Healthcare Providers Can Save on Drug Costs with Expert Drug Formulary Management
If you're running a healthcare organization, your formulary is key to achieving significant savings, but creating a high-performing drug formulary is a complicated balancing act that requires deep industry expertise and input from pharmacy, clinical, and operational experts.
This article outlines how the right approach to formulary management can help providers of any size offset rising costs while supporting clinical care and patient satisfaction.
How Drug Formularies Differ
Formularies are essentially a product selection tool that outlines which drugs should be dispensed. Items listed are often organized by drug class, therapeutic class, and are placed in different tiers. How drugs end up in different tiers is something that is determined by the designer of the formulary.
Tiers in Drug Formularies
Items in lower tiers, ie. tier 1 vs. tier 4, are considered preferred drugs that often have the lowest out-of-pocket costs for patients. The higher tiers are where the most expensive, non-preferred drugs exist, often specialty drugs or brand-names where a lower-cost generic is available.
The balance between clinical preference and cost is established in the middle tiers of a formulary and can significantly impact a provider's net costs.
An experienced formulary designer can balance a number of considerations in this area. Brand-name drugs are often eligible for drug manufacturer rebates, or 340b rebates for eligible entities. In doing so, their cost to providers is offset and manufacturers can place these drugs in a more favorable position in a formulary and gain more market exposure.
Sourcing Your Drug Formulary and Formulary Management
Drug formularies are available from a variety of sources that balance different priorities. Many providers opt for a standard, off-the-shelf formulary. Others choose to take a more managed approach to their formulary, requiring more expertise and ongoing management to keep up with developments in pharmaceuticals and clinical care.
A managed formulary will help providers achieve better outcomes when regularly reviewed. This includes routine analyses by knowledgeable experts of acquisition costs and the efficacy of listed items. Automation is becoming an increasingly effective way to complement drug utilization reviews, allowing decision-makers to identify ways to limit waste, find replacements for costly items, or identify new ways to save.
A more active approach to formulary management can yield significant cost savings while supporting patient satisfaction.
Formulary management requires the input of experts in pharmaceuticals, clinical practices, and healthcare operations who are familiar with your organization's clinical and strategic priorities. In an industry facing historic workforce issues, finding this talent can be a challenge. Outsourcing formulary management and reviews is an increasingly attractive and cost-effective proposition.
While a more restrictive formulary is often associated with maximized cost savings, it is also more likely to negatively impact patient satisfaction and clinical outcomes as clinicians encounter friction in prescribing requirements.
Your Drug Formulary and 340B Rebates
As mentioned above, a drug's placement in the formulary impacts its likelihood of being prescribed and purchased and therefore its market presence. Manufacturers regularly work with pharmacy benefit managers (PBMs) to have new drugs placed in more preferable positions in return for rebates to offset the high cost of drugs that are new to the market.
By working directly with manufacturers, 340b eligible entities can leverage their formulary to receive substantial rebates, effectively creating an additional source of revenue.
In today's healthcare industry, every percentage point of savings is vital to combat rising costs across almost every element of your operations, from supplies to staff. Experts in formulary review and design can help 340b eligible healthcare providers achieve savings of over 15% on their drug costs.
How Adjudication Supports the Performance of Drug Formularies
Submitting drug rebate claims is no simple task.
Almost every manufacturer requires rebate claims to be submitted in a particular format. Specific information is required to complete rebate requirements and submitting entities must ensure they aren't conflicting with existing GPO and 340b agreements or submitting duplicate claims.
Tech-enabled adjudication of claims is a powerful tool for healthcare providers, ensuring completeness and compliance of claims before they are submitted. Some solutions, like ThirdwaveRx, can automate this process and track claims through their entire lifecycle.
Adjudication can also enforce your drug formulary's rules and terms. By providing an adjudication system, pharmacies and providers can ensure only correct items are prescribed and dispensed. In this process, off-formulary items or contract violations create real-time alerts that allow the right people to correct the error.
Real-time monitoring helps save time and money by eliminating the need for staff to chase corrections and credits when errors have occurred.
Tech-enabled adjudication with built-in automation is the best way to ensure your managed formulary is being adhered to across every touchpoint. The larger the provider, the more important this element becomes in their overall operations, performance, and potential savings.
Contact Experts in Formulary Management
At Thirdwave, formulary management is built into our unrivaled rebate solution. While working with our clients, we tailor our formulary to their clinical and operational needs, helping providers achieve their lowest net drug cost.
Our solution utilizes a proven combination of advanced technology and pharmacy expertise to create a revenue source through drug manufacturer rebates.
If you're a 340b entity, learn how we can help you save substantially more on your drug costs.
Thirdwave RX is a rebate administration solution that helps healthcare providers achieve their lowest net drug cost. Our team of healthcare, pharmacy, and financial professionals solve critical challenges in the healthcare ecosystem. With a proprietary technology stack and proven automation, Thirdwave offers the most innovative rebate product and services on the market.
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