Specialty Pharmacy Network Disruptors

New entrants bring alternatives to standard Pharmacy Benefit Manager networks

What is a specialty pharmacy network?

Let’s lay some groundwork before we go into “What’s New.” Specialty medications are more than half of the cost of medication spend, and payers are constantly looking for methods to ‘bend the trend,’ control costs, and manage the utilization of these cost drivers. One element important in cost containment is the use of a specialty network.

Specialty networks can take on various forms and may have dependencies on regulatory requirements at a state or federal level, which is not the focus of this white paper, but is important in the delivery of a compliant network. Specialty networks are typically thought of as either broad or narrow in the number of participating pharmacies in a Pharmacy Benefit Manager (PBM) network.

Broad specialty networks typically allow a large number of providers into the network and have limited requirements to participate in the network (credentialing, accreditations, etc.), whereas narrow specialty networks tend to limit the number of participating specialty pharmacies, which can drive more aggressive discount rates from the pharmacy. The most narrow of these is the exclusive specialty network, which limits to one specialty pharmacy for the majority of prescriptions with the exception of medications that are considered Limited Distribution Drugs (LDD).

Limited Distribution Drugs

Specialty medications for which the manufacturer has limited the number of pharmacies that will have access to these medications are considered Limited Distribution Drugs (LDD). In most cases, these are biologics that are complex to create, and the manufacturer cannot support distribution to a large number of pharmacies, which could result in the waste of these high-cost medications. LDD are also typically medications for which the manufacturers want a contractual agreement with the pharmacies that are servicing patients. That would allow them to collect data from the patient experience that is useful to the manufacturer.

Some define LDD within their PBM contract based on the number of pharmacies with access to the products, while others have LDD defined with mutually acceptable lists of these products. The need to define these in the contractual relationship between payers and PBMs is due to the products typically being removed from contractual guarantees related to discounts or rebates.

Limited Distribution Drugs are currently dispensed from over 125 pharmacies with the top pharmacies, Accredo Specialty and CVS Specialty, having access to over 200 LDDs. While some LDDs are only available at a handful of pharmacies, others, like Sublocade and Revlimid, are available at 20 or more pharmacies.1


We have multiple factors that impact decisions on what specialty network strategy is utilized in payer plan benefits. Regulations requiring choice in the network typically take center stage to ensure compliance. Although the point of this paper is not to delve deep into the regulatory framework that is important in specialty network strategy, there are three types of regulations that stand out:

Any Willing Provider Laws. These laws typically require the PBM to generally accept any pharmacy willing to accept standard contractual terms and conditions from being part of the PBM Network.

Preferred Network Laws. These laws typically prevent PBMs from having a preferred network that excludes pharmacies willing to accept that network's terms and conditions.

Affiliated Pharmacy Laws. These laws typically prohibit PBMs from forcing, whether directly or indirectly, patients to use a pharmacy owned/operated by the PBM.

Outside of the regulatory factor, patient care management plays a vital role. Most specialty patients require monitoring and evaluation of their disease state by the pharmacist at a more in-depth level than those patients seen in a retail pharmacy setting.  The pharmacy's ability to track and monitor the patients to control inappropriate utilization and drive compliance is also essential. The ability for the pharmacy to have a ‘complete picture’ of the patient’s care with knowledge of all their pharmacy utilization and sometimes information driven from their claims data on the medical benefit can create a more complete picture of the patient for clinical monitoring.

However, at the end of the day, the cost of specialty drugs is the main focus of all payers. The skyrocketing costs of specialty medications and driving down those costs with aggressive contract rates have been the top priority of payers. The new entrants in the market know this and are taking a new approach to meet that goal.

What’s New

So, let’s dive deeper into the “What’s New” in the world of specialty networks as to these new entrants and differentiated offerings by disruptive vendors. The value these companies drive is to create market competitiveness between specialty pharmacies and expand specialty networks beyond the exclusive specialty programs pushed by PBMs.


Free Market Health is a technology company dedicated to improving the specialty pharmacy ecosystem with a care-driven marketplace platform. Their technology platform orchestrates an end-to-end specialty pharmacy process by facilitating the “best fit” of pharmacy and allows clients to include other patient-based attributes including benefit design, care needs, drug, and cost into the process.

