Eliminating Medication Waste in Long-Term Care Can Help the White House Pay for its Health Plan

Corkern2 The news of an $80 billion White House deal with drug companies to lower Medicare drug costs targets $30 billion in savings for consumers covered by Medicare Part D, but the sources of the remaining $50 billion in savings that is supposed to accrue to the government “have not been identified at the moment,” according to an Administration spokesperson.

With the Administration scrambling to find ways to pay for a much-wanted healthcare package estimated to top a trillion dollars in just 10 years, every few billion in potential savings counts.  That’s why the government should take a close look at the extraordinary amount of medication waste that is literally flushed down the toilet every year in long-term care (LTC) facilities.

The United States spends an estimated $1.25 billion annually on direct cost of wasted medications in LTC settings – and this is before the Baby Boomer generation has entered the scene.  Long-term care facilities, pharmacies, wholesalers and manufacturers are expected to incur an additional quarter billion in costs annually due to the labor, distribution and operations costs for distributing and disposing of unused medications.  Throughout this process there are 800,000 medication errors made every year in these facilities.

In February of 2009, The American Society of Consultant Pharmacists (ASCP) surveyed its membership – pharmacists that work in the LTC industry – on the topic of unused medications.  The top three concerns of respondents were preventing diversion, developing cost-effective disposal procedures, and reducing the overall amount of pharmaceutical waste.

Where does all this waste and error originate?  A majority of the approximately 17,000 LTC facilities in the U.S. receive medications in punch cards, cassettes, and/or unit-dose packaging that are delivered on a daily basis by a local or regional offsite LTC pharmacy.  These medications are predominately covered through Medicare Part D.

The most prevalent type of packaging is disposable 30-day punch cards, often referred to as “bingo-cards,” which are sent when the prescription is ordered and every time it is refilled.  However, when a prescription is discontinued or the patient is transferred, discharged, or passes away before the supply is exhausted, the unused medications are either destroyed onsite or sent back to the pharmacy.

However, the ability to return and credit unused medications was not addressed when Medicare Part D was created.  And, because no electronic claim crediting process is available, pharmacies must bill upfront by dispensing the entire supply of medications, up to 30 days, with any unused medications becoming waste.  The pharmacy gets paid either way, because there is no incentive to offer credit for unused medication.

A pharmacy that wants to offer credit for unused medication must use what is known as post-consumption billing – but this requires a hassle that creates cash flow delays and reporting burdens that make it all but impossible to manage.

Baby Boomer demographics indicate long-term care facilities will soon be the new epicenter of spiraling medication costs, and the waste occurring today is astounding.  Medication distribution systems in LTC have not fundamentally changed in decades.  In addition, the current systems are riddled with errors that cost untold billions, and our environment is tainted with unused medications that are flushed or incinerated ever year.  The only group that really benefits from this mess is the pharmaceutical companies.

The U.S. taxpayer can no longer afford the status quo.  While policymakers have their sights set on major reform, they should pursue the needless waste that is growing in this segment of healthcare.

To do that, policymakers and regulators should look for ways to increase automation of medication dispensing in long-term care facilities.  This process is well established in acute care settings, where waste has been virtually eliminated and patient safety has improved dramatically.

Now is the time to incentivize long-term care facilities and the pharmacies that serve them to replace the status quo with systems that will free up taxpayer dollars for health reform, and deliver safer care to our rapidly growing senior population.

More on long-term care reform:

Carla Corkern, is CEO of Talyst,
Bellevue-based automated medication-management company. Previously she worked as
chief operations officer at aerospace supply-management company Vykor,
overseeing areas including software development, customer support.

26 replies »

  1. Medicines are produced in bulks anticipating the consumption. After few months another pharmacy company comes up with a better version of the existing medicine. If the Doctors feel satisfied with the new medicine, they would suggest their patients to stop the medication of the medicine that they were already taking. Intead to continue with the new medicine. Thus there would be a less demand with the old medicines which would be a waste and the new medicines would sell as hot cakes.

  2. The top three concerns of respondents were preventing diversion,developing cost-effective disposal procedures, and reducing the overall amount of pharmaceutical waste..

  3. When a prescription is discontinued or the patient is transferred, discharged or passes away before the supply is exhausted, the unused medications are either destroyed on site or sent back to the pharmacy.

  4. Tom,
    Thank you for understanding our pain and the acknowledgment of Standards Development work. I’m involved in pharmacy standards work with HL7, X12 and NCPDP. Standards work can be very tedious but extremely worthwhile especially with everyone looking for technology to be the financial savior of health care reform (HCR).
    Although getting CMS and payers to recognize the importance of medication waste in LTC might be a small issue in the bigger HCR picture, the potential dollar savings and EPA impact in my opinion are worth it. We can use all the Congressional help we can get and would be grateful to you for passing the information along to Senator McCaskill from the great State of Missouri!

