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Pharmacy supply chain priorities in the wake of Covid-19

Health care systems are beginning to envision the post-Covid-19 “new normal”, while at the same time preparing for future pandemic waves. To support these efforts many pharmacy executives are taking action to improve the pharmaceutical supply chain.

The Pharmacy Executive Forum hosted two networking forums on June 4 and June 5 to facilitate collaboration and idea-sharing about strategies and priorities between pharmacy leaders. Below are discussion points on the four major supply chain-related priorities that leaders addressed in those sessions.

Priority 1: Establishing an adequate supply for the next wave of Covid-19 cases

The problem:

During early months of the Covid-19 pandemic, the pharmaceutical supply chain was unable to match supply to skyrocketing demand.

How pharmacy leaders are responding:

As pharmacy leaders prepare for a second wave of Covid-19 cases, they are adjusting their operations to ensure they have sufficient supplies before cases rise again. This requires pharmacy leaders to work closely with providers to identify which drugs are essential and how many doses they should keep on hand.

Establishing essential drug lists

Most organizations have compiled a list of essential drugs to treat or care for Covid-19 patients, or that they will need in great quantities as they ramp up elective procedures and prepare for flu season (which may coincide with a second wave of Covid-19).

These lists typically range from 80-100 essential drugs, though the actual number of drugs is shorter than that—the list grows when accounting for different packaging sizes for the same drug. The essential drug list should also include alternatives to preferred products, which may be used as back-ups if inventory of preferred products run low.

Estimating needed inventory on hand

Two questions inform the size of an organization’s target on-hand inventory of essential drugs. First, what is each drug’s anticipated burn rate (how fast would the institution use the medication during an outbreak)? Second, how many days-on-hand is the organization comfortable with?

Providers reported that burn rates varied over the course of the first few months of the Covid pandemic as treatment protocols changed. Leaders therefore should regularly monitor and adjust this figure. For example, one organization used EMR data to calculate 7-day and 2-day-average burn rates. To ensure adequate near-term supply, leaders then used the higher of these two averages when making burn rate projections. Organizations also reported the importance of close collaboration with internal data analysts as well as state health agencies to predict future demand.

Expectations for patient days on hand varied across our conversations and were often a function of organization size. Many organizations aimed for 90-120 days, while others were comfortable with a minimum of 20 days. Organizations with lower days-on-hand were likely to be smaller community hospitals. These leaders also expressed more difficulty in procuring larger drug stockpiles.

Leaders emphasized that even though they were building up to large on-hand inventory amounts, they still sought to purchase responsibly to avoid shocking the supply chain further. One organization built up inventory by continuing to purchase drugs at the same rate as they had before the crisis, even though patient volumes were down, in order to build a reserve.

Priority 2: Developing partnerships to improve continuity of drug supply

The problem:

With the current supply chain in crisis, typical acquisition pathways have often not provided adequate amounts of inventory. While many supply chain departments have formed innovative partnerships to secure PPE and critical devices, such as through product exchanges, working non-traditional vendors, forming purchasing consortiums, or general “MacGyvering,” pharmacy leaders have had less success with these strategies. Barriers to similar innovative pharmacy partnerships include restrictive GPO contract terms and regulatory requirements.

How pharmacy leaders are responding:

Pharmacy leaders report that their most successful strategy to improve the reliability of drug supply chains has been to leverage existing partnerships. Examples of these existing partnerships include:

Working directly with manufacturers

Several pharmacy leaders reported success when relying on their established relationships with drug manufacturer sales teams. While not all manufacturers are willing to move a product to direct sales, some organizations have been able to secure deals for critical drugs.

Working with distributors

Some organizations have relied on their distributors for insights into product movement and inventory upstream in the supply chain.

Distributors have helped providers foresee shortages and adjust treatment protocols proactively to conserve impacted supplies. However, pharmacy leaders reported marked differences in transparency across distributors.

Leaders are also considering investing in technology to improve continuity of drug supply. Organizations hope to mitigate supply chain risk by looking upstream at distributors, manufacturers, and even raw material gathering, to identify weak points and build contingency plans accordingly. While few companies offer these services to providers today, leaders that invest in these technologies are betting that they will be better able to avoid future shortages.

Priority 3: Building the business case for expanding our internal inventory/warehousing

The problem:

In many health systems, medication storage is optimized for just-in-time inventory processes, and the system doesn’t have space for increased inventory of critical drugs. Even organizations that already have pharmacy storage or warehouses are quickly running out of space. Leaders report “stashing drugs anywhere that drugs could be stashed.”

How pharmacy leaders are responding:

The issue of inventory storage has no easy answer. Leaders evaluating the opportunity to expand their internal inventory or warehousing should consider the following questions:

  1. How can we collaborate with supply chain to identify space for inventory and improve distribution?
  2. How can we consistently and efficiently keep track of our inventory levels?
  3. How can we rotate through supplies to prevent expiration?
  4. To what extent is it possible/beneficial to scale this process across the entire system?

For organizations looking to benefit from scale, it’s also important to remember that “systemness” strategy extends beyond just inventory storage.

Priority 4: Centralizing pharmacy purchasing and inventory management across the system

The problem:

Health systems that lack a consolidated, real-time view of inventory across their facilities reported the greatest challenges acquiring and managing drug inventory. One leader mentioned how each hospital in their system was purchasing separately from their wholesaler, thus they were competing among each other for the same inventory. On top of that, lack of a unified inventory management platform required pharmacy staff and leaders to spend more time performing manual daily inventory counts and maintaining inventory dashboards.

How pharmacy leaders are responding:

Organizations without centralized pharmacy purchasing and inventory management frequently reported evaluating investments into technology that would allow this coordination across the health system. They are interested in minimizing competition across hospitals within the same system and pursuing economies of scale in contracting for essential supplies. Pharmacy leaders were also eager for more immediate visibility into supply levels to ensure drugs go to where they are most needed.

However, some pharmacy leaders with centralized inventory management reported that centralized purchasing and inventory management isn’t a panacea for all inventory problems. Hospitals can often still make separate purchases even when they’re supposed to be funneling all orders centrally.

In addition, enhanced visibility into supply stock can mislead prescribers that don’t understand burn-rates. To give prescribers actionable information about inventory levels for essential drugs, pharmacy leaders with centralized inventory recommended not providing prescribers with actual inventory levels. Instead, they used a “red-yellow-green” dashboard that corresponds with their supply of the certain drugs. This allows prescribers to more effectively know which drugs are in short supply, and when they should prescribe an alternate.

Communicating changes to providers

As treatment protocols and organizational priorities shift over the coming months, pharmacy leaders must be ready to adapt their operations to new realities. However, poor communication or roll-out of these changes can stifle any well-thought out strategy. It’s therefore important to remember that the way in which leaders communicate these changes, can be just as important as the operational or strategic changes themselves. This blog post provides expert tips for communicating change amidst Covid-19.

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