Over the past year, the pharma industry — and the general public, for that matter — has grown increasingly familiar with the term “middlemen.” Given recent conflicts over drug pricing, this term has unfortunately taken on a negative connotation as some allege uneven distribution of rebates through the supply chain. But a positive aspect of this enhanced scrutiny is the pharma industry’s efforts to become more transparent about the path a product takes to get to the market. As I highlighted in my recent Top 5 Biosimilar Developments of 2017 article, the Federal Trade Commission (FTC) began the conversation by holding a workshop examining drug market competition issues, allowing each stakeholder to share more about the key roles they play in the drug pricing, supply, and distribution processes. Similarly, we’ve been privy to a number of charts showing how the different companies, hospitals, pharmacies, payers, and wholesalers, are connected to each other — the relationships of which have often been misunderstood, overlooked, or generally unknown.
Having spent the last few years primarily focusing on biosimilar developers’ regulatory, development, and market access challenges, my purview often hasn’t included the players in the supply chain — for instance, wholesalers — and the role they play in companies’ commercialization strategies. In March 2017, I published a popular Q&A with an AmerisourceBergen (ABC) expert who shared his thoughts on what factors will help biosimilars be successfully distributed and used in a hospital setting. So far, there are only three biosimilar products available in the U.S. market, all of which are distributed in hospitals. While I’ve read much (and written myself) on the biosimilar regulatory and reimbursement landscapes globally, it’s very rare that I stumble upon an article discussing how the biosimilars actually ended up at the hospital or the pharmacy in the first place. So I took the opportunity to speak with Richard Lozano, the VP of biosimilars and integrated business development at ABC. In the first of this two-part article, we discuss the manufacturer-wholesaler relationship and some of the questions companies must consider as they prepare to supply their biosimilars to the market.
Establishing The Relationship: The Role Of The Wholesaler
Most are likely familiar with ABC, a leading wholesaler in the U.S. providing assistance with commercialization and distribution strategies, logistics, health economic outcomes research, and a number of post-launch services. When it comes to the biosimilar team in particular, however, Lozano’s goal is to make sure a manufacturer places its biosimilar in the appropriate channels. The team is also responsible for determining the barriers each product might meet in the market — whether they be payment-, patient- or provider experience-related. He referred to the “launching curve” that follows market entry, advising companies to begin building a relationship with the wholesaler 18 to 24 months ahead of market launch. “This curve gives our teams an appropriate amount of time to collaborate with a manufacturer and help them determine their strategies for commercialization and the channel(s) for distribution,” Lozano explained.
There are two distribution models a company can employ to bring its products to patients: specialty distribution or full-line wholesale distribution models. Products going through specialty distribution are, as the name implies, specialty products — the biologics and biosimilars used to treat chronic indications. These products are typically distributed through a specialty distributor to physician-owned clinics, hospitals, or hospital-owned outpatient clinics. Similarly, a large portion of a specialty distributor’s customers include independent physician’s offices or privately owned outpatient clinics. In these cases, the physician owning the practice purchases, stores, and administers the drugs — for instance, the biologic Humira — to patients in the office via a process known as buy-and-bill. Oncology products, like rituximab and bevacizumab, are also good examples of the products that live in the specialty distribution realm because they’re administered in the oncology outpatient realm.
In a full-line distribution model, a company sells the whole line of its products through the wholesaler. The majority of these products — small or large molecule treatments — are supplied to a variety of pharmacies, including retail, independent or chain drugstores, stores or supermarkets with pharmacies, and mail-order pharmacies. The full-line model also delivers products to physicians’ offices and hospitals.
A biosimilar should, at a minimum, follow the same distribution strategy as the reference product. “You have to be where the innovator is,” Lozano said. “If you decide your product should be distributed via the specialty distribution method only, when the innovator is both full-line and specialty, you must have a good reason for choosing to compete only in the specialty world and garner small pockets of market share.”
As healthcare costs continue to burden hospital systems, however, Lozano has been seeing instances in which companies could choose to distribute their specialty products via full-line wholesale distribution, in addition to specialty distribution. As he described, “All biologics live in the specialty world, but some products — including biosimilars — can live in either, or both. If they have a specialty product, we consider whether the full-line model will provide more access to that product in the markets which have previously not permitted access.”
Take, for instance, Avastin, which lives in the specialty realm. Because a number of hospital systems have been seeking cost-effective alternatives and greater affordability, Lozano said the opportunity becomes even greater for certain products via the full-line strategy. Because there are only a handful of specialty distributors, hospitals can find the procurement process more expensive than if it were available through full-line distribution. As such, a company with a biosimilar of Avastin, Herceptin, or Rituxan — currently only available via specialty distribution — could find choosing a full-line approach in addition to the specialty distribution offers a competitive advantage against the innovator. Overall, Lozano’s team works with a manufacturer to ensure it understands the channel in which it’s planning to enter and compete against the innovator.
In order to help companies arrive at the appropriate models for their products, Lozano’s team provides a list of questions for biosimilar companies to consider as they begin to plot out their distribution and commercialization strategy. For one, it’s important to keep access and affordability for the patients a central tenant. A company needs to consider which distribution strategy will provide the greatest access and affordability for the patients, as well as how the company-wholesaler relationship can best deliver treatments to each individual patient. Naturally, this will involve digging into the innovator’s strategy to gain an understanding of the spaces in which the innovator is competing and how the originator product is being distributed.
In addition, there’s something to be said about the phrase “knowing your product.” When it comes to developing and approving a biosimilar, the sponsor company needs to know all the intricacies of the innovator and biosimilar molecules. But science aside, the same goes for understanding the product’s life cycle and the company’s goals for the product. To successfully enter the biosimilar market, a company will need to determine if “the distribution strategy matches the goals and expectations for the product’s life cycle,” Lozano shared.
Stay tuned for part 2!