Automated Medicare Part D Therapeutic Substitution

Between the rising prices of prescription drugs and the increasingly complex Medicare reimbursement process, senior healthcare facilities are facing growing financial and regulatory obstacles to providing appropriate pharmaceutical care to their residents. Perhaps one of the biggest challenges facing facilities is managing the highly complicated Medicare Part D formularies. With sometimes hundreds of plan choices for beneficiaries to choose from and dozens of different drug formularies to be managed, pharmacists, nurses, physicians, administrators, and CFOs alike have found themselves jumping over hurdles to manage their residents’ prescription drug therapies.


One of the most complicated aspects of formulary management is handling drug substitutions. While clinical substitutions—substituting one drug for another strictly for medical reasons—have their administrative challenges, formulary substitutions intended to comply with prescription drug plans pose a wider range of issues.

Formulary substitutions exchange a drug that is not covered by a resident’s formulary for one from the same therapeutic class that is covered. In a standard formulary substitution, the goal is to substitute more cost-efficient yet still clinically appropriate drugs. However, with the proliferation of Medicare Part D prescription drug plans, the cost of the drug and whether it is covered in a resident’s formulary have become primary concerns for facilities.

To proactively manage this new level of complexity, some facilities are working with their pharmacy providers to implement automated therapeutic interchange programs. These programs can potentially save both the facility and the insurance plans tens of thousands of dollars each year by transforming these particular complications of Medicare Part D into a process that is internal to the pharmacy, reducing the need for facility staff to manage resident formularies. With a program that focuses on low-risk, high-cost drugs, facilities can reduce the average cost of selected drugs by 25% or more and their overall average drug costs by as much as 10%, based on an automated interchange program implemented at select facilities in Maryland, Delaware, and Washington, D.C.

Before formalized programs were developed, drug substitutions were often initiated by consultant pharmacists on a case-by-case basis. Consultant pharmacists would review each resident’s prescriptions and, when applicable, suggest substitutions based on clinical outcomes and cost factors. These medication regimen reviews were only conducted during monthly visits, and the prescriptions had already been ordered and dispensed. Facilities therefore had to pay for the initial supply of the more expensive drugs, and sometimes more, while the facility awaited the physician’s authorization for the change.

As facility administrators saw the economic benefit of therapeutic interchange programs, pharmacies began to develop methodologies for making substitutions easier. These first-generation programs attempted to formalize the substitution by creating prior consent agreements between the facility, its doctors, and the pharmacy. These agreements did not set up substitutions within larger therapeutic classes, but did allow for the substitution of a single drug for another, less expensive drug in the same therapeutic class. Substitutions would often be performed across the board for any resident receiving a prescription for that drug and sometimes for only a small number of residents, such as Medicare Part A or private pay, whose drug coverage was not limited by a third-party formulary.

Keeping costs down

Drug interchanges made as a result of either periodic suggestions from consultant pharmacists or one-off drug substitution agreements attempted to address the financial challenge of keeping facility costs down. However, they simultaneously created new issues that sometimes increased risks and costs. Therapeutic interchanges often confused nursing staff, increasing the risk of medication and documentation errors. Nurses who were unaware that an exchange had been made might sometimes administer double dosages, or both the original and the substituted medications simultaneously. Moreover, therapeutic interchanges had the potential to increase documentation errors and administrative requirements, particularly in relation to end-of-the-month turnover. As a result, facilities sometimes found themselves facing new survey deficiencies that did not previously exist.

The introduction of Medicare Part D added a new layer of complexity to substitutions. With the proliferation of prescription drug plan formularies that resulted from Medicare Part D, the cost of prescriptions was no longer the single factor governing therapeutic interchanges. With the new prescription drug program, ensuring that a resident’s formulary covered a substituted drug became as important as ensuring that the substituted drug was more cost effective. Across-the-board substitutions became virtually impossible, and potentially more costly, with the proliferation and wide variances in Medicare prescription drug plans.

These growing complexities—coupled with the rapidly rising cost of prescription drugs—have necessitated an evolution in therapeutic interchange programs. Fortunately, technology has allowed interchange programs to accommodate the newer, more intricate system, and substitution programs can now be automated to reduce both risks and costs.

In today’s automated therapeutic interchange systems, the pharmacy’s software maintains a database of each of the nation’s 321 CMS-approved drug formularies and analyzes new medication orders against the resident’s formulary and the physician’s prior-consent agreement. When a substitution is possible, the system will automatically make the change and generate the required documentation, which is sent to the facility both in advance of and along with the filled prescription. As a result, facilities will encounter fewer prescriptions that are not covered by a resident’s formulary, potentially saving the facility tens of thousands of dollars a year on its pharmacy bill.

Moreover, facility staff would spend far less time performing such administrative tasks as following up with doctors to request prior authorizations and drug substitutions. Also, Medicare Part D formulary changes are maintained and updated in the pharmacy’s prescription processing system, so that facilities do not need to track these changes. Because substitutions are monitored and performed as the pharmacy processes orders, the system is more transparent to the facility and its staff, resulting in a significant reduction in labor spent managing the substitution process.

Considerations for implementation

For all the cost and time-savings benefits of an automated therapeutic interchange program, there are some important points that a facility should thoroughly consider before implementing one. Since some states prohibit doctors from giving preauthorized consent or from otherwise engaging in a therapeutic interchange program, the first thing a facility needs to know is if its state laws and regulations allow for the types of contracts that govern automated interchange programs.

Facilities want also to ensure that the program they are implementing is safe for its residents. A program designed with resident safety in mind will generally not include substitutions of drugs that could potentially pose a higher risk level, such as with many psychotropic medications. Instead, interchange programs should concentrate on reducing the costs of expensive, but commonly prescribed drugs, such as proton pump inhibitors and other low-risk, high-impact drugs. Automated programs should also be flexible to accommodate for health issues such as allergic reactions to medications or other clinical safety concerns for which certain residents or drugs might be excluded from a substitution program.

Lastly, facilities should fully understand the actual process being proposed in an automated system. Ideally, the processes involved should be safe, simple, and straightforward, and should not require the facility to create burdensome administrative tasks for its staff. A successfully implemented therapeutic interchange program should remain relatively transparent to facility staff, with the facility seeing the results in a lower pharmacy bill and more nursing staff time spent with residents.

When designed and implemented properly, automated therapeutic interchange programs can greatly reduce specific areas of growing frustration for today’s senior healthcare facilities. Although no system is perfect, facilities and pharmacy providers should collaborate to build programs that meet everyone’s needs and serve the higher goal of improving resident outcomes. The economic and regulatory pressures facilities face today are only expected to increase as the nation’s senior population expands, but facilities can preemptively alleviate some of these pressures by pursuing programs that increase the overall effectiveness of providing pharmaceutical care.

Richard Mainzer, PD, is Senior Vice President of Clinical Services, Remedi SeniorCare in Maryland, a provider of pharmacy services to senior healthcare facilities.

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