Cancer and oncology pharmacies have become a major factor in the rise of specialty pharmacy startups nationwide. Because cancer and chemotherapy medications are typically extremely expensive and complex to both manufacture and compound, it is easy to see why oncology pharmacies have become a cornerstone in the specialty pharmacy industry. Oncology drugs necessitate special storage, handling and administration procedures that must be taken into consideration when starting up a specialty pharmacy or expanding an existing pharmacy operation. Additionally, out of all the specialty pharmacy models, oncology start-ups must consider that this type of specialty pharmacy requires the most clinical communication and interaction with other healthcare professionals, patients and insurance providers. However, the opportunities to create a successful startup pharmacy operation in this specialty pharmacy area are in place and there are numerous success stories. A survey by Zitter Health Insights showed that around 31% of oncology and cancer IV therapies were fulfilled in 2013 by cancer specialty pharmacies. Additionally it was reported that almost 28% of oncology medications were distributed to physicians’ offices or directly to patients to bring to their clinic by oncology specialty pharmacies in 2015.
The Onset of the Cancer Specialty Pharmacy
Historically the oncology medication treatments were administered to cancer patients in a hospital, but this changed dramatically in the early 1990’s. Cancer treatments increasingly moved to the clinic or physician’s office settings, with an estimated 80 – 90% of patients receiving their oncology drugs intravenously outside of the traditional hospital setting. This resulted in thousands of cancer clinics being set up across the nation who were being supplied by several major drug suppliers. The primary oncology drug suppliers were divisions of major wholesalers who dominated the marketplace. The largest of these providers that eventually became known in the industry as Specialty Distributors (SD) included:
– McKesson Specialty Care Solutions
– Cardinal Specialty Pharmaceutical Distribution
– Oncology Supply (owned and operated by the Amerisource Bergen Corporation)
– CuraScript (a division of ExpressScripts)
Then arrived “the age” of oral oncology medications. With the dramatic explosion in the number of oral cancer medications available for oncology treatment during the first decade of the new millennia, oral drugs accounted for a little over 35% of the marketplace by 2011 as reported in Pharmacy Times.
Physicians were focused on their patients who received intravenous medications and oncolytics at their offices and clinics, thus sending patients to their local pharmacies who were really unprepared to dispense the oral cancer medicines. Not only did the retail chains and independent community pharmacies not wish to stock the expensive medications, but there was a definite lack of patient counseling and education regarding the dispensing of these prescriptions. Specialty cancer and oncology pharmacies quickly emerged in the marketplace as a viable solution.
Additional Challenges for Oncology and Cancer Specialty Pharmacy Startups
Along with all the usual considerations involved in the planning and execution of a pharmacy startup operation to become a successful business, an oncology or cancer pharmacy has two additional challenges that must be taken into consideration. The first is the counseling and education involved with the dispensing of these medications. In many instances the specialty pharmacist is at the communication center and the key to a patient’s treatment regimen being a success. In the instance of “brown bagging” (where the cancer specialty pharmacy ships the medications directly to the patient), many pharmacists admitted that they underestimated the amount of time required to counsel and educate patients. It definitely requires the right personality and a pharmacist who is patient and enjoys extensive patient interaction. For “white bagging” (where the cancer specialty pharmacy ships the medications directly to the physician or clinic for the patient’s treatment when they arrive), the same is true. The physician or clinic’s staff members depend on frequent communication with the specialty pharmacist and once again the time required for this essentially vital task being performed well is significantly underestimated in many situations. The cancer regimens presented a challenge to all the healthcare professionals involved in the patient’s oncology treatment by the necessity of the ongoing clinical support that the specialty pharmacist now fills the role of providing.
