Re-engineering your drug supply chain: Lessons from a specialty distribution transition

Melinta Therapeutics transitioned from a full-line distribution model to a specialty distribution model in one year. Here, Chief Commercial Officer John Harlow shares the organization’s journey.

At a recent industry conference, John Harlow, Chief Commercial Officer of Melinta Therapeutics, shared insights from his company's journey in transitioning its distribution model. "You don't wake up in the morning and say, 'Hey, I want to change my distribution model today,'" Harlow remarked, highlighting the complexity of such an undertaking. In his presentation, "Streamlining Access to Critical Therapies: A Case Study on Transitioning to Specialty Distribution," Harlow described why Melinta made the change.

Melinta is a commercial-stage company providing antibiotic and antifungal therapies, specifically novel broad-spectrum antibiotics to treat antibiotic-resistant infection. For them, the product usage is dependent upon infection rates at the hospitals, which is inconsistent at best. The decision was based on, as Harlow explained, "…cracks in the system that were frustrating and inefficient for our patients and providers." And that rested in a full line model that wasn’t the best approach and was expensive. John Harlow, Chief Commercial Officer of Melinta Therapeutics

These inefficiencies included inconsistent product availability, high wholesaler fees, and operational challenges that often resulted in perceived stock-outs. "It's typically a call to the sales rep," Harlow said, describing the common scenario when a pharmacy buyer couldn't find a product

The impact on hospitals and patients was a primary concern. "We spend a lot of time trying to build advocacy, get the product on formulary, operationalize that formulary ... and then all of a sudden, 'How do I get that product?'" Harlow noted. "All that work means nothing if, at the end of the day, the patient can't get the product they need."

Planning the transition

The transition to specialty distribution required careful planning and execution. Harlow emphasized the importance of having a clear vision: "Our vision was, we don't want any lost sales. We don't want any patient not to have product availability."

Key steps in the process included:

• Evaluating options: Deciding on the number of specialty distributors to work with.
• Building a strong business case: "Start with the assumptions and align on the assumptions," Harlow advised.
• Negotiating agreements: This process can be time-consuming and requires patience.
• Developing clear timelines and prioritizing critical therapies.
• Collaborating closely with specialty partners.

Harlow stressed the importance of flexibility in execution: "You want to be flexible on the process, but not on the outcome."

Challenges with results

The transition wasn't without its challenges, many of them unforeseen. Harlow cautioned that it’s good to be prepared and shared some of the company’s challenges including technical issues with distributors' systems and the need for extensive communication and training across the organization.

Moving into the transition, Harlow employed several strategies:

• Leveraging their inside sales team for direct outreach to buyers.
• Providing comprehensive training to all customer-facing teams.
• Over-communicating the reasons for the change to all stakeholders.
• Adopting a "white glove" approach to customer service during the transition.

The results of the transition have been largely positive. "Perceived stock-outs are virtually eliminated," Harlow reported. Other benefits included improved product availability, reduced supply disruptions, and even increased demand.

However, Harlow was cautious about attributing all positive outcomes to the transition: "We're going through the process right now of really evaluating if this was a true, sustainable demand driver or not."

Is specialty distribution right for you?

While Melinta's experience demonstrates the potential benefits of transitioning to specialty distribution, Harlow emphasized that it's not a one-size-fits-all solution. "I think it depends upon the product portfolio," he said.

He suggested that companies considering such a move should start by evaluating their current distribution service agreement (DSA) fees and the services they're receiving. "Can you get better service at a lower cost, assuming patient experience and patient journey is equal?" Harlow posed.

Additionally, companies should consider their implementation capabilities and timeline. "If you're trying to do this overnight, you're going to fail," Harlow warned. "But if you say, 'This is a 12-month initiative, and this is how I'm going to stage it,' that's a different story."

Harlow recommends that when you decide to make the transition, it is important to have clear communication up, down, left and right throughout the organization, not to panic, and embrace flexibility.

Learn more about trade and channel strategies or hub and specialty pharmacy models.

Quotes lightly edited for clarity.

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