Pharmacy, Supply Chain should not drive in the fast lane to nowhere

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After more than four decades in pharmacy operations, Marv Feldman knows a thing or two about Pharmacy and its relationship with Supply Chain. His storied background as a pharmacy executive includes serving as Pharmacy Practice Leader at Concepts in Healthcare, which was acquired by BD back in the late 1990s. Feldman, R.Ph., retired last year as Vice President, Pharmacy Member Support, at Premier Inc., where he spent nearly 16 years of his career in pharmacy consulting and medication management.

Feldman shared his thoughts about how Pharmacy and Supply Chain relate and differ with Healthcare Purchasing News Senior Editor Rick Dana Barlow.

HPN: What operational and organizational advantages does Pharmacy enjoy in managing products and services that Supply Chain could use/would love to have to manage the products and services it oversees?

FELDMAN: Pharmacists have a very unique position within any healthcare organization that affords them significant leverage in the management of their supplies. First, they typically enjoy a professional relationship with the medical staff that is built upon their expertise in the use of pharmacotherapy. Their formal educational backgrounds co-exist during college and post-graduate residency training. Physicians often seek the input from pharmacists in selecting amongst a growing scope of powerful medications. This credibility sets the stage for acceptance of recommendations regarding what drug to prescribe and the regimen to be used.

Next, products that are stocked in accordance with the “Formulary” are carefully determined by the Pharmacy and Therapeutics Committees (P&T) after significant deliberation of evidence-based literature, cost impact and comparative effectiveness studies. This time-honored and universally accepted model is common to all health care entities and is co-owned by the medical and pharmacy staffs. It is required by The Joint Commission, FDA and various physician organizations. The P&T is empowered and accountable to ensure availability and safe use of all pharmaceuticals.

Lastly, these practices and processes require that the pharmacy staff serve as drug experts who remain current with new marketplace, research and investigational drug use trends. As such, pharmacists are considered the champions for many different clinical process improvement initiatives such as antibiotic stewardship, core measures and patient satisfaction. All of which decrease length-of-stay, readmission rates, adverse effects and various other quality initiatives – helping control overall costs.

What should Supply Chain understand about the complexity of Pharmacy’s supply chain experience to put those advantages into context?

Pharmacy is one of the highest, non-labor cost areas within the hospital. The expense for labor is generally dwarfed by the expense for the commodities the department manages. With regard to supply management, pharmacists oversee the business aspects of price, inventory and contracting within their institution while ensuring the proper and safe utilization of medications. They are typically involved with evaluating and comparing the outcomes between generic, therapeutic and biosimilar alternatives when making product selection decisions. This takes significant educational training and experience. Pharmacists are uniquely qualified for this work.

They need to evaluate comparable products based on their clinical attributes as well as consider contractual obligations and negotiated agreements handled through their GPOs and other entities. This multi-focal approach places the pharmacist in a crucial position to determine the optimal value for a healthcare system. In some instances, the pharmacist may recommend a product that appears to be more expensive at face value. Yet, when considering the overall impact the drug may have on a patient’s length-of-stay and other quality outcomes may actually prove the selection provides the best value for formulary acceptance. Helping executives understand these evidence-based practices can create real value for a hospital’s bottom line.

Pharmacy is also required to be the master of inventory control, especially with extremely costly drugs. It was the original service line to embrace prime vending distribution which resulted in the use of a cost minus service fee model. That enabled rapid implementation of databases maintained by the wholesalers to track purchase history and product libraries. This practice is sometimes found curious by non-pharmacists. However, it has demonstrated a cost-efficient and auditable business process.

In recent years, Pharmacy staffs have had to deal with an unprecedented number of drug shortages often involving critical and life savings medications. These often necessitate that the pharmacist research and recommend completely different therapeutic approaches, and then train physicians and nurses to implement the safe use of the new prescribing practices. This unfortunate circumstance diverts valuable energy and skills that could otherwise be used on more productive endeavors to improve patient care.

What can Supply Chain teach Pharmacy about… well… any or all facets of supply chain operations and why?

Pharmacists are trained to be clinicians, not logisticians. Yet, they spend significant time managing the logistics of medications inside and around a healthcare campus. Investing in support for these functions can help pharmacy leaders apply to their clinically-trained skills with a focus on better managing pharmacotherapy and safety while reducing overall costs.

Further, capital agreements require significant negotiation skill. This is not something pharmacists learn in college. Similarly understanding the complexity of Terms & Conditions, the cost of money and net present value are relevant to many large ticket contracts that have to be negotiated. Support from Supply Chain Executives in handling these situations can be of tremendous value to many pharmacy leaders.

CEO misconceptions about cost management

  • Hospital formularies are open and getting more lax
  • Closing an “open formulary” will save significant dollars
  • Prescriptive patterns cannot be changed (“black box”)
  • Clinicians don’t pay attention to supply cost
  • The most costly product always works better
  • There is always an alternative product
  • We spend more for drugs when our census rises
  • We spend more for drugs…so we can save more in drugs

How can the Supply Chain executive help?

  • Understand the challenges (meet regularly with Pharmacy Leadership)
  • Provide analytic support to compare contracts (do not usurp the process)
  • Empower the pharmacy to own daily on-site inventory replenishment
  • Enable “C-Suite” visibility for the pharmacy leader to explain expense trends
  • Help pharmacy document specific facts of extraordinary budget busters
  • Help negotiate “true business agreements” (prime vendor, capital)
  • Monitor and forward important media articles

Source: Marv Feldman at SMI, 2017

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