The second additional challenge faced by the specialty pharmacy business owner that must be considered is the reimbursement from third-party providers. Many third-party providers embraced the cancer specialty pharmacies as a means to controlling costs, while the drug companies saw them as a good way to manage the expensive inventories associated with their products. However, the issues surrounding reimbursement have become extremely complex. It is important to keep in mind that about half of all specialty drug spending falls under the patients’ medical benefit coverage. Add into the scenario the Federal 340B Drug Pricing Program which requires that the drug manufacturers provide the medications at significantly reduced prices and you can start to see the complicated landscape and the “cloudy” issues involved. The drug manufactures embrace the specialty pharmacies, as they have proven effective as an additional outlet to dispense and ship their products to patients and providers. The manufacturers realize that the traditional channel strategy of wholesale distribution of their products will lead to a diminished return on investment for them. The distributor channels obviously are opposed to the cancer specialty pharmacies. They see a significant decrease in their distribution volume, plus decreased profits. If they can get the specialty pharmacy to order through them, then they get to keep the volume, but earn far less profit.
Faced with the dilemma of extremely expensive drugs used for a small proportion of patients, payers have attempted various new strategies designed to control costs. To participate, the specialty cancer pharmacy is faced with the complexity of the reimbursement system. These attempts at controlling costs include such strategies as:
– Formulary specialty tiers.
– “Split-Fill” programs.
In this scenario only half of the first 30 days of a patient’s therapy is covered for payer reimbursement until the patient is proven to be tolerating the drug and positively responding to the drug before treatment can be continued.
– Prior authorization requirements.
– Mandated use of designated specialty pharmacy providers.
To become a designated specialty pharmacy provider in many instances requires certification by the manufacturer of the pharmacy, the pharmacists and the technicians involved in the drug’s storage, handling, compounding and shipping. It must also be noted that trying to become accepted by a manufacturer into their distribution network usually requires a “tremendous” amount of data generation, collection and storage.
The Upside to Opening a New Cancer/Oncology Pharmacy
The upside of these challenges is the fact that in 2018 approximately 85% of Managed Care Plans (MCP’s) had entered into contracting with specialty pharmacy providers in regards to the supply of their oncology drugs. Although as noted above it can be a difficult task, the manufacturers also are embracing the specialty pharmacy business to help increase their market share. The fact that 51.4% of the Managed Care Plans reported using a single, preferred specialty provider is a challenging fact, but many organizations are now taking a very close look at this. One such group known as The Community Oncology Alliance (COA) is a forerunner whose mission “is to ensure that cancer patients receive quality, affordable, and accessible cancer care in their own communities”. They have become a major voice in being “dedicated to advocating for community oncology practices and, most importantly, the patients they serve”.
Find an Experienced and Reputable Pharmacy Consulting Firm to Partner With
The cancer specialty pharmacy startup is a business and needs to make a profit. Yet the complex challenges discussed present risks that can affect the bottom line (plus result in a cash flow problem that is known in the entrepreneurial world as “the killer of new business enterprises”). Since the oncology specialty pharmacy usually takes on the assignment of benefits from their patients, they bear the burden of obtaining reimbursement by billing the payer. Thus the specialty pharmacy is at risk for incurring the pharmacy costs, and when dealing with such expensive drugs cannot afford to make mistakes or miss opportunities. The point is that as with any pharmacy operation, there are numerous factors to consider in the planning, execution and long term success of starting up, opening and maintaining a new oncology or cancer specialty pharmacy business. The planning and execution are key to a smooth pharmacy operation being opened and becoming a successful business. Just a few of the considerations and tasks that are required for any successful pharmacy start-up operation include:
– The creation and review of a business plan
– Guidance regarding type of corporation to form – Limited Liability or LLC, C-Corporation, S-Corporation, Sole Proprietorship or a General partnership
– Startup cost estimates
– Obtaining financing
– Work flow design
– Assistance and guidance with the DEA & State Board of Pharmacy application process
– Creating Policy and Procedure manuals and Continuance Quality Improvement (CQI) manual
– Purchasing the equipment and supplies
– Obtaining legal support
– Staffing (not only the pharmacist, but technicians and ancillary support staff personnel)
As always, please contact us here at HCC if you have questions regarding establishing or running an oncology or cancer specialty pharmacy. With over 30+ years in the Pharmacy Consulting business, HCC can assist your business with expert advice in any area of your pharmacy operation or practice. We urge you to contact us today to see how our Pharmacy Consulting services can help. With a full-time staff of in-house Pharmacy Consultant specialists, HCC can answer any questions that you may have in all areas of your business. Contact us online or call us at 800-642-1652.