Tuesday, May 08, 2012

Armada 2012: Reflections on the Evolving Specialty Marketplace

Last week, I attended the always-energizing Armada Specialty Pharmacy Summit in Las Vegas. In violation of standard Vegas rules, I’ll tell you what happened there…or at least the part related to the specialty market.

As always, the Irene brothers put on a top-quality event at the Wynn, my personal favorite Vegas hotel. I came away impressed by the diversity and scale of the specialty pharmacy marketplace. Future directions for the specialty pharmacy industry were evident everywhere. Below are four observations from my conversations at the meeting.

Special thanks to the many, many Drug Channels readers who introduced themselves to me during the Summit. I feel privileged to have such loyal and thoughtful readers.


Booming market, booming conferences. I continue to be amazed by the Armada Summit’s size and diversity of participants. Attendance was reportedly up by 30% (per Drug Store News), even after PCMA’s also-excellent specialty pharmacy meeting just one month earlier at the same property. The event hall looked to be twice as large as 2011. There were many more attendees from big pharma trade teams, all of which are planning upcoming specialty launches. Attendance at the long-standing traditional drug meetings will be under pressure, as evidenced by the conference shrinkage occurring at certain trade associations.

The dispensing boom is real. I made a point to chat with entrepreneurial owners of smaller specialty pharmacies, which provided a fascinating window into the marketplace. Of course, “small” is relative, as these businesses have revenues of $25 to $250 million. These pharmacies often trace their roots to a family-owned independent pharmacy that grew beyond traditional drugs by carving out a disease-specific or regional niche. See 7 Reasons Why Specialty Drug Dispensing Will Boom for more on my outlook, although …

Limited networks are hindering growth. Manufacturers strategically choose pharmacies with the distinctive capabilities required to efficiently and effectively serve patients, providers, and payers. Yet few manufacturers venture beyond the 15-20 usual suspects when putting together a limited SP network. As a result, many independent SPs can only access specialty drugs in open distribution, i.e., products stocked by full-line wholesalers that lack a manufacturer-limited network. This situation is creating the conditions for industry change, so you should …

Get ready for the roll-ups. Ultimately, I expect private-equity industry roll-ups to bring together multiple regional players and create new national players. These larger companies will be able to get the attention of payers and manufacturers. At Armada, I ran into a surprising number of private equity professionals. Fans of business history know that industry roll-ups have been a key evolutionary stage in many retail/wholesale industries, including pharmaceutical distribution, electronic components, office supplies, building materials, et al. During the 1990s roll-up boom, I even co-authored an MIT Sloan Management Review article titled Manage Consolidation in Your Distribution Channel. However, these forthcoming roll-ups will have to do more than simply bundle up specialty pharmacies, because ...

The SP business model is evolving. Mere dispensing is not enough. Phil Hagerman, Diplomat Pharmacy’s CEO, gave a talk that was an event highlight—and not just because he used Star Trek to illustrate his points! (Most logical, IMHO.) Phil highlighted the twin trends of technology-enabled patient care and outcomes-based pharmacy practice. His comments about Diplomat’s growth also underscored the organizational challenges facing smaller independent pharmacies. BTW, Diplomat is now the largest independent specialty pharmacy and has a surprisingly broad number of strategic initiatives underway. It’s an impressive company with a unique vision. Keep an eye on them.


Armada will be back at the Wynn in 2013. I hope my gambling skills improve dramatically by then!


  1. Linda wiantMay 08, 2012

    Adam, As a State pharmacy director, I'd like to attend one of these specialty drug meetings.  As you can imagine, the budget for these is limited, so if you can do so, I'd love to know your thoughts about which one is the best bang for the buck so to speak.   Also, since I've missed two good ones already, are you aware of others of a similar nature that are coming up this year?  Thanks for any suggestions you have!  Love the column, btw. 

  2. Great post Adam....
    Live Long & Prosper!

  3. Chris Benz, Armada SP SummitJune 20, 2012

    Linda, we would very much welcome your participation at our Annual Armada Specialty Pharmacy Summit. Our 2013 event is scheduled for May 7-10, 2013 again at the Wynn. Please feel free to contact me via www.armadasummit.com for additional details.