Potential economic effets of a brand standardization policy in a 1000-bed hospital

The potential economic effects of a brand standardization policy on 50 multiple source, nonproprietary drugs in a 1000-bed hospital which uses a unit dose drug distribution system were studied. Inpatient drug usage cost and inpatient drug inventory cost for the year 1974 were compared under the existing nonformulary system and a simulated formulary system of brand standardization. Drug usage cost was defined as expenditures made by the study hospital for drugs which were administered. Drug inventory cost was defined as the dollar value of drug inventory being stored for use in the hospital. Potential saving in excess of $35,000 for drug usage cost and $9,000 for drug inventory cost could have been realized with a brand standardization policy on 50 nonprietary drugs. The differences in costs were significant at the 0.005 level. It is concluded that a brand standardization policy can be effective means of reducing drug usage cost and drug inventory cost in a large hospital.