Estimation of savings due to formulary implementation and group purchasing affiliation in selected therapeutic categories

The studies reported to date all attempted to document cost savings achieved through use of specific purchasing techniques or by restriction of high-dollar value drug products. No study has attempted to measure the combined effects of formulary implementation and group purchasing affiliated, or attempted to measure cost savings for low-dollar value drug products. The present study evaluated the effects of a closed formulary system and group purchasing on cost containment at Holy Cross Hospital, a 343 bed, private, non-profit community hospital located in Salt Lake City, Utah. On March 12, 1979, a generic, closed formulary system was adopted by the hospital. On April 11, 1979, the pharmacy and therapeutics committee approved affiliation, via the Utah Hospital Association, with the Intermountain Health Care Group Purchasing Program. Contracts with this group purchasing system begin July 1 of each year. The first objective of this study was to compare on a per dose or per gram basis the purchase costs of those drugs that remained on the formulary (formulary drugs), and those drugs that were removed from the hospital after implementation of the formulary (non-formulary drugs). The second objective of this study was to measure, by use of price and value indexes, the combined effects of formulary implementation and group purchasing on purchase costs and purchase volume. Four therapeutic categories were analyzed: antihistamines and decongestants, antitussives, antacids, and topical corticosteroidal creams and ointments.

ESTIMATION OF SAVINGS DUE TO FORMULARY IMPLEMENTATION AND GROUP PURCHASING AFFILIATION IN SELECTED THERAPEUTIC CATEGORIES by KAREN LOUISE SYLVESTER A project submitted to the faculty of the University of Utah in partial fulfillment of the requirements for the degree of Master of Science in Hospital Pharmacy and the Residency in Hospital Pharmacy Department of Pharmacy Practice and the University Hospital University of Utah July 1983 UNIVERSITY OF UTAH DEPARTMENT OF PHARMACY PRACTICE SUPERVISORY COMMITTEE APPROVAL of a research project report submitted by KAREN LOUISE SYLVESTER We, the undersigned, have read this research project report and have found it to be of satisfactory quality for the Master of Science in Hospital Pharmacy and Residency in Hospital Pharmacy. 1tV11k Date Chairman, Supervisory Committee J Dat Date Member, M/km)). I Supervisory Comm ttee · 'c_____IIIiI____ IIII.__ _ UNIVERSITY OF UTAH DEPARTMENT OF PHARMACY PRACTICE FINAL READING APPROVAL TO THE HOSPITAL PHARMACY PROGRAM COMMITTEE) (GRADUATE EDUCATION AND TRAINING OF THE UNIVERSITY OF UTAH DEPARTMENT OF PHARMACY PRACTICE: I have read the research project report of Karen Louise Sylvester in its final form and have found that 1) its format, graphic style are consistent and acceptable; materials including figures, citations, 2) and biblio­ its illustrative tables and charts are in place; and 3) the final manuscript is satisfactory to the Supervisory Committee and is ready for submission to the Hospital Pharmacy Program Committee. Chairman, Date Supervisory Committee Approved for the Hospital Ph�� y Program (,/ � Direc --:::--+.�-:'''--'- / , , /�/ /�J �/ � Pharmacy of Pharmacy Practice Alice never could quite make out, in thinking it over afterwards, how it was that they began: all she remembers is, that they were running hand in hand, and the Queen went so fast that it was all she could do to keep up with her: and still the Queen kept crying "Faster! Faster!", but Alice felt she could not go faster, though she had no breath left to say so • ••• just as Alice was getting quite exhausted, they stopped, and she found herself sitting on the ground, breathless and giddy. The Queen propped her up against a tree, and said kindly, "You may rest a little, now." Alice looked round her in great surprise. been under this tree the whole time! Everything's just as it was!" "Of course it is,'' said the Queen. "Well, in ~ "Why, I do believe we've "What would you have it?" country," said Alice, still panting a little, "you'd generally get to somewhere else--if you ran very fast for a long time as we've been doing." "A slow sort of country!" said the Queen. "Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!" Through the Looking-Glass, and What Alice Found There Lewis Carroll ACKNOWLEDGEMENTS I would like to thank Dr. Thomas Sudds, Associate Director at the University Hospital, who first outlined the question, offered encouragement when I felt I was running in place, and persevered in helping me organize this report into an appropriate format; Dr. Harold Rubin, Assistant Administrator at Holy Cross Hospital, who first listened to the proposal for this research, offered suggestions, and allowed me access to the necessary information; and Ms. Cynthia Adkins, Director of Pharmacy at Holy Cross Hospital, who located the appropriate records and took the time to answer my many questions. TABLE OF CONTENTS Acknowledgements iii List of Tables v Introduction 1 Methods 13 Results 16 Discussion 22 Conclusion 26 Appendix 1. Formulary Purchases, 1978-79 Period 28 Appendix 2. Formulary Purchases, 1979-80 Period 34 Appendix 3. Non-Formulary Purchases, 1978-79 Period 39 Appendix 4. Price Index 44 Appendix 5. Listed Prices 45 Appendix 6. Value Index 55 References 56 Vita 58 LIST OF TABLES 1. Average costs for formulary and non-formulary drugs 17 2. Purchases 18 3. Price indexes and estimated inflation rates 19 4. Value indexes and purchase volume changes 21 INTRODUCTION The rising cost of medical care is a frequent topic of discussion among patients, legislators, and those in the health care professions. The cost of drugs and how to contain that cost is of particular interest to the hospital pharmacist. Bid and group purchasing techniques, plus implementation of a hospital formulary system, have been accepted as methods that will reduce the cost of drug purchases to the hospital and the cost of drug therapy to the patient. I. Purchasing Techniques A. Bulk Purchasing Attempts to reduce drug expenditures have included policies of Simply purchasing drugs in large bulk quantities. In 1973, Barnes 1 reported that American Medicorp' s centralized pharmaceutical purchasing program resulted in considerable savings to each of the hospitals managed by the company, although no dollar figure was given. American Medicorp was responsible for thirty-six general, acute-care hospitals with 5576 licensed beds in ten states. Bulk purchasing of high-volume, high-dollar value drug products, plus central warehousing and distribution, resulted in substantial economic benefit for the individual hospital. Pike and Yedvab 2 earlier reported on a bulk purchasing program at 2 the Long Island Jewish Hospital in New Hyde Park, New York. Analysis of the usage of the most active and expensive drugs was used to predict needs for six months or a year. Based on these predictions, a six-month supply of drugs was then ordered. In the first two years, savings were recorded in the following areas: 1 The cost increase for drug supplies for the first year was three percent, down seventeen percent from the previous year's increase. 2 Total pharmacy drug costs for the second year were four percent less than the preceding year, even though the number of inpatient orders and outpatient prescriptions increased by ten percent. 