Your Primer to Healthcare Mergers and Acquisitions

What I'm Listening for at the National Association of Specialty Pharmacy Meeting

Aug 29, 2019

by Alan J. Hymowitz

by Alan Hymowitz, CM&AA, Managing Director

Volume 6 Issue 17, August 27, 2019

In just a few weeks, I will be attending the seventh annual meeting of the National Association of Specialty Pharmacy (NASP), which will be held in Washington, D.C., from September 9-12. I look forward to this meeting as it's a terrific opportunity to network with colleagues, soak in knowledge provided by an impressive selection of expert presenters, and learn about the current developments concerning specialty pharmacies.

Here are five of the areas I'm most interested in hearing about during this year's meeting.

1. 340B

While the 340B program is now more than 25 years old (!), we've seen a recent explosion in its growth. A Drug Channels report from about a year ago noted at the time that about 21,600 pharmacy locations were acting as contract pharmacies for healthcare providers that participate in the 340B program. The total number of participating locations had grown by 9% over the previous 12 months.

It's a program that patients, pharmacies, and providers tend to love. We've seen it help underserved patients with HIV/AIDS, cancer, and the other top disease states.

But 340B is not without its critics, including the current administration and drug companies. The program is also not without its flaws, with a Pharmacy Practice News report noting that the House Energy and Commerce Committee issued a report citing a host of problems in its implementation and oversight. This has led to calls for providers to increase transparency, which have included efforts by states to force providers to disclose those medications for which they receive 340B discounts; efforts to reduce the number of people who can take advantage of the discounted pricing; rules that aim to cut reimbursement; and other pushes to scale back the size and scope of the program.

At NASP, I will be interested in learning about the latest 340B trends and the present outlook for the program. What are its biggest threats and opportunities? Are efforts to diminish the program and its reach proving successful? What should we expect to see in 2020 as a president­ial election year, with healthcare and its costs as one of the most significant issues on voters' minds?

2. Specialty Drug Spend

How much are employers spending on specialty drugs? A lot, as recent data released from Willis Towers Watson (WTW) tells us. Its "Rx Collaborative," which WTW describes as the "largest employer-based pharmacy benefit group purchasing coalition in the United States," showed that while specialty drugs accounted for less than 1% the coalition's prescriptions last year, they totaled 40% of its total drug costs. Furthermore, the top 10 drugs by gross cost accounted for 20% of employers' pharmacy spend in 2018.

WTW reported that the top three drugs ranked by gross cost spend in 2018 were specialty injectable immunotherapy drugs indicated for conditions that include psoriatic arthritis, rheumatoid arthritis, and Crohn's disease.

It's not just employers spending more on specialty drugs. Healthcare organizations are as well. A recent a Healthcare Finance report notes, "Pharmaceutical costs are already a large share of most health organizations' budgets, and this is unlikely to change. There are a number of factors contributing to this trend — for one, specialty drug price inflation. Overall, the predicted total specialty inflation rate of 4.23% is similar to the general drug inflation rate of 4.57%. But this new price projection is important for health system leaders since prices of specialty drugs tend to outweigh prices for non-specialty medications. This inflation rate will likely result in the need for providers to increase their drug budgets in the coming year."

At NASP, I'll be interested in hearing about the challenges pharmacies and organizations are facing concerning specialty drugs and what efforts are underway to reduce or at least better contain specialty drug spend.

3. Drug Pipeline

Attending the NASP meeting is always a great way to quickly catch up on what's new and emerging in pharmaceuticals. Through August 21, the Food and Drug Administration (FDA) had approved 25 "novel" drugs in 2019 covering a wide range of applications, including the treatment of moderately to severely active rheumatoid arthritis, treatment-resistant forms of tuberculosis, breast cancer, multiple sclerosis, and postpartum depression. The Pharmaceutical Research and Manufacturers of America states that nearly 7,000 medicines are in development, with nearly three in four as potentially first-in-class.

