Raising the bar for the pharmacy buyer
Cindy Jeter, CPP, CPhT, Consultant, McKesson Pharmacy Optimization®
Many of us often find ourselves doing something the same way because it’s the way it’s always been done. However, living by the old saying, “If it’s not broken, don’t fix it” can leave us unaware of the potential to improve. This is certainly the case when addressing the business aspects of pharmacy operations.
We’re watching the proverbial belt tighten on hospital pharmacy like never before. Due to the myriad pressures facing pharmacies today, the time is now to reexamine critical business processes. One of the topics I’ll be talking about at ASHP this year is the role of the pharmacy buyer and the opportunities for improvement for this pivotal role.
In my experience, I have found that approximately 90 to 95% of individuals in a pharmacy buyer position have little to no business training. Yet these individuals are entrusted to manage one of the largest costs for the hospital. This role calls for skills in cost-effective procurement, inventory management, understanding vendor contracts, budgets, 340B purchasing where applicable, generic forecasting, and a number of other initiatives designed to reduce drug waste and expiring medications. All of these are advanced skills that take time, training and additional education to master.
Although many areas in the pharmacy have advanced and adopted new technology, most pharmacy procurement in hospitals and health systems is performed exactly as it was 15 years ago. I have seen hospitals and health systems with inventory turns that are as low as four to five per year. This tremendous holding cost poses significant risk to the pharmacy for waste and expired medications. Reducing holding cost and cash tied up in inventory increases net income and profitability for the pharmacy department and the hospital. Recommendations suggest that a minimum target goal of 12 inventory turns is reasonable for any hospital or health system pharmacy.
In a majority of the hospitals I visit, I find that there are a number of basic business skills that, when applied, can help improve process.
- Documentation. Too often, pharmacy buyers rely on the knowledge and experience they’ve accumulated over years of practice and keep all the vital information in their head. By never documenting their process and best practices, when another must step in to take the role, all of that knowledge is lost and the pharmacy suffers. Oftentimes, paper trails are not recorded and could lead to verification difficulties during an audit. Common business practices in other industries, like recording all items on back order; matching packing slips, invoices and orders for consistency and accuracy; verifying pricing; and documenting daily spends are common items often overlooked.
- Health system pharmacy communications. Health system pharmacies often do not communicate with one another nearly as well as they could. By setting up regular, monthly meetings with the pharmacy buyers from all facilities to discuss policies, goals, challenges, contracts and availability issues, the system’s procurement strengthens. Setting up trading posts where pharmacies can transfer medications that are rarely used and share packaging is one example of the synergies that can be created to enhance the pharmacies’ financial success across the system. Centralized drug shortage management is also a very effective way to manage human resources and ensure efficiency.
- Training. At McKesson, we have honed the art of supply chain management to a science. This is how we’re able to deliver just-in-time medication with low holding costs. Our supply chain experts are positioned to share the benefit of our Lean Six Sigma processes with pharmacy buyers for better application in their own pharmacy. Training programs are also offered to help develop buyer skills.
As we look ahead to a new year, I encourage directors of pharmacy to focus on strengthening the skill set of their pharmacy buyer. This very important position is crucial to the pharmacy’s success and deserves the tools necessary to perform at an optimal level. It is time we raise the bar.