Failure-to-supply pharmacy program saves hospitals more than $3.5 million by attacking drug shortage problems

CHARLOTTE, N.C. (December 9, 2010) - The Premier healthcare alliance's new failure-to-supply (FTS) program has helped 1,400-plus alliance members save more than $3.5 million in the past year.

Ongoing drug shortages are becoming increasingly common, with conditions in the past year rising to the worst ever. Many pharmaceutical contracts include FTS clauses to help hospitals capture compensation when drug shortages occur and the provider has to purchase an alternate drug at a higher cost. But the process is complicated, and many providers don't have the resources to find those areas where they are owed compensation.

In December 2009, Premier's PharmacyConnect®, a comprehensive pharmacy support program to enhance clinical and supply chain operations, established an automated way to help alliance hospital members optimize recovery for drug shortage costs.

The program began with a pilot of six IDNs representing 100 alliance members, and has grown to 89 IDNs representing more than 1,400 participating alliance members. With very little member effort, this program is saving hospitals millions of dollars - $3.5 million to date and growing.

"We're seeing more credits from FTS in one quarter than ever before in a year, plus our hospitals aren't spending any time on it now. It's a tremendous return on investment - all handled by Premier. It could not be any easier," said Ray Moore, MBA, CMRP system contract manager, PeaceHealth, Bellevue, Wash.

Using standard automation, Premier captures all sales data from its PharmacySpendTM database and can assess whether an item has been shipped. If an item has not been shipped because it is back-ordered or out of stock, Premier will submit an FTS claim on behalf of the provider for those manufacturers who have the FTS term in their contract. Once signed up, Premier submits claims on a monthly basis and credits are issued quarterly through the pharmacy distributor.

"Before the program, we didn't have sufficient staff resources to pursue this kind of work and thus missed these opportunities. Premier works behind the scenes to collect on our behalf. We didn't fill out any claims or paperwork; we simply joined the program. Between May and this year's end, we will have collected over $9,000 - money that protects our bottom line so that we can focus on providing the best care to our patients," said Steven Hamm, RPh, director of pharmacy at Catawba Valley Medical Center of Hickory, N.C.

Premier has negotiated terms and conditions detailing the FTS remedy for more than 120 Premier pharmacy contracts.

Tom Jacobsen, corporate pharmacy director at Adventist Health in Roseville, Calif., said, "For our 17 owned hospitals and 46 affiliates, this was money left on the table. It was owed to us, but we didn't have an effective way to collect it. Premier has done excellent work here. Individual facilities can't do this alone, but this concerted effort on behalf of the membership is showing great results."

According to MSNBC, "across the United States, life-saving or medically necessary drugs are running low - or running out - endangering care and increasing the odds of medication mistakes for a broad swath of patients."

This is a multifaceted industry-wide problem with many root causes. Not only are healthcare operations impacted financially, challenging the provider's ability to meet their fiscal obligations to their communities, but patient care and safety are also impacted.

"In addition to the failure-to-supply program, Premier is working with professional pharmacy associations and the FDA to address high incidences of drug shortages," said Bryant Mangum, Premier vice president of pharmacy services. "The tide of shortages we've seen in recent months is a critical concern for the Premier alliance that has serious implications for patient care. Unavailability of the prescribed drugs could lead to medication errors and poor patient outcomes, which is Premier's primary concern."

Alliance members use PharmacySpend to learn which drugs and suppliers are experiencing market-wide, or long- or short-term back orders. Premier continuously reviews this data to derive information for its contracting team so that drug product contracts may be sourced to the most reliable producers of various generic products. In addition to making careful decisions on sourcing, Premier publishes back-order status reports to its members weekly and maintains this information through its PharmacyConnect website.

Premier's FTS program is completely free of administrative burden to members and open to all classes of trade. Other such programs require pharmacy staff to reconcile claims and regularly submit paperwork. Premier's FTS fee is nominal as compared to the cost avoided by putting a person in place to manage this process in each facility.

About the Premier healthcare alliance, Malcolm Baldrige National Quality Award recipient
Premier is a performance improvement alliance of more than 2,400 U.S. hospitals and 70,000-plus other healthcare sites using the power of collaboration to lead the transformation to high quality, cost-effective care. Owned by hospitals, health systems and other providers, Premier maintains the nation's most comprehensive repository of clinical, financial and outcomes information and operates a leading healthcare purchasing network. A world leader in helping deliver measurable improvements in care, Premier works with the Centers for Medicare & Medicaid Services and the United Kingdom's National Health Service North West to improve hospital performance. Headquartered in Charlotte, N.C., Premier also has offices in San Diego, Philadelphia and Washington. Stay connected with Premier on Facebook, Twitter and YouTube.