Pharmacoeconomic Evaluation of Immunologic Therapy Use

May 2015 : Biologics - Vol. 12 No. 5 - Page #1

Given the transformative changes occurring in reimbursement models and the emphasis on value-driven care prompted by the Affordable Care Act, health care organizations must continually refine medication use processes, while simultaneously improving quality of care and reducing costs. Utilization and reimbursement practices must be carefully considered for high cost agents such as immunologic therapies, including monoclonal antibodies (MABs) and tumor necrosis factor (TNF)-blocking agents, as these are among the most expensive medications in health care. These products accounted for 4 of the top 15 drugs by expenditures in nonfederal hospitals and 7 of the top 15 drugs by expenditures in clinics in 2013.1 Thus, evaluation is warranted to ensure these resources are used appropriately. 

Outpatient vs Inpatient Administration
Most immunologic therapies are used to manage chronic disease states, so inpatient administration often is unnecessary. It is important to keep in mind that inpatient reimbursement is based on diagnosis-related groups (DRGs) and does not include direct payment for medications. This model utilizes a system of payment for the operating costs of acute-care hospital inpatient stays based on rates prospectively determined by Medicare and other third-party payers. In the event the costs associated with a particular hospitalization exceed the pre-determined reimbursement rate for a given DRG, the hospitalization results in a net loss of revenue for the institution. Thus, when a high-cost immunologic therapy is administered during the course of an inpatient admission, the cost of the immunologic therapy alone may exceed the reimbursement amount for the entire hospital encounter. Conversely, outpatient administration creates the opportunity for revenue generation, as reimbursement in the outpatient setting is based on medication acquisition and administration costs. 

An additional savings prospect for disproportionate-share hospitals is utilization of the federal 340B Drug Pricing Program, which enables outpatient settings to purchase medications, including immunologic therapies, at lower prices in order to provide services to underserved populations. Medications provided to inpatients are not eligible for 340B pricing. 

Phase 1: Clinical Evaluation
With these factors in mind, the pharmacy at the University of North Carolina Hospitals and Clinics (UNCH) undertook a multiphase project. The first phase began with a retrospective chart review of all inpatients who received immunologic therapies, including MABs and TNF-blocking agents, but excluding transplant medications, between April 4, and August 31, 2014. Where possible, data collected through the chart review were supported by data retrieved through the Carolina Data Warehouse for Health (CDW-H), a central data repository containing clinical, research, and administrative data sourced from the UNC Health Care System. Patients utilizing a home supply of immunologic therapy during admission or who were not discharged by the end of the data collection period were excluded. Data collected included medication name; date, time, and primary diagnosis at admission; medication administration; length of stay; discharge date; ordering physician; and chemotherapy regimen and cycle count (when applicable). Using the following factors, each medication administration was assessed for opportunity to shift it to the outpatient setting:

  • Primary diagnosis compared to the indication for the immunologic therapy administered
  • Appropriateness of the medication for the indication and administration in the inpatient setting
  • Whether the patient has established outpatient care at a UNCH clinic
  • Whether the medication was required for acute disease management or chronic maintenance
  • Timing of medication administration in relation to discharge time
  • Current UNCH formulary restrictions
  • Expert clinical opinion regarding chemotherapy administration

Of the 111 administrations listed in TABLE 1, 66 (60%) were identified as having potential to be safely transitioned to the outpatient setting (see FIGURE 1). This included all administrations of adalimumab, denosumab, brentuximab, and natalizumab. Over half of the administrations occurred within 48 hours of discharge (see FIGURE 2). The doses given within 24 to 48 hours of discharge had significant opportunity for administration site transfer, since these were administered as part of continued chronic outpatient therapy and appeared to be given in the inpatient setting for convenience or other reasons, even though clinic-based administration post-discharge would have been more appropriate. A total of 44 administrations were used as part of 13 different chemotherapy regimens. The following chemotherapy regimens were identified as ones that potentially could be safely administered in the outpatient setting, although additional review and approval will first be required by the Hematology/Oncology P&T Subcommittee and oncology clinicians. These infusions accounted for 180 inpatient days during the study period (437 days annualized): 

