Transcript PHARMACY 483

Pharmacy 483
Institutional Pharmacy Practice
Purchasing, Product, and Inventory
Management
Donald L. Bomgaars, M.S., M.B.A.
[email protected]
February 26, 2004
Pharmacy Practice Overview
• Product Supply Chain Management
• Patient Care Issues & Management
• Institutional Level Therapy Management
• Population Level Management
Lecture Overview
• PRODUCT & VENDOR SELECTION PROCESS
• GROUP PURCHASING
• PURCHASING & DISTRIBUTION CHANNELS
• INVENTORY CONTROL SYSTEMS
• PRICING & REGULATORY ISSUES
• RELATIONSHIPS WITH THE PHARMACEUTICAL
INDUSTRY
SELECTION PROCESS
• ASSESSMENT OF NEEDS
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P&T decisions
Patient populations
Staff preferences
Managed care environment
SELECTION PROCESS
• SUPPLIER APPROVAL
– Quality assurance
SUPPLIER CERTIFICATION REVIEW
BIG PHARMA, INC.
• Product Line – Oral solids, controlled substances, SVP,
LVP, topicals, peptides, and chemicals
• Supplier Type - ( )Primary/( )Secondary/( )Marketer
• Back Order History – What & when?
• QA/QC Director & Production Director – Appropriate
educational backgrounds and experience?
• Recall History – Is there a pattern?
SUPPLIER CERTIFICATION REVIEW
BIG PHARMA, INC. (cont.)
• FDA Documents & Company Responses – What was
noted or observed? How did the company respond? Was
there a Warning Letter issued by the FDA? Is there a
pattern of observations from visit to visit?
• Overall Comments – Company SOPs review, financial
news reports, company web site info, recent FDA
approvals?
• Recommendation disapprove?
Approve, qualified approval,
SELECTION PROCESS
• SUPPLIER APPROVAL
– Quality assurance
– Supplier performance history
– Terms and conditions
SELECTION PROCESS
• PRODUCT SPECIFICATIONS
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Bioequivalence issues
http://www.fda.gov/cder
Packaging issues
• CONTRACT BID & AWARDS
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Conventional RFQ process
Online reverse auction
SELECTION PROCESS
• PRODUCT SPECIFICATIONS
• CONTRACT BID AND AWARDS
• POST-AWARD MONITORING
GROUP PURCHASING
ORGANIZATIONS
• ADVANTAGES
– Pooled volumes
– Shared resources
– Peer networking
• DISADVANTAGES
– Loss of control
– Variety of constituencies
– Member compliance issues
PURCHASING &
DISTRIBUTION CHANNELS
• Supply Chain Management
– coordination of processes from the
supplier of raw materials to the end user.
PURCHASING &
DISTRIBUTION CHANNELS
• Wholesaler versus Direct Purchases
• Selection of a Distribution Vendor
– Big Three vs. regional players
– Specialty distributors and “grey-market”
sources
PURCHASING &
DISTRIBUTION CHANNELS
• Prime Vendor Wholesaler Features We Value
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Access to online inventory status and QOH
Accurate representation of TOS and MOS
Bar code receiving
Electronic access to invoices and statements
Clean and standardized product detail info
Data warehouse of purchase history info
Markers in wholesaler database to direct purchases to
desired products
– Pick & ship accuracy
– Customer service follow-up
PURCHASING &
DISTRIBUTION CHANNELS
• Value Management
Other directions for improvement:
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reverse distribution process
indigent care program management
information companies (HBOC, MediQual, CIC)
pharmacy distribution systems (Pyxis, API, Owens)
and pharmacy department management (Swedish)
• manufacturing component (Cardinal Assist, National
PharmPak, RP Scherer)
PURCHASING &
DISTRIBUTION CHANNELS
• E-Commerce
Expanding efficiencies to other members of
supply chain
• Decreased transaction expenses, increased info flow
Impact on wholesalers
Pharma to patients direct
• Dispensing with the intermediaries?
INVENTORY CONTROL
SYSTEMS
• Balancing the costs
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Ordering costs
Product cost
Inventory carrying costs
Outage costs
INVENTORY CONTROL
SYSTEMS
• Alphabet soup of acronyms
– JIT, POS, MRP, ERP
– ABC, EOQ, ROP
• Consignment stocking programs
• POU replenishment
• Demand forecasting
EOQ EXAMPLES
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• Filgrastim:
$1,627/pkg
Cost =
Demand= 700 annually
Reorder
cost=
$2.00
Inventory
carrying
$163
cost=
4
EOQ=
• Multivitamin:
$6/pkg
700 annually
$2.00
$0.6
68
INVENTORY CONTROL
SYSTEMS
• DEMAND FORECASTING
– Moves further out the supply chain
– Uses software algorithms to predict usage
based on seasonal and customer specific
anticipated fill dates.
