Pharmacy Cost Reduction Strategies Presenters: James Jorgenson, RPH, MS, FASHP CEO, Visante Inc. & Visante Ltd.
FACULTY DISCLOSURE The faculty reported the following financial relationships or relationships to products or devices they or their spouse/life partner have with commercial interests related to the content of this CE activity: - Speakers Bureau: Novartis Pharmaceuticals Non-Branded Educational Series - CEO and shareholder Visante Inc.
Do More With Less & Work Smarter Not Harder Objectives: Explore reengineering processes for greater efficiency Evaluate options to deploy more innovative and effective technology Utilize external resources Understand the need to invest money to save money
Why Is Cost Management Increasingly Important? Escalating Demand Shrinking Reimbursement Escalating Operating Costs Demand for Improved Outcomes
What Do Typical Pharmacy Expenses Look Like? Manpower 20% Other 2% Total Drug Spend 78%
Driving Drug Cost Savings Requires Resources Many organizations focus on the price, versus the utilization When pharmacists are in patient care areas working with physicians, they are better able to: Improve patient care Implement clinical programs Improve patient satisfaction Increase drug cost savings Yet pharmacy needs resources and support in order to be fully deployed in patient care settings 1 Source: Pharmacotherapy 2008:28(11)
Drugs Are a Major Driver of Healthcare Expenditures US Rx Drug Spend topped $457B Produced 1 st $100B quarter ever Drugs are now 17% of total US healthcare spend Drug spend this year projected to rise 11.6% By 2020 drug spend in the US could hit $640B 4.4B prescriptions dispensed (10% increase) ASPE Issue Brief, Department of Health & Human Services, Office of the Assistant Secretary for Planning & Education, http://aspe.hhs.gov, accessed 3/15/17 Keehan S, et al, Health Spending Projections Through 2017: The Baby-Boom Generation is Coming to Medicare, Health Aff Vol. 27, No 2: 145-155
Drug Costs Highest number of new molecular entities in the last 10 years 50% of total drug spend on trade name drugs on the market for less than 2 years Slow down in brand name drugs moving off patent Increase in sole source generics and price Orphan drugs = 27% of total spend and < 7% of Rx volume Berkrodt B, US Prescription Drug Spend, Reuters, April 14, 2016, http://www.reuters.com/article/us-health-usa-drugspending-iduskcn0xb08q, accessed 3/15/17
Specialty Drugs High cost drugs used for complex diseases Specialty drug increase at 18.7% Represents 35% of total US drug spend but < 1% of total volume By 2019 estimates are that 40-50% of total US drug spend will be for specialty drugs Braverman B, Prescription Drug Prices Headed for Double Digit Increases in 2017, The Fiscal Times, October 24, 2016
Composite Factors Fueling Overall Drug Cost Increases Population Growth 10% Increase in Rx/Person 30% Economy Wide Inflation 30% Price Increases & Shifts In Usage 30% ASPE Issue Brief, Department of Health & Human Services, Office of the Assistant Secretary for Planning & Education, http://aspe.hhs.gov, accessed 3/15/17
Transformational Change If you continue to think as you always thought, you will continue to get what you have always gotten Marilyn Ferguson, The Aquarian Conspiracy In an evolving market organizations that achieve the same results they have in the past will eventually fall behind Changing thinking produces that breakthrough level of performance needed for the future Transformational change Seat Belts
Will Today s Thinking Serve You in the Future? Current Results Future Breakthrough Results Behavior New Behavior Thinking Choice New Thinking
Formulary Management Evidence Based Approach Safety, Efficacy, Cost Pharmacoeconomic Analysis Rare Disease Strategy Biosimilar Strategy
Formulary Management P&T/Medical Executive Committee Structure System Formulary o Inpatient o Outpatient Don t let the perfect stand in the way of the good
Employee Prescription Benefits Double digit increases in drug costs impact your HR department as well as your pharmacy budget Employee Rx use mirrors the overall trends in the general population Excellent opportunity for pharmacy to engage with HR to evaluate the Pharmacy Benefit Management plan
Employee Prescription Benefits Opportunity to: o Maximize the value of a PBM program for the hospital o Traditional vs. Fully Transparent Model o Co-pay Tiers o Specialty Pharmacy o Incentivize business for internal pharmacy programs o Reduce costs for employees
Traditional PBM Model Physicians Rx $67 spread! Claim Employer $85 Payment Rx, Co-pay Claim Claim Data $8.50 $18 PBM Patients Drug Pharmacies Payment Rebates Not Passed Through to Client Pharma Companies
