A 2014 guide for specialty pharmaceutical manufacturers

According to the IMS Institute, the U.S. drug market saw its first-ever decline in nominal drug spending in 2012. The patent cliff is a major contributor -- branded drug makers are still losing significant revenue to generics as patents expire. The still-recovering economy also plays a part, since the number of patients visiting to providers has decreased.

Therefore, the specialty segment is growing. Drug makers have been pursuing new avenues for generating revenue and stimulating growth, and many are focusing more research and development on specialty drugs. While these drugs are targeted at a smaller group of patients, they typically carry hefty price tags. The specialty segment holds real potential -- 25 percent of health care costs can be attributed to just 3.6 percent of patients -- and specialty spend is expected to quadruple by 2020.

The constructs of the burgeoning specialty pharmaceutical market create a perfect storm of new challenges for manufacturers. In this new landscape, manufacturers will need to evolve contracting, distribution, and pricing strategies and processes in order to succeed.

Manufacturers are likely to see changes in distribution networks -- both in players and processes -- as well as terms and conditions of contracts and pricing structures. New products and new channel pathways might require different types of contracts with new terms and conditions or new incentive structures and conditions for payment. This can complicate contracting processes and pricing and reimbursement execution, especially early on.

The distribution networks, terms and conditions of contracts, and pricing structures must all be carefully managed in order to protect revenues, succeed in the marketplace, and remain compliant. Risks are higher for each filled prescription when it comes to specialty drugs, as compared to typical, primary-care drugs. Every percentage point of an incentive is magnified in terms of dollar consequence if the incentive claim is overpaid, paid late, or duplicated. Impacts can be life-threatening for those manufacturers just entering the market or betting the farm on a specialty product.

We recently published an e-book to take a closer look at the nuances of the specialty segment and address the challenges facing manufacturers. We also identified strategies for navigating the rough waters ahead. Given the intricacies and unique structure of the networks, and the high price tags associated with products, manufacturers must have solid strategies in place to closely manage contract lifecycle processes and pricing and reimbursement. Check out the e-book, “The New Normal: A 2014 Guide for Specialty Pharmaceutical Manufacturers,” to see how you can come out ahead.