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Does Pharm.D. or R.Ph. behind your name make you a better MM?

Some argue that materials managers with a pharmacy background are better equipped and more skilled for supply chain challenges than those without the pedigree, while others contend that’s more of a misnomer. In fact, one pharmacy executive with the nation’s largest privately held hospital chain recently labeled directors in her profession "stubborn, anal people who are always perfect."

So is either observation true? Can materials managers learn anything from pharmacy managers? Can pharmacy managers learn anything from materials managers? Should pharmacy rely on materials management for supply chain expertise? Or should the pharmacy supply chain remain autonomous and separate from materials management? The answer to all three may be a qualified yes.

Much depends on the facility and the individuals involved in managing the medical/surgical and pharmaceutical product supply chains, but some key characteristics of the pharmacy department illustrate its considerable influence.

Pharmacy seems to enjoy some clear advantages over materials management with the C-suite and the medical team.

For one, pharmacy products tend to represent a larger expense item in the budget than med/surg supplies overseen by materials management. This helps the pharmacy manager leverage his or her influence with the CFO, according to Ed Gravell, senior vice president, health systems, integrated provider solutions, Cardinal Health Inc., McGaw Park, IL, and a former executive with two group purchasing organizations – the now defunct Purchase Connection and the company that acquired it, MedAssets Inc.

At the same time, however, pharmacy managers also seem to have a solid grasp of managing the small stuff, so to speak, and more effectively using automation technology to do it.

"Shipments to the pharmacy generally involve totes and smaller quantities of items – not bulk pallet loads," Gravell said. "Pharmacy is geared to better handle that with bar coding and a standardized numbering system, and it has really embraced automated supply cabinets as a vital link for managing inventory, replenishment and tracking."

Dave Hunter, system director, supply chain management, Providence Health & Services, Seattle, agreed that pharmacy is rather adept at managing smaller quantities but seem to struggle with bulk products, which fall under materials management’s purview. "Pharmacy has more knowledge in the use of [automated supply management technology] and charging to patients," Hunter said. "Materials management hasn’t been quick enough to pick up on that. They see these machines as having a bigger payback for pills than for supplies."

Furthermore, pharmacy’s database tends to be connected to patient billing while the materials management information system typically is not, Hunter noted. And if materials management needs pharmacy data reports it either has to go directly to the pharmacy department or contact the pharmacy distributor because their databases are linked. "That’s business as usual in pharmacy but not in materials management," he added.

"The average pharmacist only uses one distributor to buy from," Gravell said. "Generally, materials managers use multiple distributors because they don’t want to put all their eggs in one basket. They see it as a safety valve. The pharmacist is confident that a supplier has products. The materials manager is concerned about stockouts, worried about running out of product and angering physicians. Pharmacists realize that if a stockout happens it’s more likely industry wide [than an inventory mistake by materials management.]"

What also gives pharmacy managers an edge is their clinical connections to physicians, a relationship that tends to be tighter than what materials managers may have with doctors. By and large, these interactions happen during pharmacy and therapeutics (P & T) committee meetings and also during patient rounds.

In fact, more often than not they can speak on the same level with doctors. "They go to school where they learn how to pronounce those drug names," Hunter quipped. "Materials managers don’t." But he admitted that pharmacy’s clinical training opens doors for them with physicians a bit more easily than for materials managers.

"The challenge materials managers face is that they don’t have a clinical background per se," Gravell noted, "so it’s more difficult for them to make connections with clinical champions. They’re viewed more as buyers and order takers. However, we’ve seen that materials managers with a registered nursing background seem to be more successful at it."

Hunter concurred that materials managers who have clinical experience in their background, particularly in pharmacy, may enjoy an edge. "But over time, all materials managers can develop those connections with the medical community," he added. "Pharmacy works in more of a clinical world, while materials management works with a broader group of customers."

Both Gravell and Hunter believe materials managers can learn a lot from pharmacy managers, based on their P&T committee participation and the resulting product formularies that are established.

"P&T committees basically shrink product choices," Gravell said. "Materials managers deal with a lot of [stock keeping units] that involve physician preference items and custom lines. The proliferation of SKUs is difficult to manage. Pharmacies typically deal with 700 to 1,000 SKUs while materials managers may deal with 22,000 SKUs. P&T committees look at treating disease states by controlling therapies and tracking clinical outcomes and efficacy but focusing on standard products, regardless of brand or manufacturer." Essentially, the med/surg side offers so many choices and variables that materials managers get bogged down by brands, manufacturers and individual preferences, according to Gravell, which is why P&T-driven standardization is so important. However, he admitted it’s easier to create a formulary for drugs than med/surg supplies, largely because of the limited quantity and variety of products involved.

Certainly, physician preference for branded drugs can come into play but when generics are accepted physicians have little say, Gravell noted. It’s a strategy materials managers can learn to apply to commodity med/surg products, he added.

Pharmacy’s interaction with physicians on the P&T committee can be a valuable asset, Hunter said, something that materials managers need to develop independently of that committee.

"We know that the P&T works so how do we take that and apply it to materials management, specifically for physician-sensitive med/surg supplies?" Hunter continued. "The problem with general med/surg supplies is that they include more nursing products. Physicians don’t want to be dealing with those discussions. We have a hard enough time getting them to participate [in the product evaluation process]. As hospital employees we’re paying them too much to do that."

