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3 Ways Your Hospital Can Contain Escalating Drug Prices and Shortages

Analysis  |  By John Commins  
   December 05, 2018

What can hospital executives and clinicians do inside their hospital walls to tackle rising costs and inconsistent supplies?

This article appears in the November/December 2018 edition of HealthLeaders magazine.

The one-two punch of exorbitant prices and sketchy access to inpatient drugs have left hospitals across the nation reeling. The shortages are often accompanied by dramatic price hikes. Sometimes the supply is readily available, but the price is prohibitively high, as is often the case when sole suppliers leverage their monopolies.

There's been a lot of talk around solutions at the macro-economic level, from calls for regulatory crackdown on price gouging, to more robust and timely reporting requirements for looming shortages, to modernizing the drug supply infrastructure. 

What can hospital executives and clinicians do inside their hospital walls to tackle rising costs and inconsistent supplies? HealthLeaders spoke with pharmacy directors at three health systems who are grappling with these twin issues.

Successful systems communicate the extent and cost of the problem with their clinical and administrative stakeholders and methodically monitor medication usage every day on a patient-by-patient, dosage-by-dosage basis. It's not easy, and it's not glitzy, but it gets results. 

Do it yourself

"The drug shortages of the last few years have been unprecedented," says Bob Ripley, chief pharmacy officer at Livonia, Michigan–based Trinity Health. "It is really beyond belief to walk in every day and hear about the next shortage and how are we going to manage that."

"Every hospital in our system has a different set of impacts," he says, "and they had to collaborate to use the resources they had and reconstruct care on a regular basis."

Ripley says the shortages for Trinity center around generic injectable medications that for years had been readily available from multiple vendors at reasonable prices.

"All of a sudden, we were not able to access basic medications that we need," he says. "We're not able on a regular basis to access electrolytes, or opiate injections for acute pain management."

Lou Fierens, Trinity's executive vice president of administrative services, says drug shortages also create a "shadow cost" for hospitals.

"It's not just the price hikes when you're trying to find something in shortage on the gray market or through other means," he says. "It's clinical leaders talking about, 'What are we going to do now? What have we got left? What's the new protocol?' It's the clinical implications. For providers, this shadow cost of the shortage is acute, if not more acute, than the cost."

Tired of getting slapped around by the invisible hand of the free market, Trinity and six other health systems across the nation took matters into their own hands this past summer and formed Civica Rx, a not-for-profit drug company.

The seven health systems in the consortium each ponied up $10 million to form the Utah-based nonprofit, and got another $30 million in backing from three endowments. Civica is expected to begin supplying drugs to its members sometime in 2019.

"Civica itself is a Delaware non-stock, nonprofit corporation. There is no equity in the company. We are funding the initial operations capital. Nobody owns it," says Fierens, who is Trinity's point man on the project.

"We very much structured this intentionally," he says. "The misbehavior of the market, the monopoly characteristics of the market, are the sorts of pressures that no one is immune to, in terms of wanting to make a margin and a profit."

"We felt like it would be important for this to be a long-serving asset to society, that we structured it in a way to avoid those temptations," he says.  

Civica will focus on 14 pharmaceuticals that have been susceptible to price hikes, supply problems, or both. Fierens won't say what those products are.

"It's proprietary," he says. "There are concerns about market reactions, tying up critical agents, and some of the same monopolistic behavior we've seen in the market that we don't want to encourage."

"The vast majority of the reasons why these shortages exist are not natural causes," he says. "We're acutely aware of those causes and the motivations, and we want to avoid that."

Related: Potential Game Changer, Someday

With a target date to begin distribution in 2019, Fierens says Civica will likely contract out most, if not all, of its pharmaceuticals at first, but will likely begin manufacturing its own products as the company rolls out.

"Where we go in the future will be determined by the board as we evolve the business case and grow the company," he says.

The consortium is open-ended, Fierens says, and Civica is looking at various membership structures so "every hospital can participate."

"We're going to end up in a per-bed fee structure that we'll be rolling out, which will be a very reasonable membership fee," he says.

"As a member, you'll have the opportunity to commit your volume to any of the products we manufacture as a guaranteed source of supply, with no concern about shortages, at what we think will be a very reasonable cost," he says.

The consortium will also provide opportunities to participate for critical access hospitals and other low-volume or safety-net providers that may not be able to afford standard membership fees. "We'll be available to anyone who wants to participate, and based on early interest, we think there will be a lot of providers across the country," Fierens says.

That the Civica consortium represents diverse health systems from across the nation—public, private, for-profit, not-for-profit, faith-based—is a measure of both the scope of the problem, and the common commitment to build a solution, Fierens says.

"I can't think of another thing that would have brought this mix of characters together," he says. "We've tried as a health system, and me personally, to get things done across the industry, across providers, and it's really hard to do so. But this concept has been so favorably embraced. It reinforces that we're on the right track." 

Grind out savings

Other than creating their own drug company, what can hospitals do to alleviate the growing burden of drug price hikes and scarcity? 

Andrew J. Donnelly, PharmD, director of pharmacy services at the University of Illinois Hospital & Health Sciences System, uses commonsense, hands-on tactics identified by the health system's Pharmacy Value Analysis Committee that have wrung out about $3 million in drug savings over the past five years.

The committee, composed of clinical pharmacists, administrators, and materials managers, scour drug usage reports, and look for fluctuations and waste. They're constantly reading the literature on cheaper biosimilars and other lower-cost alternatives.   

