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."