Two Frameworks for Orphan Drug IDN Launch Planning

Ira Studin, PhD
President
Stellar Managed Care Consulting

Not surprisingly, year-end industry news in 2023 pointed to record new specialty drug approvals. As one pharma expert recently put it, “More than 80% of all specialty drug development is for orphan conditions and cancer.”

For healthcare delivery, this means the great majority of patients accessing these treatments do not need to be hospitalized. They are either provider-administered on an outpatient basis or self-administered and taken at home.

For manufacturers launching these drugs, it means the market is centered around integrated delivery networks (IDNs).

However significant community practitioners are in the broader market, for orphan conditions and rare diseases diagnosis is typically confirmed and treatment established by IDN specialists.

While IDN definitions will vary, one point that’s shared by all is that the business model consists of diverse revenue streams with a priority for growing outpatient revenue.

From a strategic point of view, the implication is that one of two business units inside IDNs define the market space for orphan product utilization:

• Specialty pharmacy (self-administered)
• Outpatient clinic, infusion center, and physician practices (provider-administered)

Clearly, the ideal scenario is no incumbent. But if there is an incumbent, launch planning needs to take into consideration not only product competition, but also key business factors (KBFs) in the IDN market space the competition operates.

Where competition exists in the same IDN market space, the suggestion is that launch planning employ a “unitary” strategic framework. Where competition exists in a different IDN market space, the suggestion is to employ a “binary” framework.

UNITARY FRAMEWORK

A unitary framework applies to products launching into the same market space as the competition. This is the simplest IDN launch scenario. Here, two standard sets of business considerations come into play.

The first (always the case) is clinical, with strategy centered on differentiation and trying to establish clinically significant added benefit. For example, around efficacy; safety/tolerability; onset of action; and durability.

The second is financial, the salient point being that KBFs are the same for all competitors. When the incumbent and new entrant compete, they have to address the same financial factors.

In the specialty pharmacy space, three KBFs appear to standout out: 1) manufacturer-limited distribution arrangement; 2) potential 340b discount; and 3) off-invoice discount plus other pricing concessions.

In the outpatient space, two KBFs appear to stand out: 1) buy and bill for practices (i.e., faculty practices or private specialists with offices on the campus); and 2) potential 340B discount for hospital clinics and infusion centers.

Absent clinical differentiation, some degree of commodification will likely come into play as the new entrant searches for a financial formula sufficient to ensure equal access with the incumbent.

BINARY FRAMEWORK

A binary framework applies to a new entrant launching into a different IDN market space than the incumbent. This is a more complicated IDN launch scenario. While the same clinical considerations mentioned earlier apply here, different financial dynamics inside the two IDN market spaces come into play.

If one product is superior, how financial factors match up between the two IDN market spaces are likely to be less impactful for product performance. But if the products are comparable, how brands approach financial differences between the two market spaces could have a material effect on performance.

Understanding the KBFs governing IDN specialty pharmacy business units and the different outpatient stakeholders, then crafting a winning value component for the IDN space the new entrant will operate in, should eliminate barriers that could otherwise burden early launch momentum.

In short, a unitary strategic framework is suggested if a product is launching into the same IDN market space as the incumbent; a binary framework if launching into a different IDN space.