Healthy Skepticism Library item: 7891

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: Journal Article

Kostek NE.
Use of pharmacy carve-outs as a managed care strategy to recover pharmacy costs and generate revenues in an acute care setting
ASHP Annual Meeting 2001 Jun; 58:

Abstract:

Although prescription drug spending in the United States is a small portion of personal health care dollars, it is one of the fastest growing health care expense components, increasing at double digit rates. National prescription drug spending increased fifteen percent from 1997 to 1998 compared to a five-percent increase for physician services and a three-percent increase for hospital care. Spending for prescription drugs is expected to continue to rise rapidly, reaching $243 billion by 2008. Rising prices, increased utilization and changes in the types of drugs used have all contributed to this spending growth. Fueled by increased advertising by pharmaceutical manufacturers, many of the top selling prescriptions are newer, higher priced brand name drugs. However, payors continue to resist payment for these high cost pharmaceuticals and refuse to acknowledge the increased burden of costs on providers. Instead, they continue to reimburse most health care facilities by either per diem or case rates that do not take into consideration increased use of these expensive agents. In some circumstances, the cost of the drug can be as high as the per diem rate contributing to financial losses for many providers. The use of a pharmacy carve-out strategy during managed care contract negotiations is presented as a proactive approach to recovering costs and maximizing reimbursement for high-cost pharmaceuticals. Properly designed and implemented, this strategy could help hospitals and health-systems to remain financially competitive in a challenging and rapidly changing health care environment. Learning objectives: 1. Discuss the change in spending on prescription drugs during the past decade. 2. Describe the response of managed care to rising pharmaceutical costs. 3. Describe one strategy to increase reimbursement for high-cost pharmaceuticals. Self-assessment questions: True or false: 1. Although spending on prescription drugs has increased rapidly over the past decade, drug costs are expected to remain flat over the next several years. 2. The formation and effective functioning of a multidisciplinary team is critical to the success of a pharmacy carve-out strategy. 3. Managed care organizations have universally accepted the pharmacy carve-out concept during negotiations. Answers: 1. F; 2. T; 3. F.