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Managing Pharmaceutical Costs. Establishing and Utilizing A Centralized Pharmacy Program. Susan M. Shields, RPh Pharmacy Director, Iowa DOC Harbans Deol, DO, PhD Medical Services Director, Iowa DOC Objectives:.

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managing pharmaceutical costs

Managing Pharmaceutical Costs

Establishing and Utilizing

A Centralized Pharmacy Program


Susan M. Shields, RPh

Pharmacy Director, Iowa DOC

Harbans Deol, DO, PhD

Medical Services Director, Iowa DOC

  • Discuss the increasing burden of pharmaceutical costs on correctional health care departments and the need to find ways to reduce this burden;
  • Identify options available to correctional departments who may not want to make extensive changes to their pharmacy systems but still need successful methods to reduce pharmaceutical costs;
  • Discuss the processes followed by the Iowa Department of Corrections to implement their Central Pharmacy Program, the positives and negatives that took place during the implementation process, and the reductions in pharmaceutical costs that have occurred as a result.
iowa dept of corrections
IowaDept. of Corrections

Fort Dodge Correctional Facility

Anamosa State


North Central

Correctional Facility

Iowa Correctional

Institution for Women


Iowa Medical and Classification Center


Correctional Facility

Mt. Pleasant Correctional Facility

Clarinda Correctional Facility

Iowa State Penitentiary

iowa doc central pharmacies
Iowa DOC Central Pharmacies

Des Moines Central Pharmacy

Mitchellville, IA

IMCC Central Pharmacy

Oakdale, IA

major factors in rising healthcare costs
Major Factors in Rising Healthcare Costs
  • Increasing numbers of mentally ill offenders;
  • Steadily aging offender populations;
  • The need for more specialized health care;
  • The cost of pharmaceuticals.
mentally ill patients
Mentally Ill Patients:
  • Numbers are steadily increasing: in 2009, approximately 40% of IDOC population had a mental health diagnosis, in 2012, 51%;
  • Severity as well—2009, 26% classed as seriously mentally ill, 2012, 31%;
  • Requires many more staff, more intensive treatments ;
  • Requires new facilities—both specialized and general population to limit overcrowding.
aging population
Aging Population:
  • Incarcerated offenders aging out within the system;
  • Offenders entering the system at older ages as well;
  • Results: increasing requirements for assisted care, skilled care, and dementia facilities;
  • Hospice facilities also for terminal illnesses.
pharmaceutical costs
Pharmaceutical costs:
  • Studies estimate pharmaceutical costs within state corrections have more than doubled over the last ten years;
  • Offenders and public groups frequently emphasize maintaining community standards;
  • Despite creating budget limitations, lawmakers and legislators want to show positive results for constituents.

Providing professional services while maintaining a cost-effective correctional pharmacy department:

A significant challenge.

where to start
Where to start?

IDOC in 2007:

9 Correctional Facilities

On-site pharmacies for 5 locations;

Off-site contract provider for 4 locations.


The Iowa DOC in the late 2000’s:

Offender population decreasing, Pharmaceutical expenses increasing:

FY 2007 $8,606,402 Offender Average 8780

FY 2008 $6,237,738 Offender Average 8751

FY 2009 $8,475,163 Offender Average 8605

FY 2010 $14,688,082 Offender Average 8399

Something needed to be done.

options considered
Options Considered:
  • Continue as is: some pharmacies

on-site, some facilities utilizing contract provider;

2. Replace contract provider with on-site pharmacies for all locations;


2009 a new plan
2009: A new plan

The IDOC Central Pharmacy Project


  • Elimination of the contract provider
  • Improved cost control
  • Increased formulary monitoring
  • Standardized pharmaceutical purchasing
summer 2010
Summer 2010
  • New IDOC Des Moines Central Pharmacy opened July 2010, dispensing for two facilities;
  • Four facilities served by the contract provider gradually added in steps over the following eight months;
  • Major focus: improving formulary compliance and standardized pharmaceutical purchasing as part of the daily operations.
a big change from fiscal 10
A BIG Change from Fiscal ‘10

