Strategies to Cut Medication Costs

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Buying larger quantities of drugs and decreasing drug waste are among the options that can help practices adjust to the rising price of pharmaceuticals.
Buying larger quantities of drugs and decreasing drug waste are among the options that can help practices adjust to the rising price of pharmaceuticals.

A recent survey from the Medical Group Management Association (MGMA) found that physicians' drug costs are on the rise. Over the past 5 years, medication costs jumped approximately 53% per physician in multi-specialty practices. The uptick varies greatly by practice type, with pediatrics and family medicine experience big increases because of the large number of immunizations given. Urologists and rheumatologists have also experienced large increases caused by the increased use of expensive cancer therapies and immunosuppressants.

“In many cases, the total cost of medications has doubled,” said David Gans, Senior Fellow of Industry Affairs at MGMA. “There are new drugs with high costs and existing drugs with cost increases.”

There are few areas in a practice where costs rise that steeply year over year. While doctors do not have much control over what pharmaceutical companies charge for medications, a practice can work to reduce drug waste, negotiate lower prices and use inventory more wisely.

Purchasing power

As with any kind of stock, purchasing in larger quantities can sometimes allow an organization to negotiate better prices. Small providers, however, may not have a need for, or space to store, large amounts of medication, so they might consider looking to local hospitals or other organizations to take advantage of group purchasing.

Practices may also be able to work with drug companies to buy medication at a discount. This approach could be successful if a practice has a big market share or is the only provider of a particular service in a region.

If increasing quantity or joining a group is not an option, it may be to a practice's advantage to scale back on medication that is stored and prescribed in an office. Because of the cost of storage and waste, some providers have moved to prescribing medications but not administering them, Gans said. His primary care provider, for instance, told him he needed the newest preventive shingles vaccine, but did not administer it in his office. Instead, he wrote Gans a prescription to get the shot at his pharmacy.

“The cost of acquiring and storing medications, especially when a lot have short shelf lives, is high,” Gans said. “So some practices are just stocking the most common immunizations and sending patients to the pharmacy to get others.”

Another tip Gans offers to reduce costs is ordering medications to administer as patients need them instead of keeping and storing them for future, expected usage.

Engaging staff

In most medical practices, physicians do not personally manage medications. Physicians have to rely on their staff for this task. Both administrative (purchasing and payments) and nursing staff (tracking and managing inventory) can help lower costs in this space.

Don McAnelly, CPA, ABV, a principal at Rehmann Healthcare Management Advisors in Saginaw, Michigan, said it is wise for providers to ensure that staff members understand the significance of medication costs to the practice. “Through appropriate training it must be impressed on staff the need to help control and protect the practice's assets, and medications are one of those,” McAnelly said.

Some offices, he said, create an incentive structure as motivation to help control costs. This could be done by rewarding staff with a percentage of the medication costs saved each month or quarter. Another option is offering extra paid time off tied to reduced medication spending.

If a practice offers incentives for controlling medication costs, it is important for physicians to work with them to ensure they know how to purchase, manage, and track medications efficiently and effectively. They should be trained on proper inventory counting procedures, which should be performed frequently and regularly. Counting inventory can help prevent theft and medication misuse, retain appropriate product levels, and ensure drugs are replenished in a timely manner. For reducing waste, it is crucial to having a good understanding of storage protocols for drugs that require refrigeration.

Prior to administering any mediation, the administrative team should be obtaining prior authorization for payment. This ensures providers will not be left trying to track patients down for payment at a later time, or stuck with nonpayment.  

Employing technology

For physicians who prescribe a lot of medication, an inventory monitoring system may be a good option, Gans said. This can help guarantee that billing and inventory are well managed and avoid having too much stock on hand, which can lead to spoilage.

Many programs can track medications from the time they are purchased until payment is received. Some can be connected with a point-of-sale device, thereby allowing providers to scan medications using barcodes instead of manually entering and tracking stock.

Cost consciousness

There is not much providers can do about reducing the costs of certain therapeutics, but sometimes a number of treatments are available for a condition. In these cases, Gans recommends considering alternative, lower-cost medications such as generics if they provide patients with the same benefits.

“Many of the infusions are generics which will be much less costly than one that is still on patent,” he said. “The important thing is using what works well for the patient.”

Patients have co-pays with many medications, so opting for less costly alternatives may save patients money and enable them to receive a full course of therapy, Gans added. “People defer care all of the time because of cost,” he said.

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