  5. So, Shelly, it sounds to me like “waste in the LTC arena” is a small-ish problem that could be solved by contracts and new billing processes, but nobody wants to bother. Fine, I suppose there are bigger fish to fry.
    If CMS will say something like “you don’t have to keep sending pills after the patient no longer has need of them (patient died, Rx changed, etc) even if you agreed to supply n days’ worth” that’d be good too. That all by itself might possibly trigger action in the area. If CMS won’t say it, I perfectly well agree this is a problem. I’ll have to say something to Senator McCaskill — she was our State Auditor before she went to the Senate and she’ll get it.
    Thank you so much for working on the standards committee — it is tough unrecognized work. I’m a consumer of standards (in my former life an occasional commenter) and I understand fairly well what you’re suffering through.

  6. Tom,
    You would think it was common sense but unfortunately it is not in the world of HIPAA compliant claims transactions standards (NCPDP 5.1). I am a Co-Chair for the National Council for Prescription Drug Programs (NCPDP) LTC Work Group and I can assure you over my 8 years involvement we have not been able to fix this problem. There is no credit functionality and the payer claim systems are completely built around a retail pharmacy claim model. The payers “won’t just deal with it” because they do not have an incentive to change their contract, billing and audit process for a minority part of their claims.
    Actually LTC is a small enough piece of the payer’s business and there are too many Part D plans to ask each one to do this contractually for a small part of their business. Each pharmacy has to have a separate contract with each plan. There are just too many plans and to many pharmacies. We might be able to convince one or two payers, but the majority won’t change their contracting method without guidance from CMS; and a new contract is required every year. CMS won’t give guidance of this type without some reason and the way the MMA was written for Part D, the easy solutions require either salutatory changes to the MMA and or HIPAA.
    It is easier for everyone to just keep it the way it is by dispensing 30 days at a time and wasting the medications. As ridiculous as it sounds, there is not enough incentive for the pharmacies and payers to change without some legislative action believe me many of us have tried. As we move to adopt new and more efficient technology solutions we have to remove some of the antiquated billing processes and it really does requires legislative changes.

  7. Thanks Shelly.
    > Contractually the pharmacy agrees
    > to dispense a 30-day supply.
    …and gets paid in advance in the custodial care scenario. I see.
    My bet this that THIS is the whole sticking-point — the payer doesn’t want to pay in advance on a contract because somebody like me (I’m an MBA) told them their cash flow’s better when they don’t. On the other hand, do they REALLY prefer a transaction per day or per dose on every Rx, even the ones that don’t get stop orders??? I shouldn’t think so. Do they expect the pharmacy to accept payment in arrears?? Well, the pharmacies have their own MBAs and they’d be silly to agree to that.
    It sounds like a contract-language (not legislative) problem with the definition of “to dispense”. I know the government involved, but still, LEGISLATIVE changes??? Really?
    Maybe payers would like this better than the scenario above:
    Start a claim that looks like a normal retail claim. Contractually the pharmacy agrees to make a 30-day supply available to the patient or the patient’s custodian. This is what it means “to dispense”. Pay the claim as normal and assume the pharmacy will perform on the contract. How they do that is their business.
    Some (small) fraction of Rx get stop orders. At that point the pharmacy reverses the claim and submits a “correction” reflecting actual utilization. The payment process creates a credit, and when the next EFT happens everything’s cool. What you did not do was submit one claim per day or per dose. Everyone should like that.
    This is better for the payer than retail because in retail the unused doses get flushed — in this scenario they get a refund for them.
    It does cost the pharmacy a few cents to send the revised claim, but it did have cash for 15 days on average, and should in any case build any material costs this sort of thing imposes into the fee structure with the facility. The auditors? They’ll deal with it.
    This requires a common-sense interpretation of the infinitive “to dispense”. Is there any reason it can’t work WITHOUT legislation? This seems like an administrative thing strictly.

  8. Tom,
    A pharmacy has a contract with a Part D payer and agrees to dispense a 30 day supply (or 90 day if mail order) and will be reimbursed for the cost of the drug plus one dispensing fee. The claim is submitted for the full 30 days upon initial dispensing to assure all prior authorization and Drug Utilization Review (DUR) has occurred. The payer adjudicates the claim real time if all the information is correct. Contractually the pharmacy agrees to dispense a 30-day supply. If the pharmacy only dispenses 2 days, the pharmacy is technically violating the contractual agreement to dispense a 30 days supply. The pharmacy can submit a false transaction (which the pharmacy is charged a fee) to bill for 30 days (obtain the DUR check) reverse the claim, dispense 2 days at a time, count what was consumed by the patient and wait for the 30 days to past and bill “post consumption” after the fact. This process is a manual and labor intensive process. Payers do not like this method and contractually give pharmacies a hard time during audits that the dispensing and billing dates do not match. Because it is a manual process the amount consumed may not be counted accurately by the nursing staff, then recorded by the pharmacy accurately there is a potential for billing a false claim.
    Automated dispensing systems that provide a more accurate picture of daily dispensing can keep track of what is dispensed daily. The problem is this type of dispensing does not fit the Part D payer “retail pharmacy” billing and audit process.

