Micro/Macro Strategies for Improving Hospital Formulary Performance

Abstract

The majority of American hospitals utilize a drug formulary to guide the prescribing decisions of physicians who practice within this setting. In order to strengthen formulary performance, six administrative procedures - periodic evaluation, informal screening, explicit drug approval, educational campaigns, informal assessment, and periodic surveys of users—are recommended. Because of certain limitations inherent in these micro inputs, four macro strategies are proposed to support formulary implementation.

Presented at the 25th Annual Pharmacy Congress, St. John's University, Jamaica, NY, April 7, 1983.     

Cost containment through P & T committee drug utilization review

Provoked by changes that are occurring in health care, hospitals are currently formulating and implementing strategies to identify and control costs while maintaining the highest quality of care. Because drug costs account for a significant proportion of the hospital supply budget (5 to 10%), there is an increased need for the P & T Committee to become involved in the cost containment effort. This article will demonstrate how an existing program of drug utilization review (DUR) has reduced drug expenses without sacrificing the quality of care or imposing unnecessary restrictions on formulary items. Furthermore, implementation of the DUR program has not resulted in conflict between pharmacy, medical, nursing or administrative staffs within the institution.     

Medicaid formularies: a critical review of the literature.

Studies on the impact of restricted Medicaid formularies were reviewed to assess whether other drugs on the formulary were substituted for restricted drugs, the cost of the substitutes, whether the substitutes were therapeutically appropriate, whether restricted drugs continued to be prescribed, what incremental administrative costs accompanied restrictions, what indirect costs occurred and how the cost-effectiveness of pharmaceuticals impinged on the total cost of illness. The assumption that restriction of specific drugs results in savings in the drug costs proportional to prior usage was shown to be questionable, numerous studies found alternate formulary drugs to the restricted drugs being prescribed, or patients were paying out-of-pocket for denied drugs. There was a tendency for alternate drugs to be more expensive. Little information exists as to the incremental administrative costs of restricted formularies or the therapeutic appropriateness of substituted drugs. One study suggests that major shifts in costs occur due to restrictive formularies through substitution of more expensive services such as hospitalization in lieu of pharmaceuticals. It is concluded that restricting formularies leads to dynamic changes in the total Medicaid program of a complex and often costly nature. Plans to implement formulary restrictions require considerable careful thought.     

Savings achieved through use of a less concentrated amino acid solution.

The administrative process of adding a 5.5% crystalline amino acid solution to the formulary of two affiliated hospitals and the results of the addition are discussed. A formulary change was sought after it was found that many patients on parenteral nutrient therapy were receiving more amino acids than they needed. Nearly all patients on parenteral nutrient therapy were receiving 8.5% crystalline amino acid solution. The approach to achieving the pharmacy and therapeutics committee's approval of the formulary change included documenting amino acid needs from the literature, securing a multidisciplinary base of support and providing economic impact information. A standard TPN order form for physicians, education through the pharmacy newsletter, and presentations at surgery and medical conferences and grand rounds were implemented to assure that the change was effective. During the 12 months following approval of the formulary addition, 66% of the more than 20,000 total parenteral nutrient solutions were prepared using 5.5% amino acid solutions. This resulted in an annual savings of $41,028     

The use of pharmacoeconomic data in formulary selection

Pharmacists are encouraged to improve their knowledge and use of pharmacoeconomic data in formulary selection. The formulary selection process has changed significantly in recent years. Among its most significant uses is its potential for cost containment strategies. An overview is presented of the origin as well as the potential impact of pharmacoeconomic data. The need to balance the economic benefit with the clinical advantages for any proposed new drug for formulary inclusion remains the most critical decision to be made by pharmacists.     

