Why is Pharmacy in Supply Chain Leadership’s Crosshairs?

Drugs are a top area of spend for health systems and hospitals; now is the time to act.

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supply chain in health care

By Cory Turner, CMRP

Two decades ago, healthcare leaders ramped up efforts to control medical/surgical supply chain costs. With supplies being the second largest expense for health systems and hospitals behind labor, the C-suite called on their supply chain teams to squeeze out dollars wherever they could. 

Initially, these efforts were focused on reducing costs through supplier contract negotiations and product standardization. With a deeper look into their supply chains, leaders recognized there was further opportunity to save money by gaining visibility into supply inventory so supply chain teams could manage it more effectively. 

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Today, supply chain leaders in many healthcare organizations have a holistic view of their medical/surgical supply assets with centralized inventory management within an electronic supply chain management (SCM) platform. They have automated the tracking and management of products from the point of receipt through to the point of use (POU). Because of the digitization of processes and data, they have access to real-time analytics for informed decision making, providing clinicians with the products they need in an efficient, accurate and cost-effective manner. 

In contrast, pharmacy has remained the Wild West of healthcare supply chain in most organizations. Doctors ask for drugs, pharmacists supply them, and there are few questions asked if the pharmacy stays within budget. Spend is high, waste is rampant, but leaders can’t change what they can’t see or control.

Pharmaceutical supply chain today: disjointed, manual, messy 

While health system and hospital pharmacies are very sophisticated in how they deliver drugs to patients, their supply chains remain inefficient and immature in most cases.   

Because pharmacies are heavily reliant on multiple wholesalers and manufacturers, pharmacy technicians must manually log into each company’s portal to place drug orders, which is labor intensive, time-consuming, and prone to human error. It is estimated that technicians spend nearly one-quarter of their workday maintaining medication and inventory control systems.

With multiple ordering systems, leaders lack real-time visibility into drug spend and the analytics to guide informed purchases. If the pharmacy is buying a drug product from Company A at $100 but Company B’s product is half the price, the technician can’t easily make this comparison because the information resides in different places. 

Drug management is just as disjointed, with most pharmacies using a combination of storage and dispensing technologies. Because these systems are not integrated and therefore cannot share data on drug availability and usage, the pharmacy lacks enterprise-wide visibility into on-hand inventory. They can’t easily take steps to move drugs to where they are needed to avoid expiry and waste.  

The shift from supply chain silos

The medical/surgical and pharmaceutical supply chains have traditionally operated in silos. They have been viewed as two completely different animals by the C-suite. Supplies have been managed by operational/logistics-focused teams, while drugs have been managed by pharmacists, who are viewed as clinicians. Healthcare has traditionally avoided questioning clinicians about their purchasing decisions, but that has been rapidly changing. 

As health systems and hospitals face growing costs pressures, supply chain disruptions, drug shortages, and drug theft and diversion, the C-suite, including supply chain executives, have turned a more critical eye on pharmacy as an area for significant process improvement and financial savings.

Opportunities for improvement: lower costs, less waste, greater control

Looking at the transformation of medical/surgical supply management over the past two decades, which has accelerated in recent years, healthcare supply chain leaders have a tremendous opportunity to apply their expertise, holistic infrastructure, and automated processes to the drug side of the equation.

The consolidation of drug ordering within a single SCM platform that is integrated with the enterprise resource planning (ERP) system frees up pharmacy technicians to spend more time focused on patient care. It also provides pharmacy and supply chain leaders access to comprehensive and timely insights on spend, which they can leverage to capitalize on savings opportunities, such as 340B Drug Pricing, and wholesaler discounts and rebates.

An SCM that is integrated with an electronic health record (EHR) system and features point of use (POU) data capture technology enables the tracking of drug inventory from receipt through use. 

Supply chain has real-time visibility into inventory status to ensure adequate drug stock remains on hand, while preventing overordering or stockpiling of supplies. 

An estimated 30% of discarded pharmaceuticals can be attributed to logistics issues. End-to-end tracking of drugs through an SCM platform enables supply chain to manage expiry dates, optimize inventory by moving it to where it is needed, protect against loss and theft, and help facilitate compliance with the Drug Quality and Security Act (DQSA). 

How do we make it happen?

Change is tough in healthcare and transforming the pharmacy supply chain can appear as challenging as turning around an aircraft carrier. In many ways, it is. 

It took decades of effort by healthcare supply chain leaders, with backing from the C-suite and clinical stakeholders, to modernize and optimize the medical/surgical supply chain. Pharmaceutical supply chain transformation, too, will require stakeholder collaboration, change management, executive sponsorship, and investment.

But, unlike the previously unchartered waters, supply chain leaders navigated to boost medical/surgical supply chain performance. They have the roadmap, the technology and the expertise proven effective with supplies that they can now apply to pharmaceuticals. 

For those integrated delivery networks (IDN) that have successfully integrated pharmaceuticals into their overall supply chain processes and systems, including Parkview Health and Mayo Clinic, it all started with a conversation between like-minded leaders. More and more, I am seeing pharmacy and supply chain leaders extending a hand across the table, acknowledging the need for change, and taking those first steps toward making it happen.  

The C-suite can foster these relationships and encourage collaboration, by providing opportunities for pharmacy and supply chain leaders to come together at the executive table, share ideas, and begin planning a path forward.

Cory Turner CMRP leads Healthcare Strategy for Tecsys, one of the largest supply chain IT organizations in the healthcare industry. He has two decades of experience in healthcare supply chain operations and solutioning, having earned his credentials at Greenville Health System, (now PRISMA Health), the largest IDN in South Carolina. He has since built his career with experience with Infor, Omnicell and Workday solutions. Cory’s insights into the healthcare supply chain market are distinctively informed by his tenure as both an operator and provider of SCE software.

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