ORGANIZATION: Bangalore Institute of Oncology (BIO) PROBLEM OR ISSUE ADDRESSED: Pharmacy and Therapeutics committee's responsibilities consist of developing policies and frameworks to develop an effective formulary taking into account both efficacy and cost considerations. In the Indian pharmaceutical environment, multiple manufactures compete for market share, within a single institution itself, creating inefficiencies in inventory management and the overall pharmaceutical budget. GOALS: The purpose of this project was to create a formulary for the Bangalore Institute of Oncology (BIO), taking into account both cost and efficacy considerations, while still maintaining physician preferences and autonomy. A preliminary ABC analysis, also known as a Pareto analysis, was conducted to identify items which have a significant impact on the overall inventory costs and well as, identify and rank areas for improvement and management interventions. OUTCOMES ITEMS USED IN THE DECISION: The institutional ABC analysis was conducted for the period of October 2006 to September 2007. Pharmaceutical items were valued (item cost multiplied by quantity issued/consumed in period) with the results subsequently ranked. IMPLEMENTATION STRATEGY: The total pharmacy budget for the fiscal year was 15.89 Crore Rupees (Rs) (3.96 million US dollars, based on 40:1 exchange rate) with a resulting margin of 3.51 Crore Rupees (Rs) ($877,500), which consisted of 1033 different products from 247 manufacturers. The ABC analysis revealed that 48 medications made up 85% of the total budget, with bortezomib being the highest oncology contributor and meropenem being the highest non-oncology contributor. Analysis of purchases within the 35 oncology products revealed that there were 29 manufacturers with 95 different brands, and for the 13 non oncology products, there were 14 manufacturers with 20 different brands. Based on this analysis, consolidation of drug products and drug manufacturers were considered as an intervention for formulary management by the Pharmacy and Therapeutics Committee. Three different options were considered by the committee. Option 1 consolidates to only a single brand based on the highest margin, which would improve the present margin by 46% from 3.51 Crore Rs ($877,500) to 5.15 Crore Rs ($1,287,500). Option 2 consolidates to having two brands, one from the preferred vendor with the highest margin and the other from the innovator/premium vendor, which would improve the margin by 36% to 4.76 Crore Rs ($1,119,000). Option 3 consolidates to three brands: the preferred vendor with the highest margin, the lowest cost brand from the patient's perspective, and the innovator/premium vendor brand, which would improve the margin by 24% to 4.36 Crore Rs ($1,090,000). Option 3 was chosen as the basis for creating the institutional formulary, due to physician flexibility, patient affordability, and improvements to the margin. RESULTS: The pharmaceutical company Dr. Reddy was selected as the preferred vendor for the creation of the formulary and Option 3 was applied to all of the following pharmaceuticals(N): monoclonal antibodies(6); oral chemotherapy(23); intravenous chemotherapy(31); hormonal agents (9); and supportive care agents(13), for a total of 82 separate chemical entities. Of the total 82 chemical entities, 43 (52.4%) have one brand available, 29 (35.4%) have two brands available, and 10 (12.2%) have three brands available. The preferred vendor was utilized for 18 of these products. If the same total quantity is purchased again in 2008, the total purchase cost will be 54.15 Crore Rs ($13,538,047) with a resulting margin of 20.13 Crore Rs ($5,033,454). LESSONS LEARNED: Consolidation of the pharmaceutical products and creation of a formulary results in higher than expected margin, even when the same purchase quantity is applied. Market competition forces appear to work better in an environment of a closed formulary system.