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Mitigating the Cost of Rising Drug Prices

Mitigating The Cost Of Rising Drug Prices Web

Drug price increases remain a dominant topic in the national conversation around managing and reducing health system costs. Just as patients may find themselves struggling to afford much-needed medications, healthcare leaders must often make difficult operational decisions to absorb or mitigate drug price increases within their organizations.

While price increases largely remain within the control of drug makers, health systems are introducing several approaches to address the burden and impact associated with these rising costs.

Approach One: Introduce Alternative Therapies

For both health systems and patients, drug price increases can result in material negative impacts. A University of Chicago report commissioned by the American Hospital Association found that changes to drug prices significantly outpaced Medicare payment rate updates, with the average drug spend per admission increasing nearly 19% between 2015 and 2017. Of the executives surveyed, two-thirds indicated these changes moderately or severely impacted operating budgets. In order to offset expensive pharmaceutical costs, health system leaders are forced to reduce costs elsewhere, often in the form of staffing reductions or delays in replacing equipment.

These resulting challenges have prompted hospital leaders to seek less-costly drug alternatives where available as a way to help mitigate costs. The case studies below provide examples of alternatives for high-cost, commonly purchased drugs, which have the potential to result in significant savings for hospitals without compromising clinical outcomes.

Example One: Clevidipine as an Alternative for Sodium Nitroprusside

Known as the “hyperinflation drug,” sodium nitroprusside, despite its generic status, increased its wholesale price to as high as $900 per vial from 2013 to 2017. As a result, some hospitals began investigating other therapeutically equivalent drugs for the treatment of perioperative hypertension in cardiac surgery patients. A team of pharmacy staff, cardiac surgeons, anesthesiologists, and intensivists at Englewood Hospital, a 520-bed community teaching hospital in New Jersey that performs more than 300 cardiac surgeries per year, identified clevidipine as an acceptable therapeutic alternative and was able to achieve approximately $300,000 in annual cost savings largely because the acquisition cost of clevidipine is less than 10% of sodium nitroprusside on a per vial basis. Similarly, Cleveland Clinic achieved savings of over $8 million by adjusting medication ordering options and switching from nitroprusside to the therapeutic alternative nitroglycerin without any major patient safety or clinical outcome issues.

Example Two: Dobutamine as an Alternative for Isoproterenol

The cardiac drug isoproterenol’s price per milligram skyrocketed from $26.20 to $1,790.11 over a three-year period. While physicians at Cleveland Clinic were unable to find an acceptable alternative for isoproterenol in electrophysiology testing, they did begin using dobutamine as an alternative to isoproterenol for intraoperative testing of myectomy patients. In doing so, the organization realized over $580,000 in annual cost savings. Similarly, the cardiovascular service line at Atrium Health’s Sanger Heart & Vascular Institute generated initial costs savings to the tune of $380,000 by substituting dobutamine for isoproterenol in ablations, with no change in diagnostic performance as assessed by electrophysiology physicians.

Example Three: Ziextenzo and Udenyca as Alternatives for Neulasta

The list price of Neulasta, a biologic used to treat neutropenia in chemotherapy patients, has nearly tripled since its approval by the FDA in 2002 and now represents a $4 billion annual cost burden in the United States. A biosimilar product, Ziextenzo, was recently released by Novartis and priced at a 37% discount to Neulasta. Another biosimilar, Udenyca, has been formulated and approved by the FDA with cost reform in mind. Udenyca has demonstrated a price increase of only 27% on the consumer price index from 2009 to 2018, compared to Neulasta’s 132% growth over the same time period. The cost of cancer care represents a significant burden to patients and providers, and these new alternatives may represent less-costly treatment options that could positively impact patients and the healthcare industry at large.

Approach Two: Implement Pharmacy- and IT-Focused Strategies

In addition to introducing alternative drug therapies, providers can utilize several operations-focused approaches to achieve efficiencies and cost savings.

Collaborate with pharmacists. Healthcare organizations can help ensure patients receive high-value drug options through the creation of evidence-based formularies and the deeper engagement of pharmacists as members of the clinical team. Clinical pharmacists can teach providers about treatment options that are less expensive but equally efficacious, potentially kickstarting conversations around alternative therapies or new protocol development. Other significant outcomes of a pharmacist-physician partnership may include reductions in prescribing variation and the establishment of use standards for certain drugs and drug regimens in various clinical circumstances, which in turn would aid in controlling variable costs associated with individual prescribing preferences. Moreover, the use of control mechanisms within the electronic health record (EHR) could assist with reducing costs and mitigating nonformulary prescribing practices.

Implement real-time benefit tools (RTBTs). Providers often have limited or inaccurate drug cost information to assist them in making drug-related decisions. New RTBTs offer cost transparency and clinical decision support for providers at the point of prescribing. For example, RxRevu is one such tool that can be integrated into Epic and Cerner EHR systems to supply prescribers with cost data, evidence-based alternatives, prior authorizations, and patient copay information in real time. Such RTBTs frequently lead to a lower-cost option being chosen as the drug of choice.

Improve inventory management. Minimum and maximum stocking levels, reorder points, and reorder quantities should be established and reviewed on a routine schedule and revised as necessary, especially for high- and medium-cost products. One North Carolina cancer hospital was able to reduce drug waste costs 94% from FY 2011 to FY 2018 through the implementation of a drug vial optimization strategy within its infusion and inpatient pharmacy. As highlighted by this example, reducing IV drug waste and ensuring proper inventory management are both effective methods to lessen unnecessary pharmaceutical expenditures. Additional opportunities include:

  • Developing an IV-to-oral switch program.
  • Limiting batch sizes.
  • Reducing the time between preparation of IV doses and actual administration.

Moreover, by tracking and auditing IV mixture waste, hospital leadership can identify common occurrences and develop the necessary solutions to address them.

Looking to mitigate the impact of rising drug costs on your health system operating dollars? Contact ECG’s Performance Transformation team to continue the conversation.