Tuesday, May 10, 2016

The State of Specialty Pharmacy in 2016: Reflections from #Asembia2016

Last week, Paula and I had the pleasure of attending the 2016 Asembia (formerly Armada) Specialty Pharmacy Summit, in wonderful Las Vegas.

The Asembia Summit is now the undisputed, must-attend meeting for anyone in the specialty industry. Nearly 5,000 people were meeting, networking, and connecting at the Wynn Las Vegas. We should all be grateful to Larry and Robert Irene for making this gathering bigger and better every year. Click here to savor the social media action from #asembia16.

Today’s post marks the sixth time that I will violate Vegas code and tell you what happened there—excluding the goings-on at the over-the-top Encore Beach Club party on Wednesday. (Well, one fun picture made it into the post.)

Below, I offer my latest reflections on key specialty industry trends facing manufacturers, pharmacies, wholesalers, PBMs, payers, and trade associations. Feel free to add your own observations in the comments.

ADAM’S REFLECTIONS ON SPECIALTY PHARMACY IN 2016

1) The Asembia Specialty Pharmacy Summit has become the most important meeting for conducting business in the specialty marketplace.

The largest manufacturers, wholesalers, pharmacies, and PBMs all sent dozens of people. (See below for two notable exceptions.) I estimate that more than one-third of the nearly 5,000 registered attendees came from fewer than 40 organizations. There were also hundreds of smaller companies, service providers, technology companies, investors, and more. About 2,000 of the attendees were first-timers—primarily from health systems, managed care organizations, and financial firms.

Consequently, the summit felt like two separate meetings. Most people (including me) spent the week consumed with private meetings—and also battling for a spot on an elevator to the tower suites.

Other spent time in more than 70 educational sessions of varying quality. I suspect that these sessions were targeted toward people trying to learn more about the industry. I hope that next year, Asembia can organize the sessions into tracks that make the programming more coherent.

Two PBMs—Express Scripts and Aetna—had an unexpectedly minor presence at last week’s proceedings. Express Scripts/Accredo sent three people, while Aetna sent only two. Whatever misgivings these companies have about Asembia's Summit, they will find it hard to stay away in 2017.

2) The specialty dispensing boom keeps on booming.

Diplomat Pharmacy CEO Phil Hagerman once said: “Specialty pharmacy is the new pharmacy.” Consequently, the Asembia Summit drew hundreds of pharmacies operated by such organizations as pharmacy benefit managers, retail chains, health plans, pharmaceutical wholesalers, physician practices, and hospital systems. There were also many independent specialty pharmacies. That was no surprise given that by 2020, almost half of the pharmacy industry’s $483 billion in revenues will come from specialty drugs. (See Our 2020 Outlook for Specialty Pharmacy Revenues.)

As expected, smaller pharmacies are aggressively seeking to demonstrate their competencies to payers and manufacturers. Accreditation was a hot topic, with presentations by the three major specialty pharmacy accreditors: the Accreditation Commission for Health Care (ACHC), the Utilization Review Accreditation Commission (URAC), and the Center for Pharmacy Practice Accreditation (CPPA). As you may recall, our analysis found that nearly 400 pharmacy locations already have specialty pharmacy accreditation, per The Specialty Pharmacy Accreditation Boom Continues. Based on my conversations with accreditors and pharmacy owners, that number will continue to grow.

3) Health systems are still trying to grab a bigger piece of the action.

Hospitals and health systems were again well represented at the summit, with many attendees and multiple sessions addressing care coordination across medical and pharmacy benefits and sites of care. I’ve been tracking providers’ pursuit of specialty pharmacy for a while, per section 3.3.5 of our 2016 Economic Report on Retail, Mail, and Specialty Pharmacies.

In theory, health systems could provide more integrated, comprehensive care for patients with complex, chronic conditions that are typically treated with specialty medications. In practice, health systems are often unable to penetrate manufacturer- and payer-defined specialty pharmacy networks. Health systems’ less-than-ideal position reflects the battle for control over the specialty patient. Although health systems have good intentions, I’m still not convinced that many health systems have the organizational focus and capabilities that they need to succeed as true specialty pharmacies.

4) Care coordination is struggling against the battle to control the specialty patient.

