Why Every Hospital Needs a Chief Pharmacy Officer in the C-Suite
A CPO in the C-suite determines how a health system can move from a cost center to a revenue center with healthy operating margins by investing in specialty pharmacy services that reduce burden for healthcare staff and improve care for patients.
By Nicole Faucher | Original Article
The role of the chief pharmacy officer (CPO) has evolved over recent years, becoming a key role within the C-suite of a health system. Rising costs of medications, increased complexity in the administration of new therapies and pharmacy industry consolidation are drivers of this change, and have elevated pharmacy leaders as influential decision makers and strategists.
As pharmacy itself has evolved from an in-patient service to a strategic and innovative area of growth, CPOs have a significant opportunity to effect change within their organizations. Beyond traditional responsibilities such as managing inpatient pharmacy needs, creating centralized pharmacy services, or increasing the utilization of sometimes overlooked areas of pharmacy, CPOs connect the clinical and business strategies for the health system, expand ambulatory services and realize revenue and margin potential. Here are four reasons why this role is so important to a healthcare system.
1) Increased costs and complexity of newer treatments
Today, 11.7% of the overall healthcare spend in the U.S is on prescription medications, and about 51% of this amount is spent on specialty medications. This number will continue to grow as new specialty drug medications come to market. According to IPD Analytics, about two-thirds of the current FDA drug pipeline are for new specialty medications.
Year over year, the cost to bring a new drug to market increased by $300M – bringing the total investment to bring a new therapy to market to roughly $2.3 billion. With this brings a robust drug pipeline with congruent robust costs for new specialty drugs and therapies. Medications for diseases such as diabetes, HIV and hepatitis C are allowing patients to live full lives. And innovative new cell and gene therapies have the potential to cure diseases like sickle cell. There are incredible therapies now available to patients and because of this, the way we treat diseases has changed significantly, creating increased costs and complexity in the administration of new treatments. Healthcare systems need an executive that can navigate a complex drug market which impacts the ability to extend specialty care to patients that’s convenient and close to home, maintain and strengthen the financial vitality of the organization, and understand the overarching impact for the entire health system and its strategy. It’s crucial to have a pharmacist in the C-suite to help people navigate and make strategic decisions for organizations.
The CDC estimates that 48.6%, almost half of the population in the United States, took at least one prescription drug in the last 30 days and 71.9% of all physician visits involve a medication therapy. This wasn’t the case 30 or 40 years ago as many of these medications did not exist then. Pharmacy and medication use is becoming a key area in patient care.
More medications are also coming to market. This year alone, 91 new drug entities and biologics were approved by the FDA, so the sheer volume of pharmacy products and services on the market makes it mandatory for health systems to optimize these programs and services to improve patient care.
2) Industry consolidation
The pharmacy industry has also experienced massive industry consolidation. Large retail pharmacy chains, like CVS, own a health insurance company, and this vertical includes a PBM that controls 30% of the prescriptions that flow through the United States, as well as primary care clinics. Health systems are looking to pharmacists to respond to a new environment where pharmacy is driving critical decisions at the health system level across the country.
A pharmacy executive can help lead and shape the strategy to address cost, realize revenue and margin potential and improve value-based care for patients.
3) Medication therapy management optimization
The best way to keep patients healthy is by lowering the utilization of unnecessary medications, which is why medication therapy management is a key innovation. Unlike before, in a fee-for-service world, health systems are being incentivized to take care of patients by optimizing their care and medication use. This allows patients to receive the most out of their treatments with the least amount of side-effects, and improved health outcomes. Augmenting medication management enhances the population health and value-based care of a health system, and keeps patients and caregivers engaged and satisfied in their care.
Pharmacists at the C-suite level oversee the improvement of a health system’s specialty pharmacy services by ensuring collaboration with providers and staff to provide support at the beginning, middle and the end of the patient journey. This type of high-functioning support includes determining a patient’s medication history when they visit the ER, assisting with medication reconciliation, optimizing medications, improving prior authorization turnaround time, educating the patient, and ensuring adherence to prescribed medications. These steps improve medication therapy management and the continuity of care for patients. An efficient specialty pharmacy program improves quality metrics, patient outcomes, patient and provider satisfaction and the financial health of a healthcare system.
4) Health system financial outlook
Many hospitals and health systems across the country are suffering soft or negative margins in the current financial environment and may not be aware of the massive opportunity to grow revenue through an improved specialty pharmacy strategy. Restrictions placed on contract pharmacy have incentivized more hospitals to move to a specialty pharmacy ownership model.
A CPO in the C-suite determines how a health system can move from a cost center to a revenue center with healthy operating margins by investing in specialty pharmacy services that reduce burden for healthcare staff and improve care for patients. They evaluate the current needs of the organization and have forethought on designing a strategy and plan for the future.