3 The most significant savings were realized in the purchase of oral and parenteral antibiotics, oral and parenteral corticosteroids, diuretics, tranquilizers, anesthetics, and injectables. Following the successful implementation at the Long Island Jewish Hospital, a group bulk purchasing program with other member hospitals of the Federation of Jewish Philanthropies of New York City was developed. Each hospital in turn purchased the most active and expensive drugs commonly used by the group, resulting in savings for all. B. Bid Purchasing A further refinement of purchasing techniques is the use of a bid system. In 1964, Francke et al. 3 reported that among all hospitals, 43% of the chief pharmacists used bid purchasing 'all to most of the time' and 20% used it 'sometimes'. In hospitals with formularies, these percentages were 55% and 19%, respectively. 3 Swift and Ryan 4 stated three factors were important for a successful bid purchasing system: use of a formulary policy, an effective procedure for handling bid purchasing, and criteria for evaluation of drug products. Callahan and Kabat 5 reported that a bid purchasing system established at St. Joseph's Hospital, a 400-bed private hospital in St. Paul, Minnesota, resulted in a $4600 reduction in purchase price and substantial reduction in dollar inventory. The selected items represented only 8.5 percent of the 2400 items in inventory, but accounted for 63 percent of the total annual purchases. Price reduc- tions were obtained on 25 of 36 non-proprietary and 61 of 162 proprietary drug products. The success of bid purchasing, however, appears to vary from one hospital to the next. After studying seven multiple-source drugs and five single-source drugs, Kralewski 6 attributed differences in prices among five Minneapolis hospitals to the variance in hard bargaining abilities of the pharmacists, the coercive influence of the tremendous purchasing power of the larger institutions, and the lack of communication between the hospital pharmacists and their failure, in some cases, to check prices and maximize competition. The author concluded potential savings from group purchasing techniques would probably evolve from two factors: drug prices could be reduced to those paid by the most favored hospital, and volume buying techniques could yield savings of thirty percent, although no basis was given for this exact number. C. Group Purchasing The incidence of group purchasing in all hospitals in the United States increased from 41% in 1975 to 72% in 1978. 7 A U.S. General 4 Accounting Office report 8 on hospital purchasing and inventory manage- ment offered further evidence of savings due to group purchasing, reporting costs 82 to 240% higher when items normally purchased through a group source had to be purchased independently. Lipman and Bauer 9 estimated savings of over $300,000 in 1973 to hospitals participating in the Connecticut Hospital Association Group Purchasing Program; drug purchases totaled $995,357. In 1975, parti- cipation in fifty-two pharmaceutical contracts establishing new baseline prices was approximately seventy-five percent. Estimated addi- tional savings to the participating institutions were $155,000 on purchases of $3,037,600. Purchasing group size may also affect drug expenditures. al. IO May et studied the relationship of purchasing group size and drug price. Most of the twenty-six private hospital purchasing groups were less than 10,000 beds, with a range from 750 to 50,000 beds. Drug prices were negatively correlated to group size, with prices significantly (p <: 0.05) lower in groups representing greater than 10,000 beds. No significant relationship was found between drug prices and group age or location. D. Prime Vendor Purchasing Group purchasing techniques have also led to development of the prime vendor purchasing system. Based on group purchasing philosophies, the prime vendor purchasing system as applied to pharmacy is the procurement of a majority of the hospital's drugs from one local distribution center (wholesale drug company). Johnson et al. II described savings achieved through the prime vendor 5 purchasing system of the Metropolitan Hospital Drug Purchasing Group, a group of seventeen hospitals located in Minnesota, Wisconsin, and Iowa, and totaling 6100 beds. Detailed evaluation of the system at United Hospitals, Inc. in St. Paul, Minnesota concluded savings were achieved by the elimination of storeroom space and by a reduction in the number of checks and purchase orders processed. Storeroom space equivalent to 475 square feet was eliminated, thereby eliminating 1980 holding costs of $42,300, drug requisition card printing costs of $1545, and one FTE in the materials management area. Checks and purchase orders were reduced from 821 checks and 3252 purchase orders in 1980, to 560 checks and 1497 purchase orders in 1982, reSUlting in savings of $25,360. The calculated savings assumed costs of thirty dollars to process a check and ten dollars to process an invoice. II. A. Formulary Systems Eff ects on Bulk and Bid Purchasing Connected with many purchasing programs is development of a hospital formulary system. Pike and Yedvab 2 found this to be a necessary step in implementation of their bulk purchasing program. A formulary allowed them to limit purchases within a given therapeutic category to a few drugs, to eliminate purchases of duplicate brand names, and to purchase bulk quantities of these single brands, presumably at discounted prices because of the large quantities being bought. As previously stated, Swift and Ryan 4 included use of a formulary policy as one of the factors important for a successful bid purchasing system. The formulary policy should allow for storing and dispensing 6 of only one manufacturer's drug product of any nonproprietary drug, regardless of the proprietary name prescribed. These authors 12 showed such a brand standardization policy applied to fifty mUltiple source, non-proprietary drugs in a 1000-bed hospital could realize savings of more than $35,000 for drug usage cost and of $9000 for drug inventory cost. In eliminating the need to purchase more than one drug product of multiple source drugs, price competition between drug companies manufacturing the same nonproprietary·products presumably would be encour ag ed • B. Inventory Control The American Society of Hospital Pharmacists (ASHP) Guidelines for Hospital Formularies 13 states that 'the formulary system is a powerful tool for improving the quality and controlling the cost of drug therapy'. Schmieding and Sita 14 attempted to measure overall savings achieved by implementation of a formulary system. They reported a decrease in the physical inventory value and a decrease in drug purchases after adoption of a generic formulary eliminating duplicate brand names. The December, 1977 drug inventory at Lutheran Medical Center in St. Louis was valued at $185,000. After development of the formulary, the December, 1978 drug inventory was valued at $127,000, a 31.2 percent reduction. The 1979 inventory value was reduced by an additional 7.9 percent. Drug purchases for 1978 and 1979 were $870,000. The authors estimated that if drug purchases had continued to increase at the 1977 rate of twelve percent, this figure would have been $1,068,000. There- fore, the formulary was responsible for a potential savings of $198,000. 