Russel Allinson, RPh, MS
CEO and Chief Clinical Officer
Specialty pharmacy today represents the fastest growing segment of pharmacy spending and is one of the fastest growing segments in all of medical costs. Specialty spending increased more than sixteen percent in 2006. The spending growth for specialty drugs accounted for nearly twenty-five percent of the total growth in drug spending in 2006, making it the largest category driving drug spending. Specialty pharmaceuticals spending in 2008 is estimated to be $85 billion, according to IMS Health. Total spending in 2010 is estimated to be $100 billion, representing a growth of nearly eighteen percent over the next two years. This growth is fueled by the increased use of existing therapy for more patients, expansion of indications for existing products, and of course a robust pipeline. The specialty pipeline is estimated to have 600 products in trials.
The origin of specialty pharmaceuticals can be traced to three different events. The first was the creation of the Orphan Drug Act of 1983. This act of Congress was intended to encourage pharmaceutical manufacturers to investigate therapies that would treat conditions that affected smaller groups of patients (<200,000). The law offers a drug developer certain financial benefits and incentives from the government in exchange for researching, developing, and getting a drug approved for a rare disease or condition. Since 1983, over 325 orphan drugs have been approved by the FDA.
Second, advances in biologic technologies fostered the creation of specialty products. No longer were drug discovery and production limited to chemical processes; advances in biologic processes enabled the development of drugs produced by biotechnology.
Last, the development of genetic coding technology, discernment of the human genome, and an understanding of the genetic basis of disease, in conjunction with the aforementioned events, propelled the rapid development of biotech medications and ushered in the age of specialty therapy. Although no specific criteria have been established to define a specialty product, the following attributes are agreed as belonging to the class:
- Expense. As a general rule, specialty therapy costs between $20,000 and $25,000 per year but may range up to $250,000 or more.
- The product is used to treat a chronic condition (with a few exceptions); patients treated with specialty products may expect to be on a lifetime of therapy.
- Because the products are often made up of large molecules, they are susceptible to degradation by the gut and, therefore, are most often administered via a subcutaneous or intramuscular injection or an intravenous infusion.
- Billing. In the past, because these drugs were often administered in the physician's office, the physician billed the drug to the patient's medical benefit with an administration fee. This practice resulted in these products having a very cumbersome reimbursement process, which few community pharmacies had the knowledge or desire to follow. This attribute alone may have been the reason initially that specialty products migrated to specialty pharmacies that had the systems, processes, and knowledgeable staff to manage this complex reimbursement system.
- Special handling, dosing, and patient support requirements. Given these attributes, it is easy to understand how these products migrated to pharmacies with the financial resources and the technical and professional experience to manage them successfully.
Specialty pharmacy has often been compared with medicine, where a specialization "an inch wide and mile deep" develops quickly. Two early examples in the 1990s were Accredo and Stadtlanders, who grew multimillion-dollar businesses based on one or two therapies. As knowledge of specialty pharmacies grew, manufacturers with new specialty products sought them out as ideal pharmacies to launch their new products, further reinforcing the concept and adding to their reputation. Discussion of these new products will be a subject of future articles.