Insights Into Shifting From Traditional Retail to Specialty Pharmacy

David M. Suchanek, RPh

As reimbursement levels continue to decrease in traditional pharmacy, many owners are seeking alternative revenue sources to offset profit erosion. One area where some have turned over the past 15 years is specialty pharmacy. Some pharmacies have been very successful, while others regret ever attempting to enter the hypercompetitive specialty space. In retail, we see some occasional higher-cost prescription products flow through the community pharmacy, but unless a pharmacy truly commits to investing in the specialty platform, success will continue to be hit-or-miss. 

Specialty pharmacy has grown from a notion to a niche industry and is now a major force in health care delivery. There are reasons why pharmacy benefit managers (PBMs), commercial payers, and the government are intensely focusing on specialty products through both network management and reimbursement strategies. Biotech products drive the pharmacy spend, and this will only continue. Because of the rapid and increased spend, payers had to put more controls in place to manage escalating drug costs. These controls can cause many issues for existing specialty pharmacies or those attempting to enter the specialty pharmacy arena. However, the controls can also be an opportunity for stakeholders who understand the specialty space and invest properly. If the entry into the specialty space is not well thought out, it can be very costly.

So what are the key areas that a traditional pharmacy needs to focus on to be successful in specialty? First, we need to decide how we define success. Do we want to simply add some specialty products to our current retail business to drive some revenue? Or do we want to create a separate solution in addition to our retail business? The level of investment can vary greatly depending on the desired direction.

When consulting with traditional retail pharmacies that want to enter the specialty space, we often ask some fundamental questions that help in this decision process:

1. Does the pharmacy have an information technology (IT) dispensing system that can capture clinical information and report it to a third party?

2. Is the pharmacy accredited by any of the appropriate bodies, such as URAC, the Accreditation Commission for Health Care (ACHC), the National Association of Boards of Pharmacy (NABP), or the Center for Pharmacy Practice Accreditation (CPPA)?

3. Does the pharmacy have an external sales staff? Someone who visits physician offices and clinics on a regular basis, as well as making calls to local or regional payers?

4. Does the pharmacy have a separate space for specialty dispensing and other focused activities?

5. Does the pharmacy have external relationships with other providers such as a hospital, physician offices, clinics, and payers?  

6. Is the pharmacy willing to invest?   

At the end of the day, the decision frequently boils down to 2 primary factors: time and money. If a pharmacy continues to service specialty prescriptions sporadically without a focused plan, we can predict with certainty that success will be short-lived. Payer- and PBM-owned specialty pharmacies will mandate the shift to higher-touch or internally controlled distribution/dispensing solutions. If a pharmacy chooses to fully invest in specialty, there is a long-term opportunity. Let’s discuss some of the marketplace dynamics. 

Payers, PBMs, and manufacturers currently go through a robust vetting process when choosing which pharmacies can dispense specialty products within their network. Before you can even fill a script, your pharmacy may need to be credentialed. Currently, pharmacies are frequently required to have certain core capabilities before being allowed to dispense a specialty prescription. These credentialing documents can take a week or more to fill out, requiring very specific and intimate lists of information about the pharmacy, ownership structure, and capabilities. The payers, PBMs, and manufacturers all strive for service consistency in their network. This means that a patient could go to any of the credentialed network pharmacies and find similar prequalified services at each pharmacy. This will lead to similar patient experiences, safety standards, and optimized clinical outcomes and also may require significant reporting responsibilities. This reporting goes beyond traditional sales and inventory reporting and may include payer information, co-pay information, secondary/tertiary billing information, clinical data, prescription referral status at the pharmacy, risk evaluation mitigation strategy (REMS), and government data collection/reporting requirements (labs, attestation, training, reporting, counseling, procurement, hub connectivity, hub triage, etc).

As part of these capabilities, a core component for success is the IT software. Typically, most retail software solutions do not meet the requirements of the specialty marketplace. Core component differentiations include but are not limited to:

Second, accreditation is typically required for a pharmacy. Most payers, PBMs, and manufacturers are using accreditation as the primary condition for participation in a network or access to product. This means that if you are not accredited, you very likely will not be considered for participation in a network. URAC, ACHC, the Joint Commission, CPPA, and NABP all have accreditation offerings and standards that may be required. These accreditations are an investment in specialty pharmacy but may take a few years to fully implement. Frequently, enhanced telephony, clinical assessments, standard operating procedures, and quality programs are required for accreditation, and the pharmacy must maintain these standards over time. The programs require an application fee and ongoing internal maintenance costs, while some may include reporting measurement and clinical information to a third party, which carries an additional cost.

Next, as with all businesses, specialty pharmacies must attract and retain customers. Given the current competitive environment, many pharmacies in the specialty space are turning to dedicated sales teams to help drive prescription growth. Capturing specialty prescriptions requires skilled sales representatives collaborating closely with their customers to earn business—most pharmacies lack the experience, time, and ability to hire, train, and manage a dedicated sales team. 

Consequently, many pharmacies do not even have a sales team—and even if they do, the “team” may simply be a former drug sales representative or even a pharmacy technician promoted into the role. The result is that the sales representatives lack the required background or are sent into the field with little or no training and limited accountability for their performance. Most of these reps are unsure of how to perform their job effectively and, as a result, ultimately fail in the field or produce lackluster results. This is frequently the result of one simple factor—the lack of effective sales training. To build relationships and win business, we have found that an effective specialty sales representative needs to fill multiple roles: salesperson, account manager, project manager, and consultant. This role may also require interaction with payers as well. Ultimately, these efforts require an investment by the specialty pharmacy.

Because of these challenges, we personally, and others, were drawn to provide “special” solutions for the marketplace. What we chose to do was new and took us out of our comfort zone to provide what our patients needed. As our current health care system continues to change, it is important for pharmacists to do what some peers will not venture to do: evolve.

Specialty has been and continues to be about bringing solutions to stakeholders and linking them cohesively (Figure). It started simply with providing services to physician offices, manufacturers, payers, and patients. 

It has now evolved to include REMS programs, 501(c)(3) foundations, hospitals, home health/nursing services, infusion suites, wholesale, and hub services.  

Soon, we expect to see integrated lab and genomic testing, media tool–driven adherence support services, and Web portals that empower patients to co-manage their disease with their health care team in a real-time environment. We all need to continue evolving. Many pharmacies have invested and had a very positive return on their investments. There is a tremendous amount of opportunity if pharmacies take the proper time to thoroughly educate themselves on the specialty marketplace, develop a business plan, vet the plan with those who have traveled the path before, and execute and invest fully. Consider using an experienced consulting group to assist you in this critical journey. A modest investment pays dividends. Check out the consulting groups’ pedigree and references. Not only can they get you there faster, but more important, they can provide you with the tools and experience to get you there correctly the first time. 

About the Author
David M. Suchanek, RPh, is executive vice president of biotech and specialty services at D2 Consulting.

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