Indecision Is Not an Option: Understanding the Range of Business Models for Health-System Specialty Pharmacy
When planning for a specialty pharmacy within a health system, 3 business models should be considered: build, partner, and outsource.
Each year, more health systems and academic medical centers implement in-house specialty pharmacy programs. According to the 2016 American Society of Health-System Pharmacists (ASHP) survey of hospital pharmacy practice, a specialty pharmacy operation is in place in 47.1% of hospitals with 600 or more staffed beds. The percentage declines with hospital size, down to 1.6% of hospitals with fewer than 50 beds.
Whether a hospital is a community hospital, part of a larger health system, or the flagship of an academic medical center, it should address the issue of specialty pharmacy in all its operational and economic complexity. However, just 8.7% of all hospitals surveyed operate a specialty pharmacy.
When planning for a specialty pharmacy within a health system, 3 business models should be considered: build, partner, and outsource. A fourth model—doing nothing or delaying a decision—becomes, by default, a fragmented, reactive outsourcing program with individual patient risk managed as it arises. And it is bound to arise.
As specialty drugs carve out a greater slice of the pharmaceutical landscape, delaying a decision leaves the health system at a disadvantage in terms of managing the cost of care, maintaining continuity of care, managing medical records, delivering a high-quality experience for patients and their families, and retaining pharmacy revenue.
A brief description of each model follows. Organizations should consider the business case for and against each one: What are its advantages and disadvantages? What is the risk involved in following or not following this pathway? What resources would be required?
The Build Model
A health system is best positioned to successfully implement an in-house specialty pharmacy operation if it has 3 things:
- A critical mass of specialty patients
- Existing ambulatory pharmacy capabilities
- Commitment at the leadership level
The largest health systems and those with many specialty patients, such as academic medical centers, will see the clearest potential from building their own capabilities. The build model’s greatest benefit is the ability to manage care and transitions of care seamlessly, so that complex patients continue to receive their medications. The deciding factor in getting in or staying out is likely to be economic. Many health systems may choose to enter the space, regardless of the economic return, to align pharmacy services with their institutional mission and values.
An existing ambulatory pharmacy operation reduces the risk of issues during care transitions and provides a head start in terms of infrastructure and expertise. However, specialty pharmacy operations differ from traditional ambulatory pharmacy in many ways. Technology platforms, strict storage and dispensing capabilities, call center capabilities, and shipping capabilities will likely need to be developed.
Building a specialty pharmacy program can be approached incrementally or all at once. Either way, it is important to recognize that a capability intended to serve as much of the organization as possible from inception may still have to accommodate payers and products to which the organization does not have access. Any related concerns about access to product and access to patient lives should not, however, delay implementation. As an organization’s specialty pharmacy grows, develops, and consistently meets patient, manufacturer, and prescriber expectations, it will become more likely to gain access to these contracts.
The Partner Model
Another option that can permit health systems to retain some of the advantages of controlling their own specialty pharmacy function, depending on the choices made, is the partner model.
Midsize health systems or those with a lower concentration of specialty patients may be best served by developing some functions in-house and finding partners to assist with the rest.
Partnerships allow health systems to tap into expertise, technology, and manufacturer relationships that could be prohibitively difficult to develop on their own. As the business plan is reevaluated every few years, the decision can be made to pivot to an in-house operation. Avera Health System in South Dakota, for example, subcontracted call center services to Fairview Specialty Pharmacy while building its own specialty pharmacy.
If a health system sees compelling reasons to offer a full range of specialty pharmacy services, it may also see value in partnering or contracting with an outside resource or resources to provide certain services and perhaps accelerate speed to market. Partners are available to manage call centers, run prior authorization and patient assistance programs, provide staff training and education on the latest therapies, and take on many other aspects of the operation. Personnel needs will be less than in a full build-out, an advantage to organizations that have limited resources to acquire staff or that struggle with finding qualified employees.
The partner model allows the health system to leverage its strengths and bring in aligned resources to fill out its capabilities. Assembling the pieces involves considerable complexity, but a number of organizations have done so successfully.
The Outsource Model
With the outsource model, an organization contracts out all or most of the services, including fulfillment or patient care, that an in-house specialty pharmacy (or partner) would otherwise provide. Wholesaler subsidiaries and group purchasing organizations may offer the solutions a health system needs to put this model into place. Multiple vendors may be required to cover a range of specialty pharmaceuticals, or the selected vendor may have collaborative arrangements with other companies. Vendors frequently offer co-branding opportunities, placing the health system’s name and logo on prescription labels and promotional materials.
The outsource model makes continuity of care challenging; therefore, health systems should develop processes that help coordinate care as much as possible.
Opportunities inside and outside health systems
In the larger specialty pharmacy marketplace, businesses such as Shields Health Solutions, Trellis Rx, and Acentrus Specialty, as well as organizations such as Excelera, have emerged to help health systems negotiate the complexities of planning, funding, building, and operating successful specialty pharmacies. Large specialty pharmacies such as Diplomat, among others, also provide a variety of services to help fill partnership or outsourcing needs.
For manufacturers, payers, large specialty pharmacies, technology providers, and others, conversations that recognize the mission-driven nature of health systems and acknowledge the often-challenging economic realities they face can be the first step toward effective collaboration, whichever model a health system seeks to implement.
Many of the largest health systems and major academic medical centers recognize the significant clinical and economic benefits of pursuing the specialty pharmacy build model. Other health systems generally fall into 2 categories:
- Leadership has decided to pursue specialty pharmacy through a partnership or outsourcing agreement, a path that usually makes sense for mid-size health systems.
- Leadership is focused on other pressing issues, with specialty pharmacy planning falling to the bottom of a long list of concerns.
For those who have failed to engage with the topic, the time to do so is now. An excellent resource for further information is the ASHP Specialty Pharmacy Resource Guide, available for download at ashp.org.
- Pederson, Craig A et al. ASHP national survey of pharmacy practice in hospital settings: Prescribing and transcribing — 2016. Am J Health-Syst Pharm, Volume 74, 2017.