Valeant Pharmaceuticals’ ($VRX) problems with Philidor focused a harsh spotlight on specialty pharmacies, until then a little-noticed piece of the pharma supply chain. But it is an area that is seeing tremendous growth by riding the back of drugmakers' success with specialty drugs. In fact, a dozen specialty pharmacies made it to this year’s Inc. magazine list of fastest growing private companies in the U.S., including one in the top 10.
That was Pantherx Specialty Pharmacy, which was founded in 2012 and reported 2015 revenues of $42.4 million. By focusing on rare and orphan drugs, the Pittsburgh, PA-based company landed at number 9 of this year’s Inc. magazine list with a three-year revenue spurt of 13,381%.
CEO and co-founder Gordon Vanscoy told Inc. that when he and his co-founders learned in 2012 that the FDA was expected to approve 49 orphan drugs that year, they decided to that was the niche to serve. By handling the intricacies of delivering drugs to very small patient groups that mass retailers often won’t carry, he said he figured they could survive. That included handling HIV/AIDS drugs for South Carolina and in 2015 an exclusive for an enzyme replacement therapy for the genetic condition, hypophosphatasia. That of course would be Alexion’s Strensiq, a rare disease drug that runs about $500,000 a year.
Pantherx is having its day in the sun by virtue of its place on the Inc. 5,000 list. There are lots of other specialty pharmacies also helping patients get the drugs they need and navigate the difficulties of patient assistance programs funded by pharma companies to help with the often very high costs of specialty drugs. But some members of this growing piece of the market have drawn attention by payers, and even federal authorities, for their cozy relationships with some drugmakers.
Federal authorities are investigating the relationship of the now defunct Philidor, the specialty pharmacy which some reports suggested was actually controlled by Valeant. It helped patients snag insurance coverage for pricey Valeant meds. Lawyers for the pharmacy have denied any control of Philidor’s business by the Canadian company, which last year saw its revenues and stock price crater after questions about these and other practices came to light.
After Philidor and Valeant’s relationship came to light pharmacy benefit managers took a closer look into specialty pharmacies. In some cases they severed ties with those they believed had particularly close ties to certain drugmakers which led them to favor their brands over generics, violating the PBM’s reimbursement rules and adding to the cost of healthcare.
Express Scripts ($ESRX), CVS Health ($CVS) and OptumRx all cut off a number of specialty pharmacies. Among those dumped by Express Scripts was Linden Care, which had focused in particular on a Horizon Pharmaceuticals’ ($HZNP) painkiller. The med, Duexis, had been excluded from some top PBM formularies because it pairs two off-patent drugs and costs $500 for a 30-day supply.
Earlier this year, Horizon disclosed that the U.S. Attorney's Office for the Southern District of New York was probing its financial support to patients and its alleged ties to specialty pharmacies, the same office that last year launched an investigation into Valeant's patient assistance programs and its questionable relationship with Philidor.
Valeant under criminal investigation over Philidor ties: WSJ
Big three PBMs cut loose more specialty pharmacies as scrutiny grows
Horizon Pharma joins Valeant in DOJ's specialty pharmacy probe