Specialty pharmaceuticals/drugs are a recent designation of pharmaceuticals that are classified as high-cost, high complexity and/or high touch. They are often biologics-“drugs derived from living cells” that are injectable or infused (although some are oral medications). Specialty drugs are used to treat complex or rare chronic conditions such as cancer, rheumatoid arthritis, hemophilia, HIV, psoriasis, inflammatory bowel disease (IBD) and Hepatitis C.
The term specialty drug does not have a standard definition, and it has been broadly defined in various venues; however, they are generally described as prescription drugs (often complex, large molecule biologics) that are difficult to manufacture and require special handling or administration, have limited distribution, target a narrow group of chronic diseases, are costly (both in total and on a per-patient basis) and require ongoing clinical support.
Open-ended definitions, as discussed above, are indicative of the nature of the specialty market, which appears to be free from the constraints imposed on traditional pharmaceuticals. Bolstered by laws and regulations that have incentivized the production of specialty drugs, manufacturers have been treating under-represented patient populations that had once been completely ignored.
In 1990 there were 10 specialty drugs on the market, in the mid-1990s there were fewer than 30, by 2008 there were 200, and by 2015 there were 300. Drugs are often defined as specialty because their price is much higher than that of non-specialty drugs. Medicare defines any drug for which the negotiated price is $600 per month or more, as a specialty drug which is placed in a specialty tier that requires a higher patient cost sharing. Drugs are also identified as specialty when there is a special handling requirement or the drug is only available via a limited distributions network.
As the specialty pharma business model gains popularity and more companies adopt it as their primary business strategy, the characteristics that define what a specialty pharma company continue to expand in scope. The term “specialty pharma” is now being used interchangeably with terms such as development-centric pharmaceutical or biopharmaceutical companies. Others have applied the term to companies that focus on developing generics, reformulating drugs already on the market, or targeting niche patient populations.
Research into specialty drugs is attractive to biopharmaceutical companies from both a medical innovation and business perspective. The ability for the market to sustain the relatively high cost of these products creates substantial incentives for companies to research and develop products that address serious, unmet health needs. Also, in some cases, companion diagnostic tests are used to identify patient subpopulations in which the specialty product generates a differential response, either negative or positive. As a result, specialty products have stimulated diagnostic research. Given the level of investment, this means that patients and payers can expect continued innovation and research to develop such medicines and companion diagnostics in the future.
The Indian market for drugmakers has really taken off, thanks to the country’s growing economy and population and increasing demand for Western medicines. India has a thriving domestic industry with expertise in generics, vaccines, and contract manufacturing, while several Western companies are making inroads in the market with Indian production centers and partnerships. India is one of the largest exporters of pharma products to the US and Europe, and it boasts the highest number of FDA-approved US facilities abroad (an indication of the high quality of the industry’s standards).
In India, the scenario is changing with more and more companies entering into or establishing as specialty pharmas. Domestic companies are shifting their business models which are based on low value generics, to high value generics which are difficult to copy, to niche or specialty products or biosimilars. Dr. Reddy’s and Sun Pharma have high profit margins due to their focus on specialty products. Biocon’s launch of Herceptin biosimilar (CANMAb) is the latest example in this category.
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