by Brian Hardy, RPh, MBA
Vizient Senior Consulting Director, Pharmacy
Mark Twain once said, “the report of my death was an exaggeration.” And throughout history, that statement was misquoted many times by those wanting to embellish a misjudged outcome.
Given recent news reports of the closing of some hospital retail pharmacies, that exaggeration sounds familiar, yet the outcome is more like a realignment of how the outpatient pharmacy is meeting the needs of health systems in a post-pandemic, transforming health care environment.
For example, a large integrated health system in the western United States recently closed many of its retail pharmacies but retained its children’s hospital outpatient pharmacy, specialty pharmacy and home delivery program. That strategic decision demonstrates the changing nature of the way health care is being provided and how appropriately aligning outpatient pharmacy services supports an integrated patient experience as they transition from inpatient to outpatient as well as to home.
The truth is that media reports about these actions are only a part of the story. While some health systems see advantages in selling to or partnering with retail pharmacy chains such as CVS or Walgreens, others are identifying opportunities to develop their own outpatient pharmacy.
Three factors driving hospital outpatient pharmacy growth
Vizient serves more than half of the health care organizations across the U.S. and through my work with our members, I see three main factors influencing strategy and decision making around outpatient pharmacies (which encompass retail, specialty, home delivery, home infusion and other services).
The first factor is drug manufacturer actions that continue to erode access to the 340B Drug Pricing Program. The 340B program provides financial support to hospitals serving vulnerable communities through discounts on prescription drugs. Drug manufacturers continue to place pressure on hospitals and health systems by limiting their access to pharmaceutical products which are sent to contract pharmacies to dispense to the hospitals. Hospitals and health systems, along with other covered entities such as 340B hospitals and children’s hospitals, are expanding into the retail pharmacy space to insulate themselves from restrictive distribution actions and to remain independent of contract pharmacy relationships.
The second factor is the dramatic increase of the specialty pharmacy business, which provides medications for people with serious health conditions requiring complex therapies. The number of drugs that fall into the specialty pharmacy category has increased by 73 percent during the last 10 years. It’s now more than $500 billion in volume and about half of total drug costs. The number of specialty drugs entering the market will continue to grow as well. Specialty pharmacies owned by health care providers are seizing this growth opportunity and as of 2019 accounted for more than one-third of accredited specialty pharmacy locations across the U.S.
The last factor is the number of children’s hospitals opening retail pharmacy locations. These hospitals are entering the retail pharmacy market in response to a lack of traditional retail pharmacies and home delivery companies that want to compound prescriptions for the pediatric population (adjusting adult doses of medicine for children) due to the strict compounding and handling requirements that must be met.
Benefits for patients and providers
The new mantra from providers is “meeting the patient where they are”. Hospitals have more access to their patient populations through their own outpatient pharmacies and the services they provide. For patients, they have expanded interaction with the health system for adjustments to medications, to fill their prescriptions and remain compliant with medications.
Hospital pharmacies now offer hours outside of the typical 9–5 window, in some cases adding 24-hour access via tele-pharmacy and mobile technology; medication delivery to the bedside, home or workplace, as well as to thoughtful locations near urgent care centers, physician practices and conveniently located medication kiosks with two-way communication with the pharmacy.
Hospital outpatient pharmacies can access the same medication record within the health system that a physician uses, which is important when you’re looking at the patient’s care holistically. Hospital outpatient pharmacies can provide medication at discharge, too, as a patient is transitioning to home, enabling them to leave the hospital with medication in hand as opposed to making another stop, or waiting for a mail order delivery to arrive.
Many health systems also offer home delivery services, but they do so through more personal avenues that are cost prohibitive for large retailers. It is common for these outpatient retail pharmacies to use a courier that is aligned with the health system and who is able to hand off the medicine directly to the patient.
All of these examples lead to more integrated care delivery and direct visibility of patients and their health needs. It’s seamless, timely, and patient questions can be answered directly by their caregivers, which results in fewer medication errors, higher patient safety and quality outcomes.
What’s ahead for hospital outpatient pharmacies
Today’s hospital outpatient pharmacies are more than just what people have come to know in the traditional drug dispensing and gatekeeping sense. They are deeply involved in hospitals’ integrated care approach that improves the patient journey, outcomes and the ability to improve lives. It’s dynamic. Hospitals view it as an ability to provide continuity of care. Patients look at it in terms of a common access point for enhanced connections to medical professionals beyond just medication.
Consumer preference for more care in the home has accelerated during COVID-19, and we expect that trend will continue aided by new technology which enables additional self-service in medication information, script refills along with delivery options.
We expect more call-center pharmacy activity within health systems and more centralized services so that the call center can better support various aspects of pharmacy in outpatient or home-based settings. Examples include home infusion, home delivery, getting more drug information to patients and most importantly, be a point of resource for medication-related questions.
In terms of the overall financial models, we’re going to see more focus on value-based care and more insurers promoting care in the home because it can be provided in a way that is cost effective and has patient outcomes that are just as good if not better than inpatient care.
Though no one has a crystal ball, we do expect that changes to the 340B program will continue to pressure hospitals and trigger additional specialty pharmacy growth. In fact, 80 percent of hospitals that have 600 or more beds have a specialty pharmacy today. If you look at the under 600-bed market, you’ll see that number around 40 percent. There’s great opportunity for those smaller hospitals.
Hospital outpatient pharmacy is alive, nimble and re-aligning as part of a health care industry evolution. Don’t judge the outcome just yet.
About the author
Brian Hardy brings over 22 years of experience in the health care industry. He provides direction and support for Vizient’s Pharmacy Advisory work related to ambulatory pharmacy. Brian is responsible for helping health care organizations identify opportunities for implementing or expanding ambulatory, central fill, home delivery, specialty and home infusion pharmacy operations, including review and recommendations regarding current ambulatory pharmacy operations.