The primary objective of a drug distribution model is to ensure patients receive the medications they need when they need them. A manufacturer’s strategy for getting their product from manufacturer to patient – effectively and efficiently – is crucial to the success of a therapy. The complexity of the distribution process has been exacerbated as a result of the pandemic. In addition to considering the range of physical, financial, and logistical challenges, life science companies would be wise to evaluate the needs and preferences of key stakeholders. Commercial teams can take the following steps to optimize their distribution process across a brand’s life cycle.
A pharmacy network is a group of pharmacies that a health plan contracts with to provide medication at a discounted price. The most impactful decision commercialization teams must make is whether to leverage an open or limited distribution pharmacy network, as this decision hinges on balancing market access with the cost of distribution. Here are the pros and cons of the two most common distribution networks:
Limited distribution network: In a limited distribution network, a drug manufacturer contracts with only one or a very limited number of pharmacies. This option is commonly used for specialty therapies as it often presents a number of strategic advantages for brands. According to the 2019 State of Specialty Pharmacy Report, almost 85% of manufacturers manage some or all their products through this model.
Pros: More oversight over the distribution process and better medication adherence stemming from the high-toucher clinical care. This may also lower distribution costs.
Cons: Payer network coverage may be limited leading to lower coverage approval rates and over subsidization of medications to ensure patients can access
Open distribution network: This is the traditional distribution option in which a pharmaceutical company makes its drug broadly accessible through a major wholesaler and various dispensing pharmacies, including retail, specialty, and mail order. A 2019 report by Deloitte estimates that 92% of total prescription drug sales go through wholesale distributors.
Pros: Larger geographical and health plan coverage, economies of scale, and reduced risk.
Cons: Less control over and visibility into distribution processes. Diluted patient experience and limited support for prior authorizations.
The stakes are high for life science companies when it comes to establishing the “best fit” drug distribution model for a brand. Failure to develop an optimal distribution strategy can result in poor prescriber uptake, reduced speed-to-therapy, lower rx coverage approvals, prescription abandonment, poor medication adherence, inability to demonstrate value – and ultimately commercial failure.
It’s not unusual for manufacturers to adjust distribution models as brands mature in the market. If your brand is in the middle of its lifecycle and underperforming, it may be time to evaluate your current distribution channel and consider transitioning to a different model that can help you achieve your business goals.
The following six questions can help you identify gaps and weaknesses in your company’s distribution process:
1. Is your current distribution model enabling equal or better access to your brand vs. competitors? 2. Is your current process flexible, allowing your distribution to adapt to changes in the marketplace that may influence growth? 3. Does your return on investment justify the expenses you are incurring such as third-party logistics, transportation, limited distributor service fees, hub, and specialty pharmacy network? 4. Do you have visibility into channel data to inform critical commercial decisions? 5. Do you have the right level of pharmacy network coverage for the patient population size, geographical area, utilization patterns, and outcome goals? Does your pharmacy network have the contracts required to effectively drive coverage?
A decade ago, a column in Reuters Events dubbed the customers that pharmaceutical companies should be focusing on as the “Four Ps”: prescribers, patients, payers, and pharmacies. The article made the point that “patients often have to make substantial co-payments and are increasingly informed and anxious to participate in the choice of their therapies, allotting them some of the prescriber and payer roles; Prescribers are suffering penalties for over-prescribing, making them payers to some degree; payers are involved in treatment guidelines, making them deciders... and so on.” The bottom line was that the four Ps determined the fate of pharma manufacturers’ drugs.
Ensuring your distribution model meets the interconnected needs of these four key stakeholders is as relevant as ever today. Some relevant examples include:
Provide patient financial assistance programs, prior authorization support, and medication adherence support
Patients: Support medication access, adherence, education, financial assistance, and home delivery to deliver a seamless experience
Offer competitive pricing, contracting support, and outcomes reporting
Support compliance management, patient education, reimbursement coordination, and billing assistance
A seamless product journey is tantamount to optimizing your probability of success. All too often, life science companies find themselves entrenched in an overly complex and underperforming distribution model that lacks the flexibility to adapt to a changing marketplace and continue to meet the needs of stakeholders. Manufacturers can navigate distribution complexity by leveraging technology and data analytics to better connect patients to therapy. When life sciences companies partner with Phil, they gain access to a nationwide pharmacy network with 98% plan coverage that enables patients to receive their prescribed therapies quickly and effectively. Real-time insights ensure a consistent, predictable experience for providers and pharmacies across the network. This ensures that manufacturers are able to continue to grow their brands in a sustainable way.
Read this case study to learn how one manufacturer partner changed its distribution model and transformed an underperforming mid-cycle specialty product into a successful brand.