Costs of Pharmacy Care

In recent times, employers, particularly larger firms, have become more sophisticated in their understanding of health care delivery and more active in addressing issues related to employee benefits. Some employers have initiated efforts to promote computerized physician order entry (CPOE) and to reduce medication errors in addition to the traditional aims of decreasing their costs of pharmaceutical coverage.

As is true in hospitals as well, competing quality and financial considerations cause decision-making at the point of patient-care delivery to become increasingly complicated and difficult for health care practitioners. This article presents some examples of the contemporary issues related to these concerns and various health benefit initiatives.
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Stafford and Radley presented retrospective research from a medical group on the potential cost savings associated with the practice of pill-splitting by patients. Using this technique, patients obtain a higher-strength tablet or a similar dosage form (e.g., 100 mg) and then cut or split the tablet into two (50 mg each), thereby saving on the cost of the medication. Although pill-splitting has been of periodic interest to pharmacy benefit managers (PBMs) and physicians, serious questions remain about the true value of such a practice, which has been questioned by numerous professional groups. Furthermore, readers of such research need to fully understand the perspective and motivation behind some of these cost-savings initiatives as well as the significant limitations that are commonly associated with them. For example, physician group risk-sharing agreements can benefit from such shared drug cost savings with the health plan—or a hospital, similarly, might be able to lower its cost of drug components within a fixed reimbursement payment methodology, thereby improving its financial status.

Health plans, physician groups, and other managed care organizations (MCOs) are finding it increasingly difficult to control the rate of cost increases in health care. It is this ongoing trend of double-digit rate increases that has captured the attention (as well as the ire) of employers, who ultimately pay the cost of care through increases in health plan premiums. As a result, health plans and PBMs lack adequate responsibility for managing trends of rising costs. Furthermore, shifting the blame for cost-management deficiencies at the time of benefit reviews or renewals is common among health plans.

Recent financial pressures and the worsening economic conditions in the U.S. have again renewed many attempts to provide cost savings in budgets. Unfortunately, it is all too common to find a pennywise focus on pharmaceuticals without regard for the larger-budget categories and the impact on the cost-of-care “product” provided by health care organizations such as hospitals.


During the past few years, the marketing of older drugs under new names and indications had been sporadic, but it has now become more common. Examples include Sarafem™ (fluoxetine, Eli Lilly), a medication used to treat body wasting; this is a drug whose original use was as a pediatric growth hormone for preadolescents of short stature.

Wellbutrin® (bupropion, GlaxoSmithKline) has been renamed, for use in smoking cessation, (bupropion canadian, GlaxoSmithKline) and has also had line extensions (consisting of alterations in strength, bottle content size, or packaging) for its more traditional psychiatric indications related to depression.

The cardiovascular indications  AFTM (Berlex) have been expanded to include atrial fibrillation; some experts might also consider this to be a line extension. In some cases, these approved drugs also have off-label uses, defined as those that are not in the Food and Drug Administration’s (FDA’s) product description.

All of these examples illustrate the goal of drug manufacturers to expand the use of accepted agents as they seek to maximize their return on investment (ROI) of key brands. This comes at a time when many pharmaceutical firms are facing a limited drug pipeline and must seek to bolster existing brands. Often the new indications are well known and published in the medical literature, and their use thus occurs without promotion by the company. The prohibitive cost of research required for filing with the FDA to receive additional indications has typically minimized the frequency of these types of marketing approaches that may significantly increase product utilization for previously off-label indications. Now, from the perspective of the pharmaceutical industry’s ROI, the incremental sales increases for flat-growth products are more attractive. For pharmaceutical firms, this results in incremental costs that might have been unplanned or unexpected in the budget beyond historical expectations.

Line extensions are also used to increase marketing efforts to maximize a brand’s ROI. Although line extensions are common for changes in dosage strengths or in traditional pill, capsule, or liquid dosage forms, the expanded range of possible dosage forms has fueled the proliferation of brands. For example, the introduction of Prozac® Weekly™ (fluoxetine, Eli Lilly, Dista) changed the paradigm of widespread chronic oral dosing for psychiatric disorders that had previously been possible only through injectable “depo” formulations. A more traditional example of extended-release formulations in the popular and growing cholesterol-lowering category is Lescol® XL (fluvastatin sodium, Novartis, Reliant).
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Other line extensions of dosage forms have included rapid-dissolve technology for oral migraine and antacid medications and skin-patch technology for the delivery of hormone products for contraception or menopause.

Category: Drug

Tags: Drugs, employee plan, managed care pharmacy, pharmacy manager

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