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Executive Summary

GLAXO's ZOFRAN IS 10% OF DRUG BUDGET AT DUKE University Medical Center after only one year on the market, Duke Director of Pharmacy James McAllister told a media briefing Jan. 16. "I will finish out the year at $2.2 mil. or 10% of my budget for that one drug," McAllister said. Zofran (ondansetron) was launched in February for prevention of chemotherapy-induced nausea ("The Pink Sheet" Jan. 14, T&G-1). The briefing was sponsored by the American Society of Hospital Pharmacists. MacAllister is the immediate past president of ASHP. Robert Williams, the current ASHP president and pharmacy services director at the University of Florida's Shands Hospital, similarly described the impact of Zofran on his pharmacy's budget. "For all anti-emetic drugs last year [1990] in the entire hospital we spent $30,000," Williams said. For 1991, "we're projecting . . . spending $500,000 on that one single drug." Despite its impact on pharmacy budgets, Zofran apparently has been very successful in penetrating hospital formularies. A September Hospital Research Associates survey shows that ondansetron had been accepted by 63.7% of hospitals after six months on the market ("The Pink Sheet" Sept. 23, p. 13). Both Shands Hospital and the Duke Medical Center are bracing for another high-cost breakthrough drug class: the anti-sepsis monoclonals Centoxin (HA-1A) from Centocor and E5 from Xoma. Many hospitals are already conducting pre-approval reviews of the drugs ("The Pink Sheet" Dec. 23, p. 14). The Shands Hospital pharmacy and therapeutics committee met Jan. 15 and accepted Centoxin for use on the hospital formulary once it is approved, Williams said. The decision was tough, Williams indicated, because of the drug's "very, very high cost" and because the hospital calculates "that somewhere around 70%-80% of those patients that will receive it won't wind up needing it." Overall, Williams expects "that one drug alone could go up in the millions of our institution." McAllister said that Duke's P&T committee met to discuss anti- sepsis therapies on Jan. 8, but "declined to make a decision because nothing is available." However, he added, "I told my business manager to start a brand new line item on my budget for HA-1A and I told him to budget $32,000 a week. . . That's eight patients." The hospital estimates annual "expenditures somewhere between $1.5 and $6 mil." on the drug, he said, "so we're getting squeezed pretty hard." Stephen Schondelmeyer, PhD, University of Minnesota, said that new drugs like Centoxin "will be more akin to a capital investment than to an inventory increase." Third-party payers "are going to have to react as quickly as the hospital pharmacy in terms of putting the drug on the formulary." Otherwise, Schondelmeyer said, hospitals may have to find an additional 30%-40% for their drug budgets from other services. While the comments by McAllister and Williams illustrate one cause of escalating hospital pharmacy costs, the ASHP press briefing was called in an attempt to stave off pressure from another direction. ASHP released a report based on a membership survey of the impact on pharmacy budgets if congressional action resulted in the disappearance of discounts for hospitals. The report was coauthored by Schondelmeyer. The "worst case scenario" -- hospitals lose their exemption from the Robinson-Patman Act and are no longer able to negotiate discounts or obtain volume discounts -- would result in a 23.4% increase in pharmacy budgets or an average increase of $389,000 on a $1.69 mil. budget, Schondelmeyer said. The increase would be greater for not-for-profit hospitals, Schondelmeyer noted, which would experience a 24.6% increase. For-profit hospitals would experience an 11.4% increase in pharmacy budgets if all their discounts were no longer available. Williams, McAlister, Schondelmeyer and ASHP CEO Joseph Oddis met earlier on Jan. 16 with various congressional and senatorial staffers to discuss the report and its implications. While ASHP did not identify any specific proposals in Congress to remove the Robinson-Patman exemption, Williams noted that in the current health care reform atmosphere, "You name it, they're thinking about it." The message of the report, he added is, "like those signs that say 'Don't even think of parking here.'" He added that many states and localities are taking steps to eliminate some health care centers' not-for-profit status. A broader message delivered by ASHP at the press briefing was the society's opposition to "tinkering" with what it feels is an "inelastic" system of pharmaceutical pricing, where cost savings in one sector will lead to cost increases in another. McAllister noted that a telephone survey of ASHP members in February 1991 showed a 14%-20% increase in drug prices to hospitals as the Medicaid rebate law took effect, or an increase of about 6%-12% on top of inflation. He added that, at Duke at least, the situation may be worsening: "Companies [which] showed restraint last year have apparently not been able to do so this year."

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