Tuesday, September 01, 2015

Specialty Pharmacy’s Bright but Complex Future: Seven Reflections on #Armada15 (rerun)

This week, I’m rerunning some popular 2015 posts, so I can work on the forthcoming 2015-16 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors

Click here to see the original post and comments from May 2015. And if you want to beat the crowds, you can register now for the 2016 Armada Specialty Pharmacy Summit.

Last week, Paula and I had the pleasure of attending the 2015 Armada Specialty Pharmacy Summit, in wonderful Las Vegas.

Armada has cemented its position as the must-attend event for anyone participating in the specialty channel. Kudos to Larry Irene and Robert Irene. They’ve had the vision and wisdom to invest in making the meeting bigger and better every year. The social media buzz also was impressive. Check out the many, many #Armada15 tweets.

Continuing my annual violation of Vegas code, I'll tell you what happened there—what I heard and learned about specialty pharmacy’s future. If you were there, please add your own comments and observations.


1) The gold rush continues

Attendance at this year’s Armada Specialty Pharmacy Summit exceeded 3,500 people—continuing the event’s amazing annual growth. This year, there were more private meeting rooms than ever before. The largest manufacturers, wholesalers, pharmacies, and PBMs all sent dozens of people. Many presentations were standing-room-only.

Diplomat Pharmacy loomed large in the background. Ever since Diplomat went public last fall, its stock price has grown by 125%. With a $2.1 billion market cap, the company has every specialty pharmacy seeing dollar signs. Some will be disappointed at their pharmacy’s ultimate valuation, but there is plenty of money to be made as the industry evolves.

2) Smaller specialty pharmacies are growing up

At this year’s Summit, I met numerous independent pharmacy owners who are proactively growing their specialty dispensing businesses. Most had disease-state expertise with open-distribution specialty drugs that treat such diseases as HIV and hepatitis C.

From my conversations, it’s clear that these pharmacies have grown by developing and marketing their capabilities and services to prescribers, payers, and manufacturers. Such growth requires investment in people, infrastructure, and business communications. As the manufacturers hearing their pitches learned last week, they are not waiting around as the world changes.

It’s a different path from that of a typical independent pharmacy, which relies mostly on physical location, local consumer service, and participation in PBM networks.

3) Manufacturers are becoming better organized, but confusion still reigns

Account management and strategy responsibility still vary widely among manufacturers. Hence, most manufacturers had multiple teams and functions represented at the Summit.

While this diversity helped make the meeting feel comprehensive and inclusive, it also reflected fundamental uncertainties about key questions:
  • How should managed markets and trade functions handle payer- and PBM-owned specialty pharmacies? 
  • Should brand managers create dedicated teams to handle independent specialty pharmacies, or should they allow the trade function to call on these businesses? 
  • Who should lead strategy development and contracting? 
  • How should manufacturers balance the needs and requirements of reimbursement, market access, and channel strategy?
Over time, these questions will be answered, and something resembling a “common practices” will emerge. Until then, expect ongoing diversity of approaches and organizational structure.

4) Payers are accelerating specialty management tools

At this year’s Summit, payers and PBMs had a bigger presence than ever. Of the 39 (!) sessions on Thursday, almost half focused on drug costs, spending, and benefit design. Many of the others dealt with these issues indirectly. As the industry shifts, managing pharmacy benefits will be increasingly equated with managing specialty drugs and the patients who take these products.

I like how Eric Percher at Barclays phrased this issue:
“Sovaldi is now a verb and payers must avoid getting 'sovaldi'd by high cost product introductions.”
Let’s hope that payers and PBMs understand that highly effective specialty therapies reduce medical spending. Otherwise, we’ll find ourselves arguing about price without value. For more on this theme, see Express Scripts New Trend O’ Drugs Report: Price Without Value.

5) Hospital and health system are targeting rapid specialty pharmacy growth

At this year’s Armada Summit, hospitals and health systems had a bigger presence than ever. I’ve been tracking this trend for a while, per section 3.3.5 of our 2014-15 Economic Report on Retail, Mail, and Specialty Pharmacies.

I had many fascinating conversations about the rapid growth of health system and hospital specialty pharmacies. Since most health systems compete within a single region, they are eager to share best practices with health systems from other parts of the country. Such collaboration and knowledge-sharing would never occur among independent specialty pharmacies.

This growth poses one more challenge for manufacturers: What happens when health systems demand access to specialty pharmacy products in limited networks?

6) The specialty pharmacy ecosystem also is booming

Reflecting the growing professionalism within the specialty sector, a broad industry of supporting business providers is emerging. I was astounded to see that the Armada exhibit hall had filled a large ballroom at the Wynn Las Vegas. Exhibitors included business offering software, apps, legal, financial, and other services for specialty drugs.

Three good examples:
Each of these organizations recently published a guest post on Drug Channels.

7) The traditional pharmacy associations should be very, very nervous

Armada’s success signals that the traditional pharmacy trade associations—the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA)—risk becoming irrelevant to specialty drugs.

As the generic dispensing rate rapidly approaches 90%, retail pharmacy is becoming a generics and front-end business. In recognition of this emerging reality, NACDS has already collapsed its summer meetings into a single Total Store Expo (TSE) meeting. To me, however, it feels more like a front-end and generic expo. The Armada exhibit hall was crowded and buzzing with activity. At last August’s NACDS TSE…well, not so much buzz on the pharmacy side.

I understand the economic realities. In 2013 (the most recent year available), NACDS earned a cool $25.4 million from its conferences. So why has NACDS added more restrictive conference attendance rules and deemphasized brand-name pharmaceutical products? It will merely encourage the broader industry to gravitate toward the Armada Summit. At least NCPA finally had the good sense to send two observers to lurk around the Armada Summit.

In the meantime, keep an eye on the newly reborn National Association of Specialty Pharmacy. Its annual meeting will be held in late September this year.


I’m still having lots of fun.

Let me offer a hearty thanks to all who introduced themselves at the meeting. The many positive compliments for Drug Channels were truly gratifying.

I hunt and peck these missives and blast them out into the blogosphere. Judging by the kind and frequent feedback at Armada, you really appreciate the effort.

Thank you for reading, and thank you for letting me know how much you enjoy the site.

See you at #Armada16!

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