Overall growth in specialty pharmacy today is significantly outpacing traditional pharmacies and will soon make up approximately half of total pharmacy spend. As one of the fastest growing segments in pharmacy, specialty pharmacy may be an appealing business opportunity for pharmacy owners.
To be successful, there are several considerations prospective owners should keep in mind when starting their own specialty pharmacy.
In part 1 of a 2-part series on starting a specialty pharmacy, we discuss stakeholders, business focus, and deciding on pharmacy location.
Specialty pharmacy means different things to different groups, and each stakeholder will experience specialty pharmacy differently, making it very important to consider each stakeholder as you look to open a new specialty pharmacy.
First and foremost, you must consider your patient. Likely these patients have recently been given a life-changing diagnosis and have little-to-no understanding of specialty pharmacy. Pair this with the fact that their new specialty medication is probably significantly more expensive than any prescription they’ve encountered in the past, and it is easy to understand how daunting this experience may be. Although interactions between specialty pharmacists and their patients are often different from the traditional interactions in the community setting, this relationship is no less important. The specialty pharmacy will become a dedicated resource for patients as more drug information counseling and financial/insurance support will be needed. When opening a specialty pharmacy, the team must be prepared to offer these very high levels of patient care and service in order to be successful.
Next, consider the prescribers that you will need to both partner with and support to drive success in your pharmacy. More often than not, prescribers in the specialty space will be specialists rather than general practitioners and will have varying understanding of specialty pharmacy to start. If you plan to operate in the limited/exclusive distribution space, prescribers will require even more support as these models can be quite confusing to navigate. Prescribers may look to the specialty pharmacy to provide better clinical support and adherence counseling than traditionally provided and will certainly require the pharmacy to take a leading role in the billing of the medication, as most specialty prescriptions will require prior authorization.
The next stakeholder, which is likely less well understood, is the manufacturer. Manufacturers play a much larger role in the pharmacy process in specialty compared with traditional pharmacy. Manufacturers of specialty medications often put parameters on pharmacies to ensure that patients are receiving the best care with their products. In the specialty space, manufacturers may choose to limit the distribution of their drug to only a small number of pharmacies, so these fewer pharmacies serve as manufacturer advocates. This also allows the company to get better postmarketing data and work more closely with the pharmacies on patient payment assistance and copay cards. Because of this, specialty pharmacists become experts in dealing with manufacturers, understanding copay cards, and often specialize in 1 or more specific disease states. Creating relationships with manufacturers of specialty drugs and being able to clearly display why your pharmacy’s patient care may exceed that of others will be very important to consider when opening a new pharmacy and growing the business.
The next important stakeholder is the payer. In many ways, this stakeholder is similar to manufacturers as they are very focused on patient adherence, especially in the specialty space. We know that specialty medications can be quite expensive, and of course, payers want patients to properly take medications that may prevent future costs, such as expensive procedures. For this reason, payers will often set parameters that pharmacies must meet from an adherence standpoint in order to receive complete payments. From a profitability standpoint, this is definitely something any new specialty pharmacy will need to carefully consider when making operating plans.
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The next area to consider when opening a new pharmacy is the focus of your new specialty pharmacy. The level of focus varies greatly across specialty pharmacies. The larger payer-owned specialty pharmacies tend to dispense a wide variety of specialty medications for several disease states whereas many smaller pharmacies may limit their dispensing based on disease state and/or distribution type. Some unique specialty pharmacies do little-to-no actual dispensing and are as what is known as a HUB service, which focuses on assisting patients in obtaining their medications and quality care as well as working directly with manufacturers. Determining the level and type of focus for a new specialty pharmacy early on may help make other subsequent decisions. Some key considerations here should include whether your pharmacy will focus on certain disease states or be more general, whether your pharmacy will pharmacy seek out contracts with certain payers or nearly all payers, what level of patient care the pharmacy will aim to provide, and so on.
One of the more complex decisions that will need to be made very early on is determining where the specialty pharmacy will be physically located. The complexity in choosing a physical location for the pharmacy results from the numerous factors that must be considered such as:
Board of pharmacy (BOP) regulations: Each state’s BOP has different regulations for operating a pharmacy. Before opening a physical location in a state, it is very important to become familiar with the state-specific regulations and how they may differ other states. For example, some states have specific requirements in terms of temperature management and may require the pharmacy to meet USP standards.
State taxes: Generally speaking, taxes vary greatly state to state, and this is no different for business owners. Financially, it would be very wise to consider tax implications in any state in which the pharmacy is considering operating. Many states have no sales tax, which may be enticing as taxes are typically assessed at the purchase location. In most states, this would not apply to prescriptions, but it would be smart to make sure of that before choosing a final location. Other tax types worth considering would be income tax and property tax rates in the state where the physical location will be, as these would also affect the business owner.
Pharmacist/support staff talent and demand: Acquiring top talent is essential to any specialty pharmacy’s success. Opening in an area where the talent pool is larger will allow the pharmacy to better access available talent.
Transportation and shipping: Because most specialty pharmacies dispense the vast majority of their medication via the mail, picking a location where the pharmacy will have to spend the least amount possible on transportation/shipping could significantly reduce costs and increase profit for the pharmacy.
In part 2, we will discuss accreditation, technology and data, and licensure and payer contracts.
About the Author
Molly Gombos earned her Doctor of Pharmacy degree from the University of Pittsburgh in 2014 and is currently enrolled at Pitt in the Master of Pharmacy Business Administration (MPBA) program, a 12-month, executive-style graduate education program designed for working professionals striving to be tomorrow’s leaders in the business of medicines. Molly has spent the last 7 years working in community pharmacy, initially as a pharmacist and pharmacy manager and most recently working in pharmacy operations. Her current role is working in the patient safety and clinical space with focus on clinical decision support.