  • R-CHOP (rituximab, cyclophosphamide, doxorubicin [hydroxydaunomycin], vincristine [Oncovin], prednisone)
  • CHOP + brentuximab
  • EPOCH (etoposide, prednisone, vincristine [Oncovin], cyclophosphamide, doxorubicin [hydroxydaunomycin])
  • Dose-Adjusted (DA)-R (rituximab)-EPOCH
  • O [ofatumumab]-DA-EPOCH
  • R-BAC (rituximab, bendamustine, cytarabine) 
  • RICE (cycle > 1) (rituximab, ifosfamide, carboplatin, etoposide) 

Phase 2: Pharmacoeconomic Evaluation
Once the clinical analysis was complete, Phase 2 of the study commenced, which consisted of a pharmacoeconomic analysis to determine the total opportunity cost associated with shifting administrations of certain immunologic therapies from the inpatient to the outpatient setting. The analysis model was designed to account for both the potential savings, as well as the gross profit, the institution could achieve with administration relocation. 

To calculate potential savings, wholesaler cost information was used to determine the actual acquisition cost of each immunologic therapy. Because the drugs were coded within the electronic medical record in billing units, the cost per billing unit was determined by dividing the acquisition cost of a specific package size by the billing unit. It is important to note that the medication cost for this portion of the analysis was determined using the best contracted price (for our site, that is almost always the GPO cost).

Determining the potential revenue from outpatient administration required a more complex pharmacoeconomic model. To calculate the outpatient medication cost, the numbers of billing units administered during the study period were multiplied by 340B pricing, using the assumption that all administrations were for 340B-eligible patients.

The expected reimbursement for outpatient administration was then calculated. For Medicare recipients, HCPCS payment limits (updated July 2014) were used. For privately insured accounts, the medication charge was calculated according to the institution’s charge formula: [(medication cost x markup) + flat fee]. The flat fee varies based on type of medication (eg, IV piggyback, IV syringe, chemotherapy). The reimbursement calculation was based on historical payer-specific reimbursement rates: [charge x historical percentage]. 

The estimated outpatient margin was then calculated by subtracting medication acquisition cost from reimbursement. Finally, the total opportunity cost associated with current practice was determined by adding the inpatient cost of the medication to the estimated outpatient margin. 

The current fee-for-service model used in the outpatient setting allows for direct reimbursement of medications administered. In shifting administrations from the inpatient to the outpatient setting, the institution can expect to save the cost of the medication from the inpatient drug budget and generate revenue from the outpatient administration. The savings from the inpatient drug budget, plus the expected revenue from outpatient administration, represents the total opportunity for the institution. The implications of these calculations for UNCH can be found in TABLE 2 and TABLE 3.

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Assumptions and Limitations
The analysis was based on medication cost alone and did not take into account costs associated with administration time, ancillary supplies, or medication delivery. Furthermore, for some of the medications in the study, costs were calculated in conjunction with the historical distribution network rather than the more recently implemented restricted distribution network. 

Finally, this model works well only for institutions still chiefly operating under fee-for-service contracts. The model may not be as applicable to sites that have already adopted a value-based contract and reimbursement model. 

Implementing Strategies for Change
Once the analysis was complete, a timely, robust, and agile response to the results was important for the organization to realize the greatest possible benefit. As a result, UNCH is implementing a variety of strategies: 

Inpatient Guidelines. Currently, inpatient use of many immunologic therapies at UNCH is not guided by policy that either restricts or facilitates optimal utilization. Some immunologic therapies are included on a clinic only institution guideline, but this is not strictly enforced. The group shared the results of the evaluation with the UNCH Pharmacy & Therapeutics (P&T) Committee, along with a recommendation that a policy be developed and implemented to restrict administration in the inpatient setting to only those immunologic therapies with appropriate indications. The committee is in the process of drafting such a policy.

