When drug prices rise and reimbursement rates remain stagnant, hospitals that purchase large quantities of pharmaceuticals find themselves in a financially vulnerable position.
During a Jan. 29 webinar hosted by Becker's Hospital Review and moderated by publisher Scott Becker, leaders from four health systems discussed which service lines are driving pharmacy costs and explained what their organizations are doing to control spending. Speakers included:
- Cedric A. Terrell, PharmD, senior vice president and chief pharmacy executive at Winston-Salem, N.C.-based Novant Health
- Luke Miller, PharmD, director of pharmacy at Kyle, Texas-based Seton Medical Center Hays (a member of St. Louis-based Ascension)
- Dean T. Parry, assistant vice president of clinical informatics and care support services for Danville, Pa.-based Geisinger Health System
- Charles E. Daniels, PhD, chief pharmacy officer and associate dean at University of California San Diego Health and Skaggs School of Pharmacy and Pharmaceutical Sciences
Primary pharmaceutical cost concerns
Across the board, panelists cited specialty pharmaceuticals such as oncology, gastroenterology and rheumatology drugs are the main drivers of pharmacy costs for health systems. Drug shortages are also a top concern; all four panelists agreed costs related to drug shortages are the most difficult to manage.
"That forces us outside of our standard purchasing practices, often to higher-cost alternatives, which certainly is a factor in driving the overall cost of pharmaceuticals across the system," Mr. Parry said, explaining how shortages affect operations at Geisinger.
The situation is similar for Seton Medical Center Hays, according to Dr. Miller, who also listed pharmaceutical inflation as an important consideration. Inflation caused total hospital drug expenditure to increase more than 15 percent from 2015 to 2017, he said.
When pinpointing expenses, Dr. Terrell focuses on shifting care delivery models. He said the system's spending amounts to well over $300 million, with roughly one-third of that in the acute care space and two-thirds in the outpatient space.
"We're talking about nearly a $500 billion industry in the pharmacy supply chain," Dr. Terrell said. "There's spend across that footprint, depending on where we deliver care. At Novant Health, [we see] anywhere from 3 to 5 percent drug inflation across acute care spend, but then on the ambulatory side — self-injectables, infusion therapy, clinic-based injectables, so forth and so on, and specialty drugs, of course — is where we see that 8 to 12 percent continuous rise year-over-year, which is driving our inflation and our costs."
Although drug expenses alone may seem like a small dollar amount compared to other line items, the overall financial toll drug shortages take on health systems is massive, Mr. Parry noted.
"If you think about the total cost — the impact, first of all, simply on IT systems and changes that need to be made, the risks it creates in terms of errors that could occur as you try to adjust to alternative therapies, the number of people involved and the impact on quality of care — I think the number gets inflated by a significant factor," he said. "I think there's way more costs hidden there than people would realize."
Effective ways to manage expenses
During the webinar, Mr. Becker pointed out that there isn't a "magic bullet" for dealing with shortages and reining in pharmaceutical costs. Instead of a single solution, health systems across the country are deploying various strategies to control pharmacy costs. Dr. Daniels views cost control as some combination of strategic negotiation and pricing, avoiding certain drugs and biological agents and improving reimbursement, depending on the circumstance.
Dr. Miller's cost containment strategy involves reviewing medical literature and clinical evidence to critically evaluate whether an agent's benefits clearly outweigh its potential risks. In other words, it boils down to doing what's right for the patient.
"You have to focus on [asking], 'What is the most safe and efficacious product we have on the market, and does one show a clearly delineated benefit over another?'" Dr. Miller said. "If that's the case, you go with that agent. If there's multiple out there that have similar evidence or comparable evidence, that's really when you have the contracting opportunity."
Leveraging technology to make changes
Data analytics play a significant role in reducing pharmacy costs, according to Mr. Parry. Geisinger uses analytics to illustrate potential benefits of pharmaceuticals across the organization, rather than focusing solely on costs. Mr. Parry said this decision-making strategy sometimes means using more expensive agents to lower the overall cost of care — and vice versa.
However, making that technology accessible is crucial. Pharmacy management leaders won't utilize data as frequently as they should if they can't quickly and easily find the data they want, according to Dr. Daniels. To make the greatest impact on a daily basis, the technology should harness real-time data on drug costs and deliver that information directly to those who need it.
Ultimately, Dr. Daniels said, cost control comes down to one factor: persistence.
"At the bottom of all this, everything that we've done that's been successful is about persistence," he said. "Knowing where your opportunities are is very important, and that only comes from either some smart computer program that identifies opportunities or some really thoughtful individuals that are looking at where the money spend is. The reality is that just knowing they're there frequently doesn't drive the change."
To view the webinar, click here. To access the webinar slides, click here.