Justifying additional pharmacist staff in an era of cost reductions

A proposal is described that justified adding one full-time equivalent (FTE) pharmacist in a 125-bed community hospital that already employed in its pharmacy department 2.5 FTE pharmacists and 5.2 FTE other personnel. The administrative steps taken included identifying the need for an additional staff member and documenting the cost effectiveness of various clinical activities. Literature references were used to justify the proposed ratio of pharmacists to technicians; to show the results of deficiencies in supervision, motivation, and scheduling; and to demonstrate the cost effectiveness of serum concentration monitoring, formulary review, and patient discharge-medication consultations. Results of formulary review, drug-use audits, dosing guidelines, and serum concentration monitoring performed by the pharmacy department were included in the proposal. Prospective drug-use reviews, computerized pharmacokinetic dose determinations, additional educational programs, and tighter purchasing policies were identified as other cost-saving activities that could be performed with an additional pharmacist. A 12-page proposal was submitted in July 1983 to the hospital administrator and the budget review committee, and the additional staff position was approved. The key to maintaining the new pharmacist position will be the continual documentation of cost-saving activities within the department.     

Antibiotic cost-containment

A multidisciplinary, professional, and administrative approach to selecting therapeutic agents for formulary inclusion--as it is practiced at the Tuskegee Veterans Administration Medical Center--is described. The process by which members of a Drug Utilization Review Subcommittee evaluate drugs is explained in detail. Numerous factors, such as patient population characteristics, total therapy costs, adverse reactions, indications, dosage, and efficacy are considered. Findings, decisions, and economic cost-savings, specifically with respect to antibiotics, are revealed.     

Rationalising the pharmacist's role

Pharmacists need a formulary, and health service patients in Britain should pay proportionately for their medicines     

Institutional formularies: the relevance of pharmacoeconomic analysis to formulary decisions

Formularies, in one form or another, have been in existence for nearly 100 years. Beginning simply as a list of available agents, the formulary has evolved into a complex system which acts as a guide to prescribing practices. As the importance of the formulary has increased, so has the need for formulary managers to make an appropriate decision about each drug's formulary status. Several systematic approaches to drug evaluations have been developed to aid in the decision process. However, while some reviews of drug utilisation contain fairly rigorous analyses of their clinical efficacy, very few include an economic evaluation that goes beyond the cost of drug acquisition, preparation, distribution and administration. This is surprising, since formulary managers rank economic data second only to clinical data when making formulary decisions. In the past this apparent oversight has been due, in part, to the absence of a sophisticated model which can both approximate a drug's true economic impact and express cost and quality in similar terms. The explosion of new and very expensive biotechnology drugs into the market has the potential to improve patient care significantly. Such drugs also have the potential to increase institutional pharmacy budgets significantly; with some analysts predicting a spending of $US60 million yearly for these drugs by the year 2000, critical evaluation will be mandatory. Fortunately, advances in the relatively new science of pharmacoeconomics have made it possible to conduct appropriate estimates of the true economic impact of new drug therapies. Pharmacoeconomic studies can be very useful in evaluating drugs for formulary inclusion and in assessing the effects of formulary changes on institutional budgets. Cost-effectiveness and cost-benefit analyses, utilising decision analysis models and/or data gathered from clinical studies, are used most frequently. Relatively simple models can be used to evaluate drugs within the same class if sufficient published data on their clinical efficacy and safety are available. More complex analyses are necessary when comparing dissimilar agents or when comparing agents with non-drug therapy. Pharmacoeconomic studies have frequently been used to demonstrate that very substantial direct costs of drug therapy are often offset by equal or greater reductions in other institutional direct and indirect patient care costs. Pharmacoeconomic studies have also been used to calculate the relative cost-effectiveness of drug therapies for different disease states, although such evaluations are more useful to governmental and regulatory agencies than to individual institutions.(ABSTRACT TRUNCATED AT 400 WORDS)     

Pharmacoeconomics and formulary decision making

Pharmacoeconomic assessment of formulary actions has become increasingly common in local, national, and international formulary decision making. Tactics for managing medication use include formulary management and drug policies. Pharmacoeconomic data can provide support for these formulary decisions. For example, pharmacoeconomic data can support the inclusion or exclusion of a drug on or from the formulary and support practice guidelines that promote the most cost-effective or appropriate utilisation of pharmaceutical products. Various strategies can be used to incorporate pharmacoeconomics into formulary decision making. These include using published pharmacoeconomic studies and economic modelling techniques, and conducting local pharmacoeconomic research. Criteria for evaluating the pharmacoeconomic literature, suggestions for employing economic models, and suggested guidelines for conducting pharmacoeconomic projects are discussed. Although most formularies are viewed as cost-containment tools, formularies should not be a list of the 'cheapest' alternatives. Today's formulary should contain agents that optimise therapeutic outcomes while controlling cost. Pharmacoeconomic assessments of formulary decisions help to ensure that the agents promoted by our formularies yield the highest outcome per dollar spent. A discussion of the process for formulary action in a US hospital, the influence of pharmacoeconomics on US formularies, and strategies for incorporating pharmacoeconomics into formulary decision making are presented in this paper.     

