Asembia 2021: Specialty is a Growing Share of the Pharma Market. PBMs, Health Systems Are Vying for That Larger Slice of the Pie.

Specialty pharmacy, once a niche in the pharmaceutical industry, is on a trajectory to account for more than half of the industry’s revenues and that growth has set off some fierce competition for control of the specialty drug pricing and distribution, industry experts said today at the Asembia 2021 Specialty Pharmacy Summit in Las Vegas.

“Specialty drugs today are about 40% of the entire pharmacy industry’s revenues,” said Adam

Adam Fein

Fein, Ph.D., an expert on drug pricing and distribution and CEO of Drug Channels Institute. Within three to four years, that proportion will likely increase to 50%, said Fein.

Although independent specialty pharmacies still account for the largest share of the specialty industry, healthcare providers have moved in and now account for second largest share, according to Fein.

“In 2015, 1 out of 10 specialty pharmacies was run by a hospital or a physician practice. Today, it's 4 out of 10,” Fein told attendees at the Asembia meeting. That shift has largely coincided with the larger trend of vertical integration that has affected many aspects of American healthcare, he observed.

Doug Long, MBA, vice president of industry relations at IQVIA, also spoke at the opening session of the meeting devoted to specialty pharmacy.

Fein noted that the three largest PBMs in the United States — CVS Caremark, OptumRx, and Express Scripts — now manage more than 75% of prescription claims.

The PBMs have moved into ownership of specialty pharmacies because most manufacturers launch their specialty drugs in narrow networks, Fein explained. Meanwhile, the majority of large hospitals now have their own in-house specialty pharmacies and use them as the driver for their benefit plans. The large hospitals and their health systems “learned from what the PBMs are doing to channel patients into their business, and, in fact, the majority of the prescriptions filled by these specialty pharmacies are coming from, are written by, the prescribers who work at the health systems,” said Fein.

“Everyone is figuring this out,” he continued, “and this is where the battle is happening between

Doug Long

these different vertically integrated systems.”

Fein also discussed the controversial 340B drug pricing program, which requires drugmakers to sell their products to some hospitals and healthcare organizations at discounted prices. Supporters says it helps reduce the cost of healthcare and increase access to disadvantaged patients. Critics says healthcare systems have exploited the program to get drugs at cheaper prices and increase their revenues.

Data from IQVIA presented at the session today showed that, excluding all discounts from the program, purchasing through the 340B program accounts for more than 40% of all hospital purchasing and about 13% of all dollars in retail pharmacy.

“That means those prescriptions generate above average profits for pharmacies, often profits that are four to five times as much gross profit dollars per script as a normal commercial script, Medicare Part D script,” said Fein.

Overall, the growth of 340B is being driven by specialty drugs, and the program’s economics heavily impacts each facet of the specialty pharmacy channel, Fein noted. And on a net sales basis, the 340B program is now bigger in some ways than Medicaid, he said.

With regard to the retail specialty market, recent data show a decline, due in large part to two leading HIV drugs losing patent protection, explained Long. Therapies for HIV are among the top 10 specialty drug categories in the retail market.

Long also shared IQVIA data that showed an increased demand for mental health and pain drugs during the COVID-19 pandemic.