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The Right Prescription
The director of pharmacy faces a unique set of contracting challenges.

Editor’s Note: The particiaption of those in the following article does not constiitute an endorsement of the sponsor’s products of services.

Those who believe that contracting is pretty much the same throughout the IDN ought to sit down sometime with the director of pharmacy. Although pharmacists have similar concerns to those of directors of materials management or the OR, such as patient safety, cost containment and physician preference, the pharmacy director faces some unique challenges.

Patient safety
The director of pharmacy is not alone in his desire to balance cost containment with patient safety, but he is well aware that when medication is involved, the margin for error is slim. "Realistically, the role of the director of pharmacy is one of leadership in designing systems that prevent or greatly reduce the likelihood of medication errors," says Larry McComber, senior vice president of contract and program services at Novation (Irving, Texas). "This leadership should encompass working with physicians, nurses and hospital executives to identify system changes and to justify the investment in information systems to effectively manage the medication use process." Bedside scanning and order entry, for instance, are two such systems that can help the director of pharmacy safely manage the dispensing of medication to patients.

"Surgical infection prevention involves giving the right drug at the right time for the right length of time," says Joel Hennenfent, director of pharmacy services at Broadlane (Dallas, Texas). Prior to working with Broadlane, Hennenfent was director of pharmacy at 365-bed St. Louis University Hospital (St. Louis). Through years of experience, Hennenfent has learned that the hospital pharmacy must take special precautions to avoid safety and medication errors. Apparently, the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) agrees; it has targeted many of its newer safety guidelines at patient medication, he notes.

The director of pharmacy is time-starved, says Hennenfent. There is a national shortage of pharmacists and often budgets don’t allow hiring another full time employee, he says. And, yet, the pharmacy department faces more work than ever. "Medications must be available in safe and usable form for patients and healthcare professionals," he continues. They must be available as unit dose products, with labels that include clear fonts, barcodes and expiration dates, and they must not include abbreviations considered to be confusing or otherwise unsafe by JCAHO.

"Sometimes pre-packing is taken care of by the manufacturer," says Hennenfent. "Oftentimes, however, it is the responsibility of the director of pharmacy, as different medications generally must be controlled and handled in their own way."

Purchasing medications in unit-dose form can affect the cost, notes Jim Eskew, director of pharmacy at Indianapolis, Ind.-based Clarion Health. But the need to ensure patient safety far outweighs cost issues, he says.

At Seattle-based Providence Health and Services, Scott Jamieson, director of system pharmacy services, says he believes that patient safety can best be achieved by a "less is more" approach. "We try to limit the number of drugs used in a facility," he says. This means the medical staff has fewer medications to learn to use. "Fewer choices leave less room for error to [occur]," he continues. Pharmacy and therapeutics (P & T) committees, which make recommendations on the clinical use and management of drugs, are key in evaluating their safety, he adds.

Not only can the availability of too many types or brands of medication increase the risk of patient error, so can the overuse of some drugs. For instance, aprotinin ideally helps patients avoid heavy bleeding following bypass surgery. "This medication should only be used for 15 percent of patients," says Blane Schilling, vice president of clinical pharmacy services for Aspen Healthcare Metrics (Englewood, Colo.). "But, some hospitals use it for closer to 90 percent of their patients. If a patient doesn’t really need it, [aprotinin] can lead to renal failure."

Cost containment
As drug costs continue to rise, reimbursement for medication decreases and more underinsured or uninsured patients are served, hospitals place increased pressure on the director of pharmacy to better manage his departmental budget, says Hennenfent. Pharmacy directors have responded by adhering to hospital best practices for contract compliance and improved pricing. Still, a number of challenges remain, he points out. The director of pharmacy must:
  • Identify areas of opportunity in pharmacy contracting
  • Educate staff on best practices
  • Adjust to new problems and data, which may discount earlier purchasing decisions.
"The director of pharmacy must look at a wide variety of products," and the GPO can help, says Gary Freeman, vice president at Amerinet (St. Louis). "GPOs do drug contracting best," he says.

Indeed, the GPO can help the director of pharmacy reduce pricing by as much as 20 percent, according to Fred Halvachs, senior vice president, pharmacy services, Broadlane. That helps, because while prices may have stabilized, utilization has increased, he says. As baby boomers continue to age, there is an increasing number of sicker patients admitted to hospitals each year. "So, the cost of drug products continues to tax the director of pharmacy’s budget."

As necessary as it is for containing costs, formulary presents yet another set of challenges for the director of pharmacy. Some, such as Eskew, believe the director of pharmacy "has fewer issues with physician buy-in than [directors] working with device contracts." Still, the issue of physician buy-in is significant whether it exists in the pharmacy, the OR, or elsewhere in the hospital. Physicians look at evidence-based medicine, not anecdotes, when selecting pharmaceuticals. And, they want freedom to practice medicine without formulary restrictions when they believe this can improve patient outcomes, says Hennenfent.

