Independent Specialty Pharmacies (SPs) face a multitude of headwinds. Some drugs they want to purchase are “limited distribution drugs” (LDDs), meaning the manufacturer or wholesaler will not sell to the independent pharmacy because of deals with PBMs. PBMs control and decide which independent pharmacies, if any, get admitted into pharmacy networks. Most PBMs own their own specialty pharmacies, and have an economic incentive to exclude independent SPs that present legitimate competition. These PBMs create “restricted” specialty pharmacy networks and cumbersome prior authorization procedures. Worse yet, SPs are increasingly getting squeezed by drug manufacturers unwilling to sell their LDDs to independents. An example is Genentech’s recent decision to move three infused cancer medications (Avastin, Rituxan and Herceptin) from a broad standard distribution model into the specialty distributor (limited distribution) model. Independent SPs will now face difficulty trying to obtain these often profitable drugs.
Genentech’s decision will ultimately increase acquisition costs of these drugs by hospitals and pharmacies because wholesale distributors will either cease offering discounts or simply not sell the LDDs to the independents or hospitals. Genentech is likely to see a financial benefit through cost savings associated with administering a fewer number of distributors and better pricing terms. The shifting price structure is likely to only benefit Genentech, leaving suffering patients, pharmacies, hospitals, and the health care system to absorb the increased costs. With little negotiating power available to even large hospital systems, the industry is left to make the next move. Ascension Health, one of the nation’s largest operators of hospitals and clinics, has made the bold move to ban all Genentech sales representatives from peddling its products at all 1,900 of its hospitals and clinics.
As a boutique healthcare law firm with keen knowledge of the pharmacy industry, Frier Levitt keeps a close watch on all specialty pharmacy industry developments. Contact us today to speak to an attorney.
