The State of Specialty Pharmacy 2022: Reflections, Trends, and Photos from #Asembia22

During my session, I reviewed the current vertical integration strategies of the large insurer/PBM/specialty pharmacy/provider companies and of hospital/specialty pharmacy/physician organizations. Many people told me privately about their own companies’ challenges when simultaneously being a supplier, partner, competitor, and/or customer of the mega channel players.

These vertically integrated companies touch many aspects of the channel and are searching aggressively for meaningful synergies. Consequently, manufacturers had to send large and diverse teams to Asembia. These included people from nearly all aspects of their commercial operations: market access, trade, medical affairs, patient services, pricing, contracting, and more.

However, some of the vertically integrated companies have started to unwind their vertical efforts. I noted the deintegration efforts of Centene, Prime Therapeutics, and Humana. (See page 9 of my slides.)

Looking ahead, I expect specialty pharmacies’ functions and profit models to be linked more closely to their parent organizations. This surely will be a hot topic at next year’s summit.

The shakeout and consolidation of smaller specialty pharmacies, combined with manufacturer and payer strategies, has concentrated dispensing in a handful of companies. See DCI’s Top 15 Specialty Pharmacies of 2021—And Three Factors That Will Reshape 2022.

Despite this reality, financial buyers prowled the summit, looking to buy a strong platform business. However, the larger independent specialty pharmacies are larger and generally well-capitalized, so prices will be steep.

On the final day of the conference, news broke of two notable transactions:

• A group of private equity firms bought PANTHERx Rare from Centene, which had owned the business for less than 18 months.

• CVS Health purchased AmerisourceBergen’s US Bioservices business.

Vertical integration is making it harder to be an unaligned specialty pharmacy, which is why many smaller independent specialty pharmacies are struggling. As in Vegas, luck helps. But I wonder how much longer the larger independents can resist the siren song of cashing out?

As I noted during my keynote, hospitals and health systems have emerged as the fastest-growing participants in the specialty pharmacy market. They accounted for nearly one out of five accredited specialty pharmacies. (See Exhibit 50 of our 2022 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.)

Hospitals’ power is also growing as they acquire more physician practices and directly employ more physicians. They are becoming bolder about steering patients to in-house specialty pharmacies.

Hospital-owned pharmacies are able to generate significant profits by participating directly in the 340B Drug Pricing Program. In response to changes in manufacturers’ policies regarding external contract pharmacies, hospitals have accelerated their investments in in-house specialty pharmacy operations.

Ironically, the 340B kerfuffle is also encouraging hospitals to deepen their relationships with PBMs. When forced to choose a single contract pharmacy partner, hospitals and health systems have been gravitating to the large PBM-owned specialty pharmacies that have access to drugs in limited dispensing networks. As you can see in page 6 of my general session slides, PBMs now dominate the 340B contract pharmacy business.