Bringing It All Together: The Senior Executives Role in Managing Rising Drug Expense

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• Bringing It All Together The Senior Executives
  Role in Managing Rising Drug Expense
• Tom Woller, RPh, FASHP, Regional Director,
  Pharmacy
• Marie Golanowski, RN, Vice President and
• Chief Nurse Executive
• Aurora Health Care
• Milwaukee, WI

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Objectives

• Define a role for executives in pharmacy cost
  reduction initiatives
• Provide examples of successful cost reduction
  strategies
• Describe the balance of personnel cost and supply
  expense in pharmacy
• Discuss a model for evaluating pharmacy products
  and services

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Aurora Health Care

• Integrated Health Care System
• Serves Eastern Wisconsin
• Northern Wisconsin Border to Southern Wisconsin
  Border (3 Million lives)
• 5 Geographic Regions
• Emphasis on Community Programs
• Coordination Across Continuum
• Eliminate Geographical Internal Competition
• Maximize Capital Expenditures

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Aurora Health Care is the leading integrated
health care system in Wisconsin, uniquely
qualified to promote health, prevent illness and
provide state-of-the-art diagnosis and treatment
at more than 250 locations in 69 communities.
North Region
Central Region
Kettle Moraine Region
Metro Region
South Region
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Aurora Health Care is an Integrated Health Care
System

• Acute Care Hospitals (13)
• Psychiatric Hospital (1)
• Visiting Nurse Association (Home Care Agency)
• Family Service of Milwaukee, (Social Service
  Agency)
• Aurora Consolidated Laboratories
• Aurora Medical Group
• Aurora Retail Pharmacies
• Aurora Rehabilitative Services
• Aurora Sports Medicine Institutes
• Aurora Womens Pavilion

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Aurora Health Care Overview

• Largest private employer in Wisconsin
• 25,000 Employees
• Not-for-profit with corporate offices in
  Milwaukee
• 14 hospitals, 120 clinics, 130 pharmacies, home
  care, extended care, rehab centers
• 2.6 billion dollars in net services revenue
• 69.7 million in charity care

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Aurora Health Care Service Statistics

• 426,442 Inpatient Days
• Length of Stay (days) 4.34
• 11,058 Births
• 79,533 Surgical Procedures
• 2,408,356 Ambulatory Care Visits
• 228,128 Emergency Care Visits

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Aurora Health Care Service Statistics

• 1,071,387 Hospital Outpatient Visits
• 306,272 Home Care Nursing Visits
• 65,353 Family Service Visits
• 60,990 Hospice Benefit Days
• 404,580 Home-delivered Meals
• 5,552,981 Retail Pharmacy Prescriptions

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Senior Executive Role

• Conveys a clear sense of the organizational
  strategic vision
• Recognizes when its time to shift strategic
  direction
• Challenges status quo thinking and assumptions
• Understands the role and interrelationships of
  each organizational function
• Learn about and understand the business of
  pharmaceuticals
• Understand the meaning and implications of key
  pharmaceutical financial indicators
• Hire a senior pharmacy executive that understands
  both the clinical business side, then give that
  person the latitude to run their areas

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Senior Pharmacy Executive RoleThe Generalist

• Promotes collaboration and removes obstacles to
  team work both departmental and
  interdepartmental
• Negotiates to create the best possible outcome
• Acts as coach and teacher, as appropriate
• Plays a driving leadership role as appropriate
• Seeks and accepts constructive feedback
• Maintains a sense of humor

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Senior Pharmacy Executive RoleThe Generalist

• Relates well to colleagues and peers
• Visible to employees at all levels
• Inspires trust
• Empowers others
• Adapts leadership style to the needs of
  individuals and groups
• Encourages innovation and thoughtful risk taking
• Pursues life long learning
• Effectively prioritizes and manages time
  efficiently
• Effective work and personal life balance

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Senior Pharmacy Executive Financial Abilities

• Recognize profitability potential related to
  pharmaceutical opportunities
• Uses financial analysis to create and evaluate
  business choices
• Manages the departments overall financial
  performance
• Communicates risks and opportunities regarding
  plans, forecasts and budgets
• Assist the financial team to increase their
  knowledge of the pharmaceutical business
• Drug expense/supply chain issues
• Balance of drug expense to manpower
• Technology enhancements to profitability
• Impact of Pharmacy Therapeutics Committee

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System Pharmacy ExecutiveVisionary Thinker

• Contributes to, communicates and manages the
  strategic vision
• Aligns the goals and direction of the department
  and employees with the vision
• Sees problems and understands issues before
  others do
• Challenges status quo thinking
• Comes up with fresh, innovative ideas that create
  value in the organization and marketplace

