In-house specialty pharmacy services are gaining popularity among hospitals and health systems seeking to drive efficiency in their operations and improve profitability.
Most of the new treatments approved by the US Food and Drug Administration in the last several years have been specialty drugs, high-cost treatments used for complex conditions. Since early 2021, the FDA has approved close to 80 specialty drugs that treat conditions ranging from plaque psoriasis to metastatic melanoma.
Health systems are getting on board, adding specialty pharmacy operations or maintaining current ones to boost revenue and create potential cost savings for patients and providers. Many systems view the initial financial outlay and other challenges as a long-term investment.
“It really enables the health system to take that patient, as they present with initial diagnosis or pursuant to an acute care visit on the inpatient side, and ensure that these drugs that are very high-touch, high-cost, high-risk medications are being handled in a very seamless way with a team that is all working together,” said David Chen, assistant vice president for pharmacy leadership and planning at the American Society of Hospital Pharmacists.
About 26% of hospitals were operating a specialty pharmacy in 2019, compared with approximately 8% in 2015, according to a survey from the society.
Streamlining operations
Healthcare leaders say demand is growing.
OhioHealth, which launched its specialty pharmacy business in January, uses it as a tool to better streamline patient care, integrating treatment information into electronic health records and giving providers full visibility into a patient’s care plan at different stages, said Charles McCluskey, vice president of pharmacy services at Columbus-based OhioHealth.
Once integrated into the system, specialty pharmacists can review lab results, communicate any changes in disease state and pivot drug therapies more quickly.
UConn Health in Farmington, Connecticut, established its own specialty pharmacy in 2020. Kevin Chamberlin, interim assistant vice president and chief of pharmacy, said it is an effective way to avoid patient leakage, when patients go outside of a hospital system for the services they need.
“If you have a patient that has to go outside of your system and maybe go to another vendor for access to these medications, and they get good service, well then they’re more likely to seek out other services that may be offered to them from those vendors,” Chamberlin said. “If we lose a patient for this one thing, how else can we lose them from our system?”
Integrated specialty pharmacy also creates a predictable revenue stream for hospital systems. They can track patient demand for certain treatments and have more control over when patients will receive the medications, rather than relying on a third-party process that could take several weeks. Most specialty drugs are distributed via mail order, but some systems maintain an in-person facility for patients to pick up prescriptions.
UConn Health nearly doubled its net revenue from specialty pharmacy from fiscal year 2021 to 2022, filling more than 11,000 prescriptions, Chamberlin said.
Some health systems established in-house specialty pharmacies years ago and continue to see benefits.
At New York-based Northwell Health, a specialty pharmacy was established in 2012 to streamline care for HIV patients. The system put a pharmacist on-site at an HIV clinic and created a referral plan for physicians. Onisis Stefas, chief pharmacy officer, said the team saw significant improvement in patients’ viral loads, as those patients gained more consistent access to the medications they needed because of the in-house support.
Northwell’s specialty pharmacy team, which expanded into oncology and rheumatology, serves as an important touchpoint between patient visits, Stefas said. The team works with patients to build care plans, helps them find financial assistance programs and contacts them regularly to discuss their medications.
The potential for cost savings down the line, such as avoiding emergency care, are particularly important for hospitals treating at-risk populations, Stefas said.
“The dollars that we generate through the pharmacy are then reinvested back into the organization and a lot of times in the form of community benefit[s]so a lot of the work that we did around COVID testing, vaccinations, health clinics, providing food in the community,” he said.
Hospitals can also glean some cost savings if a specialty drug is eligible for the 340B Drug Pricing Program, which requires drug manufacturers to sell medications at discounted prices to health systems that care for uninsured or low-income patients. Manufacturers can also partner with hospitals to bring more innovative treatments to the market, said Matt Conway, chief commercial officer at Shields Health Solutions, which helps providers implement and scale specialty pharmacy processes.
Considerable challenges
Establishing an in-house specialty pharmacy is an expensive, heavy lift, said UConn Health’s Chamberlin said.
Hospital systems must gather data to demonstrate better outcomes to pharmaceutical companies before gaining full access to a drug–a process that typically takes up to two years, McCluskey said. Insurance companies also want to see accreditations before working with new specialty pharmacies, Chamberlin added.
There are the practical barriers to entry–such as ensuring there is enough storage space and equipment to keep drugs at the proper temperature.
Then there are the industrial politics.
Health systems do not have access to some drugs under limited distribution, meaning the manufacturer has restricted access to a few pharmacies. Pharmacy benefit managers often have their own specialty pharmacies, steering that patient revenue towards themselves rather than to an outside pharmacy. OhioHealth decided to launch its specialty pharmacy after changing its PBM and now includes those services as part of its health plan network, McCluskey said.
Hospital groups have also denounced white bagging–an agreement between payers and select pharmacies to send medications directly to care sites for providers to prepare–saying it compromises hospital safety checks and can delay patient care. Payers and PBMs argue this distribution model can be more cost-effective, potentially passing on savings to patients.
Last year, Arkansas, Louisiana and Virginia passed laws against the practice, with several other states considering similar measures.
“There is high competition in the specialty space,” McCluskey said. “Ultimately, when you decide that it’s something you either want to do or need to do, you’re going to be jumping into a space where there are multiple rules and barriers in order to be successful.”