7 In one study of formulary effects, Daniels and Wertheimer 15 proposed that the number of drug line items would decrease in hospitals utilizing restrictive formulary systems, and that the drug inventory value would be reduced in hospitals having a restrictive formulary system. The authors found the number of line items was significantly (Kendall's Tau = -0.526) related to the level of product substitution and to restrictiveness of procedures for requesting non-formulary drugs. No significant relationship was found between the number of ltne items and formulary review procedures, and no statistically significant relationships were found between drug inventory value and any restrictive formulary systems. The authors also hypothesized drug purchase cost per therapeutic class would be reduced as formulary restrictiveness increased. Significant positive relationships were found between cost and the total number of line items for penicillinase-resistant penicillins (r = 0.84, p = 0.002) and thiazide-type diuretics (r = 0.50, p = 0.04), but not for skeletal muscle relaxants and xanthine-type bronchodilators. c. Restriction or Deletion of Drugs One procedure associated with formulary implementation is that of drug use restriction. Marginally effective agents which would be minimally used presumably would not be purchased or stocked. Purchases of expensive agents subject to misuse, either due to inappropriate promotion or to ignorance of their proper indications, could be kept to a minimum, and these agents could be restricted to specif ic situations, services, or physicians. Wolfson 16 reported antibiotics policies introduced at four hospitals 8 in Great Britain with a total of 1300 beds resulted in savings of 36,092 pounds sterling for the fiscal year ending on March 31, 1979. The fifteen policies concerned decisions to be made when choosing an antibiotic, and provided alternative antibiotics for the majority of conditions involving antibiotic use. In fiscal year 1979, expenditures for antibiotics, antibacterials, and antiprotozoals fell 0.4%, compared with a 41.3% rise for other drugs. Savings were calculated as the difference between anticipated and actual costs, with anticipated costs based on the 41.3% rise of the non-antibiotics. Three studies have described the effects of deleting drugs from sp ec if ic therapeutic cat egor ies. Lemay et al. 17 reported deletion of all phenacetin-containing products from the formulary at the Ohio State University Hospitals did not result in demonstrated cost savings. Analysis of the total cost of oral analgesic therapy in August and September, 1978, before the deletion, and in August and September, 1979, after the deletion, showed no substantial change, even though the overall use of oral analgesics had increased in 1979. However, since injectable analgesic therapy had not been monitored, a cost analysis of total analgesic therapy could not be performed. Ivey et al. 18 reported a formulary change at the University of Washington Hospitals from an 8.5% crystalline amino acid solution to a 5.5% solution resulted in an annual savings of $41,028. During the year following the formulary change, 66% of more than 20,000 total parenteral nutrient solutions were prepared with the less concentrated amino acid. Anandan 19 estimated that reducing the number of formulary theoph- 9 ylline preparations at Henry Ford Hospital in Detroit resulted in savings of $16,000. In 1978, the hospital purchased 357,551 doses of theophylline at a cost of $27,926.10. In 1979, after deletion of several theophylline products from the formulary, the hospital purchased 309,069 doses at a cost of $11,624.39. Savings were estimated as the difference between the two purchase costs, without any attempted correction for inflation. Five studies have estimated savings due to restriction or deletion of cephalosporins from hospital formularies. Phelps and Godwin 20 discussed the process by which the University of Kansas Medical Center reduced the number of parenteral cephalosporins on its formulary from three to one. The pharmacy and therapeutics committee deleted cepha- pirin and cephalothin, while retaining cefazolin. Although more expen- sive on a per gram basis, if prescribed appropriately, use of cefazolin was expected to result in savings of eight to twelve dollars per day for the patient. Since cefazolin was a multisource product subject to competitive pricing, the committee also believed a potential for additional savings existed. Noel and Paxinos 21 studied the cost-savings following restriction of cephalothin sodium and approval of cefazolin sodium as the sole cephalosporin on a university hospital formulary. In the fiscal year 1974-75, 231 milligrams of cephalothin and 24 milligrams of cefazolin were used per patient day at University Hospital, Arizona Health Sciences Center. In the fiscal year 1975-76, 229 milligrams and 25 milligrams were used per patient day, respectively. During the fiscal year 1976-77, prescribing of cephalothin was restricted to the infectious disease 10 service. The authors extrapolated usage of both cephalothin and cefazolin for fiscal year 1976-77 without the restriction, and projected a total cost of $50,022. This compared with an actual cost of $44,019, for a projected savings of $6000. Katz and Schlamowitz 22 described the process by which St. Joseph's Hospital Health Center, a 427-bed, acute-care teaching hospital in Syracuse, New York, reduced the cost of cephalosporin therapy. The pharmacy and therapeutics committee deleted cefazolin from the formulary following unsuccessful attempts to alter inappropriate prescribing, and recommended cephapirin be dispensed whenever a parenteral cephalosporin was ordered. Savings were calculated as the total cost of cefazolin, cephalothin, and cephapirin in 1976 ($115,411 per 130,406 patient days) less the total cost of cephapirin in 1977 ($82,215 per 135,820 patient days), resulting in a calculated savings of<$33,196. . d Ryan and Francese2 3 est~ate . sav~gs · ac h·1eved by d e Iet1ng cep hal 0- thin, adding cephapirin, and restricting use of cefazolin, cefamandole, and cefoxitin at the West Haven Veterans Administration Medical Center. Based on the usage and cost figures for 1978, the authors predicted net savings of approximately $5000 during 1979, nearly twenty percent of the total cephalosporin expense. The authors also estimated that if the older cephalosporins had been replaced by either cefamandole or cefoxitin, costs would have increased by more than $25,000, nearly a 100% increase over the 1978 expenditures for cephalosporin therapy. Britton et al. 24 studied the effect of a program designed to reduce hospital drug costs by limiting the selection of injectable cephalosporins and promoting the rational use of selected agents. Cephalothin 11 sodium was deleted from the formulary, cefazolin sodium was retained as the primary inj ectable cephalosporin with guidelines for proper dosing, and cephapirin sodium, cefamandole nafate, and cefoxitin sodium were also retained with strict guidelines for use. Total cephalosporin purchases for the first fiscal year of the program were $64,914, a decrease of $55,715 from the previous year's total of $120,629, and cost per patient day for cephalosporins decreased from $0.921 to $0.519 over the same period. III. Study Objectives The studies reported to date all attempted to document cost savings achieved through use of specific purchasing techniques or by restriction of high-dollar value drug products. No study has attempted to measure the combined effects of formulary implementation and group purchasing affiliation, or attempted to measure cost savings for low-dollar value drug products. The present study evaluated the effects of a closed formulary system and group purchasing on cost containment at Holy Cross Hospital, a 343bed, private, non-profit community hospital located in Salt Lake City, Utah. On March 12, 1979, a generic, closed formulary system was adopted by the hospitalr On April 11, 1979, the pharmacy and therapeutics committee approved affiliation, via the Utah Hospital Association, with the Intermountain Health Care Group Purchasing Program. Contracts with this group purchasing system begin July 1 of each year. The first objective of this study was to compare on a per dose or per gram basis the purchase costs of those drugs that remained on the formulary (formulary drugs), and those drugs that were removed from the 12 hospital after implementation of the formulary (non-formulary drugs). The