Costs FY’10 $14,688,081 Offenders 8399

Fiscal 2011--Central Pharmacy, three on-site pharmacies, and the contract provider for part of the year, all included in IDOC drug costs:

Costs: $8,567,815.63 Offenders 8897

**5.9% more offenders**

**41% less drug cost**

the next step reorganization
The next step: reorganization
  • Facilities on the east side of the state served by Iowa Medical and Classification Center Central Pharmacy;
  • West side facilities by the Des Moines Central Pharmacy;
  • In 2012 two locations with shared DHS/DOC facilities were the last to transition, making the state entirely centralized;
  • Fiscal 2012— first year all pharmacy costs entirely IDOC purchasing (none from the outside contractor).

Costs $6,487,976 Offenders 8526

**24% less than FY 2011**

fiscal 2013
Fiscal 2013

The savings continue:

Costs $5,505,871 Offenders 8256

**15% lessthan Fiscal 2012**

cost review
Cost Review

FY 2007 $8,606,402 Shared DOC/Contract provider

FY 2008 $6,237,738 Shared DOC/Contract provider

FY 2009 $8,475,163 Shared DOC/ Contract provider

FY 2010 $14,688,082 Shared DOC/Contract provider

FY 2011 $8,567,815 Shared DOC/Contract provider


FY 2012 $6,487,976 DOC only

FY 2013 $5,505,871 DOC only

is this trend sustainable
Is This Trend Sustainable?
  • There are going to be fewer brand to generic switches;
  • Price competition between manufacturers is decreasing;
  • Patients with significantly expensive needs will continue to emerge; new specialty medications.

But even if the savings slow or stop, this project has produced three years of substantially decreased costs where increasing expenses

are more common and we have

evidence-based results that we can present to

our Governor and Legislature to show the

effectiveness of the process.

