Soaring drug prices are putting the squeeze on pharmacies, but you have the power to resist the trend. Advanced analytics can help your pharmacy loosen hyperinflation’s grip.

From 2022 to 2023, drug prices surged by 15.2%, on average, on top of an 11.2% increase the previous year, significantly outpacing inflation. This past year’s increase constitutes an average difference of $590 per drug, putting big pressure on providers nationwide.

The increases are especially bad news for rural hospitals, where over 600 facilities, or 3 in 10, were at risk of closure in 2023 due to financial instability.

Mitigating the impact of rising costs is an industry priority: 71% of hospital pharmacy participants recently stated that streamlining pharmacy purchasing and procurement was an essential priority for them this year. 

The good news is they can do just that.

Where’s the opportunity?

There’s plenty of opportunity among the 40,000 to 60,000 NDC prices hospitals must evaluate daily, given nearly 2,500 preferred NDCs and eight NDC options per therapeutic group.

Most hospitals have been managing this supply chain with low-tech tools like Excel. Many also rely on traditional siloed GPO tools, wholesale portals, and TPA software. Despite pharmacies’ best efforts, this fragmentation hampers data-driven decision-making, creating gaps, deficiencies, and waste.

Traditional procurement approaches also prioritize compliance over financial performance, missing potential improvements in fiscal optimization and sustainability. Even hospitals using newer analytics focus mostly on inventory tracking and supplier consolidation.

Cost-reduction reality

Pharmacy supply chain teams need more. In my view, they need integrated analytics created specifically to optimize spending through blended prices, real-time cost pricing data, and clear visibility into potential savings.

Hospital executives generally understand this need and intend to address it. More than half say 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 adopting purpose-built innovations that surface potential cost savings and elevate the highest-potential opportunities to the top of an integrated dashboard.

These solutions provide transparency around all available drug options to ensure a 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 purchasing-optimization technology and workflows developed by pharmacists. These leaders saved $27 million in 2023 through 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 provides three simple workflows:

• 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.

Relief is in reach

Now, any hospital system can have a bird’s-eye perspective of these workflows in their organization, viewing similar sites in “groups” and facilitating standardized buying practices where applicable. Buyers can dive deeper into any recommended change with a simple click.

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.

As a hospital pharmacy, there’s not a lot you can do to prevent drug prices from rising. But you can do more to find the best available price for every purchase. Analytics, dashboards, and the data you already have point the way.