Just like a bumper-to-bumper warranty on an automobile to cover needed repairs and replacement parts for a period of time, group purchasing organization contract pricing should protect providers from demand-related price hikes in response to production or delivery problems.
Maybe. Maybe not.
Either way, what can healthcare supply chain executives do to protect their organization’s budgets as well as supply lines when disaster strikes?
“Transparency is paramount,” argued Vincent Jackson, Vice President, Pharmacy Services Group, HealthTrust. “With so many examples fresh in providers’ minds, I think now more than ever there is an appreciation for paying the appropriate market price for medications so long as market dynamics are driving reinvestment in the quality of the supply chain to improve shortage mitigation. In order for that discussion to be fruitful, both parties involved in the negotiation need to be transparent about the issues at hand, what a reasonable price is and why, and how to address real-world challenges that may surface during the life of a contract.”
Rely on the GPO, insists Ash Chawla, R.Ph., Chairman and CEO, PDM Healthcare.
“The GPO is providers’ best advocate in fighting the scarcity of products or any sudden dramatic price increases for available products as the GPO is constantly monitoring market conditions,” he said. “A GPO relationship can also help providers who may not have a secondary source or plan in place to deal with unexpected shortages as the GPO will be able to offer other supplier contracts to the facility and streamline the new client process between the supplier and healthcare organization.”
Beth Grimsley, Portfolio Executive, Medical Sourcing Operations, Vizient, concurs.
“Protections against shortage-induced market dynamics are part of Vizient’s contracting process, and provided for in our national agreements, to better meet member needs and market dynamics,” she said. “For example, we now include enhanced ‘failure to supply’ language in all of our IV agreements as a result of the shortages experienced in 2017-2018.
“Additionally, I encourage providers to consider doing the following things to improve communications and mitigation strategies when shortages happen:
- Get to know the supplier’s field representatives. They are the first line of communication between providers and suppliers. They can help providers understand when and where product is available, especially during allocation periods.
- Make an effort to understand the distribution channels and options for alternate shipments
- Work proactively with your GPO to escalate supply challenges, understand purchasing options, supply chain status and to get timely updates on supplier and manufacturer contingency plans.”
Thomas Lubotsky, a former Chief Supply Chain Officer at a leading Midwestern integrated delivery network and senior healthcare supply chain industry observer, merely believes keeping this issue fresh and top-of-mind between a provider and its GPO may be the most expedient solution.
“Reinforcing disaster preparedness planning importance and assistance to both providers and suppliers would be helpful GPO resources to each that could set forward a common sourcing practice and demand where essential products require this level of planning,” he suggested. “GPOs might also be able to play a role where they could be a central repository of demand-based information and knowledge of supplier production issues that could be useful to providers if downstream supply impact is likely. Again, transparency requirements among suppliers will be an essential behavior for this repository knowledge to be of any use.”
It’s never too late to focus on infrastructure — even after a crisis has passed, according to Leigh Nickens, Director of Marketing, Fluid Therapy and Injectable Drugs, B. Braun Medical Inc.
“Organizations are best protected against short-term fluctuations by partnering with manufacturers who are continuously investing in infrastructure that can accommodate increasing demand, while still ensuring a consistent supply of a high-quality product,” Nickens said. “While IV solutions are no longer in short supply, it’s important that providers and suppliers do not treat the issues that led to the shortage as a distant memory. IV fluid shortages can have a profound effect on patient care and providers and suppliers both need to do their part to mitigate future risk.”
Mike Moloney, Premier Inc.’s Group Vice President of Integrated Pharmacy, hints at another potential solution, and one a bit more obvious.
“For suppliers and providers, purchasing volume and expertise will help drive responses to shortage-induced market dynamics,” Moloney insisted. “The true answer to the pharmacy problem is more competition, which means providers need a supply chain partner who can address specific market needs and engender the growth of alternatives while advocating for fair pricing. According to the FDA, when two or more generic drug makers enter the market, prices fall to 52 percent off the original price, and continue to drop as more competitors enter the market.
“We know that policies can mitigate the market dynamics and we are starting to see a major reform of the pharmaceutical market, including actions taken to curb regulatory loopholes that allow drug makers to stymie competition and HHS moving to tackle how the initial drug price is set,” he continued. “It will require providers and suppliers working together with GPOs [that] encourages market growth and advocates for reforms along the drug delivery chain.”