Drug rates are established through real-time online bidding for active patient specialty claims when more than one network pharmacy is capable of servicing a patient. Since the “market rate” for a drug is re-established with each competitive bid event, rates dynamically shift with the specialty pharmacy networks’ price floor for every specialty referral and every specialty drug. Free Market Health also plans to expand its capabilities in 2024 to intake prescriptions upstream of the prior authorization to manage the specialty process from any source to the “best-fit” pharmacy.

While most of their business has concentrated on the management within the pharmacy benefit, they have a few clients for which they manage the medical benefit. Operating in the market for nearly 3 years, Free Market Health’s first client was installed in April of 2021. Today, they have over 15 million lives serviced, including over 10.5M Blue Cross Blue Shield plan lives.


Newer to the space of specialty network management is Waltz Health. They have had a technology solution in the market for cash/discount cards, engineered as two solutions: 1) that delivers a comprehensive look at cash cards available to pharmacies and another 2) using the same platform deployed for use by health plans that extends the available cash pricing and copay out of pockets with ability to relay the information back into health plan source systems directly. They are now entering the market with a specialty network strategy using the same platform in their current solutions.

Their technology, coupled with their owned non-dispensing pharmacy, a licensed pharmacy that can accept, transfer prescriptions, however, does not carry medications or dispense to patients, and their custom network of specialty pharmacies. The overall program is meant to deliver on a commitment to reduce drug costs for specialty medications through real-time claims routing and adjudication leveraging opportunities for brand/generic, biosimilars, 340B contract pharmacies, etc. alongside using a custom network of specialty pharmacies that have populated their acceptable rates per medication product. The selected pharmacy is chosen, and the prescription is transferred to that pharmacy for dispensing.

They began to build the company in 2021. While they do not yet have clients live within their specialty solution, they have several plans using the core technology today and have plans to launch clients in 2024 with expectations to save, based on a review of claims data for target clients, 10-15% of specialty spend.

A quick evaluation of these two programs demonstrates their similarities and differences. It is noticeable that while in theory, they both aim at delivering a solution to reduce the impact of specialty drug spend, and through the utilization of a network of specialty providers and the expectation that competition drives financial value, the manner in which they are executing against that goal sees some differences in both the process and the core operations of their solutions offered.

The Process. Both Free Market Health and Waltz Health start by capturing the initiation of a prior authorization for the specialty medication. In contrast, after capture of that data, the process takes a different course; Free Market Health kicking off their online bidding (unless they have a pre-selected pharmacy based on specific client requirements, LDD, etc.) versus Waltz Health immediately pulling an actual prescription into their non-dispensing pharmacy at the same time as the selection of the network provider that will ultimately service the member. There are pros and cons to each process when considering timing, data interfaces with the PBM, number of pharmacies engaged in the process, and more. Of note, this piece of the process may be changing for Free market Health with expanded intake capabilities over the coming year, however the current process is depicted below.

FMH chart

The Operations

There are also some fundamental differences in the business operations of these two competitors. By way of example, the network providers are contracted and credentialed by Waltz Health who acts as the payer and claims adjudicator, versus a ‘network’ of providers contracted to participate in the Free Market Health model who maintain a PBM contract. Other areas of differences (all of which are highlighted in the graphic below) are: how they select the lowest net cost Specialty Pharmacy (SP), the process for obtaining the legal prescription, the level of data integration and the process for claims adjudication and payment.

WH vs FMH chart


Decision-making on how to control specialty medication costs comprises a variety of techniques from:

  • utilization management and prior authorization,
  • formulary management,
  • clinical programs,
  • use of the medical and pharmacy benefits in synergy,
  • and strategy surrounding the network.

What is essential is having deep industry knowledge, understanding of the payer marketplace, and developing a strategy to control cost and deliver the best in patient care. PayerAlly believes in being a consultant with an independent approach and deep knowledge of the industry while  not being embedded in the supply chain, to drive the best strategy, including the management of specialty drug costs and decisions on specialty networks.

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About PayerAlly

PayerAlly’s mission is to provide cutting-edge support for our clients as they look to better manage their medication costs. We offer best-in-class clinical, financial, and consultative solutions to help better manage costs and improve performance.

  1. IPD Analytics LDD source data.