Lately, a growing number of hospitals and health systems are asking a critical strategic question: Should we own and operate our own retail pharmacy and specialty pharmacy? Hospitals have often struggled to compete with large retail pharmacy chains, particularly those tied to grocery stores, that sell medications at a loss to drive foot traffic. However, accelerating changes in the competitive landscape have dramatically shifted the situation.
Finding a strategy in a competitive marketplace
Although many large academic medical centers have achieved success with a comprehensive pharmacy strategy, the market is not limited to those entities. Assessing medical services and prescription volumes can yield a fair evaluation of both the pharmacy service needs and financial opportunities that can support an organization and its patients. Payers and accreditors are acknowledging that successful programs come in many sizes.
The Care Continuity Advantage
From a clinical perspective, an in-house retail pharmacy can be a powerful tool for improving health outcomes and reducing hospital readmissions. Medication non-adherence remains a significant challenge, given that 20–30% of new prescriptions for chronic conditions are never filled.
Hospitals are under increasing pressure to lower readmissions for conditions like heart failure, COPD, and pneumonia. These outcomes are publicly reported and tied to reimbursement. Filling prescriptions before a patient leaves the hospital through bedside delivery programs has become an effective strategy to close the gap between prescribing and adherence.
The Rise of Specialty Pharmacy
The specialty pharmacy sector has undergone explosive growth, especially considering that only two decades ago, it was a niche service. Today, specialty medications account for over 50% of total U.S. prescription drug spending yet represent only 5–7% of prescriptions.
These therapies are often used for cancer, autoimmune disorders, and rare diseases. These typically high-cost medications require complex handling and demand close patient monitoring. Some are available only through accredited specialty pharmacies, and many payers direct prescriptions to their own facilities.
Still, hospital-operated specialty pharmacies can offer unique value. The opportunity here is that hospital pharmacists have full access to the hospital’s electronic medical record (EMR) and often have long-standing professional relationships with prescribers. For clinical issues such as drug interactions or new onset adverse effects, it is often far easier for them to communicate with the provider and document this in the electronic medical record that the provider also uses for bi-directional communication. For drugs like oral chemotherapy and other high-risk therapies that can also cause severe adverse effects, this tight integration and coordination of care matters.
Financial and Strategic Incentives
Hospitals have the ability to experience significant revenue enhancement, in addition to the clinical benefits discussed. Hospitals and other health-care organizations are experiencing tightening margins, have concerns about future financial risks, and must diversify revenue streams. For eligible institutions participating in the 340B program or group purchasing organization (GPO) programs, expanding pharmacy services can unlock additional savings and extend those benefits to their communities.
Market shifts can also create opportunities. For example, the rise of GLP-1 medications for weight loss has reduced bariatric surgery volumes in some hospitals, which has decreased surgical revenue. However, these same medications, which cost roughly $1,000 per month and are used by an estimated 6% of the U.S. population, represent a substantial revenue opportunity for hospital retail pharmacies.
Closing the Loop on Patient Care
The pharmacy should be viewed like any other hospital-based service. Just as hospitals aim to keep lab and imaging services in-house, pharmacy services represent another critical patient touchpoint. Allowing patients to leave without filling prescriptions, especially those at risk of readmission, creates both a care gap and a missed opportunity.
By offering integrated retail and specialty pharmacy services, hospitals can:
- Improve patient adherence and outcomes
- Strengthen care coordination
- Reduce avoidable readmissions
- Generate sustainable revenue
- Increase patient satisfaction and loyalty
- Creating ease of use for busy providers and complex patients
The Bottom Line
For many hospitals, retail and specialty pharmacies are no longer optional. They are strategic assets that bridge care, improve outcomes, and strengthen financial resilience. As the pharmacy landscape continues to evolve, the question may shift from “Should we have one?” to “Can we afford not to?” Contact our experts to explore how your hospital can launch in-house retail and specialty pharmacy services that improve care and drive sustainable revenue.
Jason Glowczewski, Pharm.D., MBA, FASHP, FACHE, Senior Consultant
Don Carroll, MHA, R.Ph., Senior Consultant
