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COVID – Potential Impact on Health System Specialty Pharmacies

COVID – Potential Impact on Health System Specialty Pharmacies


COVID-19 has altered life as we know it, including health care, across the United States. Impacts are likely to be seen in pharmacy across various business units, due to changes in consumer habits, insurance markets and economic downturn. This article will focus on potential impacts and areas of concern for health system specialty pharmacies, in terms of both workflows and a changing payer landscape.

Specialty Industry Trends

At Excelera Network member Ochsner Health, “New opportunities for specialty pharmacy may be created with the marketplace addition of new outpatient oncology medications that lead to increased prescription volume. Considerations for the changing marketplace dynamics, new opportunities for pharmacists and changing payer mix will create a new environment in specialty pharmacy,” notes the health system’s Sheena Babin, Director of Pharmacy Clinical Services and Business Development.

Overall these possible trends are positive for specialty pharmacy. They include:

-Favoring of oral oncology vs. in-clinic subcutaneous (SQ) and intravenous (IV) administration, as a methodology to reduce high-risk patient exposure in the clinic setting.

-Increase in home infusion business line with relaxed Centers for Medicare & Medicaid Services (CMS) regulations.

-Potential for increased home health attractiveness vs. traditional in-store channels

-Opportunities for expanded roles of pharmacists as providers.

-Increased opportunities for telehealth, to maintain social distancing.

-Revised rules for prior authorizations, early fills and other processes.

Impact of Economic Downturn and Possible Recession

The 2008­–2009 recession offers hints to the potential impact of the COVID challenge and changing economics in 2020 and beyond. In 2009, gross domestic product (GDP) fell roughly 2.5%; estimates for GDP as of April 2020, from the Congressional Budget Office (CBO), predict an even larger drop of 5.6%. This economic downturn will likely amplify Medicaid covered lives, as seen during the negative GDP of the 2008–2009 recession period and as a result of the Affordable Care Act (ACA).

Medicaid Market

During the 2008­­–2009 recession Medicaid enrollment increased by 13.5 million lives (30%) while a corresponding decline in employer-sponsored insurance was seen, according to the Drug Channels Institute (DCI). The ACA further expanded this number by increasing Medicaid covered lives by an additional 15 million (25%) from 2014­–2019.  Current estimates anticipate the increase to be 8–20 million additional lives covered under Medicaid (11-27%) in 2020 due to the COVID situation (DCI). This DCI graphic helps highlight historical and potential future growth in Medicaid covered lives. The number of people with employer-sponsored insurance fell from 179.3 million in 2007 to 167.3 million in 2011. It then began to increase, but it had not quite returned to 2007 levels prior to the COVID-19 outbreak; in 2019, employers provided insurance coverage for 175 million people (DCI).

For health system specialty pharmacies, access to additional lives as the payer market shifts from commercial insurance to Medicaid can initially appear to be an opportunity; however, many factors must be considered.

Medicaid Increase Considerations

-Potential to increase internal script capture with fewer commercial payer lockouts, since commercial payers restrict as much as two-thirds of scripts to a single integrated specialty pharmacy, and the top five PBM/payers dominate 75%+ of the specialty market.

-New revenue potential, determined by Medicaid market served and model used: fee for service (FFS) vs. managed care.

-FFS Medicaid model might not be sustainable for health system specialty pharmacies, with current average rates of $10-$12 per script (Abt Associates, 2020).

-Abt Associates study indicates that specialty dispensing cost is greater than $70 per script due to increased expense (clinical intervention, patient financial assistance).

-340B duplicate discount issues may change profit points and require additional attention to Medicaid carve-outs.

-Unprecedented increase in Medicaid covered lives could be temporary if economy recovers quickly.

Final Thoughts

As COVID changes pharmacy market dynamics and increases Medicaid covered lives, health system specialty pharmacies must consider what this will require of their business line. A major determinant will be the primary Medicaid market served: FFS vs. managed Medicaid. The potential for negatively impacted margins within low reimbursement FFS models and decreased 340B purchasing amounts should be considered carefully.

Babin of Ochsner Health notes, “Ochsner Specialty Pharmacy serves a diverse group of patients including patients with coverage through Medicaid programs. We are monitoring for potential impacts of COVID-19 on our payer mix to ensure we are able to continue to provide coordinated specialty pharmacy services to all of our patients.”

We would love to hear your opinion on this subject, how you envision the market changing, and what operational plans are being considered to address the changing market, at

Sources and Citations

Fein, A.  Four Unexpected Ways that the COVID-19 Medicaid Boom Will Affect PBM and Pharmacy Profits, DCI (Drug Channels Institute) April 2020.

Shoemaker-Hunt S, McClellan S, Bacon O, Gillis, J, Brinkley J, Schalk M, Olsho L, Taninecz G, Brandt J. Cost of Dispensing Study, January 2020. Abt Associates; 2020.

Swagel, P.  CBO’s Current Projections of Output, Employment, and Interest Rates and a Preliminary Look at Federal Deficits for 2020 and 2021, April 2020.

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