Pharmacy outsourcing still much in use by hospitals

April 14, 2008

Hospital outsource for a variety of reasons.

McKesson Co.'s recent exit from the hospital pharmacy outsourcing business has turned the spotlight on this field. Does it make sense for hospitals to use pharmacy outsourcers and is outsourcing a good business to be in?

Just how many hospitals outsource part or all of their pharmacy operations is not clear, said Edward Stemley, director, ASHP's section of pharmacy practice managers. Roux said HCHD is currently outsourcing three key functions: sterile compounding, 340B program drug pricing, and patient assistance program management. Sterile compounding is likely to move back in-house as soon as an extensive facility renovation is complete and HCHD can meet the revised U.S. Pharmacopeia guidelines on sterile compounding and sterile compounding facilities. "Outsourcing our sterile compounding provides benefits like longer dating," Roux said. "If we continued to do sterile compounding in-house, we'd have to make smaller batches more often because of facility constraints." It is those kinds of practical operational constraints that drive outsourcing, Stemley said.

In many cases, outside pharmacy directors and upper managers would be brought in to turn around problems in pharmacy operations and quality. Once the problems were solved, the outside staff would either move on or, more frequently, be hired by the hospital on a permanent basis. Retaining an outside problem solver as a permanent pharmacy manager could be good for the hospital, but it left the outsourcing firm short handed. "I don't know that management or operations outsourcing is all that profitable any longer," Roux said. "You still have to deal with the same problems as in-house staff in terms of recruiting, retention, and quality control."

That may be one reason McKesson dropped out of the business. Or perhaps it was trying to avoid future problems associated with outsourcing of pharmacy operations. A neonatal death at Summerlin Hospital Medical Center in Summerlin, Nev., in late 2006 was blamed on errors in pharmacy and nursing. Summerlin Hospital reached a financial settlement with the parents and pointed the finger at McKesson, which had run the hospital pharmacy before the error occurred. McKesson also had problems with pharmacists stealing narcotics at another Nevada hospital pharmacy it operated in 2006. McKesson declined to discuss these incidents because its outsourcing business is being divested.

The other two biggest drug distributors, AmerisourceBergen and Cardinal Health, continue to provide various aspects of hospital pharmacy operations and management. HCHD uses Pharmacy Healthcare Solutions, an AmerisourceBergen unit, to manage its patient assistance programs. Cardinal has managed hospital pharmacies for more than 40 years, said president of pharmacy services Steven Adams in response to written questions. The company employs 1,000 pharmacists nationwide and hires about 200 hospital pharmacists annually.

Hospitals outsource operations for a variety of reasons, Adams said. Cardinal manages more than 200 hospital pharmacies. Operations are almost equally divided between small rural hospitals that have trouble attracting qualified managers, hospitals with budget problems, and hospitals with quality or accreditation issues, he said. "The scale of our pharmacy management operations can bring capabilities and levels of expertise that are difficult for individual hospitals to develop on their own," he said.