second objective of this study was to measure, by use of price and value indexes, the combined effects of formulary implementation and group purchasing on purchase costs and purchase volume. Four therapeutic categories were analyzed: antihistamines and decongestants, antitussives, antacids, and topical corticosteroidal creams and ointments. METHODS The year from March 1, 1978, to February 28, 1979, inclusive, was selected as the pre-formulary/pre-purchasing program period. This was the twelve-month period immediately preceding implementation of the formulary. The year from July 1, 1979, to June 30, 1980, inclusive, was selected as the post-formulary/post-purchasing program period. This allowed a washout period after implementation of the formulary and group purchasing, and was the first full twelve-month period the group purchasing contracts were in effect. Purchase orders dated during the two twelve-month periods provided data for drug expenditures in each of the four therapeutic categories. To meet the first objective, an average cost per dose or per gram for formulary and non-formulary drugs in each therapeutic category was calculated. A dose was defined as a capsule or tablet for solid oral dosage forms and as fifte~n milliliters for liquid oral dosage forms (with the exception of Titralac milliliters). R liquid, whose usual dose is five Total dollar purchases were divided by the number of doses purchased, for the antihistamine/decongestant, antitussive, and antacid categories, or by the number of grams purchased, for the topical corticosteroids, to arrive at an average cost figure. To meet the second objective, price and value indexes for each drug category were calculated by the methods described by Coarse and Kubica. 25 An average cost per product size was first calculated for 14 each drug purchased (Appendices 1-3). The 1978-79 year was defined as the base period for each therapeutic category, and total purchase costs during this twelve-month period defined as the base cost level. The price index (Appendix 4) measures general changes in the price of items purchased by the pharmacy. follows: This index was calculated as The average purchase cost for a product size during the 1979-80 year was multiplied by the respective quantity purchased during the 1978-79 year. These numbers were summed, and then divided by a modified base cost level. Since average purchase costs were not available in the 1979-80 year for non-formulary items (non-formulary items not being purchased) the modified base cost level used to calculate the price index took into account those formulary items purchased in the subsequent 1979-80 year. It was assumed that prices for non- formulary items would have increased or decreased in 1979-80 by the same calculated percentage. The figure resulting from division by the modified base cost level, when multiplied by 100, converts the ratio to a relative percent of the base. An estimation of the inflation rate was calculated using the lowest of Average Wholesale Price, price to retailer, or manufacturer's direct . 26 27 28 prlce for 1978, 1979, and 1980 (Appendix 5). Four inflation indexes were calculated, two with 1978 as the base level compared with 1979, and two with 1979 as the base level compared with 1980. Each inflation index was calculated in the same manner as the price index. Within each base level one inflation index was calculated with only those formulary quantities used to calculate the price index, and one inflation index was calculated with all quantities purchased during the 15 1978-79 year. The value index (Appendix 6) measured general changes in the total value of items purchased by the pharmacy. follows: This index was calculated as The average purchase cost for a product size during the 1979-80 period was mUltiplied by the respective quantity purchased during that year. These numbers were summed, then divided by the base cost level, and mUltiplied by 100. The index measured t.he combined effects of acquisition cost changes and volume changes on the value of purchased goods. The purchase volume change, a measure of quantities purchased and adjusted for price changes, was calculated on a percentage basis by subtracting the price index from the value index. Alternatively, changes in volume were calculated on a dollar basis by mUltiplying this percentage by total purchases during the base period. RESULTS The average cost per dose or per gram for formulary (those drugs that remained in the hospital after formulary implementation) and for non-formulary drugs (those drugs removed from the hospital after formulary implementation) is summarized in Table 1. The formulary cost per dose was 19% lower than the non-formulary cost in the antihistamine/decongestant category, and 36% lower in the antacid category. The formulary cost was 7.5% higher than the non- formulary cost in the antitussive category and 13% higher in the topical corticosteroidal category. The purchases during the 1978-79 and 1979-80 periods for each therapeutic category are outlined in Table 2. The price indexes, percentage changes in price, and estimated 1979 and 1980 inflation rates for each therapeutic category are summarized in Table 3. The percentage change in the price of items purchased during the 1979-80 period was calculated by subtracting 100 from the price index for each therapeutic category. The price index for antihistamines and decongestants indicated an overall increase in price during the 1979-80 period of 2.80%, compared with predicted inflation rates ranging from 9.17% to 14.05%. Price indexes for the other three drug categories indicated overall decreases in price, compared with positive predicted inflation rates. The value indexes, percentage changes in value, and purchase volume 17 Table 1. Average costs for formulary and non-formulary drugs. Therapeutic Category Average Cost per Dose or per Gram for Formulary Drugs Average Cost per Dose or per Gram for Non-Formulary Drugs Antihistamines/Decongestants $ 0.060 $ 0.074 Antitussives $ 0.173 $ 0.161 Antacids $ 0.044 $ 0.069 Topical Corticosteroids $ 0.142 $ 0.126 Table 2. Therapeutic Category Total Purchases, 1978-79 Period Antihistamines/Decongestants $ 2837.72 Antitussives $ Antacids Topical Corticosteroids a Purchases Purchases, 1978-79 Period, used to Calculate a Price Index $ 2015.55 Total Purchases, 1979-80 Period $ 1792.31 605.62 $ 890.57 $ 1223.52 $ 1016.62 $ 933.88 $ $ 999.46 771.35 $ 429.27 $ 1133.34 This figure is lower than that for total purchases because of the method used to calculate the price index (see Appendix 4). The average purchase cost for a product size during the 1979-80 period was mUltiplied by the respective quantity purchased during the 1978-79 year. Since no non-formulary items were purchased during the 1979-80 period, average purchase costs were not available, and non-formulary purchases were not included in calculating the price index. ...... OJ Table 3. Therapeutic Category Antihistamines/ Decong es tan t s Price indexes and estimated inflation rates Price Index Percentage Change in Pr ice, 1979-80 Per iod Compar ed with 1978-79 Period a Inflation Rate based on Products used to Calculate Price Index Inflation Rate based on all 1978-79 Purchases 1979 1980 1979 1980 102.80 2.80% 11.07% 14.05% 9.17% 12.11% Antitussives 94.63 5.37% 4.12% 6.43% 4.38% 6.06% Antacids 80.08 - 19.92% 6.73% 5.16% 5.64% 5.24% Topical Corticosteroids 87.05 - 12.95% 11.76% 8.09% 9.77% 7.83% a Inflation Index: r PI QO I: Po QO P x 100 1 Po QO Inflation Rate = Price in 1979 (for 1979 inflation rate) or in 1980 (for 1980 inflation rate). Price in base year (1978 for 1979 inflation rate; 1979 for 1980 inflation rate). Quantities purchased at Holy Cross Hospital during 1978-79 period. Inflation Index - 100 ...... 