Cost-to-Fill as a North Star Metric: Reducing Operational Waste in Compounding
Apr 18, 2025
Compounding pharmacies can save money and improve efficiency by focusing on a single metric: cost-to-fill. This measures the total expense of preparing and dispensing a compounded dose, including materials, labor, equipment, quality control, and overhead. By identifying waste and improving processes, pharmacies can cut costs without sacrificing quality.
Key Takeaways:
What Drives Cost-to-Fill?
Ingredients, labor, equipment upkeep, quality checks, and overhead contribute to the overall cost.Biggest Sources of Waste:
Excess inventory, expired materials, labor inefficiencies, and process delays.Proven Savings:
The Mayo Clinic saved $39.75M by reducing drug vial waste.How to Improve:
Use automation tools, optimize batch sizes, and train staff to minimize errors and inefficiencies.
Tracking cost-to-fill helps pharmacies reduce waste, improve profit margins, and maintain compliance with quality standards. Start by analyzing past data, setting reduction goals, and using tools like AI platforms to streamline operations.
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What is Cost-to-Fill?
Cost-to-fill refers to the total expenses - both direct and indirect - required to prepare and dispense a single compounded dose.
Key Cost Components
Several factors contribute to the cost-to-fill calculation:
Direct Materials: Includes raw ingredients, containers, and packaging materials.
Labor Costs: Covers staff time spent on preparation, verification, and documentation.
Equipment: Accounts for maintenance, calibration, and depreciation of tools and machinery.
Quality Control: Encompasses testing processes and related documentation efforts.
Overhead: Includes utilities, facility costs, and administrative expenses.
How It Differs from Other Metrics
Cost-to-fill goes beyond just timing or speed. It considers the financial impact of factors like resource use, waste, process efficiency, and compliance efforts. By tracking cost-to-fill alongside other performance metrics, pharmacies gain a clearer picture of their operational costs and efficiency.
Addressing Regulatory Costs
Nonconformance costs - ranging from 25% to 40% of sales - can arise from activities like documentation, testing, storage, monitoring, personnel training, and quality assurance. A solid understanding of these cost drivers helps pharmacies identify areas of waste and improve their compounding processes.
Finding Waste in Compounding
After establishing cost-to-fill frameworks, the next step is identifying sources of waste.
Common Sources of Waste
Compounding waste generally falls into four main categories, all of which contribute to higher cost-to-fill:
Excess Inventory: Unused raw ingredients that expire before use.
Labor Inefficiencies: Tasks that are redundant or leave staff idle.
Expired or Scrap Materials: Poorly planned batch sizes leading to unnecessary waste.
Process Bottlenecks: Delays in approvals or preparation that slow down operations.
Methods to Track Waste
Tracking waste is essential for identifying inefficiencies. Here are two effective methods:
Production Record Audits: Reviewing production records helps uncover patterns of recurring waste.
Inventory and Order Audits: Keeping an eye on stock levels, expiration dates, and demand trends can highlight areas for improvement.
The data collected from these methods can then be used for financial analysis.
Financial Impact of Waste
Understanding the financial consequences of waste is key to prioritizing improvements. For example, research by Abbasi and Gay (2017) found that doubling CSP batch sizes could reduce waste by nearly 50%, saving approximately $130 per 100 patient days.
Methods to Lower Cost-to-Fill
By combining improved batching, automation, and targeted training, organizations can better align their processes to reduce cost-to-fill metrics.
Process Improvement Steps
Increasing CSP batching frequency from twice to four times daily significantly reduced wasted doses - from 3.6 to 2.7 per 100 patient days - and brought the cost-to-fill down from $4,585.36 to $4,453.88 per 100 patient days. Additionally, adopting lean batch IV methodology cut the wasted drug value in half, from $41 to $21 per 100 patient days.
Automation further enhances efficiency, speeding up tasks and driving additional cost savings.
Using Tech Tools
Here are some tools that can help streamline operations and reduce costs:
PharmacyCompounding.AI: Saves about 20 hours per pharmacist each month by handling instant calculations and compliance checks.
DocStation AI: Automates billing, prescription management, and inventory tracking, minimizing administrative errors.
Master formulation record platforms: Standardize documentation and cut compounding violations by up to 30%.
"Focal Pointe's solution streamlines master formulation review and EHR surveillance to close record gaps on the fly."
While technology plays a big role, staff training is equally important for maintaining and building on these improvements.
Staff Training Benefits
Focused training programs help reduce errors and downtime, directly impacting cost-to-fill metrics.
Role-Based Learning: Customizes training to specific job responsibilities.
Microlearning Implementation: Delivers short, targeted training modules.
Workflow Integration: Offers training right at the point of need.
"Tolmar integrates training and processes to measure impact on strategic goals."
Meeting Cost-to-Fill Targets
After identifying ways to reduce waste, it's time to turn those ideas into measurable goals. This involves refining processes, using the right tools, and providing proper training to achieve and maintain those targets.
Setting Cost Goals
The first step in setting cost-to-fill targets is to review past performance data and compare it to industry benchmarks.
Start by creating a detailed baseline assessment that looks at:
Material waste and expiration rates
Labor time spent on each task
Rework and rejection rates
From there, establish monthly or quarterly reduction goals based on this baseline. For instance, if your current Cost of Poor Quality (COPQ) is 35%, aim to reduce it by 5 percentage points within the next quarter through specific process improvements.
Tracking Progress
Use tools like dashboards or quality management systems to track your progress toward cost-to-fill targets. Key metrics to monitor include:
COPQ as a percentage of revenue (ideal range: 15–20%)
Frequency of batch deviations or recalls
Accuracy of batch record documentation
Schedule weekly or biweekly reviews to evaluate these metrics, celebrate successes, and address any issues. This keeps the team focused and ensures accountability.
At the same time, make sure quality controls are in place so that cost-saving efforts don’t compromise safety.
Maintaining Quality Standards
Balancing cost goals with high-quality outcomes is critical. Quality Management Maturity (QMM) practices are essential for maintaining strong controls and consistent results. Here are some key strategies:
Data Integrity Assessments
Regularly audit your data governance, controls, and validation processes to ensure reliability.
Quality Investment Planning
Allocate funds for automation or equipment upgrades that reduce waste and minimize disruptions.
Continuous Monitoring
Keep an eye on deviation rates and customer complaints alongside cost metrics to catch and address issues early.
A focus on quality is non-negotiable. Poor quality can disrupt supply chains and harm patient health. By aligning cost-to-fill goals with strong quality systems, pharmacies can improve efficiency without compromising safety.
Conclusion
By understanding cost-to-fill and identifying areas of waste, compounding pharmacies can improve both margins and patient safety - especially during drug shortages. Using tools like automation and focused training, along with careful data analysis, helps refine waste tracking, streamline processes, and maintain compliance with quality standards.
Key areas such as waste tracking, process improvements, and quality controls directly support the strategies discussed earlier. When applied effectively, these methods help ensure consistent product quality while meeting regulatory requirements.
Check out 503Pharma's resources, including guides, cleanroom solutions, and training modules, to take your operations to the next level.