Magazine article Drug Topics

Drug Budget Spiraling out of Control? Here's How to Rein in Your Costs

Magazine article Drug Topics

Drug Budget Spiraling out of Control? Here's How to Rein in Your Costs

Article excerpt

Your hospital has hired a hotshot doctor who specializes in AIDS. Watch out! Your drug budget could get out of hand. That warning came from James McAllister, pharmacy director at the University of North Carolina (UNC) Health Care System. He was speaking at the recent ASHP midyear conference in Orlando.

McAllister said that, depending on what "big guns" the hospital recruits, patient case mix-and thus drug costs-can shift as a result. And if the hospital is a center of excellence in AIDS, oncology, or some other area, that's where much of its drug expenditures will likely be concentrated.

Two other big drivers of drug costs are inflation and innovation. McAllister said his staff is good at estimating inflation, which covers price increases and drug utilization; the problem lies in forecasting innovation or new drugs coming down the pike. "Forecasting innovation is one of the most difficult things to do," he said. His staff has developed a database of drugs in development, which he shares with four or five hospitals in the country. He added that Lee Vermeulen, director, Center for Drug Policy, University of Wisconsin, is developing a product based on scanning the literature, personal contacts with drug firms, and other factors that would help hospitals anticipate their drug expenses. This tool should be available in about a year.

It's the responsibility of the pharmacy director to make key players in the hospital, such as the P&T committee and administration, understand what the drivers of drug cost are, McAllister declared. As part of this message, the pharmacy director should also communicate to them where drug costs are and where they're headed as well as enlist their help to contain them.

McAllister said UNC purchases $40 million worth of drugs per year. And for the first time this past fiscal year, his outpatient drug expenses surpassed his acute care drug outlays. Faced with such a hefty price tag, the hospital must have systems in place to keep costs in control, he said.

So what strategies does UNC use to rein in drug costs? One thing it has done is create new categories of formularystatus-- and restricted drugs. Besides classifying drugs as formulary or nonformulary, his hospital has set up a formulary pending class. In addition, there's a "nonformulary not available" group, meaning there's no room for debate, and a nonformulary group, meaning there is room for debate. …

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