The Growth of Hospital Specialty Pharmacies Impacts Manufacturers

Specialty Pharmacies (SP) are big business. They currently fill prescriptions that represent nearly half of overall drug costs in the U.S. every year. Looking to the future, about half of newly-approved drugs fall into the SP category (often because they’re expensive). This means the SP business is only going to get bigger and bigger. And now hospitals want in!

Here are a couple of convincing statistics:

• Over 90% of hospitals with 600+ beds already operate a Hospital System Specialty Pharmacy (HSSP). Generally speaking, the larger the hospital, the more likely it has an HSSP operation
• One-third of all registered SPs in the U.S. are owned by providers (i.e., hospitals)

Hospital systems want to fill specialty pharmacy prescriptions for a few different reasons:

1. Clinical – When the prescriber and the specialty pharmacy are part of the same system, patient care can improve. The hospital pharmacy has access to a patient’s Electronic Medical Record (EMR), giving pharmacists much better insight to a patient’s medical condition and needs
2. Economic – All pharmacies are built to create profit by filling prescriptions. Hospital pharmacy departments can add a revenue stream by filling prescriptions that were previously outsourced to the traditional Specialty Pharmacies
3. Humanistic – Patients see the convenience of their medication therapy management coming from their provider. Physician satisfaction may also increase because they have a single internal partner to help with Prior Auths, patient monitoring, and improving adherence

Some states could promote (maybe inadvertently) the growth of the HSSP segment by limiting “white bagging”. A payer’s white bagging policy mandates that patients receive their specialty drug prescriptions from the SP of the payer’s choice. Louisiana just passed a law limiting white bagging policies; NY, MA and TX are considering such bills. These bills may allow hospital systems to increase the scope of their HSSP operations.

Impact on drug manufacturers

There are several aspects of HSSP operations that should draw the attention of all manufacturers of specialty drugs:

• If a drug has a limited or closed distribution system, the hospital cannot buy and subsequently fill prescriptions of that drug. This may lead them to select a competitive product for formulary and promote its use over the unavailable drug
• Specialty pharmacies conduct many business operations that impact product access, including benefit investigation, accessing patient support programs, submitting claims for reimbursement of buy & bill drugs, and more. Manufacturers should seek to support these efforts
• Hospital pharmacies can be very effective in increasing adherence to medications, given their proximity to the patient and his/her EMR. Assisting these efforts can lead to better patient care and better product sales
• If the hospital is a Covered Entity under the 340B program, then it may purchase drugs at a deeply discounted price. This price is likely less than what one of the traditional SPs would pay. Thus, increases in HSSP purchases may result in lower revenue because they replace purchases through a SP

In summary, many of the most important hospital systems are filling more and more prescriptions, sometimes displacing the largest traditional specialty pharmacies. As hospital systems become more sophisticated, it becomes critical for manufacturers to increase their support of these important customers.

Originally post on LinkedIn June 17, 2021