Special attention for specialty pharmaceuticals
Specialty pharmaceuticals are the talk of the town: in 2016, specialty sales rose to $181 billion and 50% of drugs sold in the United States are expected to be specialty pharmaceuticals in three years. Specialty drugs are defined, in part, by their high cost: often $1,000 or more per month — and spending on them is growing 15% to 20% a year.
The high price tag is derived from various influences, but generally, the drugs treating complex conditions are advanced in composition and often have unique handling needs. The latter is where specialty pharmacy comes in: the experts manage requirements for quick delivery, temperature-controlled storage and shipping, and biologic demands such as injection or infusion administration. The pharmacists, in turn, also manage the increased human needs of the advanced treatment regimens, including patient and caregiver education, chronic disease symptom management — sometimes with the addition of other pharmaceuticals such as controlled substances — and complex consultation scenarios.
Patients can’t always simply pick up these cutting-edge pharmaceuticals — whether taken orally, injected or infused — at their local retail pharmacy. Specialty pharmaceuticals are prescribed mainly for patients with serious chronic diseases and rare genetic conditions such as multiple sclerosis, cancer, rheumatoid arthritis, severe dermatitis, psoriasis, inflammatory bowel disease, HIV, hemophilia and hepatitis C. These patients, who are able to reap the benefits of advanced therapeutics, require more than a stop at the pharmacy counter: specialty pharmacists must carefully explain and review proper administration, side effects, and other regimen demands and considerations. Specialty treatments are often quite different from patients’ previous or existing regimens.
The specialty pharmacists themselves work in a variety of practice settings under various ownership entities. About half of all specialty pharmacies are independently owned, while others are under the umbrella of healthcare providers, health plans, or pharmacy benefit managers (PBMs); a small percentage are wholesalers or retailers. The various channels are jockeying for control of distribution in this specialty market.
The task of distribution is not a simple one: disease journeys are complex and both pharmacists and clinicians must ensure patients have the appropriate understanding, dosage, and coping mechanisms to handle the protocol and the condition at large.
When discussing specialty pharmaceuticals, one topic comes up again and again: high costs. Health plans and PBMs pay particular attention to the use of specialty drugs, which also have a growing list of restrictions and requirements both at the federal and state level. Prescriber validation, substance verification and reimbursement claims collection need to become part of the specialty pharmacy daily workflow if it is to manage risk and ensure payments for ultra-costly therapies. This operational and compliance aspect will only become more important as more specialty medications become available and there are more patients to serve.
Prescription validity verification
While large, chain pharmacies may have systems in place for prescription validation, many specialty pharmacies currently rely on “mix-and-match” data and technology that have glaring gaps and inefficiencies. As specialty pharmacy grows, it should be able to perform real-time, comprehensive checks within existing workflows. The purpose of the checks is not only to verify prescriptive authority but also to mitigate the risk of regulatory fines, and maintain compliance with federal licensing, state credentials and controlled substance regulations.
Prescriber verification is also a vital step in ensuring patient safety. Specialty pharmacists need to know who the prescribers are and if they can authorize controlled substances, which sometimes accompany therapies for complex diseases like cancer.
What was once just a tiny segment of the pharmaceutical industry is now promising widespread innovation and further advancement. As more and more specialty drugs enter the market, pharmacies must consider how data-driven validation will enable a growth and operational success. This is not the place for pharmacies to falter on compliance or verification: patients requiring high-touch care first require trust.
Analysis: Amazon’s PillPack acquisition could rattle pharmacy market
Amazon’s acquisition of PillPack is a warning shot in what is about to become a major battle within the pharmacy space. Not only has Amazon finally made a solid move into pharmacy, it has done so via an innovative supplier which helps patients manage and organize their prescription drugs.
In our view, this is only the first play in what will be an increasingly aggressive strategy by Amazon to develop a much more significant presence in the pharmacy market. This is incredibly bad news for traditional players, like Walgreens and CVS, who stand to lose the most from Amazon’s determination to grow its share.
The problem for the traditional players is three-fold.
Firstly, the most loyal part of their pharmacy customer base is the older consumer. Over the next ten years, this cohort will become a much less significant part of the market and this will leave drugstores exposed to younger shoppers who are more likely to use both Amazon and remote pharmacy services. There is a significant risk that drugstores will see a real erosion in pharmacy customer share, especially in urban and suburban areas where Amazon can quickly deliver.
