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Optimizing your Drug Distribution Model

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.

Understand your distribution network options

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
  • Cons: Less control over and visibility into distribution processes. Diluted patient
    experience and limited support for prior authorizations.

Evaluate your distribution model for gaps

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.
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?

Meet the needs of the four Ps

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:
  • Prescribers: 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
  • Payers: Offer competitive pricing, contracting support, and outcomes reporting
  • Pharmacies: Support compliance management, patient education, reimbursement
    coordination, and billing assistance


Streamline the product journey

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.