellas has become the 24th drug maker to announce that it will limit 340B pricing on drugs dispensed at contract pharmacies. The new policy, which will take effect September 1st, will apply to Xtandi, a prostate cancer treatment that Astellas markets along with Pfizer. (01:27): The company said it will stop permitting direct delivery of the drug purchased at the 340B price to contract pharmacies for hospitals that have in-house pharmacies capable of dispensing the drug. The policy includes an exception for hospitals without in-house pharmacies to designate a single contract pharmacy location to continue receiving their 340B orders of Xtandi. 340B Health members can read more about the new Astellas policy and access our member resources outlining all 24 company policies and their exceptions by visiting the show notes. (02:10): And now for our feature interview with Tim Paine. Tim has significant experience in the specialty pharmacy sphere, including several years on the provider side for one of our member health systems. The use of specialty pharmacy has taken off in recent years and is becoming a larger element of the healthcare delivery ecosystem. Tim presented to the 340B community on some of these topics at the winter conference. Myles Goldman caught up with him while he was there. Here's that conversation. Myles Goldman (02:41): Thank you, David. I'm joined by Tim Paine here in the exhibit hall at the 340B Coalition Winter Conference. Tim, you're here speaking on the drug supply chain and specialty pharmacy, and it's good to have you joining us. Thanks for coming. Welcome to 340B Insight. Timothy Paine (02:59): Absolutely, Myles. Thank you very much for having me. It's a pleasure to be here. Myles Goldman (03:02): First, I just want to learn more about your background. Tell us more about that. Timothy Paine (03:07): Sure. Well, probably the easiest place to start is that I'm not a pharmacist, although I spent a lot of time in drug development. I'm actually a med tech by training, so a medical technology, microbiology background. But I spent a decade in drug development where I had helped developed mostly products in the oncology space with Amgen and then moved on from there into the field sales where I followed the product that I had actually helped developed called Neulasta out into the field where I was in sales and sales management for a while. (03:35): Over time, my career has kind of morphed into a number of different areas, including biosimilars with the Hospira Pfizer unit for a while before I moved into the health system side where I worked for Fairview Pharmacy Services at the University of Minnesota as their VP for pharma strategy and relations for about five and a half years. Most recently, I was with Blue Fin Group, a management consulting firm focused on the life sciences industry, so pharma and biotech folks will be familiar with them, and most recently have departed there and started my own little firm, EPU Healthcare Consulting. Myles Goldman (04:07): We're going to be talking a lot about specialty. I'm glad you mentioned biosimilars to it in your background. We're going to be getting into that, as well as part of this overall conversation on specialty. I want to start though at a higher level, what are the types of drugs that are classified as specialty drugs and what conditions do they treat? Timothy Paine (04:26): Now, that's pretty much everything you're going to see. It's given that there's such a breadth and really frankly an explosion in the specialty market in the last seven to eight years. Initially, they were products that were very much focused in the oncology space, very targeted agents or for multiple sclerosis, some of those other neurologic conditions and those sorts of areas. (04:47): Now you've seen areas both in pulmonology, say cystic fibrosis, certainly oral oncology, more targeted therapies there, and a host of other rare diseases as well. They can be many small molecule agents, but also a lot of the traditional enzyme replacement therapies, monoclonal antibodies. You name it. The science of the pharmaceutical industry and development work over the last 20 years has really brought forth an enormous number of new agents that have brought a great deal of benefit to society. Myles Goldman (05:16): We've definitely been hearing a lot more about specialty drugs in the news and in government reports over the past couple of decades. In addition to the benefits we've been hearing about specialty drugs, we've also been hearing about the cost. Why do you think that is the case? Timothy Paine (05:32): Well, part of it's perspective and part of it's very much the end result of supply and demand, if you will. I think when you look at back say 2005, one of the earlier agents into the oncology market was Avastin. A monoclonal antibody infused for colorectal cancer back in 2005 was stunning both for its clinical outcomes and also for its price at $40,000 a year. And here you've got a therapy that's maybe once hopefully, maybe twice, in the patient's lifetime. (06:01): Fast-forward less than 10 years and now you have a drug that costs over 10 times that amount where the patient's not only taking it once, they're taking it for the rest of their life. Now you're seeing pharmaceutical agents that have this great deal of efficacy, but they also have come with them a great deal of cost. Part of that's the development cost, but part of it is also a function of the fact that this later agent I was talking about, Soliris, you're looking at a very small patient population. (06:29): In order to recoup the costs and provide the return that their investors are expecting, a lot of these companies are putting the overall burden of that entire amount of dollars on a smaller number of patients. Hence, the larger amount of cost. You're also finding a great deal of development work that goes on in the rare disease area as well, certainly a focus for specialty drugs as well. Think about