I heard a lot of inspiring talk about outcomes-based contracting, continuity of care, and integrated care models. However, fewer people are discussing a tough organizational reality: Each market participant wants to lead patient care services. Competition to provide specialty drugs and related services is incredibly intense. Just about every market participant—pharmacies, hubs, health systems, physicians, technology companies, retailers, and others—argued for its prominence as the captain of the “patient journey.”

In private conversations, the competitive reality became clear. Will a provider accept an at-risk reimbursement when drug therapy is managed by a PBM-owned, central-fill pharmacy? Will a manufacturer offer an outcomes-based price when patient outcomes are determined by the performance of pharmacies and providers? And so on.

5) Payers are getting even more aggressive about managing specialty drugs under both the pharmacy and medical benefits.

Given specialty’s growing share of drug spending, payer perspectives were well-represented at the summit. From what I heard, many payers reiterated their reliance on the utilization management tools that are already well-established in pharmacy benefit management of specialty drugs. (See Exhibit 61 of our 2016 pharmacy report.)  And as I describe in Here Come the 2016 PBM Formulary Exclusion Lists!, tighter formulary management is becoming routine for specialty drugs.

The next frontier is medical benefit management, which applies these tools to interventions with physicians and providers. Site-of-care management will grow because there are enormous disparities in costs for provider-administered specialty drugs. In theory, insurer-owned PBMs could have an advantage over such PBMs as Express Scripts, CVS Health, and smaller competitors. Providers, however, will likely challenge implementation of integrated pharmacy-medical drug management. I expect we’ll hear much more on this topic at future Asembia meetings.

6) Manufacturers’ agreements with specialty pharmacies are evolving.

Now that the Asembia Specialty Pharmacy Summit has become a key setting for business partner negotiations, the larger specialty pharmacies spent every day in back-to-back meetings with manufacturers. During those meetings, it became clear that the Novartis case and its settlement are having a significant impact on how manufacturers are structuring agreements with specialty pharmacies.

Different manufacturers, however, are interpreting the lessons from that case in varying ways. Shannon Wiley and Mike Hess from Bass Berry & Sims provide a useful legal primer in Novartis Corporate Integrity Agreement Provides Outline for Pharma-Contracting Compliance Program. Channel participants should pay attention to the new constraints on manufacturers’ behavior.

7) Wholesalers are struggling to define a profitable role in the specialty pharmacy channel.

Behind the scenes, there was grim talk by and about pharmaceutical wholesalers, because the specialty pharmacy industry’s growth is turning out to be less than satisfactory for distribution intermediaries. Payer and manufacturer network strategies are shifting specialty product sales into the largest specialty pharmacies—which are also wholesalers’ least profitable customers. (See The Top 10 Specialty Pharmacies of 2015.)

Oddly, wholesalers continue to make hard-to-believe threats that they won’t stock a manufacturer’s specialty product. (Self-disintermediation?) They are also applying “net pricing” terms to smaller pharmacies, which are getting squeezed. The pressure on wholesalers was apparent in the quarterly earnings at McKesson and AmerisourceBergen, both of which reported financial results during the summit.

8) The meeting ecosystem is evolving.

As I warned last year, the summit's success signals that the traditional pharmacy trade associations—the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA)—have become irrelevant to specialty drugs. Anyone who is serious about specialty pharmacy was in Las Vegas last week. Asembia is also drawing people away from other large meetings. The Academy of Managed Care Pharmacy (AMCP) should also be sweating. Its spring meeting, which normally occurs just a few weeks before the summit, could quickly devolve into a purely clinical event that most senior business leaders skip.

I expect that two smaller association meetings will continue to co-exist with the Asembia Summit:
Our Drug Channels sponsors also offer targeted educational conference throughout the year.

A PERSONAL REFLECTION
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Once again, I was amazed and humbled by the many Drug Channels readers who introduced themselves. I deeply appreciate your words of encouragement and support. I’m grateful that this site remains useful and valuable to people throughout the industry.

Thank you for reading, and thank you for letting me know how much you enjoy Drug Channels.

See you at #Asembia17. Viva Las Vegas!

P.S. Many of my observations and predictions from past meetings still hold true. Refresh your memory with these articles:

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