Limited Distribution Drugs 101

What are limited distribution drugs?

“Limited distribution drug” status is generally assigned to specialty medications with complex regimens to manage. These drugs are expensive, accounting for around 45 percent of the pharmacy drug spend per Express Scripts’ 2018 drug trend report, and require special handling, administration, or monitoring. The therapy areas with the highest number of limited distribution drugs include the oncology, anti-infective, respiratory, ophthalmology, and rare disease categories. In the world of value-based payment, where drug reimbursement is tied to the quality of outcomes, specialty manufacturers are rapidly adopting limited distribution networks.

What are limited distribution networks?

Under a limited distribution network, a manufacturer contracts with one or a few specialty pharmacies to dispense high-maintenance medications. The specialty pharmacies are selected based on their expertise and ability to offer optimal patient outcomes. Some important criteria are:

  • Having a qualified and knowledgeable care coordination team that effectively communicates with patients, physicians, and payers to support appropriate access to specialty therapies.
  • Having national accreditation, which signifies that a pharmacy satisfies and is regularly assessed on quality criteria such as appropriate storage and handling of equipment.
  • Efficient tracking and reporting of dispensed specialty drugs, especially products requiring risk evaluation and mitigation strategies, to manufacturers and payers including patient-level clinical data, drug sales information, and inventory.
  • Management of tools and services such as benefits investigation, financial assistance programs, medication therapy management, counseling, and clinical expertise.
  • Payer coverage, including as the depth of a specialty pharmacy’s relationship with payers, is important for manufacturers when considering limited distribution networks.
  • Having 24/7 call centers available to provide clinical support access for patients and caregivers and enable faster access to limited distribution drugs.
  • National coverage gives specialty pharmacies an upper hand with deeper networks, which makes life easier for manufacturers trying to reach patient populations through a single contract.


Why are limiting distribution networks becoming more popular?

Specialty drug manufacturers need to ensure patient access to their products without compromising patient safety. Therefore, it is imperative that specialty drugs are dispensed in accordance with federal regulations and are monitored for safety. Manufacturers can reduce expenditures by adding specialty pharmacies that focus on a product-specific condition to provide high-touch support services over a large network of contracted pharmacies.  Payers may also benefit by having the opportunity to share in costs savings with a specialty pharmacy through volume discounts.

Payers are limiting specialty drug distribution practices to gain some control over cost management.


What are the downsides of limited distribution networks?

One of the concerns associated with limited distribution networks is potential misuse by manufacturers to increase drug prices and obstruct access to competing drugs. Some companies deliberately use the need to comply with FDA risk evaluation and mitigation strategies as a reason to create limited distribution networks. The FDA seeks to restrict drugs that are dangerous, which sometimes limits the availability of the drug. Drug manufacturers cite this limitation as a reason to justify their inability to sell the drug to competitors, thereby eliminating competition and maintaining their quasi-monopoly on the product.


What are the implications of limited distribution networks on patients and providers?

While limited distribution networks help to provide coordinated patient care and produce better health outcomes, the networks may also curtail access to cheaper generics.  Several manufacturers employ the limited distribution strategy to impede generics and biosimilars from entering the market and to prevent competitors from accessing test samples necessary for completing generic drug applications from the FDA.

Limited distribution networks can also hinder physician or hospital access to medication in emergency situations and incur high costs for these drugs, compromising patient care. Providers and PBMs that are not part of a limited disruption network  have to go through an in-network pharmacy to obtain drugs, which can lead to price gouging. Price gouging by manufacturers increases patient costs from hundreds to thousands of dollars, and leaves some patients unable to afford the only effective treatment for their condition.


What’s the future of LLDs?

Currently, more than 75 percent of manufacturers are dispensing products through a limited distribution model. It is worth noting that the number of specialty drug approvals has been on the rise, with the FDA approving 39 specialty drugs in 2018 alone. Moreover, the current pipeline for specialty drugs is promising, and new entries into the market will increase specialty drug spending even further.

Drug manufacturers are in discussion with PBMs, health plans, and government agencies to create pricing models for upcoming high-cost therapies. For instance, Express Scripts is in talks with biotechnology firms Biomarin, Spark, and Bluebird Bio around exclusive arrangements to distribute new gene therapies that are expected to become available by 2020. It is expected that more and more drugs will be dispensed as limited distribution drugs, and this will have a huge impact on payer financials.