Carmine DeNardo
Hospital operating margins in recent months have started rebounding. However, persistent challenges such as staffing shortages and rising expenses leave providers’ financial health uncertain. Hospital leaders must find new revenue streams to weather financial headwinds, and the increasing demand for specialty drugs is an opportunity to boost revenues through entity-owned specialty pharmacy.
The demand for specialty drugs is reaching new heights as 60% of Americans have a chronic disease requiring these more complex therapies and 14 million more Americans are projected to be diagnosed with chronic medical conditions between 2020 and 2030. This demand is exacerbated by the national drug shortage that renders access to medication even more challenging. In addition, as drug companies continue to restrict 340B discounts for contract pharmacies, patient access to specialty medications is further limited. Establishing an entity-owned specialty pharmacy is not only a strategy to minimize these restrictions, but a tool to ensure vulnerable populations, particularly low-income patients, retain access to specialty medications. In addition to increasing medication access for underserved populations, an in-house specialty pharmacy provides opportunities for efficiency and enhancement across hospital operations while improving patient care and enabling continuity of care.
Benefits of launching an in-house specialty pharmacy
When patients must fill their specialty drug prescriptions at pharmacies outside their health system, what could have been a seamless care journey is now disrupted. Not only does the patient have to account for any additional expenses or new administrative processes, but the health system loses insight into a crucial part of the patient’s healthcare journey, which is critical to tracking patient outcomes and measuring care plan efficacy. This phenomenon, known as patient leakage, is a persistent challenge for 76% of health system leaders and is exacerbated by the healthcare fragmentation brought on by Covid-19. Ensuring prescriptions for limited-distribution drugs are filled in-network via an in-house specialty pharmacy enables close integration between the pharmacy and care teams which ultimately leads to more streamlined communications and enhanced patient experiences.
As we can all attest, high-quality healthcare encounters can make or break patient-provider relationships and with the onslaught of digitally enabled technology to enhance consumer experiences, the time for high-touch, personalized care is now. The rise in chronic disease diagnoses across the nation will be a critical use case for the power of customized care to meet the unique needs of patients, and hospitals can solidify their commitment to patients by shortening the treatment journey for chronic and complex conditions. In addition, as rising healthcare costs and the wave of local pharmacy closures heighten medication access challenges for high-need populations, creation of a specialty pharmacy is imperative for safety net hospitals serving patients who otherwise must travel great distances for access to specialty drugs. For rural or critical-access facilities, this measure keeps in-demand drugs and resulting co-pay dollars within local communities to bolster resources where they are most needed.
Marked by the rapid increase in outpatient surgeries performed, rising from 33.6% in January 2019 to 45% in March 2024, patient preferences continue to push for more care closer to home and outside of traditional inpatient settings. Health systems have responded to evolving demands by investing in outpatient services, as well as virtual and telehealth offerings. As health systems continue to encounter challenging economic environments, these service expansions highlight the need for more diversified revenue streams to combat market headwinds. With total revenues from U.S. pharmacy-dispensed specialty drugs reaching $243 billion in 2023 and 65% of all drug expenditures projected to be on specialty drugs by 2025, an entity-owned specialty pharmacy is a competitive vehicle for health systems to earn a bigger share of national drug spending and diversify revenue streams outside of core inpatient operations. Additionally, by decreasing reliance on contract pharmacies to supply limited distribution drugs, health systems can improve the continuity of care through operational efficiencies, drug cost savings, and improved patient medication compliance.
Best practices
From inception to launch, the path to market for a new specialty pharmacy program is a rewarding, yet complex endeavor. As such, assembling the right team to support this journey is paramount. Along with internal pharmacy, finance, and operations leads, external partners can supply the necessary expertise to ensure optimal outcomes from the undertaking. While health systems are experts in their patient populations, they don’t always possess the resources and experience in areas vital to effectively launch and manage a specialty pharmacy such as accreditation, payor contracting, prior authorization management, and 340B compliance. An external partner can bring these skill sets to bear, maximizing a health system’s capabilities to develop an integrated specialty pharmacy program that meets a hospital’s unique needs. At its best, a specialty pharmacy partnership is not a one-size-fits-all model, but a flexible solution that leverages a health system’s existing strengths and experience in the pharmacy space, while offering insight into process areas that require outside support.
Innovations in automation and data analytics present another tool in a health system’s arsenal for a streamlined go-to-market process. Leveraging advanced technology, coupled with the insight of an industry expert, hospitals can get an on-site specialty pharmacy up and running in a matter of months, and the power of data and technology enablement doesn’t stop at launch. In the long-term, incorporating data-driven decision making into daily pharmacy operations is a powerful strategy to get the most value out of high-cost, high-touch medications and enhance outcomes. Long-term specialty pharmacy success is further enhanced by best-in-class medication management and dispensing tech to help hospitals optimize inventories amid national drug shortages and supply chain bottlenecks.
Common pitfalls and next steps
Access to medications and payor networks, multiple accreditation requirements, and manufacturer-imposed restrictions on the dispensing of specialty medications can slow speed to market. Moreover, logistical barriers such as space constraints and cold chain management challenges may bring even existing specialty pharmacy programs to a halt. The solution to these and other common pitfalls will rest on the degree and severity of each challenge, but at its core, working with an experienced partner can help health systems navigate roadblocks for long-term success. While economic challenges will continue to impact hospital finances, recent market conditions have created the perfect opportunity for health systems to look outside of existing channels for new revenue streams. With sights toward the evolving healthcare landscape, health systems can both improve patient care and financial outcomes by investing in specialty pharmacy.
Photo: Irina_Strelnikova, Getty Images
Carmine DeNardo, R.Ph., serves as Vice President and General Manager, Outpatient Pharmacy Services, leading the specialty pharmacy business for Omnicell. He is also the past Board Chairman for National Association of Specialty Pharmacy (NASP) and currently represents Omnicell as a Board and Executive Committee Member for NASP. Prior to joining Omnicell, Carmine was the President and Chief Executive Officer of ReCept Pharmacy, and before then, Chief Operating Officer for TheraCom, a service division of CVS Caremark, and Vice President of CVS Caremark Specialty Operations, overseeing all specialty retail locations across 25 states. Carmine earned a Bachelor of Science degree in Pharmacy from Northeastern University and brings more than 35 years of executive leadership experience in both retail and specialized pharmacy services.
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