What's So Special About Specialty Pharmacy. Specialty Pharmacy Explained.

This video provides an in-depth exploration of specialty pharmacy, explaining its unique characteristics, historical development, and the current market landscape dominated by Pharmacy Benefit Manager (PBM)-owned entities. Dr. Eric Bricker begins by defining specialty medications as those requiring "high-touch" distribution, administration, and patient management due to their complexity, cost, or specific patient needs. He highlights that there is no single official definition but emphasizes the intensive support required, such as for hemophilia or HIV medications. The discussion then traces the origins of specialty pharmacies back to the 1970s, when they emerged to handle rare disease treatments that were expensive, required extensive paperwork for reimbursement, and often needed specialized storage and home delivery.

The presentation delves into the accreditation process for specialty pharmacies, noting that only 3% of all pharmacies hold such accreditation, primarily from the Accreditation Commission for Health Care (ACHC) or the Utilization Review Accreditation Commission (URAC). A significant portion of the video is dedicated to illustrating the stark market consolidation within the specialty pharmacy sector. Dr. Bricker reveals that the largest specialty pharmacies are overwhelmingly owned by the major PBMs: CVS Specialty Pharmacy, Accredo (Express Scripts), and Optum Specialty (Optum RX), collectively generating tens of billions in annual revenue. In contrast, specialty pharmacies owned by large retail chains like Walgreens, Walmart, and Kroger have significantly smaller revenues, underscoring a profound market imbalance.

The core reason for this disparity, as explained in the video, is the practice by PBMs of requiring patients to fill their specialty medication prescriptions exclusively at the PBM's own specialty pharmacy for the medication to be covered by insurance. This effectively eliminates competition, leading to concerns about inflated costs and potentially compromised service quality due to a lack of market incentives. The video concludes by detailing the ongoing legal battles surrounding this PBM practice. It recounts the 2020 Supreme Court ruling affirming states' rights to regulate PBMs, Oklahoma's subsequent law prohibiting PBMs from mandating the use of their own pharmacies, and the successful lawsuit by the PBM trade association (PCMA) against Oklahoma, which was upheld by the 10th Circuit Court. The current status involves 32 states petitioning the Supreme Court to overrule the 10th Circuit's decision, leaving the regulatory future of PBM-owned specialty pharmacies uncertain as of August 2024.

Key Takeaways:

• Definition of Specialty Medications: These are "high-touch" drugs requiring specialized support in distribution (how they get to the pharmacy), administration (often self-injected by patients), and patient management (e.g., genetic testing for HIV medications), distinguishing them from typical prescriptions.
• Historical Context: Specialty pharmacies originated in the 1970s to address the unique challenges of orphan disease medications, which were expensive, required complex insurance reimbursement paperwork, and often needed specific storage and home delivery solutions.
• Accreditation and Market Share: Only a small fraction (3%) of all pharmacies are accredited as specialty pharmacies, primarily by ACHC or URAC, highlighting the specialized nature and regulatory oversight required for these operations.
• PBM Dominance: The specialty pharmacy market is heavily consolidated, with the top three PBM-owned entities (CVS Specialty, Accredo/Express Scripts, Optum Specialty) generating vastly more revenue (e.g., CVS Specialty at $73B) compared to specialty pharmacies owned by major retail chains (e.g., Walmart/Kroger at $3B each).
• Lack of Competition: The primary driver of PBM-owned specialty pharmacies' dominance is the PBMs' practice of requiring health plans and patients to use their proprietary specialty pharmacies for coverage, effectively stifling competition and limiting patient choice.
• Implications of Limited Choice: This lack of competition among specialty pharmacies, due to PBM mandates, is highlighted as a factor that can lead to higher medication costs and potentially lower service quality for patients and health plans.
• State Regulatory Authority: In 2020, the Supreme Court affirmed that states have the right to regulate PBMs, opening the door for legislative action to address anti-competitive practices.
• Oklahoma's Legal Challenge: Oklahoma passed a law to prevent PBMs from mandating the use of their own specialty pharmacies, aiming to increase choice and competition.
• PBM Counter-Action: The Pharmaceutical Care Management Association (PCMA), a lobbying group for major PBMs, successfully sued Oklahoma, arguing that state regulation is preempted by ERISA (Employee Retirement Income Security Act), a decision upheld by the 10th Circuit Court.
• Ongoing Legal Uncertainty: As of August 2024, 32 states and Oklahoma have petitioned the Supreme Court to review and potentially overrule the 10th Circuit's decision, indicating that the legal and regulatory landscape for PBM-owned specialty pharmacies remains highly fluid and uncertain.
• Impact on Pharmaceutical Commercial Operations: The evolving regulatory environment and the dynamics of PBM control over specialty pharmacy distribution channels are critical considerations for pharmaceutical companies in their commercial operations, market access strategies, and patient support programs.

Key Concepts:

• Specialty Pharmacy: Pharmacies that dispense high-cost, high-complexity medications requiring specialized handling, administration, and patient support.
• Specialty Medication: Drugs that treat complex, chronic, or rare conditions, often requiring specific storage, administration (e.g., injections), and intensive patient management.
• High-Touch: Refers to the extensive support and services required for specialty medications, encompassing distribution, administration, and patient management.
• PBM (Pharmacy Benefit Manager): Third-party administrators of prescription drug programs for health insurance companies, Medicare Part D plans, and large employers. They negotiate drug prices, manage formularies, and process claims.
• ERISA (Employee Retirement Income Security Act): A federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans. PBMs often argue that state regulations are preempted by ERISA.
• Accreditation: A process by which an organization (e.g., ACHC, URAC) evaluates and recognizes a specialty pharmacy as meeting predetermined standards of quality and performance.

Examples/Case Studies:

• Hemophilia Medication: Cited as an early example of a high-cost, complex medication for a rare disease that drove the need for specialty pharmacies.
• HIV Medications: Used to illustrate medications that require complex patient management, including genetic testing of the virus to determine effective drug regimens.
• Huma (likely Humira): Mentioned as an example of a specialty medication dispensed by PBM-owned pharmacies.
• Oklahoma State Law: A specific example of a state attempting to regulate PBMs by preventing them from requiring patients to use their owned specialty pharmacies.
• PCMA Lawsuit: The Pharmaceutical Care Management Association's successful legal challenge against Oklahoma's law, arguing ERISA preemption.