National drug formularies: lessons from Latin America

Although pharmaceuticals comprise up to 40% of the health care budget in developing countries, the majority of the population does not have access to many of the essential drugs needed to treat prevalent diseases. This situation demands the development of a national formulary of essential drugs for the public sector. The approach used in developing countries is to select drugs of choice for the treatment of prevalent morbidities and avoid therapeutic duplication, unacceptably dangerous drugs, or drugs of unproven efficacy. Drugs are selected based on a review of the prevalent morbidities, health care worker training, patient characteristics, and efficacy/risk information resulting from scientifically sound studies. An added component to the formulary is the inclusion of concise, unbiased prescribing information for each drug selected. A number of product selection guidelines were proven to be effective in establishing and maintaining an essential drug formulary for developing countries. These guidelines include: 1. Selection of drugs with proven efficacy and acceptable risk; 2. Selection of minimum number of drugs needed to treat the prevalent diseases; 3. Inclusion of new products only if they are found to have distinct advantages over products currently in use; 4. Inclusion of combination products only when they provide true benefit over single ingredients; 5. Selection of drugs with clear "drug of choice" indications for prevalent diseases; 6. Evaluation of the administrative and cost impact of products; and 7. Selection of drugs with established high quality.     

Superior hospital formularies: a critical analysis

The drug monograph section of eight superior hospital formularies was examined to (1) determine the type of pharmaceuticals, including dosage forms, listed, (2) delineate patterns of concurrence and divergence in drug acceptance, and (3) ascertain quantitative benchmarks by therapeutic category that may suggest optimum formulary size. The survey also undertook a comparative analysis of marginal drugs and reviewed the role of pharmacy personnel in supporting formulary administration. The critique of pharmaceutical preparations revealed significant patterns of similarity, heterogeneity, perplexity, and redundancy. The investigation also documented problems in dosage form selection and formulary publication. The report concludes that there is a need for more comprehensive studies that incorporate alternative quality assurance methods and focus on the more intangible factors of professional leadership and integrity.     

Improving patient care and pharmacy management: the effect of hospital formularies

A study of the organizational features and implementation procedures associated with formulary use in major acute-care hospitals throughout Australia was undertaken. Data were collected via a questionnaire mailed to 57 directors of pharmacy. An 86-percent response was obtained. A high proportion of formularies was found to rate poorly in terms of organizational features (e.g., content, compilation methods, format) and process variables (e.g., effectiveness as a communication document, prescribing aid, or management tool). Methods of improving formulary effectiveness are outlined in the context of practical and normative research, including improving the quality of drug therapy, use of formularies in cost control, and improving user acceptance. The results confirm previous research showing that methods of improving organizational features and implementation procedures associated with formulary compilation and use are neither widely applied nor widely known. There is an urgent need to reassess the usefulness of formularies and improve their effectiveness by adopting recommendations resulting from past research.     

The use of first- and second-line outpatient antibiotics under the Saskatchewan Drug Plan

The Saskatchewan Drug Plan proposed de-listing several second-line antibiotics from its formulary for reasons of potential overuse and expense. This study evaluated the use of second-line antibiotics as initial and secondary courses of therapy depending on the patient's prior use of other antibiotics and other factors. A total of 637,607 courses of therapy dispensed to Plan members for selected antibiotics between July 1989 and June 1990 were evaluated. Second-line antibiotics were used in 5.0% of all initial courses of therapy. This use was correlated with patient characteristics that may warrant use of second-line antibiotics as initial therapy: age, rural residence, the use of bronchodilators or inhaled steroids, and the number of prior courses of antibiotic therapy. The potential savings from de-listing second-line antibiotics from the formulary are limited because of their use in only 5% of all initial courses of therapy. Savings would be further reduced by administrative costs and physician time required to process prior authorisation requests, and the costs of treating any additional antibiotic treatment failures that may result from reduced access.     