Significant buzz continues to surround biosimilars, not only concerning the prospect of new drugs, but challenges to their development and access. Courts are working to interpret and apply laws concerning biosimilars and hearing a growing number of patent challenges. Controversy surrounds biosimilars, with the Biosimilars Council issuing a white paper in July criticizing drug companies. This report states, "Unfortunately, many biosimilar medicines are not available to patients even after they have successfully navigated the stringent regulatory process to obtain FDA approval. In fact, although 20 biosimilars have been approved by the FDA, only seven are currently commercially available. This is a direct result of the patent schemes used by some brand-name pharmaceutical companies to maintain their lucrative product pricing monopolies beyond the period Congress deemed reasonable."

At NASP, I'm hoping to learn more about those drugs likely to hit the market in the coming year. I want to hear about what disease states are getting increased attention (i.e., R&D). Finally, I'm listening for insight on how the courts are interpreting laws concerning biosimilars and how legal rulings are continuing and will continue to shape the landscape for new drug development.

4. Home Infusion

Recent research reports on the home infusion therapy market seem to all come to the same conclusion: the industry is booming. Home infusion seems positioned to achieve significant growth in the coming years. One research agency predicted that the U.S. market is set to exceed $13.5 billion by 2024; it was valued around $7 billion in 2017 and is expected to experience more than 10% CAGR from 2018 to 2024. Another research agency cites multiple factors driving growth, stating, "The need to provide continuous care to elderly population and chronic disease patients at remote locations generates demand for various infusion therapy devices and solutions. Increasing incidences of respiratory disorders, cardiovascular diseases, and other chronic ailments will result in more and more adoption of infusion products…"

But home infusion is not without its challenges. A significant obstacle seemed to arise when Medicare rolled out a new requirement at the beginning of the year. The rule, as Bloomberg Law notes, states a nurse or other skilled professional must be present in a Medicare patient's home every day during treatment for a home infusion company to be reimbursed for the service. The National Home Infusion Association (NHIA) estimates that this new policy would slash Medicare payment to home infusion providers from more than $260 million to about $60 million. Additional challenges facing the home industry market include other payers considering reimbursement changes and a lack of available home healthcare providers in more rural areas.

At NASP, I'll be eager to find out how the industry is responding to challenges hindering growth and what opportunities exist for additional expansion.

5. Legal Issues

While I've touched on some of the legal issues facing the specialty pharmacy industry, there are many, many others. Numerous states have enacted new pharmacy benefit manager (PBM) legislation over the past year, and more are likely coming. Rules governing prescription drug monitoring programs differ from state and state and continue to undergo changes. Prescription discount copay coupons and manufacturer rebates remain controversial. We're seeing a wide variety of lawsuits involving drug makers and pharmacies concerning matters including price-gauging and price-fixing, overcharging of consumers, fraud and anti-kickback, and opioids. Keeping track of the numerous legal issues affecting the specialty pharmacy industry can prove difficult.

At NASP, I expect to learn about the most recent — and significant — legal developments and how they are likely to impact the industry going forward.

Alan J. Hymowitz

Alan J. Hymowitz CM&AA

Managing Director

During the past decade, Alan has facilitated numerous, diverse M+A transactions in the pharmacy marketplace across the country, as well as providing strategic consultation to national pharmacies and similar organizations.  Prior to becoming an M+A advisor, he was a “hands-on” owner and manager in the pharmacy and home infusion healthcare marketplace for over 15 years and successfully sold his pharmacy to a national company after growing and diversifying their income streams in a very competitive market.  Alan's specialties in the pharmacy and home infusion marketplace include long term care, retail pharmacy, specialty pharmacy, and home healthcare, and he has attained the URAC Accreditation and Specialty Pharmacy Consultant designations, in addition to other recognitions.  His educational background includes a Bachelor of Arts from Rutgers University and a Master of Arts from the John Jay College of Criminal Justice.

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