These nine activities help achieve margin optimization in the pharmacy through cost reduction and revenue enhancement.
Cost Reduction
- Distribution fee reduction: Renegotiate the primary pharmacy wholesaler agreement
- Formulary review and value analysis: Substitute certain drugs with less expensive alternatives (referred to as “therapeutic interchange”)
- 340B pricing optimization: Obtain better drug pricing for hospitals with a disproportionate share of indigent patients
- Inventory management: Automate or streamline the storage, retrieval, packaging, dispensing, and distribution of medications to control inventory and costs, wastage, and medication errors
Revenue Enhancement
- Pharmacy Benefits Management (PBM): Use lower cost drugs to fill prescriptions for employees on the organization’s health insurance plans
- Retail pharmacy payment reconciliation: Ensure that reimbursement matches contract pricing
- Real-time pricing updates: Update the prices charged for drugs as drug costs increase
- Indigent drug recovery: Collect money back from drug companies for certain drugs used on indigent, non-insured patients
- Charge capture: Capture charges through proper unit of measure conversions (primarily outpatient Medicare cases), system interfaces (pharmacy to billing system), high dollar outpatient drugs and blood products (chemo therapy and infusion), and drug dispensing systems (billing interfaces and reconciliation)
Return to the Optimizing Margins Through Non-Labor Cost Reduction article.
Source: Jonathan J. Clark, Senior Partner, TRCLARK, LLC.