Secondly, both CVS and Walgreens have become particularly reliant on the pharmacy side to drive their businesses forward. Indeed, both companies – and CVS in particular – have consistently overlooked opportunities to improve and enhance their general retail propositions. This now means that the retail side of the business is largely incapable of driving footfall into stores which could help support the prescription and pharmacy side of the business. This folly of not investing in retail will become apparent over the next few years.
Thirdly, Amazon’s entry into any market will put downward pressure on prices and upward pressure on costs as others try to match its service. This will ultimately result in weaker earnings for drugstores going forward. Thre may be an opportunity for Walgreens to mitigate this thanks to the firepower of Boots and its potential in higher margin beauty categories, but we are far less optimistic about the prospects for CVS.
These unfavorable dynamics mean that drugstores need to rethink their futures. The addition of more services and positioning themselves as a destination for health advice and simple medical treatments are now more critical than ever. CVS has talked about this, but given Amazon’s advance, action rather than chatter is now required.
It goes without saying that despite Amazon’s determination, the pharmacy market is not as simple as other categories it has entered. Products and services are more complex and there are more regulations and procedures that need to be followed. It is also the case that some consumers may be reluctant to use Amazon for their health needs. Even so, we believe the market is ripe for disruption and, as it has demonstrated time and again, Amazon is just the player to pull that off.
Are you open to reinvention?
Summit highlights opportunities — for those brave enough to seize them
Can your company remain viable in the digital age? More importantly, what are retailers and their suppliers doing to ensure that they are staying ahead of the curve in a rapidly changing environment, where a misstep or just a day off can result in being way behind the times?
McKinsey, the giant research firm, recently found that just 8% of leaders believe their companies will remain viable if digital technology continues at its current pace. Furthermore, they found that only 5% reported having met their digital transformation goals.
In mid-April, Drug Store News and Mack Elevation co-produced an experiential event: The Digital Disruption Innovation Summit, highlighting ideas shared by Walgreens, Google, Facebook, IBM Watson, Bain, Kantar, One Click Retail and L2, a division of Gartner. The goal was to offer candid discussions on today’s business challenges and the new rules for creating competitive advantage brought on by the power of digital retailing.
Speakers at the event, held in Schaumberg, Ill., were quick to note that many larger brands have stalled growth, while smaller, niche, digitally native brands are on track to outperform in most industries. Digital and brick-and-mortar have become one; the very best eliminate buying friction, which is why price is less important to their customers, many said.
What the meeting — which drew more than 200 retailers and suppliers — found is that retailers and the manufacturing community definitely have their work to do to stay ahead of the digital retailing curve. More than half of all shopping trips begin with a search on Amazon. That means that all brands must honestly look in the mirror to ensure their value proposition is right.
Yes, the stakes are high and addressing the key issues seemed to be on everyone’s agenda. For example, Kantar’s Bryan Gildenberg shared that 50% of all future sales will come from digital. Retailers cannot run from the weekly circular, but they must transform it within the customer journey. Gildenberg challenged attendees to better understand their brand’s role in the category and whether the brand, and the company, are truly relevant.
IBM’s Steve Laughlin chimed in, as well. He shared that incumbent brands still have legacy and advantage, but they must move quickly, creating customization and personalized solutions. More than 80% of millennials expect personalized offers, which are a necessity, not an opportunity.
“Are you able to grab another’s eight-second attention span?” asked Google’s Ryan Olohan. Today’s consumer expects extreme service, agility, speed, adaptability and a start-up mindset from their service providers. B-to-B relationships are still about one idea: “Can I Trust You?” Brands must be able to tell emotional stories, creating memories that inspire others to act.
Facebook’s Carlos Garcia shared that 21% of ad investment is mobile, and consumers prefer video to most other content forms. And, he said, 20% of all searches are now done by voice, with this growth expected to escalate.
Though speakers said the price game is won through such intangibles as social responsibility, design, esthetics, reputational assurance, vision, reduced anxiety, flexibility and expertise, the brand’s website is still the most persuasive influencer. One Click Retail’s Nathan Rigby stated that 90% of purchases begin with search, 80% stay on page one and 64% focused on the top three items. Interestingly, 79% of consumers would rather learn through video versus the written word.
L2’s Chad Bright added that brands that have scaled social content across digital touchpoints and retailer partners have consistently shown higher level of engagement and awareness than going it alone. Bain’s Jamie Cleghorn, meanwhile, shared the 36 elements that create value in the B-to-B world.
What the one-day event found is that the new rules require reimagining everything through a wider lens, so opportunities are not missed. And the various speakers called on attendees to embrace the excitement and ambiguity of the moment.
In the end, it is clear that now it a pretty good time to be comfortable being uncomfortable.