1..0 20 changes for each therapeutic category, both in terms of percent change and dollar change, are summarized in Table 4. The percentage change in the total value of items purchased during the 1979-80 period was calculated by subtracting 100 from the value index for each therapeutic category. The value index for topical corticosteroids indicated an overall increase in the total value of items purchased during the 1979-80 period of 46.93%. Value indexes for the other three drug categories indicated decreases in the value of items purchased. The volume of purchases decreased during the 1979-80 periods in the antihistamine/decongestant and antitussive categories, but increased in the antacid and topical corticosteroidal categories. The total purchase volume change for all four therapeutic categories was -$681.33. Table 4. Value indexes and purchase volume changes. Therapeutic Category Value Index Percentage Change in the Total Value or Items Purchased, 1979-80 Period Compared with 1978-79 Period Antihistamines/Decongestants 63.16 - 36.84% - 39.64% Antitussives 89.11 - 10.89% 5.52% - $ 55.17 Antacids 83.09 - 16.91% 3.01% $ 36.83 146.93 53.07% 59.88% Topical Corticosteroids Purchase Volume Change, 1979-80 Period Compared with 1978-79 Period - $1124.87 $ 461.88 N ~ DISCUSSION The average cost per dose or per gram calculation did not consistently demonstrate a higher cost for non-formulary drugs at Holy Cross Hospital (HCH). One supposed advantage of formulary implementation is that, given therapeutic and pharmaceutical equivalence, the formulary will consist of the lower priced drugs in each therapeutic category. Based only on the average cost calculation, lower priced drugs were not always chosen for retention on the formulary. An equally, if not more, important consideration in this selection process may be usage of a drug. A commonly used antitussive is probably more likely to be retained on a formulary than its less frequently used counterpart, even if the cost of the formulary drug is slightly greater on a per dose basis. In the four therapeutic categories, usage may have been a more significant factor in distinguishing formulary from non-formulary drugs. Another consideration in placing a drug on a formulary is its efficacy. A drug may be more expensive on a per tablet or per capsule basis, yet be more effective than a less expensive counterpart. The four therapeutic categories evaluated represented many mUltiple brand agents and therapeutic duplications. A comparison based on therapeutic equivalence may have consistently demonstrated higher average costs for non-formulary drug products. Efficacy may also have been a more signif- icant factor than cost in distinguishing formulary from non-formulary drugs. 23 Other considerations specific to each therapeutic category may outweigh the factor of cost when selecting drugs for a formulary. The likelihood of abuse of a codeine-containing antitussive or the sodium content of an antacid may be far more important criteria for formulary selection. The price indexes demonstrated that the general changes in the price of items purchased during the 1979-80 period at HCH were lower than would be predicted from the estimated inflation rates. This was one expected outcome of joining the Intermountain Health Care Group Purchasing Program. The value indexes demonstrated that the total value of antihistamines and decongestants, antitussives, and antacids purchased during the 1979-80 period decreased relative to the 1978-79 period, while the value of the topical corticosteroids purchased during this time increased. Purchase volume increased slightly in the antacid category and increased more than 50% in the topical corticosteroid category. The decreases in both the value indexes and the purchase volumes for the antihistamines/decongestants and the antitussives can be attributed to formulary implementation and group purchasing affiliation. Initially, an expected outcome of formulary implementation is fewer purchases, as demonstrated by the lower total value of items purchased. The purchase volume figures, measures of quantities purchased and adjusted for price changes, also showed that the volume of purchases in these two categories decreased. While the value index for antacids decreased, its purchase volume increased slightly. This indicated the decrease in the value of 24 antacids purchased during the 1979-80 period was chiefly due to price changes, and the volume of purchases actually increased over the 1978-79 period. It could not be determined if this slight change was due to formulary :implementation, a change in purchasing patterns, an unexpected increase in antacid usage, normal fluctuations in purchase volume, or some other undefined reason. More troublesome was the increase in both the value index and purchase volume for the topical corticosteroid creams and ointments. Volume variances can be attributed to improper purchasing behavior or changing use patterns. 25 It is unlikely the variance was due to improper purchasing behavior, since no overt problems were seen in the three other therapeutic categories, and two positions, a pharmacy buyer position and an inventory control specialist position, had been created at the time of formulary implementation and group purchasing affiliation. The more likely explanation was changing use patterns, although reasons for a sudden increase in use could not be determined. One possibility was a shift from purchasing antibiotic-corticosteroid combinations, which were not reviewed, to purchasing pure corticosteroid products. Also, at the time of formulary implementation, more than 150 nonprescription, nonmedicated skin care products were either deleted or transferred as nondrug products to the materials control department. 29 Elimination of these items may have resulted in a shift to topical corticosteroid use. Properly compiled indexes are necessary elements for measurement of general changes in the price and value of drug purchases. It was assumed the 1978-79 period represented typical twelve-month purchases 25 for each therapeutic category when, in fact, this period may have been atypical. It was also assumed that the formulary and group purchasing alone could account for changes in the 1979-80 period, but other factors appear to be equally, if not more, important. This study made no attempt to measure the effects of formulary implementation alone on usage or to estimate cost savings arising from presumably changed prescribing habits. Before conclusively connecting cost savings with the formulary, anyone pursuing further study in this area would need to recognize and eliminate the other factors in the institution and marketplace that affect usage and prescribing habits. CONCLUSION The findings of this study indicate that diff erences may exist on a cost per dose or per gram basis between formulary and non-formulary drugs at HCH, but the direction and magnitude of that diff erence vary with the therapeutic category. Cost is not the sole factor when selecting items for a formulary, and formulary implementation may actually result in increased average costs in some therapeutic categories. Indexes can be used to measure general changes in the price and value of items purchased, and have the added advantage of taking into account actual quantities purchased. Based on the calculated price indexes, it appears that affiliation with the Intermountain Health Care Purchasing Program did lower overall purchase costs at HCH. However, implementation of the formulary appeared to influence purchase costs only in some therapeutic categories, implying adoption of the formulary system had only selective potential to control drug costs. An attempt was made in this study to measure the combined effects of formulary implementation and group purchasing affiliation on lowdollar value drug products. Based on the described methods, overall savings in the four therapeutic categories evaluated totaled $681.33. However, factors other than the formulary and group purchasing affected this number. Altered prescribing habits and stricter inventory control appeared to be equally important considerations when estimating cost 27 savings. In conclusion, the combined effects of the closed formulary and group purchasing systems, as measured by indexes, were to reduce overall purchase costs at Holy Cross Hospital. However, the estimated dollar savings cannot be solely attributed to the formulary and group purchasing systems, and are qualified by other factors not measured in this study. 