PHP130 - Growth of Hospital-Owned Specialty Pharmacies: Importance and Implications for Manufacturer Channel and Patient Access Strategies

Abstract

There has been a recent proliferation of hospital-owned specialty pharmacies. In 2016, Navigant surveyed 64 executives representing large health and hospital systems and found that one-third of organizations have specialty pharmacy capabilities and a further 45% are considering adding them in the future. This research explores dynamics impacting this channel, as well as its importance for manufacturer distribution and patient access strategies. Primary research was conducted with N=8 pharmacy executives representing large provider systems with specialty pharmacy capabilities, as well as payers familiar with contracting for these entities. Issues including performance and outlook, key business challenges, and relations with manufacturers and payers were discussed. Supplemental secondary analysis was also conducted, including review of pharmacy networks for recently launched specialty drugs. Key challenges for hospital-owned specialty pharmacies include access to limited drug distribution networks and payer networks. However, several market forces are working in favor of this channel: hospital consolidation and changing physician employment models; risk-based contracting requiring integrated pharmacy management; and adoption of enterprise pharmacy strategies which increase system control over prescribing. Furthermore, hospital-owned specialty pharmacies are expanding wrap-around services to demonstrate unique value to patients, payers and employers. 340b pricing has helped eligible institutions compete for payer network access, although this “crutch” may be at risk in light of recent program changes. Hospital-owned specialty pharmacies are increasing in number, and there are several reasons to believe the channel is of growing strategic importance to manufacturers. These entities have potential to improve the patient experience, coordination of care, and outcomes, and are more closely aligned with prescribers in the affiliated system. Still, the tradeoffs surrounding a move towards larger, more inclusive specialty pharmacy networks needs to be carefully considered, as key benefits of limited distribution including consolidation and control may be foregone.