it from this perspective. (06:55): If you're looking at a patient population that's only got 10, 20, 30,000 patients and you study 50 of those, compare that to studying two million breast cancer patients, how many would you have to get at? You're looking at an ability to focus down on the smallest clinical trial with fast approval times because the FDA is looking to meet this tremendous unmet need that exists in this patient population. And lastly, the opportunity for them to find competition to that product is pretty much non-existent. Hence, the cost. Myles Goldman (07:27): It wouldn't be the 340B Coalition Conference if we weren't talking about 340B. What role do 340B discounts play in the specialty drug market? Timothy Paine (07:38): Well, when you look at the 340B world when it came into being in 1992, it was developed initially as an outpatient program, which it still is today, but drug spend at that time in the hospital space was $3 of inpatient for every dollar of outpatient. There really wasn't that much being spent there. Look, contrast that with more recent data in the last few years, it's nearly one to one. (08:04): Especially when you look at the specialty space where there's outpatient administered drugs almost exclusively, you're looking at 51% of the spend on 2% of the dispenses. An incredible amount of dollars flowing through the potential for 340B qualification leads to 340B being at the forefront of basically every manufacturer's development and marketing work. Myles Goldman (08:29): What options do 340B hospitals have to contain specialty drug costs? Timothy Paine (08:34): Well, there's not a lot, unfortunately. I'd love to say there was many more options, but the fact of the matter is, what you're running into is thinking back again to Avastin say 10, 15 years ago, you're looking at a product that was physician administered, controlled through the medical benefit where there wasn't a high degree of control from the payers. Contrast that with today where you're looking at most specialty meds are self-administered. (08:59): Now you've got pharmacy benefit, high level of control from the PBMs, and high level of formulary restrictions that occur within them. Therefore, the dictation for what you can and can't use comes from an outside organization, not from internal. Your ability to actually influence on what you will and won't use and therefore maybe negotiate for price is pretty well not gone. Myles Goldman (09:24): But there is, of course, 340B to try to help lower those costs. And that brings us back to what you were talking about before. Timothy Paine (09:31): Yes, absolutely. 340B is certainly a major point of importance for any health system that's operating a specialty pharmacy because there is a great deal of expense in the high touch services that go along by nature of these drugs being specialty. And if it wasn't for some of the savings that go along, I'm not sure that you would really see that much of the ability for some of these organizations to deliver the exceptional care that they do. Myles Goldman (09:58): I want to peel back the onion of the various elements to specialty drugs and specialty pharmacy. We often hear about the term limited distribution drug networks or LDD. Timothy Paine (10:10): Ah, yes. Myles Goldman (10:12): What is an LDD network and what does it mean for 340B? Timothy Paine (10:16): Sure. Limited distribution drugs or limited distribution drug networks are efforts by a manufacturer to focus their distribution of that product through a select number of specialty pharmacies. Oftentimes, that selection process begins with the patient journey, what they see as the necessary steps that patient's going to have to go through or that prescription's going to have to go through for a successful fill, the best chance for a successful outcome for that patient. (10:45): They don't feel that every pharmacy can do that, so they limit that down to who and where it'll be done. In many cases, what it really means for a covered entity is lack of access. It's a restriction of access because you're looking at networks that can be 50, 60, 70 members, but you can also be one. And very often it's no more than a dozen or less. In the vast majority of cases, what you're finding, what does it mean for that covered entity for that 340B institution, restricted access. Myles Goldman (11:17): Because there are fewer specialty pharmacies carrying a particular drug in an LDD network, that means hospitals have very little choice of what specialty pharmacy to work with, right? Timothy Paine (11:28): Well, in many cases, what you'll find is that the negotiations that go on for coverage of that product through the payer side of things also include which pharmacies are going to service that. And lo and behold, given the vertical integration you found between PBMs and SPs, it's the PBM's SP that will be servicing that patient full stop. Perhaps they will have several payers. Yes, there's a high degree of limitation. Myles Goldman (11:57): Are there best practices 340B hospitals can deploy for LDD networks? Timothy Paine (12:02): Yes, I have my personal biases on that one and I will expose them freely. I will say that I think the best thing for health systems to do when it comes to networks, 340B and really engagement with pharma in general is engage, engage, engage. I think there has been traditionally because you feel like there's an army of people coming from the manufacturer to your doorstep as a health system. You can't possibly let them all in. I'm not advocating that. (12:29): But I do think you need to build advocates through that individual sales rep level, but then you also need to work very closely and understand who are the strategy leaders in those organizations and get them to understand what you do and how you do it better and how this all important patient journey that they've spent so much time and effort, not only building, but then rolling out into the market