That is why it is incumbent on the pharmacy team to educate staff on the benefits of formulary modification. "Clarion has a large drug information center staffed with pharmacists," says Eskew. "This helps doctors stay up-to-date on new drugs, especially before [they’re presented to] the P & T committee. We also have drug specialty panels, which look at new drugs specific to each [medical] specialty."

"Collaborating with physicians is the key to getting their buy-in on formulary," adds Jamieson. "We look for physician champions or field experts who can help make a case for the inclusion - or exclusion - of different drugs."

The formulary process greatly reduces the number of products a hospital offers, which is good from a patient safety standpoint. "Fewer products to choose from lessons the opportunity for an adverse drug event to occur," says Halvachs. Physicians often are more receptive to formulary modification once they are aware of drug guidelines provided by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), he adds. "And, when the director of pharmacy provides data on utilization and cost, physicians can make good decisions."

Team efforts
The director of pharmacy can optimize contracts by working with a number of groups, including their GPOs, the hospital’s director of materials management and drug wholesalers, according to those with whom JHC spoke.

The GPO can be a key advocate in the contracting process, says Hennenfent. But, this is true only if the GPO and the director of pharmacy maintain open lines of communication. "GPOs must always ask directors of pharmacy [about] the important medication product characteristics and how much emphasis each plays in contract negotiation. [In return], directors of pharmacy must be vocal about what is needed from medication products (i.e. minimally acceptable standards and ideal expectations), and communicate the level of importance to the GPO."

"GPOs and directors of pharmacy can work together to identify areas of opportunity," he continues. "This can be achieved by GPOs providing simple reporting tools and clinical pharmacy consulting services. Also, GPOs can provide a forum for directors of pharmacy to share best practices for purchasing and clinical programs targeted at improving appropriate medication utilization."

Open lines of communication are equally important for the director of pharmacy’s relationship with wholesalers. "Communication between the director of pharmacy and the wholesaler [is especially important] regarding patient care needs and inventory needs, and [establishing] clear expectations [between the two]," says Hennenfent. "Wholesalers’ ordering systems should be simple, and comprehensive training should be provided for pharmacy directors. [In addition], wholesalers should be able to provide the product’s pedigree history and guarantee that the product was stored in appropriate conditions."

Working closely with the hospital’s director of materials management can also help the pharmacy director secure favorable contracts. "Certain contracts provide incentives on products that are purchased by directors of pharmacy, purchasing directors and materials managers," says Hennenfent. "For instance, if a certain market share is achieved for a pharmaceutical product, then a rebate is [offered] for all products provided by that company."

Joint efforts by pharmacy and materials directors can pay off well in some product areas, such as diagnostic imaging, says Jamieson. If the pharmacy department has a more advantageous contract with the wholesaler than the materials management department has with a med/surg or radiology distributor, both departments can contain costs by pooling their volume with the wholesaler. "We’ve found we can shave 3 to 5 percent off a contract this way," says Jamieson.

Sales rep protocol
Most directors of pharmacy have learned to establish tough vendor-access policies for drug reps. "We have no issues with vendors wandering through our hospital," says Eskew. Strict policies at Clarion regulate the comings and goings of drug reps. Rep meetings with the director of pharmacy are held by appointment only, and reps discovered in unauthorized patient care areas are banned from the system. "We can control what happens within the facility, if not outside of it," he says.

Manufacturer reps should promote formulary items within the criteria developed by the hospital and the director of pharmacy, adds Hennenfent. And, reps should not be permitted to promote non-formulary items to groups of staff members, "Reps may meet with individual practitioners [to present non-formulary items], but these items must be clearly presented as unavailable on the formulary."

A growing emphasis on patient safety has drawn attention to the pedigree issue as well. "The national emphasis on patient safety has turned [pedigree] into a hot topic," says Hennenfent. "Pedigree includes a statement of origin that identifies each prior sale, purchase or trade of a drug, including the date of these transactions and the names and addresses of all parties to them." It’s not only a matter of tracking a product through a change of hands, but also a question of whether it has been properly stored, he says. (For an update on pedigree, see page 26.)

"How this is achieved is very complex," he continues. The director of pharmacy must confirm that the wholesaler can provide an Authorized Distributor of Record (ADR), or a written agreement between the drug manufacturer and wholesaler for all products carried. An ADR is not obligated to produce a pedigree document when there is a written agreement between the manufacturer and wholesaler. Apart from standard suppliers, any other supplier that has been approved with ADR status should provide the director of pharmacy with a pedigree, he says.

"We’ve made a conscious decision to not use ‘gray market’ medications," says Jamieson. "We try to only purchase medications from our wholesalers or contracted manufacturers." While experts tend to agree that pedigree supports patient safety, the process presents a challenge for the director of pharmacy, particularly when unused medications must be returned to the wholesaler. "How does [the director of pharmacy] efficiently return these medications?" Jamieson asks. "We don’t want to have drugs tampered with before they are returned. At the same time, we don’t want the hospital to be stuck with them." One option is to limit the number of days the pharmacy director has to return the product. In many cases, though, manufacturers refuse to take back any medications, he says.

