Why the Cleveland Clinic Built Its Own Specialty Pharmacy

Twenty-three percent.

That’s how much U.S. specialty drug costs were projected to grow in 2015, according to risk management/insurance brokerage Aon PLC. This estimate was based on Aon’s August 2015 survey of 60 leading U.S. healthcare vendors. It was up from 18.2% in 2014.

To cope with these costs, many healthcare providers are setting up their own in-house specialty pharmacies. In doing so they aim to reduce costs by cutting out third-party pharmacies with their markups, and improve the quality of patient care at the same time.

A case in point: After 16 months of operation, the Cleveland Clinic’s specialty pharmacy is on track to achieve its business plan and well on its way to recouping its initial investment. This pharmacy provides high-cost oral and self-injectable medications in a 20,000-square-foot clinical call center and home delivery/mail-order operation.

Cleveland Clinic Chief Pharmacy Officer Scott Knoer says that in addition to the financial success of the specialty pharmacy, “The improvements in physician and patient satisfaction and medical office efficiency are significant.” By insourcing the pharmacy component, the Cleveland Clinic has also achieved significant drug cost savings for its self-insured employee health plan through eliminating the middleman and leveraging its purchasing contracts, he adds.

“There is a strong business case for having an in-house specialty pharmacy,” says Knoer. “This is true in today’s fee-for-service world and translates even better to tomorrow’s global payment and population health models. But there are many other good reasons for having a specialty pharmacy in house, and the most important of those is improved patient care and outcomes.”

Impact on Outcomes

The reason why an in-house specialty pharmacy can improve patient outcomes has to do with the value of health data integration.

“An insourced health-system pharmacy has direct access to a patient’s electronic health record,” says Don Carroll, the Cleveland Clinic’s senior director of specialty and ambulatory pharmacy. This means the patient’s entire medical team is working from the same updated set of health information. It also ensures that communications between the pharmacist and the patient’s other medical practitioners is fast and accurate—“as opposed to pharmacists sifting through faxes and notes on their tabletops,” says Carroll.

Clearly there are economic and patient-outcome benefits to healthcare providers establishing in-house specialty pharmacies. Nevertheless, “This is a move that requires a close partnership with prescribers (physicians, physician assistants and nurse practitioners), payers (insurance companies) and pharmaceutical manufacturers in order to succeed,” says Knoer.

Physician acceptance is also critical to success. One of the biggest complaints of medical staff is the bureaucracy associated with having to obtain prior authorizations from insurance companies and the inability of outsourced pharmacies to directly access patient data. This lack of integration with third-party pharmacies results in excessive phone calls, faxes and waiting on hold.

In contrast, the ability of health system-owned pharmacies to operate directly within the EHR saves countless hours of time for physicians and their office staff. All they have to do is click on a button in the EHR to send the prescription to the Cleveland Clinic specialty pharmacy, and the pharmacist takes it from there.

Good relationships with insurance companies (payers) are also critical to success. They must see that an in-house specialty pharmacy will reduce (or at least control the growth of) their overall expenses without resulting in unhappy customers and increased consumer complaints. According to Knoer, patient satisfaction with Cleveland Clinic-owned pharmacies is significantly higher than it is for national chain specialty pharmacies as measured by customer satisfaction surveys completed by the pharmacy benefit management (PBM) service used by the Cleveland Clinic.

Finally, in order to succeed, a specialty pharmacy must be able to acquire specialty drugs from pharmaceutical manufacturers. These drug companies need to know that patients are being compliant with their therapies. If patients do not take their medications, they will not get better.

‘The System Works’

It isn’t easy to create a specialty pharmacy from scratch, but for the Cleveland Clinic it’s been worth it. Developing a comprehensive business plan that addressed all of these issues, organizing the hardware and software to run the pharmacy, and working a proposal through the organization’s capital process took almost three years before it launched in September 2014. Today this pharmacy is proving itself to be an extremely astute business and clinical move, with prescription volume going up about 10% each month.

“The system works,” says Knoer. “Everyone is getting what they want from our specialty pharmacy model, including us.”

James Careless is a freelance writer with extensive experience covering computer technologies.