Is Your Hospital Interested in Joining the Specialty Pharmacy Trend? Here are Five Things to Consider

by Brian Hardy, RPh, MBA

Vizient Senior Consulting Director, Pharmacy

In my last blog, I shared that hospital outpatient pharmacy—which encompasses retail, specialty pharmacy, home delivery, home infusion and other services—is alive and well. Since then, I’ve received questions from hospitals and health systems about starting a specialty pharmacy, one that provides medication therapy management services for patients with chronic, complex health conditions.

Specialty pharmaceuticals indeed continue to dominate drug approvals and purchasing, with spending on specialty medications accounting for 52% of drug spend in 2020. In Vizient’s latest Pharmacy Market Outlook, the predicted price inflation for specialty products for calendar year 2022  is 4.68% as of July 2021. And while the American Society of Hospital Pharmacists’ national survey of pharmacy practice in hospital settings found that approximately nine out of 10 hospitals with 600 or more beds operated a specialty pharmacy in 2019, there’s still room for growth. For example, among hospitals with 300–399 beds, only 49% had a specialty pharmacy. For hospitals with 200–299 beds, 39% operated a specialty pharmacy.

While specialty outpatient growth, inclusive of specialty pharmacy, may be part of your hospital’s overall strategy, there are other factors to keep in mind. Here are five questions to ask yourself before making a case to leadership about opening an outpatient pharmacy.

1. Why would my hospital start a specialty pharmacy? Though revenue and profitability are strong rationales, maintaining continuity of care can result in improved patient outcomes. Having a specialty pharmacy can help enable a cohesive patient experience, from inpatient to outpatient to ambulatory. With access to the electronic medical record, the hospital pharmacist and care providers have more visibility into the patient and outcomes and can more easily collaborate on patient care. Providers can monitor side effects and adverse events as well as see notes from each other. Furthermore, the time to therapy for a patient is significantly shortened when the pharmacy is part of the overall system of care.

2. Does my hospital have the right data? Look at your dispensing data to determine what is prescribed and where those prescriptions are going. There must be enough volume to sustain your specialty pharmacy. In addition, you also must be able to collect and report the right data points to meet the requirements of the payer as well as the manufacturer. The payers and manufacturers will need to know about patient compliance and any issues, including how quickly patients start therapy, time on therapy, reasons for discontinuation and any alternatives to therapy started.

3. What type of business model would my hospital deploy? There are many models to consider—a combination of retail and specialty or a standalone specialty pharmacy; own and manage or own and hire a third party to manage. If considering combination retail and specialty pharmacy, it is important to have access to the drugs that are being prescribed by your system as well as the appropriate specialty pharmacy accreditation(s). If you decide to operate a standalone specialty pharmacy, you need to have the protected volume to sustain that business and dialog with payers becomes an early step in the process.

4. How would it be managed? When contemplating managing a specialty pharmacy, think through what is involved. It is important to be able to deliver a highly personal touch to your patients. The infrastructure includes a lot of delivery components that are often overlooked as well as dispensing distribution concerns such as cold chain requirements. Plus, one of the key components is benefit investigation/confirmation early in the process, which entails contacting the payer to determine coverage formulary limits, alternatives, restrictions and to investigate potential co-pay assistance programs. A benefits investigation counselor can help with types of patients, disease states and payers that you are likely to encounter and restrictions around those products.

Outsourcing the management while maintaining ownership of your specialty pharmacy may be more beneficial depending on your situation. The timeline to implement is shortened in that you can potentially open in six to eight months versus nine to 18 months if you own and manage the pharmacy yourself. Third-party management companies often support multiple pharmacies so they can offer some economies of scale. They provide management staffing, technology solutions, payer contracts and sometimes call center support. Also, contracted pharmacy management can streamline the accreditation process as their staff is trained and their policies and procedures have already been developed to support accreditation. However, these management agreements often require a share of the revenue of your specialty pharmacy in exchange for their services.

5. What is the investment and is my hospital willing to commit long term? One of the most commonly overlooked areas for starting a specialty pharmacy is accreditation and payer contracting which require significant lead time, investment in developing procedures and having the infrastructure and licensing in place to dispense prescriptions prior to contracting with payers. Another big “aha” moment for the c-suite is the amount of staffing needed to operate a specialty pharmacy.

This tends to be a surprise to leadership as there are many touchpoints with patients that are not typical in acute care. For example, pharmacy staff are initiating calls to the patient to schedule medication delivery as well as clinical follow up and outreach between the physician and the pharmacy. Therefore, an investment in staff and supporting technology are critical.

While it’s clear that a specialty pharmacy may make sense as a part of your hospital’s overall growth strategy, there are many factors to keep in mind. If you need help figuring it out, feel free to reach out to me.