Wednesday, August 28, 2019

The State of Specialty Pharmacy 2019: Industry Trends and Photos from #Asembia19 (rerun)

This week, I’m rerunning some popular posts while I work on the forthcoming 2019-20 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors. Click here to see the original post and comments from May 2019.

Last week, Paula and I had the pleasure of attending Asembia’s 2019 Specialty Pharmacy Summit at the wonderful Wynn Las Vegas.

The Specialty Pharmacy Summit remains the most important forum for learning, networking, and conducting business throughout the entire specialty marketplace.

Today marks the ninth year that I will violate Vegas code and tell you what happened there.

Below, I offer reflections on the meeting, share my experiences during the featured session, and highlight four crucial specialty industry trends. You’ll also find a link to the conference’s Featured Session slides and cool photos—including two of the many selfies for which I posed during the meeting. Enjoy!

REFLECTIONS FROM #ASEMBIA19

Asembia’s Specialty Pharmacy Summit remains the undisputed champion for conducting business in the specialty marketplace.

The 2019 Summit attracted an incredible range of job functions and organizations. This event has more diversity than any other industry event. As in previous years, the largest manufacturers, wholesalers, and pharmacies sent dozens of representatives. A few companies had more than 100 people at the conference.

This year, I noticed a greater presence of account directors and managers from every part of the drug channel. Consequently, the number of private meetings has increased faster than the number of attendees. Like many other people, I spent much of the summit running between private meetings. I was therefore happy that Asembia reinstated the opening reception, so Paula and I could catch up informally with our industry friends.

We should all be thankful that Larry and Robert Irene have personally sustained and grown an annual event that unites all aspects of the specialty industry in a neutral forum. The Wynn’s coming expansion looks to make the 2020 Summit even bigger, better, and more productive.

Doug, Lisa, and I delivered another successful Featured Session on the specialty industry's outlook.

I again had the honor of leading the event’s Featured Session, Specialty Pharmacy Industry Outlook: What’s Next?. I was joined by Doug Long from IQVIA and Lisa Gill from J.P. Morgan Securities. SpongeBob SquarePants also made a surprise appearance.

We made our slides available in real time at the conference via this @DrugChannels tweet. You can download the full deck here: https://drugch.nl/asembia19

If you were there on Wednesday morning, you also heard our spirited panel discussion. We of course took a selfie from the stage—my Asembia tradition!

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I had some general session fun with Maria Shriver.

To conclude Wednesday morning, I had the great privilege of interviewing the inspiring Maria Shriver. I was a bit nervous about this session. I don’t normally sit casually in front of thousands of people and chat with an internationally known journalist and celebrity. Unsurprisingly, she was a true professional and made my job very easy.

Here’s a picture of us on stage. I’m on the left.

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FOUR TAKEAWAYS ON THE STATE OF SPECIALTY PHARMACY IN 2019

Here are four additional observations, based on my conversations at the summit:

1) Specialty drugs continue to drive the pharmacy and PBM industries, though growth is slowing.

Total prescription dispensing revenues from specialty drugs at retail, mail, long-term care, and specialty pharmacies reached $146 billion in 2018, an increase of 6.0% from the 2017 figure. (See Exhibit 36 of our 2019 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.) This growth rate was a historical low. We estimate that specialty drugs accounted for more than one-third of the pharmacy industry’s revenues in 2018.

2) The larger independent specialty pharmacies are pulling ahead.

There appears to be an unexpected growth rebound for some of the larger independent specialty pharmacies. So far in 2019, these companies are growing more quickly than the overall specialty market.

As I see it, leadership at the winners have a business mindset. This means that they are not afraid to exit unprofitable therapeutic categories and reject contracts with subpar reimbursement. These savvy specialty pharmacies are successfully marketing their businesses’ capabilities and services to regional payers and health plans.

In some case, these SPs have been added as a network option even after the payer has limited specialty dispensing to a PBM-owned pharmacy. They are also focusing on patients covered by Medicaid and Medicare Part D, two of the fastest-growing payers for prescription drugs. (See Section 7.1.3. of our 2019 pharmacy/PBM report for details.

As in Vegas, luck also helps. The bigger companies are benefiting from the exit of Avella Specialty Pharmacy (acquired by UnitedHealth Group’s OptumRx) and the troubles at Diplomat.

3) Many smaller independent pharmacies are struggling—and want to cash out.

After last year’s Asembia meeting, I predicted: “Specialty pharmacies are entering a period of intense competition that will reduce prescription profits.”

Unfortunately, this prediction seems to be coming true for many smaller specialty pharmacies. I spoke to numerous owners who told me about competitive pressures, struggles to gain access to payer and PBM networks, and profit challenges associated with direct and indirect (DIR) remuneration payments to Medicare Part D plans. As we show in The Top 15 Specialty Pharmacies of 2018: PBMs Keep Winning, PBMs and insurers dominate specialty drug dispensing channels.

Consequently, I heard about many owners looking to sell their companies. Based on my chats with business brokers and bankers, these owners may face valuations far below their expectations.

4) Hospitals and health systems are battling—and partnering with—PBMs over specialty pharmacy.

As I show in The Specialty Pharmacy Boom: Our Exclusive Update on the U.S. Market, about one-quarter of all accredited specialty pharmacy locations are owned by hospitals, health systems, physician practices, and providers’ group purchasing organizations.

Drug Channels Institute estimates that in 2018, the 10 largest specialty pharmacies owned by health systems had specialty pharmacy revenues of $170 million to $425 million. (See Exhibit 50 of 2019 pharmacy/PBM report for the list.)

However, competitive conflicts continue to grow between PBMs and provider-owned pharmacies. Many hospitals are discovering that their patients may be unable to fill (or refill) prescriptions at the provider-owned facility. In a few situations, payers are trying to alter reimbursement in order to capture 340B drug discounts for commercial plan sponsors—which is totally unacceptable behavior, IMHO.

For evidence, look no further than Premier’s decision to unload its specialty pharmacy business to CVS Health. Premier implied that 2019 annual revenues were $470 million, which is higher than our estimates for 2018. Alas, Premier's specialty pharmacy business was apparently losing $6 million per year.

Payers’ network management is—or should be—making hospitals and their consultants reduce revenue and profit forecasts. Ironically, it is also now encouraging hospitals to deepen 340B contract pharmacy partnerships with PBM-owned specialty pharmacies. For our evidence of these relationships, see Specialty Pharmacies and PBMs Penetrate the 340B Program—And How Manufacturers Should Respond.

Much more to come as the shakeout intensifies.

THANK YOU, DEAR READERS!

Thanks to the many Drug Channels readers who introduced themselves at the summit. I am gratified by your compliments and words of encouragement.

I had many requests for selfies. In honor of the gross-to-net bubble, the jokers at CoverMyMeds and RelayHealth asked me to sign SpongeBob SquarePants t-shirts. Very cool!

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Below is a fun photo featuring my Club XS party shirt along with leaders with Humana Specialty Pharmacy (left to right: Lori Grebe, me, Adam Hanauer, and Diane Wolfe)

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Paula, my wife and business partner, and I are grateful that Drug Channels Institute remains useful and valuable to people throughout the industry. Below is a picture of us relaxing at the Wynn. We’ll see you at #Asembia20.

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