Education. Education is an important component of any stewardship effort. As such, education on inpatient reimbursement models and new inpatient prescribing policies will be distributed to all clinicians at UNCH. Because providers of specific services, including gastroenterology, oncology, nephrology, neurology, rheumatology, and transplant, prescribe the majority of these immunologic agents, these clinicians will receive additional education.

Infusion Clinic Expansion. Of the agents included in the evaluation, rituximab, which is a component of many chemotherapy regimens, was identified as having the greatest opportunity for administration relocation—of 72 inpatient doses of rituximab, 39 met the criteria for potential for outpatient administration. The financial analysis revealed that nearly two-thirds (64%) of patients received at least one dose of rituximab, indicating a significant opportunity cost. Some rituximab chemotherapy regimens are provided in the inpatient environment due to the lack of available outpatient infusion chairs and the need for multiple days of continuous therapy. This evaluation supported an ongoing initiative at UNCH to open new outpatient facilities and expand infusion clinic operating hours to include weekends. Not incidentally, the effort will free inpatient beds for patients with acute needs. 

The impact of these measures will be tracked to evaluate compliance, measure cost-savings, and enable follow-up analyses. Additional strategies to optimize immunologic therapy prescribing in the inpatient setting are under consideration, including using the EHR to alert prescribers to restrictions on certain agents, and working directly with manufacturers of high cost agents to optimize wholesale acquisition cost and GPO contract prices. 

Moving Forward
Shifting the setting of immunologic therapy administration can decrease the total cost of care at the patient and health-system level. Just under two-thirds (60%, 66 doses) of inpatient monoclonal antibody doses were identified as appropriate for outpatient administration, correlating with an opportunity cost of $1.1 to $1.4 million (a 50% to 75% shift). 

Health systems may wish to evaluate their immunologic therapy utilization and implement similar strategies for improved use. As more health care payment structures evolve into a fee-for-value model, the focus on drug cost containment will become increasingly important. Examining and, if appropriate, relocating administration of immunologic therapy, is an effective and appropriate step toward patient-centered, value-based health care.


  1. Schumock GT, Li EC, Suda KJ, et al. National trends in prescription drug expenditures and projections for 2014. Am J Health Syst Pharm. 2014;71(6):482-499.

Danielle A. Griggs, PharmD, MBA,* is a PGY1 health-system pharmacy administration resident at UNCH and is currently completing an MS in health-system pharmacy administration at the University of North Carolina (UNC) Eshelman School of Pharmacy. She received her PharmD from the University of Kentucky (UK) College of Pharmacy and her MBA from the UK Gatton College of Business and Economics.

Kevin N. Hansen, PharmD,* is a PGY1 health-system pharmacy administration resident at UNCH and is currently completing an MS in health-system pharmacy administration at the UNC Eshelman School of Pharmacy. He received his PharmD from Lake Erie College of Osteopathic Medicine.

T. David Marr, PharmD, MBA,* is a PGY1 health-system pharmacy administration resident at UNCH and is currently completing an MS in health-system pharmacy administration at the UNC Eshelman School of Pharmacy. He received his PharmD from the UK College of Pharmacy and his MBA from the UK College of Business and Economics.

David A. South, PharmD,* is a PGY1 health-system pharmacy administration resident at UNCH and is currently completing an MS in health-system pharmacy administration at the UNC Eshelman School of Pharmacy. He received his PharmD from Samford University McWhorter School of Pharmacy.

Adam S. Wolfe, PharmD, MS, BCPS, is an informatics pharmacist at Cornerstone Health Enablement Strategic Solutions. At the time of writing, he was the pharmacy business intelligence and data analytics coordinator at the UNC Medical Center. He received his PharmD from the University of Utah School of Pharmacy and his MS in health-system pharmacy administration from the UNC Eshelman School of Pharmacy.

Ashley L. Pappas, PharmD, BCPS, is the lead pharmacist for medication use advancement at UNCH and an assistant professor of clinical education at the UNC Eshelman School of Pharmacy. She received her PharmD from the Virginia Commonwealth University and is working on her Masters in Healthcare Administration at UNC.
*These authors contributed equally to this work.


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