According to an AHA/FAH report, “Hospital budget pressures resulting from the continued dramatic increases in drug prices have negative impacts on patient care, with hospitals being forced to delay infrastructure investments, reduce staffing, and identify alternative therapies.”
Drug prices put pressure on health systems and patients
This growing pressure has prompted the Food and Drug Administration (FDA) to focus on curbing drug prices and has led to a number of federal and state legislative proposals. Whether the new FDA Commissioner will be able to effectively reduce drug pricing remains to be seen; however, health system pharmacy directors should take steps to proactively address pricing pressures and maximize revenue opportunities.
The rapid adoption of specialty medications was a major factor in the spike in drug prices between 2015 and 2017. While generic medications generally help drive pricing down, we have also seen a drop in the number of drugs going generic as the focus continues to shift to targeted specialty drugs. And as the industry grapples with higher pricing, pharmacy benefit managers (PBMs) and insurance companies are exerting more control over which drugs are covered and included in formularies. High deductible health plans (HDHP) and larger co-pays are pushing greater financial burden onto patients. This in turn puts pressure on health systems as there is greater risk that patients won’t be able to cover the costs and won’t follow the entire course of treatment. When a patient doesn’t adhere to a prescribed drug regimen they are putting their health at risk.
Smarter purchasing starts with data
Leveraging data and analytics are increasingly important to developing and implementing an action plan designed to help reduce costs and support quality patient care. Effectively using data to manage drug spend requires a clear view into the pharmacy’s purchasing history and spending trends. We encourage pharmacy directors to work with their distributor to leverage their reporting and analysis capabilities to regularly evaluate drug spend data and create custom reports that enable customers to:
- Access their data for daily views of drug spend
- Quickly identify specific drugs that are driving drug spend versus historical trends
- View the impact of price fluctuations on drug spend
- Leverage extensive filtering options for multi-hospital health systems to identify facility-specific purchase trends
For example, University of Missouri Health Care (MUHC) operates five hospitals and nine ambulatory pharmacies, filling more than 340,000 prescriptions a year. MUHC wanted to identify ways to reduce its drug spend and standardize purchasing. Working with McKesson RxO, MUHC analyzed 12 months of purchase data and compared this information against manufacturer contracts, drug availability and the state prescription formulary to identify the preferred national drug code (NDC). To date, MUHC has made 240 of the recommended NDC changes with a resulting savings of nearly $1.4 million.
“With an in-depth assessment of our pharmacy supply chain, we’ve been able to standardize our purchasing and we’ve seen significant drug spend savings thus far and will continue to make the recommended changes to our preferred NDCs to maximize our potential savings,” said Brad Myers, MUHC.
Be proactive: act on the data
While being proactive is important, drug spend information should not be reviewed in a vacuum. Today’s pharmacy buyers and directors must also understand the intricacies of formularies, drug contracts, patient access and reimbursement. For example, decisions about reimbursement – which represent revenue – are just as important as cost containment.
This starts with being aware of Prior Authorizations (PAs) and having good controls. If a patient is treated without PA and the claim is rejected, how do you cover the costs? Do you bill the patient? Do you write off the charge? Among the possible solutions, check your payer contracts and don’t treat without a treatment regimen selected and approved. Work with your distributor to negotiate distribution agreements that leverage rebates and discounts. For example, the McKesson ordering portal flags special generics pricing and preferred NDCs to help customers fully maximize opportunities to lower costs and improve revenues.
Pharmacy directors face increasing pressure to leverage data analytics to reduce costs, help maintain a healthy bottom line and drive quality care. When implemented strategically using the right tools, analytics can yield meaningful drug spend analysis, providing the evidence needed to effectively establish and track cost containment initiatives. In turn, this information can help lower drug spend and improve efficiency, so the pharmacy team has more time to focus on medication safety and patient care.
