One of the most talked about topics in our industry right now is the growth of specialty pharmacy. The cost of many specialty medications has employers and health plans scrambling for answers on how to best manage their growing specialty drug expenditure.
The price tags associated with recent hepatitis C drug launches have been all over the media, and debate rages on over how to pay for such costly medications. By 2019 or 2020, specialty drugs are expected to account for 50% of overall drug costs,1 and the new drug pipeline is full of these large molecule drugs as manufacturers turn their focus to specialty therapies and orphan drugs.2
This begs the question of what a retail pharmacy should do to avoid being left behind as the pharmacy industry shifts its focus to the high costs of long-term therapy for chronic diseases such as rheumatoid arthritis, multiple sclerosis, and cancer.
Retail pharmacies noticed that specialty pharmacy has the fastest growth in our industry; independent and chain pharmacies alike have shown interest in changing their business models to capitalize on this new trend.
There are, however, many challenges associated with being recognized as a specialty pharmacy provider, and we are seeing a wide variety of business models emerge. Some pharmacies are building a specialty pharmacy from the ground up, whereas others have participated in acquisitions or joint ventures to capitalize on the expertise of other specialty pharmacies already established in the industry.
There are also retail pharmacies that have elected loose partnerships with specialty pharmacies whereby the specialty pharmacy fills any prescriptions that the retail pharmacy either cannot access or chooses not to fill for other reasons. A recent report from the Office of Inspector General at the US Department of Health & Human Services has called into question the viability of this model, and suggested that specialty pharmacies cannot make payments to another pharmacy where a referral is involved without risk of violating the anti-kickback statute.3
What can retail pharmacies do to change their business models and participate in the ever-growing specialty pharmacy space? Although there is no 1 simple step to changing a business model overnight, there are several key points that should be taken into consideration.
It is important to recognize that there is no standard definition for what constitutes a specialty medication. They are generally defined as expensive medications requiring special handling and administration, typically have an extensive adverse effect profile, and are often indicated for conditions for which there have been no other recent drug approvals. As a result, specialty drug lists vary from payer to payer so that pharmacies can typically fill the same drug for some payers and not for others because of network exclusion.
- Pick a Therapeutic Category
Many successful specialty pharmacies began by focusing on 1 therapy category and became recognized as experts in that space before branching out into other therapies.
One of the first considerations for retail pharmacies is choosing the therapy category or categories of focus. This will likely depend partly on the prescribers in the area. Who are the top prescribers in close proximity to your pharmacy and what therapies do they practice? Which prescribers do you have the best relationships with? Are there specialists in the area who you have not called on in the past?
Specialists are more likely to refer patients to your pharmacy for care if they understand the clinical expertise and level of service you can offer their patients.
- Create a Clinical Program
Once the therapeutic area has been established, it is crucial to create a comprehensive clinical program around that disease state.
Clinical assessments will be needed to record data that can be reported back to providers and payers. Oftentimes this necessitates special pharmacy software that can accommodate recording clinical information that cannot normally be maintained in a typical pharmacy management system.
Having a defined program to drive compliance and record outcomes can be a key differentiator for your pharmacy and is critical to competing in the specialty pharmacy space. You will need to consider special education, training, and credentialing for your staff to confirm the required clinical expertise. Pharmacy accreditation is also becoming a standard requirement for payer and pharmaceutical access.
- Provide Access to Medications
Even pharmacies with the best clinical programs still have challenges accessing limited distribution specialty pharmaceuticals. Manufacturers are increasingly using limited networks for specialty medications as part of their marketing strategies. Manufacturers limit access to control costs and help ensure clinical expertise and data reporting.
Most specialty pharmacies have staff dedicated to new business development and manufacturing relationships. Being involved with manufacturers very early on in the new product development process is important, as network decisions are made well before the product receives US Food and Drug Administration approval.
Manufacturers are typically interested in pharmacies that have a history of clinical excellence, good relationships with providers and payers, and the ability to record and report clinical data points.
- Get Access to Payer Agreements
Perhaps the biggest challenge associated with specialty pharmacy is how to get into payer networks. Even if you have access to limited distribution medication, great provider relationships, and a robust clinical program, there is no guarantee that you will be able to fill the prescription. Pharmacy benefit managers are increasingly using narrow networks and often go to great efforts to funnel business to their own specialty pharmacy. Independent specialty pharmacies must dedicate resources to meeting with payers and negotiating access to networks. Payers that use open or preferred networks are interested in how you can help lower costs and enhance outcomes. Although aggressive pricing is generally at the top of the priority list, keep in mind that you will need to meet reporting requirements and other performance guarantees to qualify for participation in most specialty networks.
- Differentiate Your Business
Differentiating your service is the key to success in specialty pharmacy. It is important to determine what services you can provide that are not currently available to patients and providers in your area. Find a therapeutic category that you are passionate about, and where you can identify an unmet need. Lastly, recognize that transitioning into a specialty provider role will be more of a marathon than a sprint. It takes time to create and implement new clinical programs, and the sellcycle for manufacturers and payers is lengthy.
- The Express Scripts Lab. The 2013 Drug Trend Report. http://lab.express-scripts.com/~/media/7f14884da6ef434dbf30abd82dd7e655.ashx. Published April 2014. Accessed November 4, 2014.
- Pharmacy Benefit Management Institute. 2014 PBMI Specialty Drug Report. http://reports.pbmi.com/report.php?id=5. Published February, 2014. Accessed November 4, 2014.
- Office of Inspector General, Department of Health & Human Services. re: OIG Advisory Opinion No. 14-06. https://oig.hhs.gov/fraud/docs/advisoryopinions/2014/AdvOpn14-06.pdf. Published August 15, 2014. Accessed November 4, 2014.