challenges lessons learned
Challenges & Lessons Learned
  • People don’t always like change:
    • No matter how much lead time you provide and how many reasons why it’s a good idea, there are going to be staff who will not be behind the idea of changing to a centralized model.
    • Give people as much time as you can to get used to the idea, and, within limits, try and make accommodations.
  • How much change is actually taking place?
    • New location, new delivery process, new ordering, new packaging—all required more adjustment than expected . This was not just moving an existing DOC pharmacy to a new place.
challenges lessons continued
Challenges & Lessons, continued
  • Keep ALL the staff completely up-to-date:
    • Staffing is a BIG factor—some people may not adjust. Staff turnover led to being shorthanded during the implementation process.
  • Establish any new procedures with all your locations early and standardize as much as possible:
    • Example: Four facilities--four different ways of accomplishing one simple task—ordering provisional stock—allowed by the contract provider. Standardization is cost-effective and is an evidence-based practice. Stress it from the start.
challenges lessons continued1
Challenges & Lessons, continued
  • Don’t change too much at once:
    • It’s very difficult to initiate more than one new program at a time, i.e., trying to implement an electronic MAR at the same time a facility changed to the Central Pharmacy as a provider.
    • Even with plenty of support and training time, the end result was extremely stressful and used more time and effort than if the two projects had been accomplished separately.
    • Consider ALL that you need to accomplish and plan timelines accordingly.
challenges lessons continued2
Challenges & Lessons, continued
  • Formulary restriction and purchasing control: In theory—great; in practice—difficult:
    • Buy-in from providers is critical--obtain support from department leaders;
    • Information is key—therapeutic data, cost information, input on choices;
    • Formulary development should be ongoing; frequent review and evaluation.
what did we do to succeed
What did we do to succeed?
  • Formulary control:
    • IDOC utilizes a strict formulary--emphasis on generic medications;
    • Before Central Pharmacy, formulary exception review not routinely done, many non-formulary medication orders put into place with no review or approval;
    • Even before formal Central Pharmacy implementation, Pharmacy Director on board and responsible for monitoring exceptions; routine reviews almost immediately began producing changes in pharmacy costs, prescribing habits began to change;
    • Criteria and guidelines for non-formulary medication use have been developed to assist providers in knowing which products are available.
what did we do to succeed1
What did we do to succeed?
  • Formulary control:
    • Immediate impact:
      • Non-formulary percentages down significantly, from as high as 13 to 16% in some facilities, to now between 1 and 3%.
    • Can be conflict with providers; higher authority can help with resolution.
    • Reviews are time-consuming; development of policy/procedure is essential;
    • EMR very helpful for immediate reviews BUT NOT ABSOLUTELY NECESSARY.
what did we do to succeed2
What did we do to succeed?
  • Inventory and purchasing control:
    • Iowa DOC is a member of the Minnesota Multi-State Contracting Alliance for Pharmacy (MMCAP); has been very successful for us. But no matter which you choose, correctional entities should always consider a group purchasing option;
    • ICON, our electronic medical record/pharmacy program allows on-hand inventory monitoring at both pharmacy locations to prevent excessive and/or unnecessary purchasing;
    • Non-contract purchases and other purchase monitoring—critical; available through our EMR and through pharmaceutical prime vendor reports.
what did we do to succeed3
What did we do to succeed?
  • Changing to 30-day punch card unit dose:
    • Then: IDOC used standard unit dose packaged medications in individual patient drawers, loaded with 7 to 14 day supplies.
      • Excessive staff time to fill and check every 7-14 days;
      • Higher cost to purchase pre-packaged UD medications plus bulk for multiple filling options;
    • Now: 30-day punch cards, packaged on-site.
      • Packaging equipment was initially costly but savings in cost of bulk vs. unit dose medications has been significant;
      • Staff time saved dispensing 30 day quantities over 7 or 14 days is extensive; facilities spend less time maintaining medication supplies during administration and ordering processes;
      • Cards can be moved with patients at transfer, maintaining continuity of care, no matter when patients arrive at their new facility;
      • Medication waste is reduced, since cards are not automatically discarded when patients transfer or orders change.
what did we do to succeed4
What did we do to succeed?
  • Eventual reorganization of our pharmacies to the East/West Centralized format:
    • Iowa DOC initially had pharmacies in seven of its nine facilities; four of them were contracted out due to RPh shortages. The remaining five facilities continued with on-site pharmacy services by IDOC locations until the Central Pharmacy opened in 2010:
    • FDCF, NCCF, ICIW, NCF in 2010; CCF in 2012
    • ASP, ISP to Central in early 2011 then moved to IMCC in mid 2011; MPCF to IMCC in 2012

Final arrangement:

Des Moines Central: Iowa Medical & Classification Center:



the facilities
The Facilities

Fort Dodge Correctional Facility--DOC Central Pharmacy (2010)

Anamosa State

Penitentiary—IMCC Pharmacy (2011)

North Central

Correctional Facility—DOC Central Pharmacy (2010)


Iowa Correctional

Institution for Women—DOC Central Pharmacy (2010)

Iowa Medical and Classification Center—IMCC Pharmacy (2011)


Correctional Facility--DOC Central Pharmacy (2010)

Mt. Pleasant Correctional Facility—IMCC Pharmacy (2012)

Clarinda Correctional Facility—DOC Central Pharmacy (2012)

Iowa State Penitentiary—IMCC Pharmacy (2011)

what did we do to succeed5
What did we do to succeed:

Reorganization into two pharmacies allows us to make many organizational changes that facilitate cost savings:

  • We can standardize dispensing procedures significantly. For example, certain short-term orders are not dispensed from the pharmacy. Staff on-site issue and administer the med from provisional stock for the duration of the order.
  • Our provisional stock is the same throughout all nine facilities. Facilities decide what quantity to stock but the items are standard. Providers on call know what is available and there is no hesitation after hours when ordering.
  • Inventory is decreased when only two pharmacies are involved. When patients transfer, meds go with them--packaging system is the same for all; inventory can be transferred and shared when necessary (i.e., costly or multi-package items).
what did we do to succeed6
What did we do to succeed?