  9. Anyone wonder why the PHARMACEUTICAL INDUSTRY has ENDORSED HEALTH REFORM legislation? Because it guarantees them a massive expansion of medication waste that will secure their profits for years to come.

  10. Tom,
    Happy to take you through my take on the political issues and the ROI that we use to sell our systems today (part A med savings) unfortunately the savings we generate for part D are unable to be “recaptured” and create problems for part D. We are working on a way to save the gov’t dollars on waste that our systems elliminate and yes, if we sell a few more systems, that is GOOD for me but also good for all tax payers.
    You googled me – you know my phone number – give me a call.
    Carla Corkern
    CEO and Chairman of the Board
    Talyst, Inc.

  11. So, Shelly, let me get this straight.
    Resident has an Rx for (say) spironolactone, 2/day for 30 days – 60 tablets. Pharmacy takes the Rx, submits the bill to some Part D carrier. Gets paid.
    Are you telling me it is illegal for the pharmacy to deliver 2 tablets per day for 30 days to the facility — they have to send all 60 at once?
    Or are you tellimg me it is simply difficult, that the pharmacy has to submit a part D claim to pay for the meds themselves, and then the facility has to pay the pharmacy for the clinical day-at-a-time packaging they need for their own internal purposes?

  12. The whole heath care system is a waste. When will the US realize its time to fix/overhaul/redo the whole system?

  13. here is an idea, pay the physician supervising the care of these folks for actually managing their care. Nursing home medicine is so under reimbursed that, aside from a few healthcare heros, only the docs who can’t get any other job do it.

  14. As a pharmacist, I’ve been involved with providing pharmacy services to LTC facilities for over 20 years. The reason there is so much waste is because the payment model (especially Medicare Part D) is based off of 30 day dispensing retail pharmacy process. Automated dispensing systems allow LTC pharmacy providers to manage shorter dispensing cycles thereby significantly reducing the medication waste. More than 75% of the patients in LTC are Part D patients and the Part D program never really worked well in the LTC setting. The Prescription Drug Plan’s (PDP’s) electronic claims systems do not handle shorter dispensing cycles.
    It will take statutory changes to the Medicare Part D program to enable these potential cost saving measures. A statutory mandate for CMS to do a demonstration project should be performed and if successful, and implemented, should save tax payers and patients millions of dollars in savings.

  15. Jabba D. writes:
    > they want to get legislative support to allow their
    > systems in states where arcane pharmacy dispensing
    > rules do not allow it.
    That isn’t what she said she wanted, but since you can read her mind, name such a state. Show me the regulation that prevents a nursing home from buying and dispensing meds this way. I’ll wait.
    When you demonstrate that such rules actually exist, tell us why a law requiring a particular technology is needed rather than simply abolishing the old rule that was most likely put in place to similarly protect another business interest, and letting the vendors compete for the business.
    And Louis, they ARE onto something. I’ve worked with systems like this for years (doing integration work), they’re very well established in acute care settings. They DO have a fair shot RIGHT NOW. What they want is an unfair shot — they want the force of law on their side. That will help them sell more systems quicker and at higher prices. You don’t want higher prices in healthcare, do you?

  16. If there is this kind of waste in long term care, let’s do something about it.
    Now is the time to be talking about legislative fixes because Congress is ramming through a complete reinvention of the financing system for US healthcare. If there was ever a time to express opinions, it is now! I for one am extremely disturbed our government is hell bent on upending our system without spending enough time debating the best course. Instead we’re going to end up with a multi-trillion dollar experiment and no idea how to pay for it.
    I wish more people would jump into the debate and offer solid ideas – and force Congress to do it right rather than light speed.

  17. If private sector has discovered ways to save money in the system and reduce the number of drug errors leading to death, why not give it a fair shot? These guys seem to be on to something, with or without legislative support. The prob with health care is that it’s so highly regulated that it takes forever to adopt new innovations. Instead of fighting to protect the status quo, I favor trying lots of different models – and if some of them come from the private sector, they should be welcomed.