Future of pharmacy
Experts agree that the pharmacy will remain focused on patient safety and cost containment for some time. "The vision of pharmacy contracting will continue to be [that of] obtaining safe and effective medications at the lowest cost," says Hennenfent. "There will continue to be an emphasis on packaging, especially [with regard to] colors, clarity, font, unit dose and barcoding."

Government standards have already become more stringent for hospital pharmacies. "The hospital pharmacy must now mix products in such a way that the procedure is more sterile," says Jamieson. In addition, he anticipates that directors of pharmacy will have to address the issue of the rapidly escalating costs of bio-engineered drugs. "While these products are new [and expensive], the director of pharmacy will have to find ways to work with manufacturers to keep costs down," he says.

"[The director of pharmacy] will have to look at how to leverage [his] purchasing power by working with a single vendor for drugs and services," adds Eskew. "This will help drive down costs, while better ensuring patient safety."

One looming question is, who will take responsibility for providing safe packaging? "Will it be the manufacturer, a pre-packing company or individual organizations?" asks Hennenfent. "Will manufacturers be willing to step up and buy in to the patient safety culture vision? Will they be compensated for this added expense? Or, will directors of pharmacy re-label and re-package all products at the individual pharmacy level, and will they be able to afford the technology?" In the end, providing safe packaging may give manufacturers an edge in a market where many products are very similar.

"[The director of pharmacy] wants to focus more on clinical decisions," says Eskew. "If we allow wholesalers to [take greater responsibility], we can [spend more time] on our job."

Pedigree rule on hold

A group of small drug wholesalers prevailed in their fight against the federal government and national wholesalers when a federal judge held off implementation of a rule that would have required the smaller companies to produce a pedigree on all the drugs they sell. The rule was to have gone into effect Dec. 1, 2006, but was temporarily put on ice while its constitutional implications are examined.

A pedigree is a record of who made a pharmaceutical (and when and where), and from whom it was bought and to whom it was sold. By documenting the path that drugs take throughout the supply chain, pedigrees are designed to cut out counterfeiting and other unsafe practices. Pedigrees were mandated by the Prescription Drug Marketing Act of 1987, as amended by the Prescription Drug Amendments of 1992.

Objections raised
Led by Bob Drucker, president of Port Washington, N.Y.-based RxUSA, a group of wholesalers disputed the constitutionality of the law because it would have required so-called secondary distributors (that is, those who buy pharmaceuticals from other wholesalers, not manufacturers) to produce pedigrees, but it would have exempted the so-called authorized distributors (that is, those who purchase directly from manufacturers) from the same requirement.

In his request for an injunction, Drucker argued that the rule could put his company and 4,000 other secondary distributors out of business. Many drug manufacturers refuse to sell directly to small wholesalers, forcing companies such as RxUSA - whose gross revenues in 2005 were $295 million - to buy products from the manufacturers’ authorized distributors, he maintained. But the national wholesalers are not bound by law to give pedigree statements to secondary wholesalers. (One national wholesaler, Chesterbrook,

Pa.-based AmerisourceBergen, has begun making pedigrees available to secondary distributors for a monthly fee of $5,000.) Instead, authorized distributors are only "encouraged" to provide pedigrees and information to trading partners for each sale, transfer or trade of prescription drugs. That puts the secondary distributors at the mercy of the big companies, according to Drucker.

One day before the rule was to have gone into effect, U.S. Magistrate Judge A. Kathleen Tomlinson of the U.S. District Court of the Eastern District of New York ruled that the small wholesalers had raised enough questions about the constitutionality of the rule to justify a preliminary injunction prohibiting the Food and Drug Administration from enforcing the pedigree requirement. On Dec. 8, U.S. District Judge Joanna Seybert affirmed Tomlinson’s decision.

Ruling for secondary wholesalers
Seybert ruled that the independents had successfully made their case that the rule could jeopardize their businesses (one of the conditions that must be met for an injunction to be issued). She also ruled that the independents had successfully argued that they had a good chance of winning a court case disputing the constitutionality of the pedigree rule (another condition necessary for an injunction).

Seybert pointed to the irony of the rule itself: Should secondary wholesalers be run out of business, only authorized wholesalers would be left standing. But since authorized wholesalers are exempt from the pedigree requirement, pedigrees also would cease to exist.

Finally, Seybert ruled that little harm could result from delaying implementation of the rule pending the outcome of a trial considering that implementation had already been delayed about 12 years.

In the weeks leading up to the Dec. 1 implementation date, the FDA had argued that the Prescription Drug Marketing Act was constitutional and should be implemented without further delay. "The Oversight Subcommittee’s investigation found that most of the drugs that were counterfeits, stolen, expired, or obtained through fraud were handled by secondary wholesalers, who were not authorized to distribute that manufacturer’s product," wrote U.S. Attorney Roslynn Mauskopf, quoting the Congressional record. "Thus, the requirement … that wholesale distributors must inform their wholesale customers of all previous sales of the product applies only to wholesale distributors who are not authorized distributors for that product."

At press time, both sides were preparing for trial.

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