Daniel Shifrin, R.P., M.S. is a recently retired pharmacist who enjoys sharing his insights about hospital pharmacy. He is proud to own one of the largest collections of Pharmacy Stamp First Day Covers.
How Money Matters Plague the Pharmacy while Impacting their Hospital’s Existence
I’m sorry. I can’t even balance a checkbook. I was never into finance. Oh sure, I know how to pay bills online, but that’s more of a point of being computer savvy rather than being into money matters.
Even with my taxes, I’ve never used any of those computerized tax programs—no matter how simple they were. Instead, I brought everything to my accountant and let him figure it out.
Which is strange, especially since I managed a department in the hospital. And a pharmacy department at that!
Now most hospitals will tell you that they are here for their patients. They put the patients first. These facilities describe themselves as benevolent beings who always put the patients in the forefront— above the almighty dollar.
Don’t believe it for a minute.
Hospitals are in the business of making money. And if they don’t make money, they go out of business. I’ve seen it.
Out of the four hospitals that I’ve worked at:
- One has gone out of business,
- One has outsourced services (including Pharmacy), and
- One has incurred such a massive financial loss that it lost its attractiveness in the acquisition market.
As I said, I never had a knack for finance. However, I was always meticulous with my financial reports. I used Microsoft Excel and PowerPoint to prepare tables and graphs detailing where every dollar was spent. But when it came to financial statements, it was just a bunch of numbers to me.
Our hospital had a Chief Financial Officer (CFO). He was also in charge of the Finance Department. Thus, in the world of finance and money matters, he was well- versed.
He also knew his managers, directors, and vice-presidents in the hospital. He knew that we were experts in our own respective fields. But he never expected us to be experts in the field of finance.
In fact, he didn’t want us to worry about the money aspect at all. For he often said, “When it comes to the patient, if you do the right thing, the money will follow.”
And he was right. When we (and our departments) made sure that the patient was properly taken care of, the money aspect always worked out.
Preparing My Budget
In the hospitals where I worked, they always made a big deal about each department preparing their annual budget. Preparation of the annual budget started at the end of the calendar year.
At that time, each manager would need to have their preliminary budget completed by a certain date. Then, each manager would meet with their Director or Vice-president (assuming they were not the same people). A discussion amongst the participants ensued.
Following the discussion, the budget was usually rejected because the figures were too high. The manager redid the budget with lower dollar figures. The budget was then accepted by everybody. It was then submitted to the Finance Department, where it was eventually finalized.
I was an Assistant Director of Pharmacy for eighteen years at one hospital. I was a Team-Leader at another hospital for about two years (followed by nine more years as Pharmacy Manager). Both my bosses were quite knowledgeable about the finances of the Pharmacy.
Especially my boss at my second hospital. She had her MBA. She was quite knowledgeable about the medications, their prices, and the quantities used in our facility.
She could justify every line item in her budget. And the CFO and all the finance people knew it. She never compromised or reduced any of her budgets.
She was a very kind person, a compassionate person, in addition to being a good boss. She had to resign due to unfortunate circumstances. I became the Pharmacy Manager, and my budget was the first thing due.
My former boss came to my house, sat down with me, and taught me how to prepare a budget. Then, we worked on the budget for the upcoming year. She made me feel comfortable as she helped to determine the pharmacy’s costs and justified each line item. She even helped me build a little extra into the budget, should I be forced to reduce it.
She didn’t have to do this. Especially after all she went through. But she did. She’s a wonderful person. And I was eternally grateful.
Reviewing Clinical Aspects
Like most hospitals, we had a Pharmacy and Therapeutics (P&T) Committee. A P&T Committee oversees all aspects of medications within a facility.
Our P&T Committee was outstanding when it came to the clinical aspects of medications. We had physicians, pharmacists, and other experts that prepared detailed presentations on the clinical effectiveness of new and existing medications.
However, when it came to financial decisions, their focus was sorely lacking. They seldom discussed cost when exploring the benefits of the medication. As a result, many medications were added to the formulary with absolutely no regard to price. This caused the medication budget to rise and, in turn, increased the hospital’s expenses.
Physicians Pulling Rank
A physician called the pharmacy and wanted the brand name of a drug for his patient. I explained to the physician that we are a closed formulary. In other words, our pharmacy did not carry every drug— only a certain group of them.
Our pharmacy did not have the brand name of the medication that the physician wanted. Instead, the pharmacy carried the generic drug. It was the same exact drug. It did the same exact thing as the brand name drug, except it was less expensive.