Local formularies

The widespread availability of authoritative guidance on prescribing from a wide variety of international and national bodies calls into question the need for additional local formulary advice. This article describes contemporary local formulary management in the United Kingdom and discusses the areas where local decision making remains valuable. Local formularies can fulfil important roles which justify their continued existence, including ensuring local ownership and acceptance of advice, rapid dissemination of information, responsiveness to local circumstances and service design, sensitivity to local pricing arrangements and close professional links with commissioners, pharmacists and prescribers.     

Potentially inappropriate prescribing in Canada relative to the US

OBJECTIVE: To explore the prescribing of potentially inappropriate drug therapy in Ontario, Canada where there is a restrictive drug formulary relative to the US where there is no single drug formulary. METHODS: A retrospective, cohort study using an administrative database (Ontario, Canada) compared with published survey results (US). All 1,088,680 community-dwelling adults >or=66 years of age in Ontario, Canada compared with published survey results from 2455 community-dwelling older adults in the US in 1996.Patterns of potentially inappropriate drug prescribing were compared between countries using a list of 33 potentially inappropriate drug therapies. These therapies were classified by an expert panel into three categories: (i) those to always avoid; (ii) those which are rarely appropriate; and (iii) those with only some indications to prescribe. RESULTS: Among the 33 potentially inappropriate drug therapies, 15 (45%) prescribed in the US were not available through Ontario's drug formulary. Potentially inappropriate drug therapies available through the Ontario Drug Benefit Plan (ODB) and also in the US were frequently prescribed in both Ontario and the US. Differences in prescribing patterns of individual drug therapies were noted between the two countries. Specifically, in the rarely appropriate category, diazepam, a long half-life benzodiazepine, was much more frequently dispensed in Ontario than in the US (3.18% vs 1.37%). In contrast, dextropropoxyphene, an opioid with a poor adverse event profile was more frequently prescribed in the US than in Ontario (6.21% vs 0.74%). CONCLUSION: Almost half of the potentially inappropriate drug therapies that are available in the US are unavailable from Ontario's drug formulary. Potentially inappropriate drug therapies that were available through the ODB were frequently prescribed in both countries. Alternative approaches that make information immediately accessible to physicians at the time they make prescribing decisions should be considered to improve prescribing practices.     

Perspectives on the hospital formulary

The hospital formulary system will become increasingly important in future years with the transition to target-rate third party reimbursement. This paper provides an overview of the hospital formulary and its management. A brief history of the formulary system is provided along with some key definitions. The potential benefits and actual effectiveness of a formulary system are described. Various potential problems in managing a hospital formulary are identified along with recommendations to minimize their occurrence.     

Results of our national survey. Current formulary decision-making strategies and new factors influencing the process

Formulary recently conducted a survey of 2,000 of its readers to uncover what forces are at play in their formulary decision-making processes. Topics included general philosophies toward formulary decision making, philosophies toward adding and deleting products, influences on the process, trends related to product reviews, formulary management strategies, drug information educational strategies, and new approaches to the formulary decision-making process. Some 295 surveys (14.75%) were returned. Highlights and analyses of the survey findings are presented for your review and comparison with your practice setting's approaches.     

Therapeutic decision-making: a model for formulary evaluation

A systematic approach of evaluating medications for a hospital formulary is discussed. The hospital formulary is a program of objective evaluation, selection, and use of medicinal agents in the hospital. In light of the ever-increasing numbers of new and/or improved therapeutic agents, formulary decisions must be made with an eye to the future. Therefore, it appears that the best means of choosing a medication for formulary addition, both clinically and economically, is to choose an agent based on its clinical indication(s). Examples of such indications are presented. Selecting formulary agents by indication rather than by simple drug cost or pharmacologic class should ensure the most effective utilization of therapeutic agents and hopefully a diminution of overall costs.