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Limitied Drug Distribution and The Affect on Pharmacy Benefit Plan Cost

The average worker enrolled in a pharmacy benefit plan today knows that the cost of their prescription drug plan is going up.   A major driver of this is the increasing cost of specialty drugs in therapy classes such as multiple sclerosis, cancer, hepatitis C, and HIV. In the 5/16/2017 Drug Topics Newsletter, it notes that specialty drugs will account for 42% of pharmacy revenues by 2021.  Specialty Drugs are higher cost prescription medications that generally require special oversight, case management, and administration.

A rapidly growing influence within specialty drugs are limited drug distribution networks often referred to as LDDs.  The recent 2017 State of Specialty Pharmacy Report by CSIGroup.Net states that 79.2% of manufacturers are managing their products through a limited distribution model.  Clearly, in their eyes these manufacturers LDD networks are important. 

Because of the special nature of the drugs in these LDD networks, special care, training, and communication is required to assure the highest standards of patient care.  This model has opened the door for potentially higher Pharmacy Benefit Manager (PBM) profit margins as a very small number of traditional and specialty pharmacies are selected by manufacturers to dispense these drugs.  There are many qualitative reasons related to patient care as to why this is the case.  That said, careful attention should be paid to the cost of these drugs going forward as they are projected to be a major driver of plan cost. 

One concern of LDD networks is whether price gouging is an issue.  There are examples such as Daraprim which increased from $13.50 to over $750 per tablet in 2015 as noted by The Atlantic’s June 14, 2016 issue.  The US Senate Special Committee on Aging is investigating limited drug distribution networks over a concern of the impact of anticompetition on pricing and the ultimate cost to the individual taking a specialty medication.

The point of this blog is to raise awareness on topics that can affect the ongoing cost of pharmacy benefit plans.  In this vein, plan sponsors should note that often LDD specialty drugs can be a material cost driver.  Note that a drug of this nature may have a much lower discount and may also have a cost which can vary significantly from one LDD pharmacy to another which is something that should be watched carefully.