Utilization Management Drug Cost Opportunity Analytics The right data to drive cost savings The right clinical resources to interpret and promote the data A proven system that delivers accurate results A process that sustains savings year-over-year
Leveraging a Total Equation to Manage Costs Cost = Price x Utilization Price of medications Optimizing prescribing and medication utilization Involves one function Quick success with low impact Requires multi-disciplinary teams (physicians, nurses and pharmacy) Yields significant impact to hospital s financial and quality benefits yet requires long-term focus Phase one: Price Contract Optimization Lowest cost on drugs Pharmacy focused Phase two: Utilization Benchmark data Targeted programs Measurement/scorecards Benefits Improve outcomes Lower costs Decrease LOS
Realize Medication Savings Opportunities Identify and monitor savings through proprietary analytics tool Leverage established strategies and tools to drive savings Deploy scorecard to monitor results Clinical Support Initiative database Implementation tool library Access to subject matter experts Project management and change management tools Drug Cost Opportunity Analytics Monitor both purchase and utilization drug costs Trend antibiotic use Benchmark against similar hospitals by drug cost or DRG costs Evaluate length of stay as a surrogate for outcome data
Antimicrobial Stewardship Impacts quality of care and cost of care with rapid ROI Multi-drug resistant organisms (MDRO) on the rise MDROs impact mortality/morbidity & add significant cost Anti-infectives still consume approximately 20% of the total cost of drugs for a typical hospital
Antimicrobial Stewardship Over 50% of all hospital patients receive an antibiotic Most effective strategy for hospitals is a well run AMS program o Pharmacy o Infectious Disease o Infection Control o Laboratory o IT Trends in US Antibiotic Use, PEW Charitable Trust Issue Brief, March 2017, http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2017/03/trends-in-us-antibiotic-use, Accessed 3/27/17
Antimicrobial Stewardship Do you know what your anti-infective resistance patterns are and where you have current or emerging problem areas? Do you know what your drug spend/patient day is and how that compares to best practices? Do you know what percent of your total drug spend is consumed by anti-infectives and how that compares to best practices?
Antimicrobial Stewardship Do you know how many of your 30-day readmissions are infection related? Do you know what your CMS penalty potential is for 30-day pneumonia readmissions? Do you know what your Hospital Acquired Conditions status is relative to infections (CLABSI & CAUTI)?
Risk Sharing Innovative new business model Leveraged business expertise of partner Created at risk financial model with $12M guarantee over 36 months Linked inpatient and outpatient pharmacy care Improved quality of care and financial performance
Risk Model All expenses netted against totals All dollars real and hit the operating statement no cost avoidance numbers included Added clinical pharmacists in oncology, dialysis, cardiology, HIV, infectious disease, chronic disease management, PBM, and OP Pharmacy
Risk Model Outcomes Reduced cost of goods Improved utilization Reduced readmissions Improved clinical outcomes Improved revenue o Outpatient Rx capture o Clinic infusion revenue Net margin improvement of $34M in 36 months
Capital Partner Focus on ambulatory pharmacy programs o Outpatient Pharmacy o Specialty Pharmacy o Mail Order o Infusion Services o Clinical Services Provide capital & expertise Create hospital branded program Share in bottom line profit
Outsourcing Effective use of external resources on an episodic or on-going basis Ongoing use of external resources o Packaging o Compounding o Inventory Management o Order Entry/Review
Order Entry/Review Redeploy existing pharmacist FTEs from order entry to higher margin strategic projects and clinical initiatives Provide work-load balancing and reduce order review and order entry times, especially during peak hours Perform order entry/review at a lower cost per order action
When Do You Consider A Consultant? Organization is stuck and needs a fresh perspective Organization understands it needs a particular set of skills for a project that is not currently in place The organization does not have sufficient internal resources for a specific project There is a time sensitive nature to a project where adding additional external resources produces faster results Need a respected external opinion to validate an organizational direction and help push it over the goal line