is best delivered by that health system, by you. Myles Goldman (12:55): I'm going to switch gears a little bit to another stakeholder in the healthcare system that is discussed a lot, payers and PBMs. We discussed them a lot in terms of specialty drugs. They've implemented strategies for specialty pharmacy as well. Can you tell us more about those? Timothy Paine (13:13): When it comes to the payers and PBMs, they certainly have moved forward with a strategy, and the crux of that strategy revolves around vertical and integration. You've seen a high degree of consolidation over the last 10 years, and even more so in the last five when it comes to health plans, PBMs, payers, another word for them I use, and their specialty pharmacies. (13:37): As you've seen that consolidation, you've seen a high degree of control and with that has become an even greater challenge for any health system specialty pharmacy to try to gain access to that patient's life so they can serve them. It's become more and more difficult simply because the payer PBM SP troika has no incentive to provide that patient's lives access to anybody else but their own pharmacy. Myles Goldman (14:06): Another issue, and this is one that we've covered on the podcast before, is prescription drug white bagging by payers and PBMs. Timothy Paine (14:16): I really do believe that's important. From a variety of safety reasons in particular, particularly given the level of control you have for that product coming from an outside pharmacy into your organization is something that's very likely at a first glance against your SOPs. Myles Goldman (14:34): Where do you see this issue headed in the coming years? Timothy Paine (14:37): Oh, there's going to be a great degree of friction on this one. I do see a great deal of effort by the health plans to try to garner more of the profit and more of the business under their roof. At the same time though, there's been a great deal of effort by the health systems themselves at the state level for advocacy around state legislation that restricts a plan's ability to force white bagging on the health system. Myles Goldman (15:03): You mentioned at the beginning of this conversation your background working on biosimilars. How do biosimilars affect specialty drug trends? Timothy Paine (15:14): The biosimilar market to date has been relatively robust, but it's been relatively robust in a very defined area that really hasn't been touched by specialty, given that most of these medications that today have biosimilar competition fell into the physician administered drug space. Again, think Avastin, the cytokines, other monoclonal antibodies from about 20 years ago are now open to that biosimilar competition. We're really advancing as we speak into a new frontier when it comes to self-administered meds, which is where specialty lives. (15:49): Biosimilars in that space really didn't get off the ground until January with the launch of the first adalimumab biosimilar and are going to be evolving as more and more players roll into that market. I wish I had a crystal ball to tell you exactly what it's going to look like, but I do think you're playing in a completely different ball field here as they were before. You're now dealing with competitors on the originator side who have extensively rebated these products and entrenched themselves with the payers. (16:22): It's not just that single product that now has biosimilar competition. It's their entire portfolio that they're focused on. Are payers going to be willing to give up those rebates for something that's lower cost? We're not talking generics here. You can throw the generic book out the window when it comes to biosimilar competition. You really have to disarm yourself of that notion any further. This is really brand versus brand and you're trying to bring in one with lower cost against somebody who's rebating very heavily. It's going to be an interesting fight. Myles Goldman (16:53): Could we expect the biosimilar conversation to continue to grow? Timothy Paine (16:57): Oh, absolutely. It's going to be very exciting, I think, frankly, to use that phrase, over the next 18 to 24 months. I think everybody's really learning and feeling their way. Who's going to offer what to whom? How are they going to do it? What's it going to look like? How are they going to market it and position it on the provider side, as well as to the payer side? And will the providers even have much of a say? Will we be faced with PBM formularies that basically say you can choose one of these three or one of these two, or maybe even just this one? Myles Goldman (17:28): Well, you've given us a lot to consider, and it'll be interesting to follow all these different elements of the specialty pharmacy drug market in the coming years. Tim, I want to thank you for taking time out of your speaking schedule here at the conference to join us. Timothy Paine (17:46): Well, thank you very much, Myles. Greatly appreciate it. David Glendinning (17:49): Or thanks again to Tim Payne for sharing all his expertise on specialty pharmacy trends with our audience and with 340B Coalition Conference attendees. We appreciate him for putting on his pharmaceutical, health system pharmacy, and consulting hats to explain how specialty pharmacy got to where it is today and where it might be heading next. (18:10): What 340B and pharmacy trends do you want us to cover on this show? We always welcome ideas for podcast topics and interview guests. You can email us at podcast@340bhealth.org. We will be back in a few weeks. In the meantime, as always, thanks for listening and to be well. Announcer (18:35): Thanks for listening to 340B Insight. Subscribe and rate us on Apple Podcasts, Google Play, Spotify, or wherever you listen to podcasts. For more information, visit our website at 340bpodcast.org. You can also follow us on Twitter @340BHealth and submit a question or idea to the show by emailing us at podcast@340bhealth.org.