Towards value‐based healthcare: Establishing baseline pharmacy care costs for diabetes management

The prevalence of diabetes has increased by three folds over the last 20 years, and the global cost of diabetes mellitus surpassed one trillion US Dollars (USD) or 1.8% of the global GDP in 2015. Generally, prescription medication to treat complications of diabetes makes up nearly 30% of diabetes medical expenditures. To facilitate value‐based decision‐making at national and organizational levels, we analyzed the cost drivers of pharmacy services in a diabetes care institute by developing a flexible costing model that accounts for pharmaceuticals and labour costs of pharmacy processes. We calculated the direct pharmaceutical costs and the indirect labour costs at the activity level from electronic health records and observational data. On average, the cost of pharmacy services over 1 year was equivalent to 1246 USD per diabetes patient. Approximately 98% of the pharmacy costs were pharmaceutical costs, while 2% were attributable to labour. The flexible costing model and cost estimates are essential for value‐based comparisons of interventions and care redesign. The outlined costing framework and findings carry implications nationally and organizationally to accelerate the path towards value‐based healthcare delivery and provider reimbursement schemes through agile cost estimation, efficiency improvements, and higher value of care.