Limited Distribution Drugs: A Primer

Limited Distribution Drugs: A Primer

What are Limited Distribution Drugs (LDD)? 

A limited distribution drug, or an LDD, is a specialty medication that is complicated to manage. These are expensive drugs that require special handling, administration or monitoring. The specialties with the highest number of LDDs are oncology, respiratory, ophthalmology, and rare disease. Specialty manufacturers are rapidly adopting limited distribution networks in cases where drug reimbursement is linked to the quality of outcomes, otherwise known as value-based payment. 

By marking a drug as a limited distribution drug, pharmacies and manufacturers indicate that this drug needs special treatment in order to achieve optimal patient outcomes and have the best possible effect on the patient journey. This means patients are more adherent, involved, and satisfied with their treatment. 

What is a Limited Distribution Network? 

A limited distribution network means that a manufacturer forms a contract with one, or very few, specialty pharmacies in order to hand out high-maintenance medications. These specialty pharmacies are selected according to stringent criteria, such as expertise and the proven ability to offer high-quality patient outcomes. Pharmacies must stand out in order to earn these coveted limited distribution contracts. Some of the criteria pharmacies are judged on include: 

  • A knowledgeable and well-qualified care coordination team that excels at communication between patients, physicians, and payers, thus supporting appropriate access to these specialty therapies

  • National accreditation, signifying that a pharmacy is regularly assessed on its ability to satisfy important criteria such as storing medication appropriately and handling equipment correctly

  • Tracking and reporting of dispensed specialty drugs to manufacturers and payers. This data includes patient-level clinical data, drug sales info, and inventory

  • Efficient management of tools and services including counseling, benefits investigation, financial assistance programs, medication therapy management, and more

  • Payer coverage, especially including the depth of a specialty pharmacy’s relationship with payers

  • 24/7 call center availability to provide clinical support for patients and caregivers, as well as faster access to LDDs

  • National coverage, which indicates deeper networks manufacturers can leverage to reach higher patient populations through a single contract 

What are the pros and cons of an LDD network? 

The critical consideration of specialty drug manufacturers is how they ensure that patients can access their products without compromising the safety of those patients. That’s why it’s important that specialty drugs are dispensed by responsible pharmacies in accordance with federal regulations and are monitored on an ongoing basis for any safety confirms. 

In a limited distribution model, the pharmaceutical manufacturer not only controls supply but is in a position to better influence patient services, including risk evaluation and mitigation strategies, safety monitoring, and medication adherence.

To reduce their costs, manufacturers can add specialty pharmacies focusing on product-specific conditions with high-touch support services rather than adding a large network of contracted pharmacies that may not be able to offer similar support and monitoring. By contracting with a specialty pharmacy known for producing positive outcomes, the patient has a better experience, especially compared to larger networks with pharmacies that can’t provide this level of support. 

Payers also benefit by sharing in cost-saving with specialty pharmacies through volume discounts. According to the Pharmacy Times, adding a single specialty pharmacy to a distribution network can cost a manufacturer over $90,000, so it can be cost-prohibitive for a manufacturer to have a large network of contracted pharmacies. The more contracted pharmacies, the lower payer reimbursement rates tend to go and the more diluted patient populations become. 

However, one potential con is that manufacturers could use limited distribution networks to raise drug prices and stifle access to competing drugs. 

For example, some companies misuse the need to comply with FDA risk evaluation and mitigation strategies in order to create limited distribution networks that limit the availability of a drug. Manufacturers will cite the safety limitations of the FDA as a reason they cannot sell the drug to competitors, which eliminates market competition and maintains something of a monopoly on the product. 

Another possible con is that these networks may impede access to cheaper generics. There are manufacturers out there who use the limited distribution strategy to keep generics from entering the market and stop competitors from accessing the test samples they need to complete generic drug applications from the FDA. 

Finally, limited distribution networks can keep doctors and hospitals from accessing appropriate care in emergency situations and cause patients to incur high costs for these drugs. If a provider or pharmacy benefit manager (PBM) is not part of a limited distribution network, they will have to go through an in-network pharmacy to get the drugs the patient needs, which may lead to price gouging. This can leave some patients unable to afford the only treatment that will work for their condition. 


According to Decision Resources Group, a healthcare analytics company, more than 75 percent of manufacturers are currently dispensing some products through the limited distribution model. Specialty drug approvals are also on the rise, as the FDA approved 39 specialty drugs in 2018 alone. 

With drug manufacturers in discussion with PBMs, health plans, and government agencies, it is expected that more drugs will be dispensed in exclusive arrangements under the “limited distribution” umbrella, which will have a major impact on payer financials for upcoming high-cost therapies.


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