Specialty Distribution Trends

September 12, 2016

Specialty products are challenging the status quo. Whether due to innovation, health outcomes, complexity, or cost, this product class has driven the reinvention of brand planning, allowing companies to cope with an increasingly complex regulatory and economic environment.

Despite the evolving challenges of the current environment, the four cornerstones in all brand planning and marketing activities remain product, promotion, price, and place.

The pharmaceutical industry spends a great deal of time researching and planning product, promotion, and price; we are hard-wired to keep them in mind. Yet, sadly, we are not plugged into place.

It is always interesting when we ask marketers if they include place in their marketing and brand plans. To be honest, the answer is usually no. Little or no effort, analysis, or research goes into place, which can, indeed, be critical for success, especially for specialty and oncology distribution.

The movement of product and money from your warehouse or third-party logistics provider to the patient is a fascinating journey, and there are incredible nuances that should be understood for those working with oncology and specialty product launches and brand planning.

Your choice of distribution model (open versus closed, full access versus limited access), as well as accompanying terms and conditions, is also a major factor for success in achieving patient focus and bottom-line financials. Preferred pharmacy networks and, if applicable, patient support partners (PSPs) should be fully understood and explored to determine where synergies exist as part of the planning cycle.

At Pangaea, we estimate that the overall Canadian prescription drug market is $24.9 billion CAD annually, and is segmented into the following three channels:

  1. Retail distribution channel (82%)
  2. Hospital (12%) 
  3. Direct-to-patient (6%)

The retail segment is primarily indirect from manufacturer to pharmacy via wholesale distributors and self-distributing retailers. The hospital segment is primarily supplied nationally by either McKesson Canada or the Canadian Pharmaceutical Distribution Network. The direct-to-patient segment is composed of mail order (which is still a small portion of the business) and a sub-set of high-priced specialty and oncology products serviced from the PSPs to the patient.

The overall cost of distribution and fees for services can vary depending on the selected channel, product requirements, region, and any additional services that may be needed to effectively manage commercialization of the product(s). Investigating these factors early on in close- and long-range commercial planning is a key step that is not to be overlooked.

The American model for specialty and oncology products is controlled by a small number of specialty distributors supplying retail stores and/or physicians’ offices. The Canadian model, however, is still primarily managed through the retail distribution channel; and although many specialty and oncology products are broadly available in the channel, they only see demand from a very small portion of the 9,000+ total pharmacies in Canada. Infused products are a further exception as a greater majority move through the PSPs.

Are we moving to an American model where these medications might only be available from a small set of all potential pharmacies? If regulations change and these products are purchased and dispensed in the physician’s office, all bets are off.

Until this question is answered, planning teams should be aware that there is a need for training at pharmacies to educate pharmacists, as well as technicians, how to properly understand, counsel, and communicate with patients taking these medications throughout the treatment cycle. This is especially true with oncology medications where potential toxicity and interactions can cause front-line pharmacists to be reluctant to get involved.

With products and knowledge in the right place, you can rest easier knowing that you have an aligned distribution strategy that supports patient outcomes while the evolving conversations on policy in the industry continue. These are exciting times!

Originally published in Canadian Pharmaceutical Marketing June/ July/ August 2016

For further information, please contact Ben Parry, Director, The Pangaea Group