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Diplomat ready to expand role in specialty Rx.

FLINT, Mich. -- Specialty pharmacy is one of the fastest-growing sectors in health care, and Diplomat Pharmacy has positioned itself to lead that growth with a platform that enables it to support payers, physicians and manufacturers while maintaining focus on its patients.

According to chairman and chief executive officer Phil Hagerman, as the specialty pharmacy sector has evolved and become more refined, new opportunities and challenges have appeared. "Diplomat is in a unique position to serve as smaller biotech companies emerge," he says. "With the cost of bringing drugs to market, these companies have had to become more nimble. Instead of building brick-and-mortar capabilities, they're contracting for many services that larger pharmaceutical companies have historically delivered themselves.

"We are currently reviewing the expansion of our specialty pharmacy management services to meet market demand."

In recent years Diplomat has laid the groundwork for expanding and optimizing its service offerings by making significant investments in technology. It is currently rolling out a redesign of eNav, a proprietary patient care system that it developed to improve efficiency and lower costs while providing comprehensive business intelligence and reporting capabilities for the company's partners.

The basic functions of eNav include patient search, prescription status, data export, secure electronic document exchange, electronic signature and chat. "While dramatically increasing the depth and quality of business-driving data available to Diplomat, the main purpose of our technology investments is to continuously improve our customers' experience and increase their engagement with Diplomat," Hagerman says.

Although new specialty drug approvals by the Food and Drug Administration have slowed since the record of 45 in 2015, the number of specialty approvals has increased in recent years, outpacing those of traditional drugs for the past five years. Despite a contraction in the market for hepatitis C drugs, the outlook for specialty pharmacy remains bright, and Hagerman sees many positive long-term trends for the industry and for Diplomat.

One example is specialty infusion, an area in which Diplomat has built a major business through a strategy of creating a nationwide platform, leveraging the broader Diplomat network, and tactical acquisitions. Last year it created Diplomat Specialty Infusion Group, combining five subsidiaries: American Homecare Federation, At-Home IV Infusion Professional, BioRx, MedPro Rx and XAS Infusion Suites. Combined, these operations give Diplomat expertise in such areas as hemophilia, hereditary angioedema, alpha-1 antitrypsin deficiency, immune globulin therapies and parenteral and enteral nutrition.

In February, Diplomat further expanded its capabilities in the specialty infusion area by acquiring Affinity Biotech Inc., a specialty pharmacy and infusion services company that is based in Houston and has operations in Texas and New York. The acquisition also extended Diplomat's geographic footprint.

Other areas of opportunity are rare disease medications and oncology drugs, where more approvals by the FDA are ex pected this year than in 2016. Hagerman notes that multiple approvals are projected in both breast cancer and blood cancers, and adds that he expects a significant percentage of the drugs coming to market this year to be oncology medicines.

"We actively monitor the drug pipeline and maintain dialogues with our pharma and biotech partners to identify opportunities in the pre-commercial stages of drug development," Hagerman points out. "We continue to believe the limited-distribution drug model will dominate specialty drug approvals and lend itself to program solutions that are both patient- and partner-centric. "

Biosimilars represent another area of future opportunity. The few biosimilars to enter the market thus far have had little impact on specialty pharmacy because they have been mainly dispensed through physicians' offices. Hagerman points out, however, that biosimilar drugs coming into the market will need to be managed by specialty pharmacies, creating service opportunities.

Caption: Phil Hagerman, Diplomat Pharmacy

Diplomat Pharmacy


Phil Hagerman, chairman, CEO


4100 S. Saginaw St.

Flint, Mich. 48507

Phone: (888) 720-4450


* INDUSTRY RANK--6 in sales

* Full-year results (12/31/16) (1)

Sales--$4.41 billion (+31%)

Net earnings--$28.3 million (+9.7%) (2)

Net margin--0.6%

* Number of pharmacies--3 specialty/retail pharmacies, 14 specialty pharmacies

* Number of states operating--50, plus D.C. (3)

* Number of pharmacies opened or acquired in fiscal 2016--1

* Number of pharmacies closed in fiscal 2016--0

* Number of pharmacies planned for fiscal 2017--N/A

* Pharmacy size--2,700 sq. ft. to 15,000 sq. ft.

* Distribution--Warehouse

* Other businesses--Wholesale, mail-order pharmacy, infusion suites (22)

(1.) Results reflect the acquisitions of BioRx LLC in April 2015, Burman's Specialty Pharmacy in June 2015 and TNH Advanced Specialty Pharmacy in June 2016.

(2.) Earnings for 2016 reflect special items totaling a net of $23.1 million. $7.11 million in pretax restructuring and impairment charges, and a reduction in the effective income tax rate to 30.9% from 39.6% in 2015.

(3.) Diplomat ships medications nationwide. N/A = Not available.
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Title Annotation:Diplomat: The Chains
Publication:Chain Drug Review
Date:Apr 24, 2017
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