How Distributors Can Navigate the Fragmentation of Vaccine Administration
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Eight years ago, the Affordable Care Act (ACA) implemented universal vaccine coverage, requiring private group and individual health plans to provide insurance coverage of vaccines as part of preventive services. This shift in policy created new challenges for physician practices and renewed opportunities for pharmacists and retail clinics to claim a piece of the $17.8 billion U.S. human vaccines industry. And, they have. Physicians are increasingly considering discontinuation of vaccine administration because of the specific advantages pharmacies present in the competition for market share. The question to vaccine suppliers, how do they effectively support both parties amid this disruption.
The Shift from Physicians to Pharmacies as Vaccination Destinations and other Vaccine Supply Chain Updates
Multiple news articles (1, 2) cite that 67% of the 22,000 member National Community Pharmacist Association Pharmacies provide vaccinations, it is clear that pharmacies are immunization destinations. Both distributors and insurance plans offer support for pharmacists as vaccinators. McKesson developed the Independent Pharmacy Solution Center which offers pharmacies guides and tools, and Cardinal introduced the Collaborative Practice Program aimed at preparing Pharmacies to administer vaccines. Blue Cross Blue Shield plans and Cigna both advertise directories of pharmacies that offer a selection of vaccines that are covered by each of the insurance companies. It is advisable for suppliers to continue looking to pharmacies as a revenue stream.
How this Shift Negatively Impacts Physicians
As pharmacies continue to be a revenue stream for suppliers, physician practices are struggling with managing vaccines. A 2017 study by Dr. Mandy A. Allison and her colleagues indicates that 12% of pediatric practices and 23% of family medicine practices stopped purchasing vaccines because of financial concerns and 24% of pediatric and 26% of family medicine practices responded that they “have seriously considered” ceasing vaccine programs. While not a majority of providers, these figures still point to a substantially decreased revenue stream for vaccine distributors and suppliers.
Physicians are negatively impacted financially by this shift for eight reasons, according to Dr. Allison (largest to smallest physician concern):
- Inadequate Reimbursement for Vaccine Cost
- Inconsistent Coverage Across Payers
- Upfront Costs to Purchase Vaccine
- Costs of Maintaining Vaccine Inventory Too High
- Lack of Reimbursement for Vaccine Administration
- Reimbursement Taking Too Long
- Uncertainty about Patient Demand for Vaccine
- Prefer to avoid a ‘two-tiered’ system of vaccines for their patients for example (Vaccine for Children (VFC) was delayed)
The three reasons (3,4,7) of ‘upfront costs to purchase vaccine’, ‘costs of maintaining vaccine inventory too high’, and ‘uncertainty about patient demand for vaccine’ are all factors that can be attributed to physicians not knowing if patients will come to them for immunization versus a pharmacist as an alternate provider.
To alleviate the financial pressure, the study suggests that physician practices could benefit from “increased use of strategies to reduce vaccine purchase costs and increase payments for vaccine delivery” and negotiate on cost and reimbursement payment. Distributors could play a new and key role by advising providers on vaccine costs and overall programs.
This disruption extends further, however. Fuld & Company conducted a survey in 2017 of 182 internal medicine, family medicine, and pediatrician physicians that complements Dr. Alison’s work. The resultant analysis demonstrates that the fragmentation of vaccine supply chain, meaning the administration between physician practices and retail pharmacists impacts the physician’s ability to control their finances and quality of care.
Fuld & Company’s physician survey results indicate that there can be financial benefit for physicians to have pharmacists as vaccinators. However, our results also indicate that physicians have mixed feelings about this shift as they worry about quality of care and the continuum of patients’ health. Approximately one-third of internal medicine, family medicine, and pediatricians surveyed are undecided about the impact of pharmacists as vaccinators and there is still a sizable portion that feel it will have a negative impact on health. Physicians largely attribute their undecided or negative feeling to poor documentation and care coordination, and lack of training.
Therefore, in addition to physician practices being aware of supply cost and reimbursement negotiation tactics, it is important that physicians employ strategies to anticipate patients’ vaccination venue. When this demand is properly assessed, the physician practices can have more oversight on volume, inventory, administration, and quality of care needs. This information would allow the physicians to control costs and offer value to patients from an overall financial and quality of care perspective—another opportunity for distributors to support their physician buyers.
How Suppliers Can Help
Given the trend of pharmacies continuing to disrupt the traditional healthcare model regarding immunizations, physicians will need help negotiating the cost of vaccines and negotiating reimbursement rates. Here is a shortlist of how suppliers can help:
- Work with physician groups to create a more positive environment for physicians to offer vaccines whether through purely price or enhanced relationships
- Help improve the relationship between physicians and pharmacist. How can familiarity and trust be created to ensure high quality of care? Can this be accomplished through technology and workshops?
- Work with payers to improve reimbursement rates and coordination among physicians and pharmacists. How can documentation be updated and accuracy ensured?
The fragmentation of vaccine administration reflects existing and continuing competition among providers and pharmacies – a microcosm of the disruption occurring broadly in healthcare. The Fuld & Company life science consulting group’s research illustrates how providers and pharmacists, and ultimately consumers, are affected by market dynamics. Across the continuum of care, whether you are a provider, pharmacist, insurer, distributor, supplier, or other stakeholder, identifying and planning for new entrants, threats and opportunities is critical to sustain and improve your market position in the unpredictable healthcare marketplace.
Learn More About How Pharmacies are Disrupting the Traditional Healthcare Model
For more detailed analysis and recommendations for how to navigate the pharmacist/physician relationship in the context of vaccinations and to see the explicity results of our survey, download our whitepaper: Pharmacists as Vaccinators: New Entrant Disruption in Healthcare.
Author Laura Ruth, is a Director in our Life Science Consulting Practice.
Tags: Competitive Strategy, Diagnostics, Disruption, Health & Life Science, Market Analysis, New Entrant Strategy, Pharmacies
