WASHINGTON _ As more biotechnology companies begin tolaunch products, one of the most important decisions to makeinvolves distribution.

"The key distribution decision each company has to make is definingthe ultimate customer," explained Holly Ong, marketing director forMatrix Pharmaceutical Inc., of Fremont, Calif.

Several factors need to be considered including inventory control andthe need to provide "just-in-time" delivery. In addition, evaluatinghow to obtain reimbursement for the drug and assessing what adistributor can and cannot do are additional factors. Finally, themanufacturer has to consider how much the distribution needs tocontrolled to prevent abuse of certain drugs and to ensure timely andcontinuous delivery so that therapy is not interrupted.

Biotech manufacturers can choose between larger pharmacy benefitmanagers (PBM) or more specialized distribution channels. Electingto distribute a drug through a PBM could run afoul of competitiveconsiderations, said Keith Watts, sales director for Nova Factor Inc.,a Memphis, Tenn.,-based disease management firm that specializes inmanaging patients who use biotech pharmaceuticals.

"A manufacturer might be hesitant to use a PBM that is owned by acompetitor out of concern that its products will be replaced on thePBM's formulary list with the competitor's drugs. As manufacturerscontinue to integrate vertically, competition will become a criticalconsideration," Watts said.

One answer for biotech companies whose products require specialdistribution may be niche distribution firms such as Nova Factor.These firms may be able to provide solutions for biotech firmsconfronting serious reimbursement obstacles and providers who donot have the expertise to stock the drugs.

"Biotech drugs are not like traditional medications," said Bill Aliski,vice president of reimbursement for Genzyme Corp., of Cambridge,Mass., which manufacturers Ceredase, one of the therapies managedby Nova Factor. "Many biotech therapies require considerablemedical intervention and are indicated for a limited number ofpatients. In addition, many pharmacists in the traditional wholesaledrug distribution channels are not interested in stocking biotech drugson their shelves," Aliski said.

Nova Factor provides specialized management and delivery servicesneeded to address the needs of these patient populations, he added.

Nova Factor has been Genzyme's principal distributor of Ceredasesince the drug was introduced on the market four years ago."Hospitals, physicians and traditional pharmacists don't want to stockour drug. But as a provider, Nova Factor pays for the drug and thenpursues reimbursement from payers. The relationship has been veryuseful to us," Aliski said.

Aliski predicted that as other biotech drugs come to market, nichedisease management firms such as Nova Factor will have a readymarket for their specialized experience and services.

"Few wholesale distributors will want to tie up $2 million worth ofbiotech drug inventory on five shelves in a single refrigerator," Wattssaid. "Our distribution model will offer a manufacturer `up-close'inventory management and specialized clinical disease managementthat many biotech drugs will require."

Nova Factor specializes in services to patients with growth disorders,multiple sclerosis, hemophilia, Gaucher's disease, cystic fibrosis andprecocious puberty, to name just a few. Like other diseasemanagement firms, Nova Factor aims to control utilization and costsof the services delivered to patients as well as improving thetreatment outcomes by providing patient and provider education.

Nova Factor started out in 1989 as a modest pharmacy service forhemophiliacs. It soon expanded to provide care and medications forother patients requiring complex biotech or other highly technicaltherapies, Watts said.

He described Nova Factor as a "cross between a home care providerand a mail-order pharmacy. We try to minimize co-morbiditiesthrough drug education and dose monitoring," he said. "In addition,we work with young adults who often are in denial about theircondition and are not compliant with recommended therapies.

"We utilize a team management approach for each class of patient.For example, the pharmacist who handles multiple sclerosis patientsworks with a reimbursement team dedicated to eliminatingreimbursement problems that may occur when an insurer or managedcare plan declines to partially or fully reimburse for the drug," Wattssaid.

Nova Factor's customers are managed care plans, physicians andhospitals that do not routinely stock biotech drugs because of theircomplicated delivery systems and often perishable handlingrequirements. The firm also subcontracts with a number of PBMs.

Dealing with reimbursement problems posed by insurers often iscomplicated, Watts said. "One payer wanted us to discount the priceof Ceredase by 13 percent before we signed the contract. But withone supplier of the drug and only a few hundred patients in the U.S.,that made no sense."

Other common reimbursement problems encountered by Nova Factorinclude difficulty getting a biotech drug included on a managed careplan's formulary and dealing with lifetime caps imposed by manyinsurers.

"We have found that it is politically more difficult to cap the lifetimecost for clotting factor administered to hemophiliacs who require thedrug to survive. Far more common are lifetime caps on humangrowth factor which many insurers see as discretionary," Watts said.n

-- Michele L. Robinson Washington Editor

(c) 1997 American Health Consultants. All rights reserved.