  18. Tom, I do not think you actually looked at their system before you started your ranting and posturing. From what I see, the Talyst system works with whatever existing software infrastructure a facility might use, and doctors prescribing meds do not have to go up to some web site to do it. And isn’t that “good old Rx pad and pen” where transcription errors start? I forget which pharmacy magazine has the monthly “Try to read the doctor’s writing” feature, but I know they aren’t prescriptions I want to carry in to the pharmacist.
    According to Coal N’s article, it looks like Talyst is already making a difference, and now they want to get legislative support to allow their systems in states where arcane pharmacy dispensing rules do not allow it. Are you the last candlemaker in an Age of Light Bulbs or something? Time to move forward.

  19. MD as HELL writes:
    > What is so bad about eliminating waste in LTC?
    Nothing MD, nothing at all. A Medicaid reimbursement better than $12 for the monthly medical management visit will go a long way towards eliminating waste in LTC too. And yes, meds (especially what this thread is talking about) is the tippy tip of the tip of the iceberg.
    Jabba D. says:
    > I looked at their system and it
    > sounds like it is all about improving
    > patient outcomes
    Did you now? Well, I’m sure it sounds great. And if it really is as great as it sounds, improves safety, reduces costs, and all the rest then Ms. Corkern won’t need “legislative support”, will she?
    > I searched 3 different Lobbyist sites and
    > couldn’t find anyone working with or for Talyst.
    Is that supposed to be sarcastic or are you really this obtuse?
    Yes, coal n, moving from a manual system to an automated system is a fine thing, especially if you can get all the docs who precribe for all the patients in the LTC facility to use the dispensing system’s website instead of their own e-prescribing system or a good old Rx pad and pen. Good luck with that. Notwithstanding, I’m sure it is so very fine that it can be sold without “legislative support” but probably not for as much money, which is the WHOLE POINT of her lobbying in the first place.

  20. What is so bad about eliminating waste in LTC?
    The pharmacy costs are the tip of the iceberg.

  21. I searched 3 different Lobbyist sites and couldn’t find anyone working with or for Talyst. Here’s what I also found:
    — According to the Institute of Medicine, an estimated 1.5 million people are sickened, injured or die annually as a result of medication errors, and 88 percent of medication errors result from the wrong drug or dose.
    — According to the National Academy of Sciences’ Institute of Medicine, an estimated 400,000 preventable drug-related injuries occur annually in U.S. hospitals, adding at least $3.5 billion in medical costs.
    I, for one, did not mind when they legislated safety belts into cars–even though it probably only “helped a few patients” and didn’t “provide real value”. I looked at their system and it sounds like it is all about improving patient outcomes; isn’t that the core idea behind all healthcare? It also sounds like a pretty strong added value to me.

  22. This is clearly a case of rent-seeking: Ms. Corkern wants to have it legislated that nursing homes or the pharmacies that serve them buy her product or something like it. If she’s successful, she’ll sell more systems at a higher price per each, what with all those incentives! If not, she’ll have to show nursing home operators how she saves money and improves patient safety and I seriously doubt she can. Short-stay actue care settings just aren’t the same animal as LTC facilities. It is fine with me if medical facilities are required to dispose of surplus meds as hazardous waste because that’s what it is. It is not fine with me when yet another industry lobbyist lobbies for her particular niche to have the protection of law. Let her profit by providing value, not by getting laws passed.

  23. I’m a middle class student on my parent’s employer provided health plan: Kaiser Permanente, a large HMO. I don’t know much about the health care system. I’m just aware of university provided health care as another alternative.

  24. Ooooooooh! Those eeeeeeevil patient-safety companies making PROFIT! Sheesh, Tom. Too much pickle juice this morning? I don’t know what you do, but I’m trying to understand a perspective on health care that considers it a solution to litigate over the death of “perhaps a few patients”. Put me down as one who prefers the error didn’t happen in the first place.
    And what’s that dismissive “If there’s waste, well, that’s on them.” Do you not understand where the waste goes; into the water we drink and the air we breathe. Is that something else we’re going to need lawyers for, because I’m on that “prefer it didn’t happen” side on that one too.

  25. Ooooohhhhhhh! Those eeeeeeevil pharmaceutical companies making PROFIT! Surely it is they who have prevented LTCs from buying dispensing systems. Yes, that’s it: pharmaceutical companies have spent hundreds of millions lobbying state governments to keep LTC per diems so low they can’t afford to buy on-site dispensing systems, and the sneaky bastards have reaped $1.2B in extra income because waste can’t be eliminated!
    Why should policymakers and regulators should look for ways to increase automation of medication dispensing in long-term care facilities? If they hurt people with medication errors, our tort system’s there. If there’s waste, well, that’s on them.
    Who would benefit if policymakers and regulators actually found ways to increase automation of medication dispensing in long-term care facilities?
    Maybe, perhaps a few patients. But surely Carla Corkern: