My payor contract doesn’t include Specialty…why?

A large healthcare system in Northern California recently asked the Specialty Sage,”Do I have to renegotiate my commercial payor contract now that we are opening a specialty pharmacy?” The short answer is yes and it is not easy.

Hospital-owned, integrated and managed specialty pharmacy is one of the most effective ways hospitals have to improve patient care post-discharge. “Pharmacy Today”, an official publication of the American Pharmacist Association, says that “[adherence strategies]are the linchpin of specialty pharmacy and the driving force behind improving patient care and satisfaction.” What better place to get care then the hospital, right? Then why do commercial payors exclude or “carve out” specialty?

If patients get better care, then it is reasonable to believe that readmission to the hospital system would go down. If readmission to the hospital goes down then it is reasonable to believe that adherence to prescribed specialty drugs may be a factor. This means there’s a more effective use of the drug regimen and avoidance of other factors that may complicate patient care resulting in a lower cost of care with better patient outcomes. Why would a payor negotiate specialty separately?

Now that I have asked twice, here is a great RA patient blog post that makes this issue come to life. Basically, this patient’s insurer forces her to fill at a particular specialty pharmacy. The care she receives isn’t meeting her needs and she is left without any choices. Why would the payor do this?

Let’s ask the question differently – if payors believe that care through the hospital produces better outcomes then why would they be difficult about including specialty pharmacy in their contracts? This is an issue touched on in a previous Specialty Sage post here.

Let’s use another analogy – let’s say that you are buying a new construction home.  Your new home was built by a reputable builder that believes in quality and craftsmanship. The builder happens to also have a realtor associated with them and a lawyer that can draw up the papers.  Although convenient and not illegal, it does beg the question as to why everyone is employed or associated with the builder. Of course the builder wants to sell as many houses as they can and retain as  much of the revenue for themselves.  This is called vertical integration.  It happens in most industries and it has already happened in healthcare.

You, the healthcare system, want to give better, more cost effective care and retain revenues. The smart folks at the payors want to retain revenues as well. This now makes you, the healthcare system and the payor competitors. So, what is the best way to get access to those patients?

The short answer is to look at the entire contract. The long answer is make sure that you have an expert on your side.

Contact me at with your solutions and feedback – all my posts come from you the readers!








Are Academic Medical Centers the next Blockbuster Video?

Who doesn’t remember Blockbuster Video? Millennials for one have no idea what a Blockbuster Video is. The hell you say – it wasn’t that long ago and I loved that place! Blockbuster, founded in 1985, grew to over 8,000 stores across the United States. If your town was cool, you had a Blockbuster. However, the market shifted and some very savvy companies came along and were able to squeeze Blockbuster out. Namely Netflix came along and started delivering DVD movies in the mail. No longer could your title get sold out – you just had to create a list and as Emeril says (good 90’s reference)….Bam! You had a video. No personal touch – just convenience. Netflix and Video On Demand services pushed Blockbuster out, and they ended up filing for bankruptcy in 2010. Blockbuster never successfully adapted, they didn’t know how to serve the changing demands of their customer base, and ultimately lost all of it customers to competition.

And all of that is a distant memory…so could be your Academic Medical Centers.

So how does that tie into Academic Medical Centers (AMCs)? AMCs provide the vast majority of clinical care nationally to the most chronically-ill patient populations – oncology, multiple sclerosis, infectious disease, rheumatoid arthritis, transplant and cystic fibrosis. However, Fortune 100 companies like the big three – Caremark, Express Scripts and Optum – have successfully carved-out a $200 billion per year market related exclusively to the care of these same chronically-ill patients. That market is referred to broadly as “specialty pharmacy”.

Right now you’re saying that AMC’s do so much more than the act of selling videos and you are totally right, but it’s clear that Fortune 100 companies have aligned with health plans and drug manufacturers across the country to establish very narrow, and in some cases exclusive payor and drug networks, leaving AMCs on the outside looking in. AMC’s are getting “Netflixed” by payors and PBMs – they are aligned with keeping AMCs out.

This is a simple description of the alignment…

Here’s the really good news!!!! Care matters, patient outcomes matter and AMCs matter. AMCs are the only providers positioned to properly and effectively care for these patients through fully integrated clinical/pharmacy care. An AMC-owned onsite specialty pharmacy program permits seamless therapy management via shared EMR access, customized clinical/pharmacy integration and high-touch patient care interventions.

The specialty market is evolving once again and it is demanding that AMCs take back all components of clinic and pharmacy care for their most chronically-ill patients. Shifting this market back to AMCs is a must for improving patient outcomes while lowering the overall cost of care.

How else can we take patients back for AMCs?

All ideas welcome at

Specialty pharmacy…where do we start?

Ah, from sea to shining sea, Specialty pharmacy is a hot topic. The Specialty story always starts with how big the market is (approx~$200B depending on who you listen to) and growing super fast (approx 25% CAGR depending on who you believe). It continues with how you need to get into the market and some of the “key things to think about” from their perspective. Usually the topic ends with someone trying to tell you their way is the only way to do it.  I’ve always felt that if someone is telling you that this is the only way to do anything then they are trying to sell you something.

You can’t go to a hospital conference without at least one of the presenters talking about how their hospital has done Specialty in a “big way”. It seems like every hospital both big and small has already started on something to do with Specialty. It reminds me of the couple that was with a group of people ushered into the most recent Oscars. It’s like everyone else is having this party celebrating success and your tour just happened to be ushered in the door. Specialty is the Oscars award ceremony and you, the hospital, are the tour group. “No one told me this was going to happen…” “Look who is here A list hospitals all doing Specialty” “Smile and pretend like this is totally natural”. It’s a little tongue and cheek but not that far off.oscars-denzel-tourists-selfie

Why is Specialty so hot if the topic overall isn’t that new? Why is everyone looking into it now? What are they doing? What are the metrics for success?  Where do I start? Where are the resources to help?

Great news for all of us out there that are looking into Specialty, are in Specialty and want to get better and even those that are “doing it in a big way” – we are all learning together and there’s so much more to learn and do!

This blog is designed to help hospitals get information on promoting Specialty pharmacy best practices. Every aspect of Specialty will be covered from Specialty care to market structure, contract pharmacies, PBMs, Payors and more…some topics sooner than others. You as the reader can decide the topics you want to know more about and feel free to send me suggestions and feedback at

This is a fantastic journey – I’m looking forward to continue to learn and take it with you!

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