28 Appendix 1. Drug Formulary Purchases, 1978-79 Period. Quantity Cost of Total Purchases Cost per Purchase Size 5.60 $ 2.80 64.07 4.58 291.32 41.62 Antihistamines/ Decongestants Actifed Syrup 2 x pt Actifed Tablet 14 x 100 7 x 1000 $ Chlorpheniramine 4mg Tablet (Chlor-Trimeton) 23 x 100 76.40 3.32 Chlorpheniramine 8mg Tablet (Chlor-Trimeton, Teldrin) 5 x 50 15.80 3.16 5 x 100 29.25 5.85 Chlorp hen iramin e 12mg Tablet (Chlor-Trimeton, Teldrin) 2 x 100 17.53 8.76 Cyproheptadine 4mg Tablet (Periactin) 4 x 100 35.62 8.90 Dimetapp Elixir 8 x gal 272.53 3.4~07 4 x pt 16.56 4.14 10 x 100 89.06 8.91 Dimetapp Extentabs 29 Drug Diphenhydramine 25mg Capsule (Benadryl) Quantity Co st of To tal Purchases Cost per Purchase Size 7.60 $ 3.80 142.40 28.48 272.50 4.95 2 x 1000 77.55 38.78 1 x gal 20.74 20.74 8 x pt 36.25 4.53 84.89 0.14 22 x 100 242.90 11.04 4 x 100 35.65 8.91 151.65 6.32 1 x 500 59.50 59.50 Promethazine 25mg Tablet (Phenergan) 10 x 100 89.87 8.99 Promethazine 50mg Tablet (Phenergan) 8 x 100 109.44 13.68 Pseudoephedrine Syrup (Suda£ed) 9 x pt 28.65 3.18 Pseudoephedrine 30mg Tablet (Suda£ed) 60 x 24 70.80 1.18 23 x 100 73.05 3.18 24 x 100 94.80 3.95 2 x 100 5 x 1000 Dip henhyd ram in e 50mg Capsule (Benadryl) Diphenhydramine Elixir 55 x 100 592 x 5ml UD Drixoral S.A. Tablet Entex Capsules Ornade Spansule Pseudoephedrine 60mg Tablet (Sudafed) 24 x 50 $ 30 Drug Quantity Tripelennamine 50mg Lontab (pyr ibenzamine, PBZ) 15:x 100 Cost of Total Purchases Cost per Purchase Size $ 70.20 $ 4.68 2 x pt 19.76 9.88 5 x 4 oz 13.45 2.69 Hycodan Syrup 6 x pt 52.51 8.75 Novahistine Expectorant 4 x pt 37.00 9.25 Organidin Tablet 10 x 100 49.12 4.91 Phenergan Expectorant Plain 3 x pt 13.39 4.46 11 x pt 81.61 7 ~'42 1 x pt 8.81 8.81 Robitussin Syrup 42 x 4 oz 39.90 0.95 Robitussin A-C Syrup 12 x pt 95.03 7.92 36 x 4 oz 80.52 2.24 84 x 4 oz 122.28 1.46 10.56 1.32 12.00 0.12 Antitussives Ambenyl Expectorant Phenergan Expectorant Codeine wI Phenergan VC Expectorant wI Codeine Robitussin-DM Syrup Terpin Hydrate Elixir w/Codeine 8 x 4 0 z 100 x 5ml UD 31 Drug Quantity Cost of;Total Purchases Cost per Purchase Size Antacids Aluminum Hydroxide Susp. (Amphoj el) $ 253.80 $ 1.76 18 x 32 24.17 1.34 144 x 6 oz 17.52 0.12 1 x 1000 17.10 17.10 121 ~:·44 0.44 1.85 1.85 190.52 1.54 1.93 1.93 285.04 0.79 4 x 40 3.50 0.88 2 x 100 5.35 2.68 12 x 12 oz 22.56 1.88 3 x 100 5.64 1.88 31 x 15 gm 98.20 3.17 gm 31.10 6.22 Betamethasone Ointment 8 x 15 gm 0.1% (Valisone) 24.60 3.08 3 x 45 gm 14.61 4.87 Gaviscon Foamtab Gelusil Suspension 144 x 12 oz Gelusil Tablet Maalox Suspension 276 x 12 oz Maalox No. 1 Tablet Magaldrate Suspension (Riopan) 1 x 100 124 x 12 oz Magaldrate Tablet (Riopan) Mylanta Suspension 1 x 100 360 x 5 oz Mylanta Tablet Titralac Suspension Titralac Tablet Topical Corticosteroids Betamethasone Cream 0.1% (Valisone) 5 x 45 32 Drug Quantity Cost of Total Purchases Cost per Purchase Size 6.00 $ 3.00 Fluocinolone Cream 0.01% (Synalar) 2 x 15 gm FluocinoloneCream 0.025% (Synalar) 1 x 15 gm 2.36 2.36 Fluocinolone Ointment 0.025% (Synalar) 5 x 15 gm 17.40 3.48 Fluocinonide Cream 0.05% (Lidex) 4 x 15 gm 13.92 3.48 Fluocinonide Ointment 0.05% (Lidex) 5 x 15 gm 17.58 3.52 Halcinonide Cream 0.1% (Halog) 3 x 15 gm 10.02 3.34 Halcinonide Ointment 0.1% (Halog) 1 x 15 gm 3.46 3.46 Hydrocortisone Cream 0.5% (Cort-Dome) 1 x 30 gm 3.05 3.05 Hydrocortisone Cream 1% (Cort-Dome, others) 37 x 30 gm 118.80 3.21 gm 12.00 3.00 Triamcinolone Cream 0.025% (Ar istocort, Kenalog) 19 x 15 gm 33.34 1.75 Triamcinolone Cream 0.1% (Aristocort, Kenalog) 6 x 15 gm 14.58 2.43 5 x 60 gm 31.92 6.38 Triamcinolone Ointment 0.025% (Ar istocort, 3 x 15 gm Kenalog) 5.64 1.88 Hydrocortisone Ointment 1% (Hytone, others) 4 x 30 $ 33 Drug Quantity Triamcinolone Ointment 0.1% (Aristocort, Kenalog) 7 x 15 gm Cost of Total Purchases $ 17.24 Cost per Purchase Size $ 2.46 34 Appendix 2. Drug Formulary Purchases, 1979-80 Period. Quantity Cost of Total Purchases Cost per Purchase Size 4.30 $ 4.30 Antihistamines/ Decongestants $ Act if ed Syrup 1 x pt Actifed Tablet 40 x 100 176.17 4.40 Chlo rpheniramine 8mg Tablet (Chlor-Trimeton, Teldrin) 4 x 100 26.25 6.56 Chlorpheniramine 12mg Tablet (Chlo r-Tr imeton, Teldrin) 6 x 100 58.52 9.75 Cypro heptadine 4mg Tablet (p er ia c tin) 9 x 100 83.31 9.26 Dimetapp Elixir 7 x gal 205.44 29.35 Diphenhydramine 25mg Capsule (Benadryl) 16 x 100 48.20 3.01 Diphenhydramine sOmg Capsule (Benadryl) 21 x 100 100.49 4.79 147.20 49.07 2 x gal 66.59 33.30 100 x Sml UD 18.90 0.19 3 x 1000 Diphenhydramine Elixir 35 Drug Drixoral S .A. Tablet Entex Capsules Ornade Spansule Promethazine Syrup (Phenergan) Quantity Cost of Total Purchases Cost per Purchase Size 14 x 100 $ 158.58 $ 11.33 1 x 100 9.05 9.05 27 x 50 180.26 6.68 3 x pt 10.35 3.45 Promethazine 25mg Tablet (Phenergan) 13 x 100 111.68 8.59 Promethazine 50mg Tablet (Phenergan) 2 x 100 26.20 13.10 Pseudoephedrine Syrup (Sudaf ~d) 7 x pt 24.14 3.45 Pseudoephedrine 30mg Tablet (Sudaf ed) 7 x 100 22.85 3.26 Pseudoephedrine 60mg Tablet (Sudafed) 12 x 100 46.10 3.84 9 x 100 40.27 4.47 6 x 4 oz 16.32 2.72 14 x pt 130.81 9.34 Novahistine Expectorant 3 x pt 29.10 9.70 Organidin Tablet 2 x 100 10.10 5.05 Tr ipelennamine 50mg Lontab (pyr ibenzamine, PBZ) Antitussives Ambenyl Expectorant Hycodan Syrup 36 Drug Phenergan Expectorant Plain Quantity Cost of Total Purchases Cost per Purchase Size 9 x pt $ 40.10 $ 4.46 Phenergan Expectorant wI Codeine 19 x pt 139.93 7.36 Phenergan VC Expectorant wI Codeine 4 x pt 29.95 7.49 Robitussin Syrup 60 x 4 oz 23.40 0.39 Robitussin A-C Syrup 12 x pt 92.38 7.70 'oz 132.72 2.21 72 x 4 oz 93.04 1.29 900 x 5ml UD 138.00 0.15 14.72 4.91 27 x 120z 47.25 1.75 146 x 500 ml 272.68 1.87 5 x 32 5.95 1.19 23 x 100 92.73 4.03 3 x 130 16.62 5.54 151.14 0.10 198.00 0.46 9.24 1.85 60 x 4 Robitussin-DM Syrup Terpin Hydrate Elixir w/Codeine 3 x pt Antacids Aluminum Hydroxide Susp. (Alternagel, Amphoj el) Gaviscon Foamtab Gelusil Suspension Maalox Suspension Maalox No. 1 Tablet 1512 x 6 oz 432 x 12 oz 5 x 100 37 Drug Magaldrate Suspension (Riopan) Quantity 48 x 12 oz Cost of Total Purchases Cost per Purchase Size $ 69.96 $ 1.46 3.86 1.93 192 x 5 oz 59.79 0.31 Mylanta Tablet 21 x 100 49.96 2.38 Titralac Suspension 17 x 12 oz 31.96 1.88 4 x 100 7.48 1.87 23 x 15 gm 72.20 3.14 12 x 45 gm 77.65 6.47 Betamethasone Ointment 0.1% (Valisone) 8 x 15 gm 24:.64 3.08 Fluocinolone Cream 0.01% (Synalar) 18 x 15 gm 54.00 3.00 Fluocinolone Cream 0.025% (Synalar) 71 x 15 gm 219.32 3.09 Fluocinolone Ointment 0.025% (Synalar) 12 x 15 gm 38.82 3.24 Fluocinonide Cream 0.05% (Lidex) 6 x 15 gm 21.96 3.66 10 x 60 gm 77.24 7.72 7 x 15 gm 29.28 4.18 25 x 15 gm 78.17 3.13 Magaldrate Tablet (Riopan) Mylanta Suspension 2 x 100 Titralac Tablet Topical Corticosteroids Betamethasone Cream 0.1% (Valisone) Fluocinonide Ointment 0.05% (Lidex) Halcinonide Cream 0.1% (Ha1.og) 38 Drug Quantity Cost 6f:Total Purchases Cost per Purchase Size Halcinonide Ointment 0.1% (Halog) 8 x 15 gm $ 27.68 $ 3.46 Hydrocortisone Cream 0.5% (Cort-Dome, others) 12 x 30 gm 15.66 1.30 Hydrocortisone Cream 1% (Cort-Dome, others) 77 x 30 gm 190.90 2.48 9 x 30 gm 33.72 3.75 Triamcinolone Cream 0.025% (Aristocort, Kenalog) 18 x 15 gm 28.44 1.58 Triamcinolone Cr eam 0.1% (Aristocort, Kenalog) 19 x 15 gm 53.21 2.80 9 x 30 gm 46.62 5.18 Triamcinolone Ointment 0.025% (Aristocort, 3 x 15 gm Kenalog) 5.22 1.74 Triamcinolone Ointment 0.1% (Aristocort, Kenalog) 15 x 15 gm 38.61 2.57 Hydrocortisone Ointment 1% (Hytone, others) 39 Appendix 3. Drug Non-Formulary Purchases, 1978-79 Period. Quantity Co st of Total Purchases Cost per Purchase Size 8.55 $ 8.55 Antihistamines/ Decongestants Azatadine 1mg Tablet (Optimine) 1 x 100 Co-Pyronil Pulvule 6 x 100 45.84 7.64 Coricidin Tablet 5 x 100 14.34 2.87 Coricidin 'D' Decongestant Tablet 4 x 100 14.16 3.54 Deconamine Tablet 3 x 100 17.37 5.79 Demazin Repetab 2 x 100 14.04 7. 