What’s so special about specialty? This was the question lurking below the surface in many of the presentations at a conference hosted by Pharm Exec’s sister organization, CBI, in Philadelphia last week. Now that the blockbuster era is fading under a wave of patent expirations, big pharma is pinning its hopes on the specialty category – innovative, high-priced, difficult-to-manufacture drugs with a small but well-differentiated customer base focused on unmet clinical needs. But like the careening car race to the money pit in the movie classic It’s a Mad Mad World, companies are pouring time, people and resources to chase a “new” model for profits that may already be passé.
More competition. Nearly two thirds of the R&D pipelines of the major innovative drug companies are now focused on specialty drugs. Assuming some of these will be authorized for sale, the result is going to be increased competition and declining market exclusivity per therapeutic category – mirroring the trend already evident in primary care. The overall impact is more choice for payers, leading to increased pressure on specialty’s ability to command premium pricing.
Fiscal pressures. More of the high cost burden for specialty drugs is being passed on to patients. This is shredding the argument that specialty drugs are “special needs” and thus exempt from the normal dictates of a price-conscious consumer market. The ability of industry to determine how patients contribute to the cost is critical to specialty, due to a smaller prescribing base, the need to keep as many patients as possible on therapy, and the importance of tracking compliance with complex regimens,.
Unfortunately, the trend in pharmacy benefit programs is to replicate “one size fits all” solutions introduced for asymptomatic and chronic care medicines. Industry thus has to focus on creative ways to help a key untapped constituency – the under-insured – pay for high-end specialty drugs. Occupying the vast middle ground between subsidized low-income patients and the larger self-insured employer and union pools, the needs of the under-insured must be addressed. Failure to do so will make the specialty pricing model politically non-viable. Its fate will be no different than the path for so-called “me too” drugs – can CMS negotiated prices or even price controls be far behind?
Value. Specialty’s future depends on living up to its name – the business imperative is differentiate or die. In other words, define your value to the customer, or the customer will do it for – to – you. The challenge here is that industry is not really stepping up to the plate with the hard evidence of value where it counts, in improving health outcomes, against existing products and from a system-wide perspective. A recent survey of US payers conducted by Amerisource Bergen found that 50 per cent felt they had “zero” input into the development process for new specialty drugs, with a mere eight per cent finding it “adequate.” And almost all this input occurred during the Phase III stage, which is equivalent to stopping the clock at the eighth inning, with bases loaded. Will companies really want the input at that point, or more directly can they do anything about it?
The discussions set up a stark display of two alternative futures. One is the politicians’ vision of a commoditized drug world focused on basic primary care. Innovation will drive more toward finding efficiencies in low cost services to meet budget priorities, rather than spreading the adoption of new technologies widely enough so smaller diseases or indications get priority. The other is the flexible application of innovation in drug discovery to seed the promise of personalized medicine, where specialty drugs can justify higher price points if they can demonstrate real value as a coordinating driver toward better health outcomes.
Achieving this latter outcome – which carries significant advantages to both industry and the patient – depends on investing a lot more in customer-based insight and doing what that insight actually tells you. Is big pharma alert and nimble enough to adapt to a environment where good prices are simply the result of a value proposition agreed with the customer? The answer will determine whether specialty remains special. If past is prologue, what do you think?