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3 Ways You Can Increase the Buying Power of Your Pharmacy Budget

The prevailing environment for hospitals and health systems is becoming increasingly economically and operationally turbulent. Various research underscores the challenges faced by hospital leaders daily. Notably, hospital expense growth surged by 17.5% from 2019 to 2022, while reimbursement through the Medicare Inpatient Prospective Payment System (IPPS) saw a more modest increase of 7.5% (source). A May 2023 report revealed that the median operating margin for U.S. hospitals stood at 0% (source)

Over the past three years, 69% of hospitals implemented staffing changes, and 55% underwent staff reductions. In terms of expenses, a significant 80% of inpatient pharmacy costs are attributed to drug spend. Furthermore, the average number of prices a hospital team must contemplate daily is nearly 60,000, further emphasizing the complexity of the challenges faced by healthcare institutions. 

Below are 3 ways you can increase the buying power of your pharmacy budget.

Stringent Monitoring of Overcharged Invoices

In our experience working with hospitals, roughly 2% of pharmacy spend is sheer overcharge. Unfortunately, organizations can’t measure this until they can apply data and analytics to the problem. However, this rarely happens, as most of today’s healthcare systems are still attempting to monitor spending manually equipped only with spreadsheets, wholesaler portals, or 340B split billing software reports. In 2023, this accounted for $1.9M (6.9%) of total savings for CostCheck customers according to our 2023 Pharmacy Purchasing Report

A 1043-bed integrated healthcare network (IDN) recently saved over $2.4 million in one year of using a spend-monitoring solution. Before implementing it, the IDN’s purchasing oversight and contracting team struggled to deal with more drug-contract data streams than they could manage. The IDN worked with Bluesight’s Director of Supply Chain and a team of our software developers to automate the identification of overcharges and integrate potential savings into existing workflows. The result was a real-time pharmacy purchasing analytics platform that required no informatic resources and produced hard-dollar savings, streamlining processes to support its particular operations. The pharmacy team only needed to interact with the software for 45 minutes a week to achieve these results.

Cost Savings from NDC changes

On average, hospitals l have around 2500 different preferred NDCs that they routinely buy. And, buyers must routinely evaluate whether it makes sense to change to one of the 40,000 to 60,000 other NDCs the wholesaler carries based on pricing that is also continually changing. That’s virtually impossible for overextended teams to achieve manually.

There’s simply too much going on and too many siloed data streams for pharmacy staff to reliably detect anomalies and discover cost-saving opportunities in time to react. CostCheck customers saved a total of $10.47M (37.5% of total CostCheck savings) from making tactical NDC changes that the software highlighted for them based on their hospital or systems-specific purchasing needs

Optimizing your 340B and Sub-Wac 

Several changes have been proposed for how the 340B program should work over the last few years. Oftentimes hospitals and health systems need to leverage multiple tools to ensure that they are receiving the correct 340B and sub-wac pricing. While the 340B program offers financial advantages for eligible hospitals, the complexities involved demand a dedicated effort to stay compliant. Hospitals often invest in specialized staff, software, and training to address these challenges and ensure accurate tracking of 340B program requirements. Regular training, internal audits, and staying informed about program updates are essential components of successful 340B program management. Last year CostCheck hospitals were able to save $15.5M by focusing on 340B and sub-wac savings accounting for 56% of all savings.

Watch the Webinar 

If you want to dive deeper into these 3 key takeaways, you can watch a recording of the “Increasing the Buying Power of Your Pharmacy Budget Webinar”.