02 Dexchlorpheniramine 2mg Tablet (Polaramine) 2 x 100 7.02 3.51 Dexchlorpheniramine 6mg Repetab (Polaramine) 4 x 100 34.37 8.59 Naldecon Tablet 1 x 100 13.39 13.39 $ Nolamine Tablet 17 x 50 89.15 5.24 Phenergan-D Tablet 2 x 100 16.16 8.08 Primatene Asthma Tablet 1 x 60 2.77 2.77 ',.40 Drug Quantity Cost of Total Purchases Cost per Purchase Size 1.89 $ 1.89 Sinutab Tablet 1 x 30 Tuss-Ornade Spansule 4 x 50 29.30 7.32 Actifed-C Expectorant 5 x pt 32.74 6.55 Asbron G Tablet 1 x 100 6.44 6.44 Benylin Cough Syrup 8 x 4 oz 12.44 1.56 Benzonatate 100mg Perle (Tessalon) 1 x 100 8.00 8.00 Brondecon Tablet 2 x 100 17.50 8.75 Cheracol Cough Syrup 1 x pt 9.20 9.20 Cosanyl Syrup 3 x 4 oz 5.04 1.68 Dimetane Expectorant 1 x pt 4.77 4.77 Histadyl E.C. Syrup 1 x'..4,oz 2.16 2.16 Hycomine Compound Tablet 1 x 100 10.95 10.95 Hycomine Syrup 1 x pt 11.05 11.05 Novahistine Elixir 5 x 4 oz 7.70 1.54 Para-Hist Antitussive 2 x pt 11.90 5.95 Phenergan Syrup Fortis 2 x pt 20.00 10.00 Pyr ibenzamine Expectorant w/Codeine and Ephedrine 1 x pt 4.80 4.80 $ Ant itu ssives 41 Drug Quantity Cost of Total Purchases Cost per Purchase Size 4.80 $ 4.80 Pyr ibenzamine Expectorant wI Ephedrine 1 x pt Ru-Tuss (Green) Syrup 6 x pt 41.83 6.97 Ru-Tuss (Red) Syrup 2 x pt 9.90 4.95 Ru-Tuss Tablet 2 x 100 20.90 1 0~·45 Tedral Expectorant Tablet 1 x 100 6.95 6.95 Triaminic Expectorant 7 x 4 oz 11.20 1.60 1 x pt 6.04 6.04 22 x 4 oz 31.46 1.43 3 x pt 13.47 4.49 1.60 1.60 Triaminic Syrup $ Triaminicol Syrup 1 x 4 oz Tussionex Liquid 1 x pt 15.26 15.26 Tu s s-Ornad e Spansule 4 x 50 29.30 7.32 Ulo Syrup 1 x 12 oz 6.12 6.12 1 x 25 0.99 0.99 2 x 36 2.83 1.42 3 x 12 oz 6.39 2.13 Antacids Alka-Seltzer Tablet Cana lox Suspension Digel Liquid 26 x 6 oz 26.72 1.03 Digel Tablet 12 x 56 14.28 1.19 3 x 100 5.17 1.72 35 x 12 oz 88.90 2.54 Oxaine-M Liquid 42 Drug Quantity Cost of Total Purchases Cost per Purchase Size 9.07 $ 0.70 Pepto-Bismol Liquid 13 x 4 oz Tr isog el Liqu id 62 x 12 oz 113.24- 1.83 1 x 12 oz 1.45 1.45 Alphosyl-HC Cream 1 x 30 gm 3.30 3.30 Aristocort A Cream 0.1% 5 x 15 gm 17.00 3.40 Aristocort A Ointment 0.1% 2 x 15 gm 6.80 3.40 Carmol":'HC Cream 1% 1 x 30 gm 2.75 2.75 2 x 120 gm 13.70 6.85 3 x 15 gm 7.30 2.43 3 x 60 gm 21.46 7.15 Desoximetasone Cream 0.25% (Topicort) 6 x 15 gm 17.40 2.90 Dexamethasone Cream 0.1% (Decaderm) 1 x 15 gm ?.53 2.53 Fluocinolone Cream 0.01% (Synalar) 1 x 45 gm 3.50 3.50 Fluocinolone Cream 0.2% (Synalar-HP) 2 x 12 gm 15.72 7.86 Fluo cinonide Cream 0.05% (Lidex) 8 x 30 gm 32.4:4 4.06 Fluocinonide Ointment 0.04% (Lidex) 8 x 30 gm 34.20 4.28 Wingel Liquid $ Topical Cort icostero ids Desonide Cream 0.05% (Tridesilon) 43 Drug Flurandrenolide Cream 0.025% (Cordran) Quantity Cost per Purchase Size 2.80 $ 2.80 2 x 60 gm 8.50 4.25 3 x 15 gm 8.25 2.75 2 x 7.5 gm 3.16 1.58 2 x 15 gm 5.50 2.75 2 x 60 gm 16.64 8.32 Halcinonide Cream 0.1% (Halog) 2 x 60 gm 18.51 9.26 Hydrocortisone Cream 0.25% (Cort-Dome) 6 x 30 gm 10.53 1.76 1 x 120 gm 4.69 4.69 14 x 15 gm 31.82 2.27 1 x 75 gm 7.05 7.05 Flurandrenolide Cream 0.05% (Cordran) Flurandrenolide Ointment 0.05% (Cordran) Hydro cor t ison e Ointment 1% Tr iamcinolone Ointment 0.1% (Ar istocort) 1 x 30 gm Cost Qf .Total Purchases $ 44 Appendix 4. Price Index Price Index X 100 Po = 1978-79 period acquisition costs. PI = 1979-80 period acqu isit ion costs. QO = Quantities purchased during the 1978-79 period. 45 Appendix 5. Drug Purchase Size Listed prices. ,1978 List ed Price 1979 Listed Price 1980 Listed Price $ 4.30 $ 4.30 $ 4.30 Antihistaminesl Decongestants Actifed Syrup pint Actifed Tablet 100 tab 4.75 4.75 4.75 1000 tab 42.75 42.75 42.75 Chlorpheniramine 4mg Tablet ( Chlor-Trimeton) 100 tab 2.68 2.88 3.22 Chlorpheniramine 8mg Tablet (Chlor-Trimeton, Teldrin) 50 tab 3.10 3.40 3.73 100 tab 4.99 5.09 5.60 Chlorpheniramine 12mg Tablet (Chlor-Trimeton, Teldrin) 100 tab 6.98 7.54 9.87 Cyproheptadine 4mg Tablet (Periactin) 100 tab 7.35 7.94 8.58 gal" 32.50 33.80 35.49 pint 4.50 4.68 4.91 100 tab 9.00 9.00 9.90 Dimetapp Elixir Dimetapp Extentabs 4·6 Drug Diphenhydramine 25mg Capsule (Benadryl) Dip hen hydr am in e 50mg Cap su Ie (Benadryl) Diphenhydramine Elixir Purchase Size 1978 Listed Price 1979 Listed Price 1980 Listed Price 100 cap $ 2.60 $ 3.45 $ 4.42 1000 cap 22.65 29.90 38.42 100 cap 3.87 5.10 6.55 gal 18.00 23.80 30.63 pint 3.10 4.05 5.21 15.40/100 20.30/100 26.10/100 5ml UD Drixoral S .A. Tablet 100 tab 9.97 10.20 11.03 Entex Capsules 100 cap 8.50 9.05 9.30 50 cap 6.25 6.55 6.90 500 cap 59.50 63.25 67.00 PrGmethazine 25mg Tablet (Phenergan) 100 tab 7.91 7.91 8.46 Promethazine 50mg Tablet (Phenergan) 100 tab 12.16 12.16 13.00 Pseudo ep hedr ine Syrup (Suda£ ed) pint 3.15 3.15 3.50 Pseudoephedrine 30mg Tablet (Suda£ed) 24 tab 1.05 1.18 1.35 100 tab 2.85 3.15 3.55 100 tab 3.95 3.95 3.95 Ornade Spansule Pseudo ephedrine 60mg Tablet (Sudaf ed) 47 Drug Purehase Size 1978 Listed Price 1979 Listed Price 1980 Listed Price Tr ipelennamine 50mg Lontab (Pyr ibenzamine, PBZ) 100 tab $ 1.06 $ 1.06 $ 1.27 Azatad ine 1mg Tablet (Optimine) 100 tab 7.27 7.27 9.90 Co-Pyronil Pulvule 100 cap 7.64 7.64 8.40 Coricidin Tablet 100 tab 2.29 2.42 2.54 Coricidin 'D' Decongestant Tablet 100 tab 2.89 3.01 3.16 Deconamine Tablet 100 tab 5.34 6.00 6.00 Demazin Repetab 100 tab 6.45 6.45 6.99 Dexchlorpheniramine 2mg Tablet (Polaramine) 100 tab 2.89 3.13 4.11 Dexchlorpheniramine 6mg Repetab (Polaramine) 100 tab 7.13 7.54 9.89 Naldecon Tablet 100 tab 10.62 11.68 14.12 Nolamine Tablet 50 tab 4.80 5.15 5.65 100 tab 6.46 6.46 6.80 Primatene Asthma Tablet 60 tab 30.41 33.80 35.15 Sinutab Tablet 30 tab 1.78 1.89 1.89 Tu s s-Ornad e Spansule 50 cap 7.10 7.55 8.00 Phenergan-D Tablet 48 Drug Purchase Size 1978 Listed Price 1979 Listed Price 1980 Listed Price pint $ 8.04 $ 8.75 $ 9.38 4 oz 2.46 2.60 2.69 Hycodan Syrup pint 7.75 9.15 9.70 Novahistine Expectorant pint 9.06 9.70 10.38 Organidin Tablet 100 tab 4.32 4.97 4.97 Phenergan Expectorant Plain pint 4.46 4.46 4.46 Phenergan Expectorant w/ Codeine pint 6.53 6.53 6.53 Phenergan VC Expectorant w/ Codeine pint 7.05 7.05 7.05 Robitussin Syrup 4 oz 0.92 0.95 1.03 Robitussin A-C Syrup pint 7.55 7.55 8.31 4 oz 2.20 2.20 2.42 Ro bitussin-DM Syrup 4 oz 1.42 1.47 1.59 Terpin Hydrate Elixir w/Codeine 4 oz 1.60 1.83 2.05 5ml UD 15.50/100 15.50/100 17.00/100 pint 6.55 6.55 6.85 100 tab 6.70 7.20 8.29 4 oz 1.31 1.31 1.44 Antitussives Ambenyl Expectorant Act if ed-C Expectorant Asbron G Tablet Benylin Cough Syrup 49 Drug Purchase Size 1978 Listed Price Benzonatate 100mg Perle (Tessalon) 100 cap $ 8.60 $ 10.00 $ 10.00 Brondecon Tablet 100 tab 8.00 8.75 8.19 Cheracol Cough Syrup pint 7.36 7.36 8.10 Cosanyl Syrup 4 oz 1.48 1.98 2.09 Dimetane Expectorant pint 5.35 5.35 5.89 Histadyl E.C. Syrup 4 oz 2.16 2.16 2.38 100 tab 9.95 11.50 11.50 Hycomine Syrup pint 9.45 11.05 11.05 Novahistine Elixir, 4 oz 1.54 1.62 1.71 Para-Hist Antitussive pint 5.80 5.80 5.80 Phenergan Syrup Fortis pint 8.89 8.89 9.78 Pyribenzamine Expectorant wi Codeine and Ephedrine pint 