Management of Drug Costs

Management of Drug Costs

Because it is difficult to influence the time when patients are referred to hospice, the duration of time in hospice care, or the inherently higher costs when patients are first enrolled into hospice, the management of drug costs has taken a high priority in providing cost-effective hospice care. Table 6-2 illustrates historical reimbursement rates and how drug costs have proportionately consumed a larger portion of the Medicare reimbursement received by hospice programs since the inception of the Medicare Hospice Benefit.

Most hospices pay for prescriptions obtained from retail pharmacies based on the AWP of a drug. The AWP is determined by pharmaceutical manufacturers and is published as RED BOOK products²⁷ or by First Databank.²⁸ Although widely used, the AWP is often criticized as an inflated, artificial index, with drug markups as high as 1,000% over true acquisition costs.²⁹ In 2001, drug costs consumed 13.4% of hospice reimbursement, and, presumably, this percentage has increased since that year given the disparity in the rise of drug costs compared to hospice reimbursements.³⁰ Controlling drug costs, therefore, is a critical component of fiscal management for hospice programs.

Well-trained clinical pharmacists can affect the fiscal margins of hospice programs by discouraging inappropriate use of medications, establishing evidence-based formularies, promulgating prior authorization policies for specific targeted drugs, establishing policies for adhering to the use of generic drugs, and managing the quantities of medications to be dispensed. In addition to managing drug expenditures, pharmacists provide drug information both to patients and providers, and work integrally with other members of the hospice health care team to improve the safe and effective use of medications.

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