Is a consignment program right for my pharmacy? Ask yourself these questions.

For the second year in a row, hospital and health system CEOs ranked cost containment as one of their top three strategic priorities, according to the Advisory Board Annual Health Care CEO survey. The survey also found that c-suite executives are also looking for innovative approaches to expense reduction, with more than 50 percent of respondents ranking this as a top priority.

As hospital leaders look for new ways to contain costs, specialty drug spend continues to present a challenge.

In 2018, a growing number of patients received new specialty treatments across a wide range of therapeutic areas, from oncology to migraines. Even as net spending for traditional medicines fell 3.4 percent in 2018, specialty medication spending increased more than 5 percent as prescriptions for these treatments grew at more than double the rate of traditional medicines, according to IQVIA.

In addition to increased spending on specialty pharmaceuticals, there is also a cost associated with managing this inventory, which often has unpredictable demand. While it’s important to have these products on hand when they are needed, there is also a higher risk associated with creating waste due to obsolescence.

Although the product mix in a hospital’s overall drug spend has dramatically shifted, many hospitals and health systems have not adapted their inventory management processes to accommodate. A majority of facilities currently use an ownership model for specialty drug inventory, citing increased flexibility and availability of products when needed as key reasons, according to Burke Research.

Looking to the future, as specialty medications continue to become a larger portion of overall drug spend, traditional ownership models may not be sustainable going forward. An inventory consignment program can help to address some of these complex challenges. Consignment programs eliminate carrying costs and waste due to obsolescence and help to reduce the risk associated with keeping specialty medications on hand.

Is a consignment program right for your hospital or health system pharmacy? When evaluating if this approach is a good fit for your organization, here are the key factors to consider:

What are my utilization and inventory carrying costs? How much waste is being created due to expiration?

The first step in analyzing whether a consignment program can help your organization contain costs is to review total utilization across your entire product inventory. Determine what percentage of your inventory reaches its expiration date and must be disposed of. How much waste is being created? This dollar amount represents the savings associated with inventory carrying costs and product expiration avoidance that can be realized by transitioning to a consignment program.

Are we able to keep the emergency products we need on hand?

A consignment program allows your hospital or health system to keep products on hand without paying to carry them in inventory. While forecasting when emergency medicines will be needed is difficult, it’s critical to have the right dosage on hand. However, the high cost of many emergency medicine products leads many hospitals and health systems to keep only a minimum amount in stock. Through a consignment program, your organization can keep these products on hand and only pay for them when they are actually used. Additionally, having more of these products on hand means that you can potentially avoid the costs and risk associated with transferring patients to another facility, as well as additional costs associated with same-day product deliveries. 

How much time is spent ordering products and monitoring inventory?

Many hospitals and health systems are still physically counting and checking inventory par levels manually. The more time your staff spends tracking inventory and placing individual replenishment orders, the less time they have to spend on patient care and other higher-value tasks. Perform a time-tracking study with your staff. How much time is being spent weekly on these tasks? Leveraging innovative technology and automating these processes through an RFID-enabled consignment program can generate cost and time savings.

How much waste is generated due to human error?

Many specialty medications require refrigeration. If these products are not being stored properly, you could be throwing away high-cost doses of product. Additionally, excess inventory created by over-ordering or inaccurate inventory counts could also be creating unnecessary cost. Many consignment programs offer refrigerated cabinets that provide 24-hour temperature monitoring to ensure products are being stored correctly. And, using an RFID-enabled consignment program, inventory usage is automatically tracked, and products are replenished when they fall below their par levels, saving valuable time and avoiding potential error.

After you’ve asked these questions, take a holistic look at potential areas for optimization and review with your leadership team. Can we potentially reduce costs by streamlining our current processes, and automating manual tasks? Can our hospital pharmacy save costs across the organization by ensuring we have the right medications on hand when they’re needed? How much is our current inventory carrying cost and how much waste are we generating?

Consignment programs offer solutions that can help to eliminate some of these costs and streamline your workflows. While it can be difficult to identify cost-savings in your overall drug spend, transitioning to a consignment program can help contain unnecessary costs by offering innovative new ways to operate.


Cardinal Health Specialty Pharmaceutical Distribution provides flexible consignment solutions to ensure critical medications are available when your patients need them, allowing you to focus on patient care instead of time-consuming manual processes, excessive carrying costs, or waste due to obsolescence. Learn more.

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