Limited Distribution Medications
Limited distribution medications have many potential implications for patients and providers. Some of these include: limitation of access, price gouging and monitoring requirements. The effects of limited distribution can be far reaching and can be particularly important for patients with chronic diseases.
Whether you have a QHP or are a consumer, you’ve probably heard of prior authorization. This process limits your access to reimbursable medications, and may lead to exacerbations of your illness, expensive hospitalization, or both. There are many reasons why prior authorization is the anti-hero of drug coverage.
While this might seem like an effective way to control health care costs, it’s a red flag if you ask any physician, nurse, or pharmacist. It also makes physicians less likely to prescribe the right medicine to their patients, leading to lower quality of life, higher health care costs, and more unpaid time off work. Also, it’s not a good way to keep people healthy and out of the emergency room.
One possible solution is to codify the most common coverage policies. The easiest way to do this is to implement a formulary. A formulary is a list of drugs that the insurer covers, or doesn’t cover, for a set fee. Some commercial plans use this to their advantage, negotiating discounts with drug manufacturers.
While the most efficient and cost-effective way to limit access to reimbursable medications is to set up a formulary, you can still control costs by restricting the number of drugs you can use. Several state Medicaid programs have taken this approach to heart. The federal government has not. As a result, hundreds of patient advocacy organizations are opposed to the change. However, the Centers for Medicare and Medicaid Services (CMS) has stepped back from its own proposal to slash protections for six classes of drugs.
A well-implemented formulary scheme can save the average consumer tens of thousands of dollars in out-of-pocket medical expenses. Moreover, a well-constructed and marketed formulary program can improve patient satisfaction and help prevent health care fraud.
There are numerous competing manufacturers, from the big pharmas to the independents, in the burgeoning biosimilar space. While they all do a fine job of bringing a wide range of generics to market, a unified plan of action is necessary to reduce duplicative efforts and maximize the overall health outcome for consumers. This is where the FDA comes in. As a matter of fact, the FDA is currently working on an action plan to re-engineer its regulatory architecture to enhance its ability to respond to the changing landscape of healthcare. Among other things, the FDA is examining the most cost-effective ways to expand and improve the efficacy of its drug approvals. In short, the FDA is on the lookout for the best way to help patients and their families get the best possible treatment, all while keeping the patient’s dollars in the bank. The FDA has also recently taken on a more active role in drug safety, a subject of great interest to pharmaceutical companies and their shareholders alike.
With its newfound clout, the FDA can now better steward itself and its sister agencies. As such, the agency will continue to keep the science and technology of its drugs on par with the rest of its federal colleagues. It will also be able to enact the most effective measures to protect consumers from shady marketing schemes and bogus claims of authenticity.
Limited distribution medications are a type of specialty drug that requires special administration. The manufacturers of these medications have a monopoly on the drug, which restricts patient access. It can also lead to high costs for patients.
While it can be beneficial to limit the number of pharmacies that can dispense a drug, it is important to understand how limited distribution networks can be misused. Some companies have intentionally used this strategy to increase prices. Others may have found a way to use it to thwart the competition for cheaper generics.
In addition to the price gouging, patients may not be able to get the most effective treatment. This can result in billions of dollars in lost savings each year.
Manufacturers must comply with FDA requirements before placing a drug in a limited distribution network. They must disclose the drug’s status and risk assessment to payers. When deciding whether to place a drug in a limited distribution network, the manufacturer must consider the size of the patient population.
Aside from limiting the amount of available drugs, a limited distribution network can lead to price gouging. If a provider outside of a limited distribution network must purchase the medicine through an in-network pharmacy, this can add hundreds of dollars to the patient’s bill.
One of the most common methods of price gouging is the use of in-network pharmacies. If the pharmaceutical company has a large enough network, they can charge a premium for their products. These exclusive arrangements can negatively impact the financial health of the payer.
Some manufacturers have been successful in using this limited distribution model to block the entry of competing generics and keep biosimilars out of the market. But these networks can also impede physician access to medications in emergencies.
For decades, pharmaceutical companies have been engaged in anticompetitive behavior to drive up drug prices. As a result, life-saving medicines are increasingly more expensive. In the face of the rising cost of drugs, many states are pursuing legislation to stop the price gouging of prescription medications. Here, we take a look at how such laws might work, the legal challenges, and recommendations for surmounting them.
First, states may use their buying power to negotiate with drug manufacturers and wholesalers for reduced pricing. This may involve buying medications in bulk. While this approach would not impact the out-of-pocket cost of drugs, it could influence bargains upstream in the distribution system.
Second, the state may decide to establish a maximum allowable increase in price per year. The amount must be defined in statute and be adjusted based on inflation.
Third, the state might decide to implement a strict definition of “price gouging.” Some states have adopted a two-pronged approach. One prong involves the creation of a limited distribution network (LDN) for drugs, which limits a manufacturer’s ability to access the market. Another prong involves the use of a single distributor, which restricts a drug’s availability to a very few pharmacies.
Fourth, some manufacturers have intentionally used LDNs to prevent generic competition. For example, Turing Pharmaceuticals has resorted to LDNs to block biosimilar companies from accessing samples of its drug.
Finally, some states have taken the step of creating a buying pool. In doing so, state employees, prison inmates, and Medicaid beneficiaries are all included in the purchase. Although this may not affect the out-of-pocket costs of medications, it has been shown to increase rebates.
It is important to understand how each state’s PGLs will work in practice. As with any law, some states may choose to use this approach to limit or eliminate drug price gouging, while others might use it to establish an upper bound on what is considered unaffordable.
Implications on patients and providers
Limited distribution medications can lead to significant impacts on patients and providers. Oftentimes, these medications are expensive. They require special handling, administration, and monitoring.
Limited distribution networks can also limit access to cheaper generics. Additionally, they can impede physicians’ ability to access appropriate care in emergency situations. These factors may increase patient stress, increase the costs of drugs, and lead to ineffective treatment.
Manufacturers can misuse limited distribution networks to impede access to competing products. Insurers and pharmacy benefit managers (PBMs) are in discussion with manufacturers about ways to address this problem.
The number of manufacturers that are currently using a limited distribution strategy has been growing. Seventy-five percent of manufacturers dispense some products through a limited distribution model. However, manufacturers can’t afford a large network of contracted pharmacies. Instead, they rely on specialty pharmacies. Specialty pharmacies provide high-touch support services and share cost savings with payers.
Using an integrated health system specialty pharmacy can improve medication access. This type of pharmacy outperforms non-integrated pharmacies. It also has deeper networks that allow it to reach a larger patient population.
In addition to providing high-touch patient support services, specialty pharmacies can reduce the cost of specialty drugs. They can also offer regular follow-ups to monitor the status of medications.
Having a single team oversees drug ordering and delivery is another key element of a successful limited distribution network. Adding a clinical pharmacist or technician into a clinic can reduce barriers to timely access to limited distribution drugs.
Despite the positive benefits of a limited distribution strategy, some companies use the approach to stifle generic drugs and increase prices. Some manufacturers are even utilizing the FDA’s risk evaluation process to create these networks.