Some healthcare organizations are following the lead of teaching institutions by redirecting oversight of the clinical aspects of pharmacy to the chief medical officer while leaving the non-clinical/operational aspects to the CFO. They’re doing this not only as a way to achieve better outcomes but also as a way to control expenses.

Essentially, clinical pharmacists accompany physicians during rounds on the nursing floors to advise them on appropriate drug use to minimize adverse events and control drug therapy costs.

"The strategy of getting pharmacists on the floor with the doctors is a positive one because there’s big money to be saved," Hunter said. "Most pharmacists didn’t go to school to count pills. They leave that to their techs."

Providence is experimenting with such a division in an effort to focus more on quality and safety measures so one of the pharmacy managers will be reporting to the CMO and not to Hunter in supply chain. However, he will have a dotted line to Hunter for issues related to contracting and supply chain.

HCA saw pharmacy as "the next logical extension of supply chain operations" and highlighted that idea at the annual conference of the Association for Healthcare Resource and Materials Management in San Diego in mid August.

Jay Kirkpatrick, CEO of HCA’s Nashville Supply Chain Services division, which represents 11 service centers and warehouses in Kentucky, Tennessee and Georgia for HCA facilities, as well as Trina Kaylor, Pharm.D., division director of pharmacy, told attendees that a variety of market factors inspired HCA’s CEO to ask Kirkpatrick’s group to review pharmacy operations back in 2003.

Pharmacy operations was being squeezed by regulations and standards for patient safety without additional resources to help alleviate the pressure, the organization lacked standardized drug formularies and bar coding processes, and facility chargemasters didn’t link up with any of the disparate formularies. In addition, HCA facilities operated multiple systems internally for receiving, storing and distributing drugs that contributed to erratic availability, and they didn’t effectively use GPO contracts.

Another trend involved changes in education and training and the job market. More medical schools were eliminating the Bachelor’s degree programs in favor of Pharm.D. degrees. That meant pharmacists were spending at least two more years in school and when they graduated, they didn’t want to count pills but accompany doctors in seeing patients on the floors, according to Kaylor. Another key statistic added to the alarm. More than 27,000 pharmacists were retiring and being succeeded by 10,000 graduates, 90 percent of which were going to retail pharmacies and not hospitals, she cited.

HCA’s Supply Chain Services arm launched in January 2000 to protect the company’s core business of patient care, reduce supply cost, increase profitability and improve service by consolidating back office functions, share supply cost reduction opportunities throughout the organization and work with the GPO (HealthTrust Purchasing Group) in developing and optimizing division contracts for medical devices and standardization initiatives.

Based on their initial success, Supply Chain Services was recruited to help pharmacy operations apply and integrate its own practices, standardizing procedures and processes for supply contracting, inventory management and technology implementation (centralized physician order entry and drug database that enables home-based orders), as well as streamlining formularies and building evidence-based cases for company-wide rules, and developing an infrastructure to expand clinical pharmacy services, according to Kirkpatrick and Kaylor. It was a process that began in earnest last year.

"Up until recently, pharmacy was autonomous and reported to the COO," Kaylor said. "They viewed their No. 1 job as logistics, but we don’t look at it as that. We’re good at creating contracts."

One of the key strategies and tactics they launched was a companywide clinical pharmacy program where pharmacists collaborate with doctors to influence drug use decisions and support supply cost initiatives.

"If you get your pharmacists out on the floor working with physicians your costs will go down," Kaylor said emphatically. "Drug costs go down and clinical interventions go up." That’s because the pharmacists can show doctors right away that another drug may be less costly than the one they’re recommending, she added. In fact, HCA found that clinical pharmacists can provide a 300 percent return-on-investment in drug savings over full-time equivalent costs and can achieve 90 percent use of therapeutic formularies, protocols and order sets.

Meanwhile, Supply Chain Services centralized purchasing, formulary management, inventory management and bill payment, as well as consolidated bar-code packaging, distribution, IV preparation and the chargemaster for pharmacy operations.

"We’re introducing PAR levels to pharmacy," Kirkpatrick chimed. "How cool is that?" They have linked the materials management information system and the warehouse management system with pharmacy’s ordering and dispensing systems and interfaced with their drug wholesaler’s system to monitor purchasing. "This didn’t come easy," Kirkpatrick admitted. "It involved a lot of work but we’re there. Now we’re working on eliminating core inventory in pharmacy."

Kaylor concurred. "Putting an inventory management system in pharmacy is leaps and bounds ahead of where you’re at if that’s all you can do," she said. "You can standardize and consolidate all you want but if you don’t set up a policy and make it viable it won’t work."

Neither Gravell nor Hunter see pharmacy divesting itself of all supply chain operations, however, largely because regulations require that pharmacy must handle oversight of certain controlled substances and high-end drugs that could be abused.

Still, both believe that materials management and pharmacy should be working together.

"Pharmacists should work collaboratively with materials management for contracting because pharmacists are more well-versed on these products in the same way that doctors are with physician preference products," Gravell said.

Hunter admitted that materials management and pharmacy at his organization are "fairly even" in contract negotiations and "think the same" on inventory management. "I sense that supply chain management worries more about inventory turns than pharmacy directors who simply need to have product available 100 percent of the time for patients," he noted. "I think it’s helpful for materials management to be advising pharmacy on inventory turns and levels, particularly if those are out of hand, but the ultimate decision over what is carried and how much may be the pharmacy’s."