Should You Put All Your Eggs In One Basket?

Do you increase or decrease risk with “one throat to choke”?  Is the best form of government a benevolent dictatorship, such as Plato’s aristocracy (as described in Book VIII of The Republic)?

For rare disease products with very small patient populations (certainly under 500 US patients, maybe as high as 5,000) and a pharmacy benefit (typically an oral or self-injectable) there’s a big decision to make with the distribution network.

Assuming the rare disease has a complex patient treatment journey and the cost of therapy is high (say more than $120,000 annually) the right dispensing choice is specialty pharmacy providers (SPPs) not retail pharmacies (who won’t stock a high cost therapy with low volume and will struggle with likely insurance barriers such as prior authorization.)  One orphan therapy, with an annual price tag of over $300,000, that tried to launch into retail via full line wholesale not surprisingly reversed that decision in favor of a limited SPP network.

So the big decision is not retail or specialty.  It’s should we use one exclusive, or two to three high-touch SPPs?  There are pros and cons to both options.

A potential advantage is removing the need for a manufacturer sponsored patient services hub.  Hub services costs can rack up quickly (one large manufacturer just realized it’s paying over $100 million per year in patient services fees).  The best SPPs can provide all of the services offered by a patient services hub and many of these services may be considered core services by the SPP (as opposed to enhanced services which may be associated with a Fair Market Value fee under the agreement between manufacturer and SPP).

On the plus side for exclusive, it simplifies the path for patients, providers, payers, the SPP and the manufacturer.  Providers only have to establish a relationship and communication with one SPP (and no hub), and there is no choice to be made based on payer coverage.  Patients will only get calls from the exclusive SPP (and perhaps a co-pay foundation if applicable).  The SPP doesn’t have to coordinate with the patient services hub.  Manufacturers can have great transparency and accountability if they only get data from one SPP, and need to manage only one SPP relationship for performance.  If a script is stuck, there’s only the SPP to call to investigate.

In an exclusive arrangement the SPP has great leverage with payers (there is no option of the payer’s own aligned pharmacy, unless it’s the exclusive SPP), so provided the payer has decided to cover the therapy, the SPP can get reimbursement once it provides the necessary documentation.

If you’ve chosen a great SPP, you’ve put together a good program, and you’re not leaving it to chance (as we discussed recently) exclusive looks pretty good.

Until things go wrong.  That fantastic account manager takes another job.  Management changes at the SPP put the focus on cutting costs at expense of service levels. The SPP gets acquired and the acquirer messes up the operations or changes the priorities.  Suddenly your entire business for this rare disease is at the mercy of this SPP.  If poor performance is enough to turn patients or providers off your therapy that could be devastating.

The choice is yours: small predictable risks but added complexity vs. larger unpredictable risk but daily simplicity.  Wishing you an absence of broken eggs this Easter!