“Saving the Outpatient Pharmacies” HCSD Retail Pharmacy Operations Review April 17, 2012

1. “Saving the Outpatient Pharmacies” HCSD Retail Pharmacy Operations Review April 17, 2012 Danny Jackson, PD, FABC System Director of Pharmacy Louisiana State University Health Care Services Division Djacks5@lsuhsc.edu

2. Statistics PAP Non Purchased – $36M FY10, $40M FY11, $21M FY12 (6 months)

3. Hospital Cost Report Accounting -101 • All Costs (direct and indirect) associated with outpatient pharmacy are unallowable. State general funds and self generated funds are used to support the operation. • Direct Costs – include drug cost, supplies, and staffing. • Indirect Cost/allocated cost – All other costs associated with the operation of the facility and/or pharmacy. (utilities, maintenance, housekeeping, administration, etc.)

4. Crisis – LSUHCSD Faces $14M midyear Budget cut – FY11 • FY10 • Direct Cost $33,753,333 • Indirect/Allocated Cost $10,128,941 • Total Cost $43,882,274 • Revenue $30,382,337 • Net Revenue $13,499,937 • FY11 • Direct Cost $32,308,823 • Indirect/ Allocated Cost $ 8,618,371 • Total Cost $40,927,194 • Revenue $26,536,718 • Net Revenue $14,390,476

5. Challenges: • How do we reduce cost without reducing the number of prescriptions filled or services provided? • How do we increase revenue?

6. Strategies to Decrease Costs • Drug Cost • HIV drugs cost - $17M (FY11) $4M (allocated) • Utilization of Contract Pharmacy Model • Patient Assistance Programs/Nominal Price Drugs/Therapeutic Substitution (without negatively impacting patient care) • Stopped filling Medicaid Prescriptions • Cost Report Review • Operations • Staffing - $3M (FY10) $2.2M (FY11) • Efficiency – Central Fill Processing

7. Strategies to Increase Revenues • Renegotiated ADAP dispensing fee • Increase dispensing fees • Increase participation by 3rd party payers

8. Results - FY12 (7 months) • Cost Reductions • Drug cost – 69% reduction (# Rx down by 5%) • Allocated cost – 28% reduction • Savings - $12.7M • Revenues • Net +$1,718,633

9. Comparison of Actual FY11 to Projected FY12 • FY11 • Direct Cost $32,308,823 • Indirect/ Allocated Cost $ 8,618,371 • Total Cost $40,927,194 • Revenue $26,536,718 • NET Revenue $14,390,476 • FY12 - Projected • Direct Cost $10,705,798 • Indirect/Allocated Cost $ 2,453,769 • Total Cost $13,159,566 • Revenue $16,105,794 • Net Revenue $ 2,946,228

10. Benefit • LSU Pharmacies Remain Open • Over 60,000 patients continue to get prescriptions filled by an LSU pharmacy • Disease Management Programs continue to be supported by a drug benefit • Implement a Central Fill Pharmacy Model that will allow LSU pharmacies to increase volume without increasing cost.

11. Thank you!