Our electronic medical record and pharmacy software, ICON Medical/Pharmacy, has been one of the major reasons for the IDOC’s success with its Health Care Department, including the Central Pharmacy. Anyagency that is considering whether an electronic medical record and/or CPOE pharmacy software is worth it—absolutely. The amount of time it saves by eliminating paperwork, transcription issues, and other manual entry problems and the benefits it provides in reducing the potential for errors more than justifies the cost.


Many of these recommendations can be made to work for ANY department, no matter what size.

  • Large departments may be able to consider a centralized model;
  • Smaller facilities who don’t have the budget for this can make some changes and still achieve cost reductions.
large and small size locations
Large and Small Size Locations
  • Formulary Monitoring
  • Group Purchasing Programs
  • Standardized Procedures
  • Patient Assistance Programs

Large Size Locations

  • Centralized Pharmacy
  • Electronic Medical Record
recommendations any size
Recommendations—any size
  • Formulary Monitoring:
    • Generic-based formularies help monitor prescribing, and therefore control costs;
    • Formularies are the standard of practice in Medicaid, Medicare, and insurance programs throughout the country;
    • Pharmaceutical societies and associations can provide assistance in formulary development for departments who do not have a specific pharmacy provider;
    • For smaller locations who do not have EMR, it can be time consuming, but worth the time.
recommendations any size1
Recommendations—any size
  • Group Purchasing Programs
    • There are many pharmaceutical purchasing programs available to government entities. Depending on what type of patients you serve, you may qualify for different pricing (such as 340b). Whatever size, correctional departments should be aware of group purchasing programs and consider them —they can be a source of great savings.
recommendations any size2
Recommendations—any size
  • Standardized Procedures
    • Establishing standard processes for routine daily tasks such as ordering stock and ordering refills will save staff time and assure compliance with departmental policies;
    • Standardization can also be cost-effective since it enables both pharmacy and facility to better plan their staffing and supply needs around established procedures.
    • If you have providers who order medications routinely for you, being able to establish standard protocols for frequently ordered items, especially non-prescription medications, can be another standardized procedure, since it can facilitate cost control for commonly utilized stock items.
recommendations any size3
Recommendations—any size
  • Patient Assistance Programs
    • Patient assistance programs from the medication manufacturers are not options for some locations since many specifically exclude patients in institutional settings;
    • Patients in locations which may not keep patients in long-term correctional situations may qualify; city or county correctional departments may want to consider these as an option for patients, especially those on mental health medications, which often are more expensive or are not on the chain drugstore “$4” medication lists;
    • The website is a clearinghouse for many manufacturer patient assistance programs and low cost generic medication mail order programs as well.
recommendations large department
Recommendations—large department
  • Electronic Medical Records
    • Electronic medical record and/or CPOE pharmacy software is worth the cost by the amount of time and potential for errors it saves eliminating paperwork, transcription issues, and other manual entry problems.
    • Our electronic medical record and pharmacy software, ICON Medical/Pharmacy, has been one of the major reasons for the Iowa Department of Corrections’ success with its Health Care Department, including the Central Pharmacy.
recommendations large department1
Recommendations—large department
  • Consider the reorganization to a central pharmacy model:
    • As evidenced by the cost savings, the two-pharmacy model has been very successful for the IDOC.
    • Many other state DOCs are also utilizing a central model; network as much as possible.
    • Obtain buy-in from staff, plan carefully, and allow time for adjustment.
for the future doing more with less
For the future…doing more with less:
  • Focus on: cost savings and formulary management, increasing emphasis on quality improvement and chronic disease monitoring.
  • Focus on: community standards--evidence-based practices of efficient medication management.
  • Focus on : peer review, policy and chart reviews, timely, cost-effective care.
continuing cost challenges
Continuing cost challenges:

Increasing numbers of aging patients;

Increasing numbers of mentally ill patients;

Emphasis on chronic disease management .

The goal:

Maintaining cost-effective departments without compromising offender health care.

The processes used by the Iowa DOC have successfully accomplished this, and we believe they can be used by other departments to do the same.



Thank you for your attention!


Susan M. Shields, RPh

Pharmacy Director, Iowa DOC

Harbans Deol, DO, PhD

Medical Services Director, Iowa DOC