With the price of prescription drugs a hotly contested issue in the upcoming U.S. presidential election, some are sounding the alarm about less-than-ideal supply chain strategies adding to those costs.
The drug supply chain is still reeling from COVID-19, even a full year after the World Health Organization declared the pandemic officially ended. Continuing problems are compounded by the fact that the supply chain management strategies within pharmaceutical suppliers and hospitals compare unfavorably to the retail business, according to two executives from Intelliguard, which provides medication inventory management services to some of the biggest hospital and healthcare companies in the U.S., as well as major healthcare testing and equipment manufacturers.
Drug supplies tend to work on more of a “push” model than a “pull” one when it comes to supply, and getting better visibility into demand is the way forward, explains Tim Tinnel, chief operating officer of Intelliguard. Deploying intelligent inventory management tools gives higher visibility to the availability or unavailability of medications, allowing healthcare providers to see shortages before they become problematic, he argues. “But it’s also essential to recognize that there will always be drug shortages; you just have to prepare for them as best you can.”
Tinnel adds that the situation is further complicated by the fact that generic drugs are, by their nature, made by multiple manufacturers, so it’s harder to coordinate information about what’s actually available at any given time. “Again, improved visibility would help,” he says.
Inefficient supply chains drive up the cost of drugs, whether brand-name or generic. “I’d like to see a slowing in price increases across pharmaceuticals in general,” Tinnel says. “I think that giving them that insight into a measurable supply chain is what gets us there. I don’t think the manufacturing costs have gone up tremendously. If we can give manufacturers better visibility, then they can better predict, have less waste, and be more efficient in the supply chain. I think that’s a key to at least maintaining prices.”
Part of the challenge is handling the mix of availability of generic and brand-name drugs. Often, demand is driven by healthcare provider preferences, rather than pure price point. “From a supply chain management perspective, it adds to this complexity, [so] when you have a shortage of a specific medication, you have to have a good supply chain to understand all the generics of the drugs, where they are, and in what quantities,” says Paulo Viola, vice president, data science solutions at Intelliguard. “So managing the equivalencies is important as well. And not all companies are doing that very well. I’d say that’s a point for improvement for many health care systems.”
Once there’s a generic alternative for a drug, the entire supply chain is more protected against issues that arise when there are shortages arising from particular manufacturers, says Viola. In that case, it’s not just considerations of the lower cost that should kick in, but also the efficiency of the supply chain in terms of sheer availability. “It benefits everybody, including the hospital and the patient,” he says. “It goes all the way to the patient.”
When it comes to achieving supply chain visibility, the drug industry tends to compare unfavorably to the retail sector, say Tinnel and Viola, who both worked in the retail industry before joining Intelliguard. They’re aiming to provide manufacturers with a better flow of information on how drugs are being used, especially within hospital pharmacies, as well as how they’re being prescribed by doctors and surgeons. Often, hospitals are ordering without enough information about likely demand. “They’re ordering a large quantity in a single order,” says Tinnel. “They’re not looking that far ahead.” Then, a disruption to supply can catch the hospital off-guard.
Better communication is needed about the flow of drugs from manufacturer through distributor to the hospital, and, at the end, how those medications are being prescribed and taken. “That whole loop needs to be tied together so that manufacturers have a better idea of what that supply chain actually represents, so that they can match up their production rates with actual usage rates,” says Tinnel. “That’s what’s used in every retail company. Retail is much better at managing that process than [they are] in healthcare.”
Intelliguard uses radio frequency identification to ensure the availability of good data and track the exact location of inventory as it moves through the supply chain. “There’s a cost component to that,” says Viola. “But the focus is on keeping the patient safe. We want to know the patient is going to have the medication he or she needs, when he or she needs it.”
As the impact from COVID-19 tails off, Tinnel hopes there have been lessons learned. “We’re now rebounding from that, and I’m sure that a lot of adjustments have been made,” he says. “But we still need an upward trend in generics manufacturing, to be able to even get back to the inefficient, push methodology that is being used by distributors.”
