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Cost Containment Strategies for
Controlling Pharmacy Drug Spending

It¹s no secret that Health Care spending in the US is through the roof. Health Care costs have been rising for several years and exceeded $2 Trillion in 2006. While prescription drugs account for only about 10% of the total costs, it has been the fastest growing cost segment. In the long-term care market, drug expenditures now exceed food costs as the single largest part of a Skilled Nursing Facility budget. It appears that drug costs will only get worse. But there are ways to better manage these costs at your facility.

UNDERSTAND YOUR BILL: The first step is to try and wrap your arms around the subject. If you are a hands-off manager, you need to get your hands dirty. That means understanding your pharmacy bill. And it's not easy. Get some help by enlisting the Director of Nursing or someone else on the clinical side. Better still is to have your pharmacy contact walk you through a couple of month¹s worth of invoices until you get a comfort level. Then schedule time each month to dig into the details. Don't assume the pharmacy never makes a mistake because mistakes happen. Sometimes it's a consequence of having incorrect payer information for a resident. Sometimes it's just a mistake made by the Billing Associate at the pharmacy. Either way, you lose, so question and dispute those charges with which you disagree.

ADMISSIONS: What is the Admissions Strategy at your facility? Are you selective in the residents you admit or not? Your drug spend will reflect the admissions strategy you have chosen. If you market your facility as a world-renown Rehab Center for knee and hip replacement, don't be surprised when your pharmacy bill arrives with high-cost Lovenox expenses throughout. Be aware of the high-cost drugs prior to admission so you are not caught off-guard. Research the electronic formulary and pre-admission screening tools that are available on the market or through your pharmacy vendor. Call the pharmacy for costs if you have to. But remember, once you¹ve ordered those high-cost drugs, you¹re already behind the cost curve.

DISCHARGE PLANNING: On the opposite end of the admissions process is the discharge piece. Here it pays to know your Average Length of Stay at your facility, then order the meds accordingly. However, you also need to know when that resident is being discharged so your nurses don¹t automatically reorder a 10-day supply when a 3-day order will suffice. This takes a lot of coordination and usually requires specific nurses skilled in ordering. Communication within the facility is key to ensure the ordering nurse has up-to-date discharge data. When all else fails and that resident has been discharged before you could stop the order to the pharmacy, make sure the meds are refused upon delivery and sent back for a credit. Don't have the time or the staff? Think about all those meds you had to toss out and the expenses you had to eat. Well-run SNFs make this work. You can too.

DRUG RETURNS: Speaking of drug returns, know the pharmacy¹s P&P on drug returns. Again, assign staff who are knowledgeable. Returns need to be done timely or you won't receive the credit you deserve. Don't have the time? Make the time and you¹ll see the resultant savings.

OTCs: Here's an easy one ... management of Over-the-Counter orders to the pharmacy. In almost all cases, you do NOT want your OTCs supplied from the pharmacy because the expense is never going to be lower than you can get from your OTC wholesaler. Ordering OTCs through the pharmacy includes special packaging and RPh reviews not needed for OTCs. Make sure you have a policy in place for ordering, or not ordering, OTCs and stick to it.

TIs: OK, you've gone through all the recommendations above and your pharmacy costs are still high. What more can you do? If you have a good working relationship with your physicians, you can work the Therapeutic Interchange (TI) process, either on the front-end or the back-end of drug ordering with the pharmacy. Work with the pharmacy to develop your own formulary for drug prescription upon resident admittance. Over time, this will get you the biggest bang for the buck.

DOSING AND PROTOCOLS: However, there will always be some high-cost drugs being prescribed without generic or less expensive equivalents e.g. Procrit, a stimulator of red-blood cell production often used in hip and knee surgery. What's an Administrator to do? Work with your pharmacy and some of the Big Pharma representatives to manage the dosing of these high-cost drugs. Many times the resident comes from the hospital on a dose that needs to be adjusted downwards. You will still be paying for a high-cost med, but perhaps only half of what you would have paid if not for the correction.

IN SUMMARY, make use of your pharmacy vendor, if you aren't already, to better manage your drug spend. They can point to the trends to demonstrate where the opportunities are for reducing drug expenditures. You should schedule regular meetings 2-4x per year to review your spend. You can even try getting them to reduce your pricing! Caution, this may seem like a logical way to reduce your drug bill, but if your spend focus is on highcost drugs, then you really need to reduce the amount of high-cost drugs you order, not just reduce the cost of the drug itself. Reducing a $5,000 drug order by $100 still leaves you with a $4,900 bill! Clinical Protocols are another tool for controlling high cost prescribing. For example, Zyvox is the new antibiotic wonder drug. Its effectiveness is well-known. If you didn't know it was a high-cost drug before reading this, now you do. Zyvox may not always be indicated. Contact your pharmacy for a Clinical Protocol that will guide your physicians and nursing staff in Zyvox ordering.

Jeff Johnston is General Manager, PharMerica, and can be reached at 1-800-282-4321.