In today’s economy it is critical to optimize pharmacy cost savings, and ensuring that the lowest price is being paid for quality generic drugs can save facilities considerable funds. However, the dynamic generic drug market can be confusing and frustrating, with pharmacy margins on generic prescriptions sometimes negative after dispensing costs are factored in and compared with third-party reimbursement. In addition, the myriad manufacturers and offerings make it difficult to ascertain if pharmacy is receiving the best possible price. 

To obtain the lowest pricing on generic drugs, it is prudent for pharmacy leaders to review all the options and accurately compare the costs of wholesaler purchasing programs versus the value of GPO pricing. Differences in programs make it vital for hospital pharmacies to evaluate their facilities’ needs, thoroughly research available options, and choose the most cost-effective service that provides the highest quality products.

Marshfield Clinic is a multispecialty physician group practice whose outpatient pharmacy division offers prescription fulfillment services at 18 locations, filling one million prescriptions annually with an 80% generic fill rate. The division of pharmacy is also responsible for procurement of all medications that are used in our physician offices, infusion centers, and ambulatory surgery centers. In total, Marshfield Clinic has an annual pharmaceutical expenditure of just over $130 million dollars. Our large percentage of generic purchases necessitate that we thoroughly research generic purchasing options and identify the program that provides the best value for the best price. 

Evaluating Contract Portfolios
In order to determine which generic program best suits an organization’s needs, a thorough analysis of generic purchasing must be completed. If the generic spend is primarily outpatient-focused (generic oral solids), a wholesaler program may provide the best value. On the other hand, GPO-based programs often outperform wholesaler programs in their depth and breadth of coverage for traditional hospital products, such as generic injectables. When reviewing generic contract offerings, consider your facility’s business model and annual pharmacy spend, and determine if generic spend is primarily inpatientor outpatient-based. Measuring the potential impact of the contract on the entire spend for the organization, rather than just the generic portfolio, is particularly insightful and will protect the interests of the facility as a whole. Keep in mind that a contract change may affect discount positions and administrative fees. 

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Performing the Cost Analysis
One approach to determine the most cost-effective strategy is to request that the organization providing the contract portfolio perform a cost analysis for your facility. Review the stated financial benefit, and then verify the accuracy of the evaluation by analyzing the details in spreadsheet format. Sorting the spreadsheet by dollar amount, with the top amounts considered first, will save time. How much of the results will translate into actual savings, and how much is related to market changes or is simply unachievable based on your facility’s practice? Ask the contract organization to provide the metrics used in their analysis. Due to package size variances, naming convention differences, frequent NDC code changes, supply issues, and new generic entries, it is often difficult to perform an accurate price comparison between generic portfolios, so a comprehensive fact-check is a necessity.

When reviewing a generic contract analysis, numerous questions need to be addressed: 

• How much of the savings is attributed to a new generic launch, a generic experiencing a dramatic price drop, or a product your facility deems medically necessary to purchase in brand form?
• How much of the savings is attributed to medications that were purchased at a higher cost due to shortages? 
• Was the evaluation based on the same package size or were equivalents used? Can your organization use the equivalent selected? Did the analysis use historical pricing data, and if so, how far back did it go? 
• How well does the analysis reflect current market pricing? 

Make it a priority to find answers to these questions before signing a contract, as the program will run more smoothly if all program parameters have been accurately defined and communicated to staff up front.

Moving from a GPO-based program to a wholesaler program, or vice versa, requires that staff be trained in areas that may be unfamiliar to them. Estimate the impact of the change on departmental staffing and workflow, and provide support to staff members throughout the early days of the new contract. Have purchasing staff review the program to determine the time required to maximize the contract portfolio. Also, assess how often NDC changes may occur and factor in the impact on your practice; this is especially important if NDC changes are typically challenging to implement at your facility.

Monitoring Program Performance
After a generic contracting strategy has been selected, monitoring the performance of the program and the vendor will help ensure that the portfolio is performing as expected. Reporting tools, available from both the wholesaler and the GPO, can be used to monitor the program. Keep in mind that reporting tools designed by vendors are likely to highlight the strengths of their respective offerings. Follow up with the staff responsible for placing orders to ensure that the program is working as expected and is not increasing workload or causing any unexpected consequences.  

Conclusion
A thorough understanding of your hospital’s specific needs, as well as an accurate evaluation of the pros and cons of the available wholesaler and GPO programs, will help clarify which is best for your facility. As a hospital’s generic drug requirements may change from one year to the next, a regular review of the available programs to address any changes proactively will ensure medications are purchased at the lowest possible price.

Sarah Rall, PharmD, is director of pharmacy purchasing and supply at the Marshfield Clinic pharmacy in Marshfield, WI. Her professional interests include immunizations, pandemic preparedness, and medication utilization management.

• How often is the contract refreshed? 
• How long is the typical time lag from a new generic launch until it is available for purchase on contract? 
• How stable is the contract portfolio (eg, how often does the NDC code change)? 
• By what method do you ensure price competitiveness during the life of the contract? 
• How does the contract portfolio compare to your facility’s needs (eg, does the portfolio focus on hospital products, while the facility has a large outpatient business, or vice versa)? n Do you have a failure-to-supply program? How does it work? 
• What are the available options for financial reporting, both canned and customizable? 
• What are the implications for purchasing off contract? 
• How will using the contract program impact total (brand and generic) cost of goods? 
• If the program is associated with a rebate, how is that calculated and when is it distributed? 
• What is the raw fill rate for the contracted items? n Is there auto-substitution associated with the program? 
• How are changes communicated and notification of new contracts made? 
• How much time is required to effectively manage the program?