Top of mind for nearly every hospital or health system CFO is the roughly 10% annual increase in the cost of pharmaceuticals.
Many of these healthcare executives might be surprised to learn that the main reason isn’t due to new novel therapeutics, but rather to older medicines with extraordinary price increases. These drug manufacturers are not trying to recoup the research and development cost of bringing a drug to market.
Instead, as discussed in many news articles including this one by Consumer Reports, they are simply capitalizing on little to no competition for drugs that have an entrenched use in the healthcare environment.
Therefore, CFOs and Pharmacy executives must explore every effort to limit the use of these drugs to those cases with no viable alternatives and to compound, dispense and administer in dosage forms developed to minimize the waste.
Limiting the use of these older drugs with the new costly price tags will require the assistance and cooperation of the affected clinical departments. Often the clinicians ordering these agents have no idea that these commonplace drugs are now today’s pharmacy budget-busters. Educating them on this new reality will probably lead to engaged clinical champions.
The following two strategies, which we originally shared with Becker’s Hospital Review readers as a Supply Chain Tip of the Week, should significantly lower the overall cost of these expensive medicines:
- Develop and implement guidelines that limit the use of these pharmaceuticals to cases in which a less costly alternative is not clinically appropriate.
- Develop a means to dispense the optimal amount of drug that minimizes waste upon administration.
Case Study: Multi-Pronged Approach Reduces Drug Costs
These price increases for older injectable drugs with little competition greatly affected one of our clients, a multi-hospital system. This negatively impacted the inpatient pharmacy expense budget more than all the new or novel therapeutic medicines combined. To drive down these costs, we partnered with the Pharmacy Director to identify the fact that many of these drugs had a very high usage rate in the procedural areas, such as the operating suites and EPS Lab.
We worked closely with the key clinical stakeholders in these procedural areas to educate them about these tremendous price increases. This motivated the team to identify less costly therapeutically equivalent alternatives for some of the existing use. Although this did provide savings, the remaining usage still resulted in a substantial expense budget challenge due to the high cost of these drugs.
To continue to drive down savings, the project team reviewed the doses dispensed versus the actual doses administered for these identified drugs. Our goal: to understand if there was an opportunity to reduce the amount of waste. We identified many drug administrations that had a dose substantially less than the dose dispensed, resulting in considerable waste.
For example, one drug was dispensed in a 1 mg vial when the dose administered rarely exceeded one-tenth of that dose. This created the opportunity for the pharmacy to compound doses in smaller increments to minimize waste.
Importantly, the pharmacy leaders did not try to address these changes in a silo; rather, they partnered with clinical and technical staff to implement the compounding of these drugs in smaller doses, enabling the team to achieve additional savings.
The compounding of these smaller, unique dosages by the pharmacy, while providing savings, started from the same injectable drug with the very high price. Was there a way to produce these same new dosage sizes without using the high-cost injectable drug? The pursuit of this answer ultimately led to the addition of a 503B manufacturer who could produce several of these drugs for a considerably lower cost.
By battling extreme drug price increases in a variety of ways, we helped our client save more than $3.3 million annually. Our client is able to use these very expensive drugs in a cost-effective manner while maintaining exceptional patient care.
Mr. Drugan is a senior manager with GE Healthcare Partners with more than 30 years’ experience. He helps clients across the country improve their pharmacy costs, profitability, and operating efficiency. His background in pharmacy leadership enables him to bring deep understanding and subject-matter expertise to every project. Mr. Drugan possesses an outstanding record of accomplishment as a pharmacy leader and healthcare executive. His engaging, collaborative leadership style makes him an ideal partner for clients seeking to improve their pharmacy operations, ensure regulatory compliance, implement a complex 340B program, optimize their employee pharmacy benefits, or establish a retail pharmacy.He may be reached at firstname.lastname@example.org.