– Longs’ Drug California DC reduced
inventory by 58%, cut replenishment costs
by 65%, maintained 99.5% controllable
service levels, released enough cash flow
($60M) to purchase 20 stores.
INVENTORY CONTROL
SYSTEMS
• Decision Support & Monitoring
– Linear programming
• Allows optimization under constrained
resources
– Decision trees
• Simplifies complex decisions using
outcomes and probability distributions
Decision Trees
$328,000
STATUS
QUO
$328,000 (p= 1.0)
SUCCESSFUL
$235,000 (p= 0.2)
$319,000
MAKE
SWITCH
$340,000 (p= 0.8)
FAILURE
INVENTORY CONTROL
SYSTEMS
• Decision Support & Monitoring
– Multi-Attribute Utility Theory (MAUT)
• Method of quantifying assessments of worth
of diverse attributes
– Financial concepts
• Time value of money (NPV, IRR)
• Risk value of money
• Standard cost monitoring
PRICING & REGULATORY
ISSUES
• For Profit vs. Not For Profit Status
– Class of trade and own use provisions
• Governmental/Regulatory impacts
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Cost based vs. DRG based reimbursement
Budget Deficit factor - OBRA 90
Veterans Health Care Act of 1992
Medicare APC program
Medicare Prescription Drug, Improvement, and
Modernization Act of 2003
PHARMACEUTICAL
INDUSTRY RELATIONSHIPS
• The Global Market and Price Controls
– Impact on the US market
– Cross border internet sales
PHARMACEUTICAL
INDUSTRY RELATIONSHIPS
• The Changing Face of Industry
– Rapid consolidation continues
– Driven by failure of the R&D organizations to
meet the earning per share expectations
– Increased R&D expenditures may not solve the
problems
PHARMACEUTICAL
INDUSTRY RELATIONSHIPS
• The Changing Face of R&D
– The Human Genome project could provide up
to 25,000 new molecular targets
PHARMACEUTICAL COMPANY
RELATIONS
HUMAN GENOME PROJECT TO SPARK EXPONENTIAL GROWTH
IN NUMBER OF TARGETS FOR DRUG INNOVATION
Source: Drews, Jurgen, M.D., "Genomic Sciences and the
Medicine of Tomorrow: Commentary on Drug Development,"
Nature Biotechnology, Vol. 14, November 1996
PHARMACEUTICAL
INDUSTRY RELATIONSHIPS
• The Changing Face of R&D
– The Human Genome project could provide up
to 25,000 new molecular targets
– Combinatorial chemistry will allow increases
of the number of compounds synthesized and
screened by a million-fold
PHARMACEUTICAL
INDUSTRY RELATIONSHIPS
• The Changing Face of R&D
– The Human Genome project could provide up
to 25,000 new molecular targets
– Combinatorial chemistry will allow increases of
the number of compounds synthesized and
screened by a million-fold
– Increased ways of attacking medical problems
could fragment market and allow easier
competition
PHARMACEUTICAL COMPANY
RELATIONS
SHRINKING PERIOD OF MARKET EXCLUSIVITY BETWEEN INTRODUCTION
OF BREAKTHROUGH MEDICINE AND COMPETING INNOVATORS
Sources: PhRMA, 1997; The Wilkerson Group, 1995.
PHARMACEUTICAL
INDUSTRY RELATIONSHIPS
• Marketing
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Partners versus antagonists
Managed care organizations
Government funding for prescription coverage
DTC and Internet marketing
SUGGESTED READINGS
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TEXT: www.ashp.com/bestpractices
– ASHP Technical Assistance Bulletin on Assessing Cost-Containment
Strategies for Pharmacies in Organized Health-Care Settings
– ASHP Technical Assistance Bulletin on Hospital Drug Distribution and
Control
– ASHP Guidelines for Selecting Pharmaceutical Manufacturers and
Suppliers
– ASHP Guidelines on Managing Drug Product Shortages
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Additional reference regarding business methodologies as they are used in the
clinical arena:
• Magid, David et al., Doxycycline Compared with Azithromycin for
Treating Women with Genital Chlamydia trachomatis Infections: An
incremental Cost-Effectiveness Analysis, Ann Intern Med.
1996;124:389-399.
Pharmacogenomics reference:
• Evans WE, McLeod HL. Pharmacogenomics-drug disposition, drug
targets, and side effects. NEJM 2003; 348:538-49.