Cost Savings Without Compromising Care

About the Program

Category: Financial Management (Best in Category)

Year: 2011

Controlling medication costs is critical to preserving access to appropriate medications for individuals who depend of public services. A challenge of Los Angeles county Department of Mental health is controlling the drug budget, when external factors like increased patient load and increased drug prices continue to mount. Reimbursed to DMH, contracted pharmacies had been based on a long standing industry pricing benchmark, Average Wholesale price (AWP). In March 2009, however, a federal judge determined the benchmark illegal, ruling that prices were artificially inflated. As such, DMH worked collaboratively with other County department to inform and request cooperation from its contracted pharmacies to use other benchmark standards for drug reimbursement. New benchmark reimbursement terms were created to take advantage of the ruling, improve reimbursement flexibility, and ensure that DMH reimbursement terms remain within industry standards on an ongoing basis. Total savings for Fiscal Year 2010-111 amounted to $9.3 million, or about 25 percent of the pharmacy budget. The program continues and is assisting with the Departments efforts to cope with increased patient load and escalating prices for all medications. In Fiscal Year 2009-10, Los Angeles County recognized this project by awarding it one of its most prestigious awards, Mega Million Dollar Award.