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Budgeting, auto-substitution formulary help manage impact of rapidly rising generic drug costs

A perfect storm of critical factors is squeezing skilled nursing providers into an increasingly tight space between rising drug costs and shrinking reimbursement. For years, insurers have encouraged patients to choose generic drugs because they were less expensive than brand-name equivalents. As a result, most prescription drugs currently in use are generics. However, during the past year, the cost of generic drugs has risen at record rates – including the cost of medications that have been on the market for many years.

According to AIS Health:

  • Branded drug price inflation remained in the 10-12% range in 2014.
  • Generic drug prices jumped from a decrease of 4% in 2011 to an increase of 6.8% for 2014.
  • Generic drug inflation peaked in the second quarter of 2014 at 11%.

The trend of rising generic drug prices shows no sign of slowing during 2015. In fact, Evercore ISI forecasts a 7-10% rate of weighted drug inflation for 2015. And a managing director of Evercore ISI's Health Services and Technology Research Team recently stated that generic drug prices could rise at a "faster growth rate than we've seen in the last couple of years."

How higher pharmacy acquisition costs affect pricing
These price increases are hitting Symbria Rx Services – and consequently our client communities – where it hurts, on the bottom line. 

Symbria Rx Services rarely adjusts our pricing formula because we understand how important medication cost management is to our clients. You count on the contracted discount rate we've agreed upon. However, when our costs go up and we deliver medications at the agreed-upon discount, your costs will also rise.

(Symbria Rx Services cost + acquisition cost increase) X Client discount = Higher client cost

What you can do to help manage rising generic drug costs
It is important for your community to consider rising costs when budgeting for the next fiscal year, especially for Medicare Part A business when your community is responsible for residents' medication costs. A realistic budget will help avoid financial challenges as the year goes on and the predicted cost inflation continues. Do not hesitate to contact Director of Pharmacy Jay Mandra for assistance in developing reasonable pharmacy budget projections.

We also recommend the use of formulary prescribing to contain costs. Urge your residents' prescribers to use our Preferred Drug Formulary – especially the auto-substitution option. The auto-substitution formulary assures that your residents receive medications that strike the right balance among cost, dosing, and clinical effectiveness.

When we update the auto-substitution formulary, we list highly inflated generics as non-preferred options, offering alternative generics with more stable pricing in the same classes. For example, in our recent formulary update, we listed Clobetasol Propionate 0.05% cream 45GM, priced currently at an AWP of $384.68, as a non-preferred drug. The recommended alternative is Betamethasone Dipropionate Augmented 0.05% ointment 45GM, priced currently at an AWP of $127.71. Keep in mind that our alternative recommendations take into account not just price, but dosing, frequency, and other factors that have an impact on your costs per patient day.

We are your partner
Our aim is to help our clients manage the rising tide of high-cost medications. Although we are unable to influence drug pricing at the manufacturing and wholesale levels, we can continue to provide your community with formulary tools that will help your prescribers make cost-conscious choices and reporting that will help you identify prescribers whose formulary compliance is less than ideal. Our Admission Planner tool (visit MySymbria and click on the Admission Planner tile) can help you identify admissions with potential for higher-than-average medication costs.

We welcome feedback and suggestion from you on how we can do more. If you have comments or questions, please contact Director of Pharmacy Jay Mandra at This email address is being protected from spambots. You need JavaScript enabled to view it..

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