SPECIALTY DRUG COSTS
Specialty pharmacy (sometimes known as “SpRx”) is the business of providing usually expensive and sometimes scarce medicines to patients with complex and often chronic health conditions. They are not the prescriptions you get filled at the corner pharmacy.
Hospitals, their specialty pharmacists, trade associations and consultants know specialty pharmacy is a financial juggernaut. They prefer to speak in terms of patient safety as they pursue SpRx growth and seek to restrict or bar safe, lower-cost competition. However, let’s follow the rate of explosive growth in hospital-owned specialty pharmacy and the resulting money. Then, decide what you think is the real motivation in this SpRx arms race.
Special pharmacy is big business — and big money. One advisor had previously predicted that by 2018 special pharmacy would represent 40% to 50% of entire drug spending (depending on the report). Another firm estimated that in 2020, specialty pharmacy would approximate $400 billion. Big money, even for healthcare.
Turning to New Hampshire, the November 2020 Cost Drivers in Healthcare Report, prepared by Gorman Actuarial, stated that at least 45% of the entire drug spend in 2019 was specialty pharmacy and that specialty pharmacy cost increases significantly outpaced trends in non-specialty drugs. At almost 20% of health insurance costs, we spend more on pharmacy than inpatient hospital services. One writer asserts that total pharmacy spending is the second-largest category of spend in the entire economy, behind only food and drink.
Specialty drugs represent approximately 1% of all prescriptions but 45% of the total pharmacy spend.
Due to the enormous numbers and rates of increases in SpRx, hospital delivery of these drugs has been the target of market disruptors, which rolled out safe and lowercost specialty pharmacies that are nationally accredited by the same organizations lauded by the facility-owned SpRx providers.
Previously, SpRx had been an inpatient, and more recently, outpatient hospital service. White- and brown-bagging, where lower-cost specialty pharmacies ship medicines directly to the patient (brown-bagging) or the healthcare provider (white-bagging), precisely because the facility-based delivery of the medications had simply become too expensive.
According to Adam J. Fein, CEO of the Drug Channels Institute, nine out of every 10 large hospitals owned a specialty pharmacy by 2019. The American Hospital Association is now lobbying to prohibit brown-bagging and white-bagging by independent, nonhospital-owned specialty pharmacies purportedly based on patient safety concerns.
The same is happening here in New Hampshire.
URAC (Utilization Review Accreditation Commission) accreditation, a well-respected national seal of approval, is promoted by Dartmouth-Hitchcock’s specialty pharmacy as evidence of its “commitment to quality care … and better patient outcomes.” But the independent specialty pharmacies are accredited by the exact same organization. The only apparent difference then between these two types of specialty pharmacies is that one is generating substantial profits for the hospitals and the other is providing much needed competition that lowers costs for healthcare consumers and health insurance premium payers.
Interestingly, the increase in scope and frequency of lobbying on this issue and related public affairs activity by the trade associations on behalf of the health systems and providers seems closely correlated to growth of specialty pharmacy ownership by hospitals, accelerated by the disruption underway to correct the exorbitant prices occasioned by hospitals’ buy-and-bill processes. It is not an unusual response by incumbents to strike out against those with new ideas by trying to ban or restrict new entrants’ participation in the market.
Every day, you can find a story or two about some sector of the economy fighting over turf, revenue and margins. Heck, you even get a politician in a consumer costume when polls tighten. However, the true win for the consumers, which won’t need “the guy across the avenue’s thumb on the scale” (credit to my great-grandmother, the butcher shop owner), is elimination of the excessive pricing that spurred the disruption. Consumers must ask if there is a safe, lowercost alternative. The answer is yes.
As a proud insurance lawyer/lobbyist, I know — thou not always saintly — but let’s not forget the providers know their way around the collection plate.
Attorney Donald Pfundstein, a shareholder and director of Gallagher Callahan & Gartrell, represents insurers, financial institutions and other businesses on insurance law issues.