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Any competent manager can direct men and women
who are already motivated to achieve. A great
leader can do the same for those who are tired,
discouraged and fearful. Alan Axelrod, Elizabeth
I CEO
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Be Careful with Industry Lingo
Atlanta Journal-Constitution, December 12, 2002
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Understanding Pharmacy Opportunities

• Improvements in purchasing (15)
• Contract compliance, contract accuracy, market
  share optimization, 340B, distributor agreements
• Improvements in utilization (55)
• Strength of PT, therapeutic substitution,
  clinical pharmacist involvement, target drug
  programs, pre-printed order sets, education, IV
  to PO, Renal dosage adjustment, clinical
  pharmacist review, rounds

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Understanding Pharmacy Opportunities

• Technology-robots, unit based cabinets (5)
• Distribution-centralized production, batching,
  waste reduction, buy vs. make decisions (10)
• Revenue enhancement-Outpatient vs. Inpatient (15)

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Drug Use Management Savings
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Budget Reductions 101
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Metro Region Hospital Pharmacy Supply to Cost
Ratio

• Total expenses 76,423,000
• Total salary expense 17,933,000 (23)
• Fringe benefit expense 6,479,000 (8)
• Total supply expense 51,282,000 (67)
• Improving the expense base requires action on the
  supply expense

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Executive Role

• Understand the financial landscape of pharmacy
• IP vs. OP
• 340B vs. not-for-profit pricing
• personnel vs. supply
• Inflation vs. utilization
• Tools used by pharmacists

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Executive Role

• Set expectations for pharmacy leaders
• Finance
• Budget, performance monitoring, revenue, cost,
  ROI
• Operations
• Productivity, staffing, talent accumulation
• Drug policy
• PT, substitution policies,
• Make vs. buy
• Injectables, orals, outsourcing decisions

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Executive Role

• Partner with pharmacy leaders and providers,
  especially for physician driven opportunities
• PT committee
• Utilization management
• Preference items
• Clinic vs. inpatient administration

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Executive Role

• Sensitize pharmacy leader to political issues,
  goals, priorities
• When to stand, when to stand down
• Running interference

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Model for Evaluation of Pharmacy Products and
Services

• Products-drugs
• Safety, effectiveness, costIn that order
• Marginally more effective products
• Marginally safer products
• Impact of product detailing/counter detailing
• Products-technology
• Some technology solutions can be supported with
  purely a financial ROI
• For others consider safety, environment,
  regulatory agencies, liability,
• Pharmacy services
• Default is ROI
• Factor in physician relationships
• Must be hard savings
• Require documentation of savings realization

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Waste Reduction-example

• Annual Cath Lab stats
• 9,000 caths, 3,400 PCIs
• Reopro
• Expensive drug used in angioplasty
• Supplied in vials of 10mg
• Dose is typically 1 ½ vials
• Existing practice-RN prep
• Turnaround time, waste, billing, shrinkage
• Proposed practice-Pharmacy prep
• Less waste, FTEs, concern over turnaround time

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Reopro Financials
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System Formulary Management

• Single PT Committee with teeth
• Market share vs. volume
• Outliers cause loss of tiers
• Strength of PT Committee
• Credibility of administration/pharmacists
• Therapeutic substitution

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Therapeutic Substitution

• Generic vs. therapeutic substitution
• Driving market share compliance
• Hospital vs. system
• Nominal pricing
• 340B pricing
• Requires removing access to popular drugs
• Decreases lines in inventory
• Consider physician ties to Drug Companies
• Automate substitution and notification

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Market Share Contract Management

• No two contract structures are alike
• Nominal pricing opportunities
• Tactics vary based on
• Money involved
• Difficulty of switch
• System vs. site contract
• Utilization breadth

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Medication Assistance Program- example

• Drug company sponsored programs
• Paperwork is tedious and complicated
• Tracking and distribution of supplies
• 2.0 FTEs (89,000)
• 385,000 in drug cost savings (avoidance)
• Evaluate inpatient vs. outpatient savings

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Medical Group Purchases-exampleWhos Watching
What the Clinics are Buying?

• Contract vs. Non-contract Items
• Generic vs. Branded
• Contract Optimization
• Rebate Tracking
• Contract Pricing Audits
• More than 1,000,000 in net savings projected for
  1st year

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Reimbursement in the Outpatient Setting

• Pharmacy Finance must partner
• Lowest cost sometimes means a net loss
• Moving target
• Consider in the budgeting process
• Use caution when setting budget goals

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Buy vs. Make Decision

• Pre-mixed vs. frozen vs. vials
• Bar-code packaging
• Pre-filled syringes
• Bulk vs. unit dose

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• QUESTIONS?