Most pharmacies spend a significant portion of their total budget on drug acquisition, so it’s no surprise that a core component of success revolves around making the right purchasing decisions. By working closely with purchasing decisions on a daily basis, I have observed three key challenges that health system pharmacy buyers will likely see this year. Here are the steps you can take to help address them:
Managing the rate of change and complexity
Fifteen years ago, purchasing for a hospital pharmacy was a straightforward process. Experienced buyers relied on institutional knowledge and instinct to ensure proper supply to meet the demands of patient care. Today, the industry continues to experience rapid consolidation as health systems look for ways to deliver quick and cost-effective care. This leads to a greater focus on care settings outside of traditional acute, inpatient services, including ambulatory, retail, oncology clinics, infusion centers and regional outpatient locations.
As a result, buyers are no longer ordering for one inpatient account, but for many locations, using many accounts and for a much more diverse set of patient needs. In this case, instinct alone will not be enough. Leveraging data and analytics are increasingly critical to developing and implementing a strategic action plan designed to help reduce costs, promote inventory management and budgeting, as well as support quality patient care.
Pharmacy buyers have multiple data streams they can use to analyze inventory. By dedicating resources to regularly evaluate and leverage drug spend data, buyers can adjust to reflect the hospital’s strategic priorities. Look for reports that can help you analyze purchases, utilization and wastage, understand trends and provide the foundation you need to make improvements over time. By analyzing data, you can gain valuable insights to identify potential savings as well as opportunities for new revenue streams.
Not having available data is generally not an issue at most health systems; however, having the data analytics resources to sift through the data to get a clear picture, may be. We encourage buyers and pharmacy managers to work with their distributor to leverage their reporting and analysis capabilities to predict trends and changes in their needs. For example, Yale New Haven Hospital identified high cost medications dispensed via the automated dispensing cabinets and created a high cost medication redistribution program initiative with the help of McKesson RxO’s Spend Analytics.
Planning for drug shortages
Drug shortages are a complex, global issue. To better equip your hospital or health system, consider the resources that you currently have at your disposal, including manufacturer representatives, your distribution partner and industry associations. They can help you find accurate and timely information on drug shortages to ensure that your actions are as effective as possible. Debra Carlson, Pharmacy Purchasing and Inventory Analyst for St. Charles Health System in Oregon, promotes the benefits of pharmacy buyers keeping clinical stakeholders up to date on availability issues to reduce waste and conserve limited supplies.
Having the right amount of inventory is a true balancing act. Keeping inventory too lean can cause unnecessary disruptions in supply, but stockpiling a formerly scarce product once it becomes available can have a significant impact on cash flow. It can often lead to waste due to out-of-date stock or diversion. Pharmacy buyers are often so busy putting out fires; they don’t have time for fire prevention – to prevent the problem from happening again in the future. Talk to your distributor about inventory optimization technologies and programs that can help you find the right balance for your needs.
Specialty impacts inventory management
Specialty pharmacy is rapidly becoming a key component of health system pharmacy operations. Accessing specialty drugs, gaining additional information needed and ordering through a channel other than the main wholesaler all bring new challenges to the pharmacy buyer. Because specialty drugs are administered in a variety of clinical settings, buyers must also manage various purchasing accounts and pricing structures, including GPO, WAC and 340B.
In addition to restricted access to some specialty drugs, health system buyers must also plan for narrow indications associated with more personalized treatment regimens. As a result, Drug A, which is indicated from one patient population, may not be replaced with Drug B because it is not indicated for the same patient population. As patient treatment patterns are very dynamic, buyers must continuously adjust inventory. For example, one new melanoma treatment costs more than $100,000 per year. If this medication expires, it could mean a large financial hit to the pharmacy’s operating costs. Ensuring proper supply and inventory management requires keen attention to patient utilization data as well as efficient procedures for procuring, handling, and storing of these expensive medications. Work with your distributor to leverage their specialty expertise to ensure that you’re able to order under the correct classification and secure the best pricing.
Ultimately, health system pharmacy buyers are responsible for ensuring a proper supply to meet the need of patient care in a timely and cost-effective manner. However, truly successful pharmacy operations are built on collaboration among the business and clinical teams to make strategic formulary and purchasing decisions that maximize inventory management, reimbursement and quality care.