MedCity Influencers

Don’t Let Inflation Bloat Your Drug Spending

Smart but easy tech upgrades can boost margins.

Inflation has made drug prices as eye popping as grocery prices and has hurt hospitals as much as households. In both cases, smarter shopping can ease the pain.

From 2022 to 2023, drug prices surged by an alarming 15.2%, on average, on top of an 11.2% increase the previous year, significantly outpacing inflation. The past year’s spike alone translates to an average increase of $590 per drug, exacerbating financial strains on hospitals nationwide.

The repercussions have been particularly dire for rural hospitals, where over 600 facilities, or 3 in 10, were at risk of closure in 2023 due to financial instability. In a recent survey conducted by Bluesight, 71% of respondents stated that streamlining pharmacy purchasing and procurement was an essential priority for them in 2024.  

Where’s the opportunity?

Although drug purchasing is a cost center for hospital systems, there’s abundant opportunity for financial relief. Hospitals must evaluate 40,000 to 60,000 NDC prices daily, given nearly 2,500 preferred NDCs and eight NDC options per therapeutic group.

That’s a vast supply chain that most hospitals have been managing with low-tech tools like Excel. Many also rely on traditional, siloed GPO tools, wholesale portals, and TPA software. Such data fragmentation hampers data-driven decision-making, fostering gaps, deficiencies, and waste (despite earnest efforts).

These approaches also focus more on compliance than performance, missing potential improvements in fiscal optimization and sustainability. Even hospitals using newer analytics focus mostly on inventory tracking and supplier consolidation.

presented by

Cost-reduction reality

Supply chain teams need blended prices, real-time information, and clear visibility into potential savings to improve decision-making. 

This combination requires collecting, analyzing, and tracking real-time pricing data. Hospital executives understand this need, with more than half saying data-driven improvements in supply chain management can improve margins by at least 1% to 3%, according to a Sage Growth Partners Survey. The challenge, however, has been creating the right solution.

Fortunately, some hospital systems are turning the corner, bringing advanced purpose-built technology to the problem. Their innovations flag potential cost savings and elevate the highest-potential opportunities to the top of an integrated dashboard. Increasingly, these solutions provide transparency around all available drug options to ensure the hospital system gets the best prices and is fully stocked with the drugs it needs. From 2023 to 2024, there was a significant increase in the adoption of new software technologies to help combat purchasing problems, with 25% of respondents turning away from their wholesaler tools compared to 8% the previous year.  

Millions of dollars recouped

We looked at 140 hospitals using state-of-the-art technology and workflows developed by pharmacists. These leaders saved $27 million in 2023 through purchasing optimization based on real-time data-driven recommendations for better purchasing options. The recommendations considered preferred NDCs, GPO compliance, availability, and WAC, GPO, and 340B ratios.

For the pharmacy professional, a useful real-time purchasing optimization dashboard focuses on three simple workflows that are available in existing purchasing optimization solutions:

  • A direct savings workflow that flags overcharges and recommends lower-priced options for identical products and hard-dollar ROI. 
  • A cost avoidance workflow that flags 340B insights, contract management opportunities, and impending price increases, preventing overcharges before they happen.
  • An oversight workflow that monitors spending, shortages, and GPO compliance.

These three workflows provide a more detailed approach to fine-tuning a health system’s purchasing strategy by allowing a buyer to dive deeper into a recommended change with a simple click. Previously, hospitals relied on GPO or wholesaler tools to make purchasing decisions, but those tools provided a narrow view with limited data.

Now, any hospital system, no matter how complex, can realistically have a bird’s-eye perspective of these workflows, viewing similar sites in “groups” and facilitating standardized buying practices where applicable.

Developing such a system doesn’t have to be a major IT undertaking. It’s more about gathering primary data: a wholesaler account list, a 12-month inventory history, 340B covered entity status, and GPO’s preferred NDC list. Standard templates help pharmacy departments connect to major wholesalers. 

Relief is in reach

Healthcare notoriously lags in technology adoption, and for too long supply-chain teams (not to mention hospitals, their employees, and patients) have shouldered the burden. The data for optimization is readily available, as are the analytical technologies, and there is an enormous target: spending. 

Inflation hurts, but smarter shopping can ease the pain for households and hospitals.

Photo: sinemaslow, Getty Images

AJ Rivosecchi is a senior product manager at Bluesight, the medication intelligence company.

This post appears through the MedCity Influencers program. Anyone can publish their perspective on business and innovation in healthcare on MedCity News through MedCity Influencers. Click here to find out how.