Drug services under scrutiny

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As long-term care facilities continue to grapple with controlling the escalating costs of medications for residents, some are finding that drug formularies provide mixed results.

Many contracts address cost containment, but there is no uniform approach to formulary or preferred drug lists, noted David Jones, director of utilization and outcomes management, NeighborCare, Baltimore.
A formulary is a list of drugs that are therapeutically appropriate but less expensive. Drugs not on the list often are still provided and covered, but at a higher cost to the facility.
More than half the states' Medicaid programs have preferred drug lists affecting how nursing homes are paid for medications and how patients are prescribed. Some nursing homes will work with their consultant pharmacist or pharmacy services provider to develop a formulary that will not only assist the nursing home with complying with the Medicaid drug list but also streamline billing and cost containment.
"The burden often falls to the consultant pharmacist to help the nursing home comply with the formulary," explained Ross Brickley,  director of pharmacy, Neil Medical Group, Kinston, NC.
Although negotiations for contracts between pharmacy service providers and long-term care facilities may not have changed significantly over the last few years, Brickley said he has seen increased interest in educational programming, quality assurance and cost containment services that an LTC pharmacy can provide the nursing home staff.
Accordingly, industry experts have seen both large and small pharmacy companies adjust their services offerings to reflect the additional expectations of LTC facilities. Core services commonly expected in pharmacy services today include dispensing medications (prescription as well as over-the-counter) and any needed IV medications or therapies, administering medical records and monitoring usage through clinical and financial reports affected.

Competitive pressures

The extent, breadth, and scope of such services, and any extras such as educational programming, are what sets pharmacy services providers apart. Most pharmacy industry experts, however, contend there is little wiggle room in the contract negotiations.
"Margins are tight," explained Brickley, "because as much as 70 percent of LTC pharmacy revenue comes from Medicaid, and Medicaid reimbursements continue to be cut."
Most recently, some states have reduced or eliminated reimbursement for dispensing fees, essentially refusing to adequately pay for the pharmacists' services Brickley said.
So nursing homes and pharmacies alike look to improve clinical and financial management of pharmacy services to control costs.
"Pharmacy services cost containment is extremely necessary because reimbursement is not improving, especially in the area of medications," said Howard Staples, administrator of Alamance Health Care Center, Burlington, NC.
Staples said he likes the use of the formulary to control costs because it helps his center get patients on less expensive, but just as effective, medications. At Alamance the pharmacist consultant has been invaluable in the development of the drug formulary, Staples said.
"I'd say their services have paid for themselves in savings," he added.

Challenges to success

While the formulary is a baseline to managing drug utilization and costs, challenges exist.
Many long-term care facilities continue to utilize a per diem rate to control costs, according to NeighborCare's Jones, because they are not taking into consideration drug utilization costs up front.
Although pharmacy companies say they are working hard toward increasing formulary implementation, Jones said, full implementation is impeded to some degree because of the collaborative nature of the pharmacy in the long-term care setting.
"Within a nursing home setting, the consultant pharmacist is limited in terms of taking and recording prescriber orders and having them accepted as legal documents," he said. "Any changes in the order must be counter-signed by a nurse and the physician to be accepted for the LTC patient chart."
The consultant pharmacist is seldom seen as a direct agent of


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