Barriers to Consultants Pharmacy leaderships perception that using external resources somehow means they have failed or are not good enough The professional attitude that I can do it all and don t need any help Concerns that using a consultant may uncover problems that would reflect negatively on the operation or leadership
Barriers to Consultants Negative connotation associated with slash and burn consultants C-suite familiarity with consultants that may not really have any pharmacy expertise Negative perception of consultants that provide cookie cutter solutions Lack of innovation & creativity by consultants - someone that uses your watch to tell you the time
Service Consolidation Drug Policy Development Medication Safety Contracting/Purchasing o Cost of Money Pharmacy Ebay
Service Consolidation Centralized Distribution Education Research Compliance o 340B o USP 795/797/800 o Drug Diversion
340B Complex program that is continuously and rapidly evolving and changing Maximize program value o Prime Vendor Use o Sub-ceiling discounts o Contract Pharmacy o IT Configuration/Maintenance
340B Protect current discounts: o GPO exclusion o Duplicate discount o Diversion o Split billing software o Contract pharmacy management o Self audits
System Approach to 340B Compliance
Clinical Services Clinical pharmacists generally are the most expensive personnel resource Are they used most effectively in terms of an ROI for caring for patients? How do they typically see patients? How do they gather/use data to support their activity? How do they document their activity?
Clinical Services New approach and real time tool for clinical pharmacist workflow Risk stratifies patients relative to risk for an adverse drug event Creates pharmacist task list
Clinical Services Links to data sources to pull all relevant clinical information needed by pharmacy to care for the patient Captures pharmacist interventions Dashboard for order time waiting 30% increase in clinical pharmacist productivity
Pharmacist Work Display Interventions captured in background
Pharmacist Work Display Consults Worklist Rounds notebook Order volume & wait time Service area patients risk stratified based upon auto profile review and pharmacocomplexity Clinical Coordinator view of all clinical pharmacy activity and patient risk & complexity
Pharmacotherapy Complexity Score
Risk Review Drill Down
Admission/Readmission Reduction CMS Readmission Reduction Focus Hidden Cost of Adverse Drug Events sssociated with ineffective Admission Med Rec Oncology Payment Model Up to 35% of readmissions are medication related Best defense o Strong Medication Reconciliation Program o Strong Discharge Rx Capture Program
Admission Medication Reconciliation Typically falls to mid-level practitioners and prescribers who are not as familiar with medication therapy as pharmacists Generally requires at least 15 minutes for a complete admission Med Rec Hidden source of medication errors and costs Medication reconciliation project performed by Laura Jobin and Lauren Gray, PharmD students under the direction of Brian Marden, DOP Maine Medical Center
Med/Surg Unit Admit Med Rec Accuracy 75% Incorrect > 1 error on original admission med list 25% Correct 25% Correct 75% Incorrect With permission from Main Medical Center
Discharge Medication Reconciliation Significant opportunity to help patients leave the hospital on the correct medications, doses and schedules Opportunity for further education on medications and the importance of adherence Coupled with a Discharge Rx Capture program for organizations with outpatient prescription programs can provide a powerful deterrent to readmissions as well as a source of new revenue
Effective Medication Reconciliation DISEASE STATE 7/1 9/30 RE- ADMISSION RATE AMI 18.9% 7.4% HEART FAILURE PNEUM ONIA 22.5% 18% 19.4% 4.3% 11/1 RE- ADMISSION RATE COPD 17.3% 16.6% Medication histories from 11am to 11pm on all ER patients Medication histories within 24 hr. of admission for all inpatients Review of allergy info and status Review of vaccine info and status Med reconciliation by pharmacy at admission, transfer, and discharge with pharmacists entering medication orders as pending at discharge for MD approval Patient education for all Core Measure patients as well as other high impact patient groups or medications
If you build it, they will come Maybe Discharge Rx Program 5-15% discharge Rx capture with passive approach 55-70% utilizing pharmacy technicians rounding through hospital Bedside delivery Improved patient satisfaction and convenience Enhanced access and triage