12. SUPPLY CHAIN: Hospitals move into compounding due to cost, quality concerns
Quality control, costs drive hospitals to mix drugs
As public officials and providers fret over the safety and cost of drugs bought from compounding pharmacies, more hospital systems are working on plans to mix and package the drugs themselves.
The multistate meningitis outbreak last year that led to 48 deaths and sickened another 714 people was caused by contaminated steroid injections produced by the New England Compounding Center.
Hundreds of hospitals in the U.S. purchased compounded drugs from NECC and Ameridose, a national compounder that shares ownership with NECC.
The outbreak triggered calls for stronger federal and state oversight of compounding pharmacies, especially for companies such as NECC and Ameridose that were operating more like drug manufacturers than traditional compounders before they closed last year.
“The tipping point for people who were close to making that decision was probably the Ameridose closure,” said Erin Fox, director of the drug information service at the University of Utah Hospitals and Clinics. “It was a wake-up call. They certainly trusted NECC and they trusted Ameridose.”
Most hospitals rely to some degree on external compounding pharmacies as sources of certain drugs. Some hospitals buy more drugs from compounders or secondary drug distributors, while others have traditionally focused on doing more compounding internally.
Safety concerns stemming from the meningitis outbreak are one reason why hospital pharmacies are now seeking new ways to address how they obtain certain compounded drugs. Other factors include hospitals’ increased reliance on compounding pharmacies because of drug shortages, the rising costs of compounded drugs and broader questions about safety and risk.
Mercy Health System in Chesterfield, Mo., UC San Diego Health System and Vanderbilt University Medical Center in Nashville, for example, are moving forward with plans to either assume all compounding activity or take on more low- and medium-risk compounding in an effort to decrease reliance on external sources.
The 909-bed Vanderbilt plans to build a centralized facility that aims to handle compounding of all drugs that it previously bought from external sources.
Within two days of the federal government’s announcement of the outbreak in October of last year, hospital administrators visited the pharmacy with questions about how the outbreak would affect the pharmacy operations.
“This has refocused us as a profession,” said Mark Sullivan, Vanderbilt’s director of pharmacy operations. “We’ve got to provide a safe drug to the patient first.”
Hospitals have long relied on compounders as sources of certain drugs. The introduction of the U.S. Pharmacopeial Convention’s (USP) Chapter 797 standards in 2004 led many hospital administrators to question the practicalities and costs necessary to build sterile compounding facilities in their hospitals.
As a result, an industry traditionally made up of small “mom-and-pop” compounding pharmacies turned into one that now includes national compounding companies, many of which are backed by private equity firms and other investors.
Some estimates put two of the largest players—Pharmedium and Ameridose—at a combined 70% market share. The closure of Ameridose worsened a shortage of six drugs already in short supply so severely that the Food and Drug Administration had to take specific actions to mitigate the impact.
Fox compared the closure to ripping off a bandage, noting that “it creates that sense of urgency when all of your product is gone in one day.”
Indiana University Health last considered bringing its compounding in-house several years ago as a cost-cutting measure. At that time, the 15-hospital system based in Indianapolis estimated that it could cut $1 million from the $4 million it spends on compounded drugs each year by handling its compounding internally.
The system now plans to boost the volume of compounding at its three academic medical centers in downtown Indianapolis, said William Shaw, director of statewide pharmacy purchasing and logistics at IU Health. However, he said, the system is not likely to handle all compounding at its facilities, notably because of high-risk products that require additional testing.
The growing costs of certain drugs in short supply, which are increasingly made by compounding pharmacies when the
commercial options are not available, is another factor driving more hospitals to reevaluate compounding.
“We can save some money doing it ourselves,” Shaw said.
In addition, IU Health plans to seek accreditation from the Pharmacy Compounding Accreditation Board, a not-for- profit organization that has accredited 170 of the 3,000 pharmacies that provide sterile compounding. Shaw said IU Health would be the first hospital to be PCAB-certified.
A number of hospitals have expressed interest in PCAB-accreditation, and the group is considering modifying its standards to address the differences between hospital and community compounding, Joe Cabaleiro, PCAB’s executive director, said in an e-mail.
Cost challenges are another barrier for hospitals that want to handle more drug compounding at their facilities. Those systems need to build facilities that are up to USP 797 standards, conduct ongoing sterility testing if they are undertaking high-risk compounding, and establish delivery and storage procedures. In addition, compounding narcotic drugs, such as painkillers, requires registration with the Drug Enforcement Administration.
Mercy Health System in Chesterfield, Mo., has also developed plans to build a centralized compounding facility. Each of the system’s 21 hospitals currently does some sterile compounding, and the system purchases high-risk compounded drugs from external compounders.
John Kleiss, executive director of collaborative services at ROi, the system’s group purchasing organization, said Mercy expects to halve the $1.5 million it spends on compounded drugs each year when it installs a pre-fab clean room this year. The plan had been in discussion long before compounding pharmacies hit the spotlight last year following the NECC investigation and meningitis outbreak, Kleiss said.
“It allows us to control the quality of the product that is going out,” he said. “This is where that makes sense from a system standpoint.”
Kleiss said a combination of drug shortages, expected cost savings and enhanced quality control are the driving factors behind Mercy’s decision. At one point, the system considered building a facility that could sell compounded drugs to providers outside of the system but put that plan on hold, in part because of uncertainty around the patchwork of existing state and federal regulations.
Lawmakers and state officials are pressing the FDA to establish clearer definitions of compounding. States have traditionally had oversight of pharmacies, while the FDA is responsible for regulating drug manufacturing.
“From a regulatory perspective, there are still a lot of unclear points,” said Dr. Charles Daniels, pharmacist-in-chief for the UC San Diego Health System, which is now doing its own repackaging of sterile products.
Other hospitals, especially smaller facilities, continue to rely on external compounders, which can provide drugs with longer expiration dates and reduce waste.
“Bringing in more compounding is not a good fit for small to medium hospitals,” said Ray Moore, lead contracts manager for PeaceHealth, a Bellevue, Wash.-based system. “It’s better to leave compounding to the companies that are set up to do that full time.”