4.50 manufacturer discontinued Pyr ibenzamine Expectorant wi Ephedr ine pint 3.60 manufacturer disrontinued Ru-Tuss (Green) Syrup pint 6.85 7.19 8.55 Ru-Tuss (Red) Syrup pint 4.95 4.95 5.30 100 tab 6.40 6.95 7.14 Hycomine Compound Tablet Tedral Expectorant Tablet 1979 Listed Price 1980 Listed Price 50 Drug Purchase Size 1978 Listed Price 1979 Listed Price 1980 Listed Price 4 oz $ 1.60 $ 1.60 $ 1.85 pint 5.61 5.61 5.90 4 oz 1.43 1.43 1.68 pint 4.49 4.49 5.92 Triaminicol Syrup 4 oz 1.60 1.60 1.88 Tussionex Liquid pint 13.85 14.96 14.96 Tuss-Ornade Spansule 50 cap 7.10 7.55 8.00 U10 Syrup 12 oz 5.28 5.88 5.88 Aluminum Hydroxide Susp. (Amphojel) 12 oz 1.56 1.65 1.75 Gaviscon Foamtab 32 tab 1.38 1.57 1.57 100 tab 3.69 4.07 4.07 6 oz 0.91 1.06 0.99 1000 tab 16.00 17.10 15.17 12 oz 1.73 1.83 2.03 100 tab 1.74 1.85 2.08 12 oz 1.49 1.63 1.63 100 tab 1.75 1.93 2.09 5 oz 0.85 0.88 0.92 Triaminic Expectorant Triaminic Syrup Antacids Gelusil Suspension Gelusil Tablet Maa10x Suspension Maalox No.1 Tablet Magaldrate Suspension (Riopan) Magaldrate Tablet (Riopan) Mylanta Suspension 51 Drug Purchase Size 1978 Listed Price 1979 Listed Price 1980 Listed Price 40 tab $ 0.82 $ 0.88 $ 1.02 100 tab 1.60 1.75 2.03 12 oz 1.80 1.80 1.80 100 tab 1.80 1.80 1.80 25 tab 0.81 0.89 1.00 36 tab 1.27 1.36 1.42 12 oz 1.93 2.13 2.65 Digel Liquid 6 oz 0.97 0.97 0.97 Digel Tablet 56 tab 1.18 1.18 1.18 100 tab 1.60 1.60 1.60 12 oz 2.20 2.42 2.60 4 oz 0.70 0.76 0.83 Trisogel Liquid 12 oz 1.96 1.96 1.96 Wingel Liquid 12 oz 1.:45 Mylanta Tablet Titralac Suspension Titralac Tablet Alka-Seltzer Tablet Camalox Suspension Oxaine-M Liquid Pepto-Bismol Liquid no price listed Topical Corticosteroids Betamethasone Cream 0.1% (Valisone) 15 gm 2.50 2.70 3.08 45 gm 4.87 5.26 5.96 15 gm 2.50 2.70 3.08 45 gm 4.87 5.26 5.96 Fluocinolone Cream 0.01% (Synalar) 15 gm 1.75 3.00 3.00 Fluocinolone Cream 0.025% (Synalar) 15 gm 2.57 3.48 3 •. 48 Betamethasone Ointment 0.1% (Valisone) 52' Purchase Size 1978 Listed Price 1979 Listed Price 1980 Listed Price Fluocinolone Ointment 0.025% (Synalar) 15 gm $ 2.57 $ 3.48 $ 3.48 Fluocinonide Cream 0.05% (Lidex) 15 gm 2.92 3.66 3.66 Fluodinonide Ointment 0.05% (Lidex) 15 gm 2.92 3.66 3.66 Halcinonide Cream 0.1% (Halog) 15 gm 2.75 3.23 3.23 Halcinonide Ointment 0.1% (Halog) 15 gm 2.75 3.23 3.23 Hydrocortisone Cream 0.5% ( Cort-Dome) 30 gm 1.75 1.85 1.95 Hydrocortisone Cream 1% (Cort-Dome, others) 30 gm 2.40 2.53 2.66 Hydrocortisone Ointment 1% (Hytone, others) 30 gm 2:' 0 2.79 2.93 Triamcinolone Cream 0.025% (Aristocort, Kenalog) 15 gm 1.37 1.58 1.74 Triamcinolone Cream 0.1% (Aristocort, Kenalog) 15 gm 2.18 2.35 2.59 60gm 5.40 5.94 6.53 15 gm 1.37 1.58 1.74 Drug Triamcinolone Ointment 0.025% (Aristocort, Kenalog) 53 Drug Purchase Size 1978 Listed Price 1979 Listed Price 1980 Listed Price Triamcino Ion e Ointment 0.1% (Aristocort, Kenalog) 15 gm $ 2.18 $ 2.35 $ 2.59 Alphosyl-HC Cream 30 gm 3.07 3.53 3.85 Aristocort A Cream 0.1% 15 gm 2.70 2.86 3.39 Aristocort A Ointment 0.1% 15 gm 2.70 2.86 3.39 Carmol-HC Cream 1% 30 gm 2.65 2.75 3.63 120 gm 6.75 6.95 7.18 15 gm 2.30 2.70 2.98 60 gm 6.50 7.48 8.23 Desoximetasone Cream 0.25% (Topicort) 15 gm 2.90 2.90 3.40 Dexamethasone Cream 0.1% (Decaderm) 15 gm 2.13 2.30 2.48 Fluocinolone Gream 0.01% (Synalar) 45 gm 3.87 4.20 4.20 Fluocinolone Cr eam 0.2% (Synalar-HP) 12 gm 7.86 8.34 8.34 Fluocinonide Cream 0.05% (Lidex) 30 gm 4.00 4.44 4.44 Fluocinonide Ointment 0.05% (Lidex) 30 gm 4.00 4.44 4.44 Desonide Cream 0.05% (Tridesilon) Purchase Size 1978 Listed Price 30 gm $ 2.62 manufacturer discontinued 60 gm 3.97 manufacturer dis c-ori t inu ed 15 gm 2.57 manufacturer discontinued 7.5 gm 1.48 manufacturer discontinued 15 gm 2.57 $ 2.75 $ 3.47 60 gm 7.77 8.31 9.13 Halcinonide Cream 60 gm 7.60 7.98 8.38 Hydrocortisone Cream 0.25% ( Cort-Dome) 30 gm 1.71 1.80 1.89 120 gm 4.31 4.53 4.75 Hydrocortisone Ointment 1% 15 gm 0.80 0.69 0.69 Triamcinolone Ointment 0.1% (Ar istocort) 75 gm 5.82 6.17 7.10 Drug Flurandrenolide Cream 0.025% (Cordran) Flurandrenolide Cream 0.05% (Cordran) Flurandrenolide Ointment 0.05% (Cordran) 1979 Listed Price 1980 Listed Price 5.5 Appendix 6. Value Index = Value Index ~ PI Q1 ~ Po Qo Q 1 X 100 Po QO = 1978-79 period acquisition costs. = 1979-80 period acquisition costs. = Quantities purchased during the 1978-79 period. Quantities purchased during the 1979-80 period. REFERENCES 1 Barnes Fh. American Medicorp's materials management system. Prog 1973; 54 (Mar): 36-44. Hosp 2 Pike M, Yedvab JO. Bolstering the budget with bulk purchasing. Hospitals. 1964; 38 (Mar 1): 89-92. 3 Francke DE, Latiolais CJ, Francke GN, et ale Mirror to hospital pharmacy. Easton, PA: Mack Printing Company; 1963. 4 Swif t RG, Ryan MR. Bid purchasing 6f pharmaceuticals. Pbann. 1978; 35: 1390-2. 5 Callahan PH, Kabat HF. in a private hospital. 6 Kralewski JE. Lower drug costs through group purchasing. Hospitals. 1968; 42 (Oct 1): 98-106. 7 Stolar MR. National survey of hospital pharmaceutical services-1978. Am J Hosp Pharm. 1979; 36; 316-25. 8 U.S. General Accounting Office. GAO report on hospital purchasing and inventory management. Am J Hosp Pharm. 1979; 36: 1171-9. 9 Lipman AG, Bauer ED. Pharmaceutical group purchasing cuts costs, expands knowledge. Hospitals. 1976; 50 (Apr 16): 99-104. Am J Hosp Experiences with a bid system of purchasing Am J Hosp Pharm. 1965; 22: 471-5. 10 May BE, Daniels CE, Herrick JD. Economies of purchasing group size. Am J Hosp Pharm. 1983; 40: 263-6. 11 Johnson LH, Haight R, Herrick J. Evaluation of the prime vendor purchasing system in a groU.p of community hospitals. Paper presented to 17th Annual ASHP Midyear Clinical Meeting. Los Angeles, CA: 1982 Dec 6. 12 Swift RG, Ryan MR. Potential:economic effects of a brand standardization policy in a 1000-bed hospital. Am J Hosp Pharm. 1975; 32: 1242-50. 13 Anon. ASHP guidelines for hospital formularies. 1978; 35: 326-8. 14 Schmieding JL, Sita MJ. Key inventory to formulary to cut drug costs. Hospitals. 1980; 54 (Sep 1): 78-81. Am J Hosp Pharm. 57 15 Daniels CE, Wertheimer AI. Final report: evaluation of hospital formulary effects on cost control. Minneapolis, MN: University of Minnesota College of Pharmacy, 1981. 16 Wolfson DJ. Financial implication of a set of antibiotics policies. Pharmaceutical J. 1980; 224: 706-7. 17 Lemay AP, Salzer LB, Visconti JA, et a1. popular drugs from a hospital formulary. 38: 506-10. Strategies for deleting 1981; Am J Hosp Pharm. 18 Ivey MF, Ba1uch W, Mueller W. Savings achieved through use of a-lass concentrated amino acid solution. Am J Hosp Pharm. 1979; 36: 57-9. 19 Anandan JV. Reducing the number of formulary theophylline preparations. Am J Hosp Pharm. 1981; 38: 511-3. 20 Phelps MR, Godwin HN. Pharmacy and therapeutics committee review of the parenteral cepha10sporins. Am J Hosp Pharm. 1978; 35: 73-5. 21 Noel MW, Paxinos J. Cepha10sporins: 1978; 35: 933-5. use review and cost analysis. Am J Hosp Pharm. 22 Katz E, Sch1amowitz S. Savings achieved through cephalosporin surveillance. Am J Hosp Pharm. 1978; 35: 1521-3. 23 Ryan JL, Francese J. An approach to regulating cephalosporin use and costs. Hosp Formulary. 1980; 15: 674-6. 24 Britton HL, Schwinghammer TL, Romano MJ. Cost containment thraugh :restriction of cepha10sporins. Am J Hosp Pharm. 1981; 38: 1897-9. 25 Coarse JF, Kubica AJ. Hospital pharmacy indexes: a bool1 for assessing purchasing and inventory control performance. Am J Hosp Pharm. 1980; 37: 837-43. 26 Anon. Drug Topics Redbook 1978. Company; 1978. Oradell, NJ: Medical Ec:(!)nomics 27 Anon. Drug Topics Redbook 1979. Company; 1979. Oradell, NJ: Medical Economics 28 Anon. Drug Topics Redbook 1980. Company; 1980. Oradell, NJ: Medical Economics 29 Rubin H, Keller DD. Improving a pharmaceutical purchasing and inventory control system. Am J Hosp Pharm. 1983; 40: 67-70.