"I have 22 clinical pharmacists for the hospital, and they spend the majority of their time in patient care units or care services," Donnelly says. "They're rounding with the medical teams daily. They're being proactive in identifying the appropriate medicines in the appropriate doses. They're trying to make sure that we're as cost-effective as possible, that we aren't wasting, and that our patients are getting the best medications."

These savings often come one patient at a time, but they add up. It might be something as simple as keeping a lower inventory of higher-priced drugs, or using smaller IV infusion bags.

"We see how much the patient gets and we find out if they ever get more than half the quantity that we're sending upstairs," Donnelly says. "We can reduce the amount of the drug and the size of the infusion bag to more accurately match what the patient is using on a routine basis."

"Either by examining patients' medication usage, by doing various audits, or by examining the types and amounts of drugs that are being returned to our central pharmacy, we can oftentimes identify opportunities to change the way we're providing certain medications," he says.

The Pharmacy Value Analysis Committee also keeps close tabs on generic alternatives.

"We're taking advantage of biosimilars that are hitting the market right now," Donnelly says. "We switched from Neupogen to Zarxio, and we saved about $175,000 annually."

Another solution, dose rounding, isn't flashy or cutting-edge, but it works.

"On intravenous immune globulin, for example, we do dose rounding so that if we only need a little bit in another vial, we drop the dose down and make sure that is appropriate," Donnelly says. "You don't waste almost a full bottle when you only take a little bit out of it."

On some medications, UI Health pharmacists will prepack smaller doses from a vial. "We take a 2 mg vial of remifentanil and we prepare 50-microgram syringes out of that 2 mg vial, thereby eliminating waste," Donnelly says.

UI Health's central pharmacy compares prices of commercially prepared infusion bags versus the cost of compounding the product in-house.

"There was a commercially available nicardipine bag but we were able to save almost $300,000 by making it ourselves," Donnelly says. "You have to weigh the benefits of having it already made against the cost. In this instance, there was quite a difference that we could make up in-house."

UI Health also pushes clinicians to provide pharmaceuticals in the appropriate setting.

"An example would be infliximab, which is routinely administered for irritable bowel disease as an infusion on the outpatient side," Donnelly says. "We do not allow new starts for infliximab in the hospital. The patient has to be discharged. We've been able to save money by making sure it's appropriate for the medication to be started in the appropriate venue."

Anyone looking to UI Health for a magic-bullet solution to runaway drug costs and iffy supply chains may come away disappointed. The upside, Donnelly says, is that the meticulous, grinding, daily hunt for drug efficiencies at UI Health is something that many hospitals can replicate.

"Most of the things I've described could be done in a community hospital or an academic medical center," says Donnelly. "Given the issues occurring now, we're all just trying to be as effective as possible, focusing our attention, and putting enough people toward it to be successful."

Involve your clinicians

Bonnie Levin, corporate vice president for pharmacy services at MedStar Health, says pharmacists and clinicians at the Washington, D.C.–based health system use a number of strategies to contain drug costs and maintain supplies.

"There are several buckets that we use," Levin says. "Probably the most sophisticated would be utilization; working with our doctors, nurses, and IT folks to impact the way we use drugs; using less drugs, using a different drug, using it for a shorter amount of time, adjusting for patient variables that use less drugs."

"From a utilization perspective, we try to do antibiotic stewardship using less drug, using the right drug and using it for a shorter amount of time, or not using it at all," Levin says.

Two years ago, MedStar launched a medication use management program with a dedicated staff that included two pharmacists and a systems analyst.

"They work collaboratively with physicians and pharmacists using our electronic records so that we can impact the way drugs are used to make them less expensive, and it always works out safer," Levin says. "The great thing about these kinds of programs is that, if you do the right thing with medication, it's almost always less expensive and definitely safer."

The program constantly monitors adverse events to ensure patient safety. 

"We look to see how patients react to the medication. We make sure that kidney and liver function aren't impacted," Levin says. "On the positive side, for antibiotics, we make sure that the temperature comes down, the cultures are good. We monitor whatever elements there are for that drug, looking for efficacy and adverse events." 

The program is demanding, requires open and ongoing collaboration across the care continuum, and must be applied meticulously on a patient-by-patient basis. 

"We put out these clinical practice guidelines after a lot of consultation and collaboration and a technology build," Levin says. "Then we provide our pharmacists and physicians with these standards. It's a journey. I can't say that we are at 100%, but every day we get better."

Physician acceptance for the initiative was achieved over time through clinical practice councils that represent all specialties.

A medication use management initiative typically starts with the pharmacy, but it also starts with the physicians who say, "We need guidelines for X,' " Levin says. "We evaluate the literature—that is the role of the drug information specialists and the drug policy person—and we look at the evidence. We come up with recommendations, and then we work with the provider groups to endorse it. It's collaborative

It works, Levin says, because physicians know they have a voice in the process.

"People revere what they're part of," she says. "Yes, there are some doctors who say, 'Don't mess with my job.' But for the most part there is a lot of collaboration, and as long as they approve it, it's easier to implement it."

As for return on investment, Levin says internal analysis suggests that the program saves between $8 and $10 for every $1 invested.

"It's an ongoing investment and it takes a whole lot of time, but it gets easier over time," Levin says. "We've been in the game a couple years now, and the clinical practice councils come to us and say, 'We want to do a guideline on this new drug. Will you help us?'"

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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