The physician did not care. He wanted the drug. He would not back down. Neither would I— at first.
The physician called the Chairman of the P&T Committee (who also happens to be the Vice President over the Pharmacy Department). I was forced to get the brand name medication for the patient.
But it didn’t end there. The physician attended the next P&T meeting. He recommended that the pharmacy carry both the brand and generic drugs on our formulary.
I was against this addition. If both drugs were exactly the same, but one was more expensive, why did we need it?
But the P&T Committee agreed with the physician. The committee decided that the pharmacy needed to carry both drugs on its formulary.
From an expense, effectiveness, and logical viewpoint, I was baffled by this decision.
Adding More Effective Drugs
A new drug appeared on the market. From a clinical viewpoint, it was far superior to any other medications in its class. It produced its desired result much quicker. It had fewer side effects. It was less expensive and better helped the patient.
This was a no-brainer. It was the best choice for treating the patient. No one would consider using anything else now that this drug had come along.
The P&T had an easy decision. The committee would add this drug to the formulary.
So why didn’t they remove the less effective drug(s) at the same time?
Most of the time, if you buy a new car, you don’t keep the old one. If you buy a new phone, you don’t keep the old one. If you buy a new appliance, you don’t keep the old one.
So if we have a state of the art medication that was better than anything that we had on formulary— why were we still keeping (and paying for) less effective medications? I just don’t understand.
By keeping both new and older medications on formulary, it just increased the pharmacy’s and hospital’s expenses.
Requesting New Medications
My hospital’s Chief of Medical Affairs had a favorite saying. When it came to sales reps, he used to say, “Give a physician a free pen and he’ll write for anything.”
Our hospital had two rules when it came to adding new drugs to our formulary:
- The physician, personally, had to come to the pharmacy and fill out a formulary request form in order to add a new drug to our formulary. We felt that if a physician truly wanted a medication, then he/she had to come to the pharmacy and fill out the formulary request form.
- The physician had to attend the next P&T Committee meeting and explain why the medication should be added to our formulary.
I received a phone call from a surgeon in the operating room (OR). He wanted to add a new drug to our formulary. He asked if we could send the formulary request form to the OR.
I explained that normally we required the physician to come to the pharmacy in order to fill out the form. He understood. But he said that he was between OR procedures. And coming down to the pharmacy at this time would severely impact his OR caseload.
Normally, I wouldn’t make an exception. But this seemed like a valid reason. I told the surgeon that I would allow his designee to pick up the form. The surgeon thanked me and said he appreciated it. A nurse came to the pharmacy to get the formulary request form.
After about an hour, I received the form back. Something struck me as odd. The form was handwritten. But that wasn’t the odd thing, and I expected that. What I did find unusual was that I didn’t recognize the handwriting. It wasn’t the OR surgeon’s. And I compared it to few other OR doctors. It wasn’t their handwriting either.
Maybe an OR nurse? Maybe an OR resident? Or maybe someone else?
Usually, after I received a completed formulary request form, I contacted the physician to let him know when the next P&T meeting was scheduled for. That way the physician had ample time to gather any materials he needed to make his case for formulary addition of the drug
But I suspected something. So I decided to do nothing.
And as I suspected, nothing happened. I heard nothing from the physician. He never followed up to see if I received the formulary request form. He never called to find out when the P&T meeting was. He never requested materials so that he could make his presentation. In fact, I never heard from him at all.
After several weeks, I contacted one of my colleagues— an OR nurse. She kept a logbook of all visitors to the OR. And on the day that the OR surgeon requested the formulary request form, a sales rep had visited the OR. The sales rep brought lunch for the staff. He talked about his new drug. And he gave out pens.
I was absolutely positive that the sales rep had something to do with the OR surgeon’s request for the new drug. Now in all fairness, the surgeon may have truly wanted the new drug added to our formulary. On the other hand, the surgeon may have requested the drug just to get the sales rep to stop bothering him.
But I’m certain that the sales rep prodded the surgeon to make the call. And I’m sure the sales rep filled out the FR form.
My philosophy on new medication requests was quite simple. I’ve often felt that there should be an interest in a new drug not only when the sales rep is in the building— but the next day as well.
Quite often, hospital administrations, physicians, and the P&T Committee view the pharmacy’s budget as a separate entity, having nothing to do with the hospital’s finances. This is a mistake.
Because, even though it is the pharmacy department’s budget that is immediately impacted, it is the hospital’s financial expenditures that are affected in the long run.
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