Hospital Pharmacy Buyer Compliance: Separating Fact From Fiction

Post by QuicksortRx on October 25, 2023
Hospital Pharmacy Buyer Compliance: Separating Fact From Fiction

Q&A with Matt Hebbard, PharmD, co-founder and vice president of pharmacy for QuicksortRx.  

Q: What needs to be understood about hospital pharmacy buyer compliance?

Matt Hebbard: Compliance is a pretty broad term associated with a lot of subjects in our space. When we specifically discuss “buyer compliance,” it is associated with group purchasing organization (GPO) contracts, wholesaler preferred items, and a lot of other metrics around whether a pharmacy buyer is purchasing the right product. When you hear about “buyer compliance problems,” you'll often hear it characterized elsewhere as a buyer not purchasing the correct medication — with the pejorative suggestion that buyers are "throwing darts" to select what to purchase, buying whatever some salesperson suggests, or taking some other misguided action. 

That couldn't be further from the truth.  

Buyer compliance is rarely — if ever — a buyer problem. Buyers are much more effective than they get credit for. The purchasing problems we’ve seen have turned out to be an information and alignment problem at almost every hospital we've worked with. Buyers are smart. They have a strategy, and they're pursuing that strategy. The issue is that they often don't get access to the big picture view or the central decision support that can guide them to the right choices and lack the tools to see beyond basic price or availability information. 

There are essentially two metrics around buyer alignment that we look at. One is what I’ll call “incidental overspend.” As an example, a buyer places a single order for a brand-named drug when they should have bought a generic product, costing an excess of $10,000. We see this scenario play out in a fair number of hospitals, and it's often referred to as a buyer compliance issue when it comes up in third-party QBRs a few months later. In actuality, it is an information and visibility issue as no one is bringing forward the latest information in a clear and helpful way. Over and over, we’ve seen that when buyers know what they should be buying, they buy it. Hiccups do arise, but systems should ask: Was this a buyer problem or an information and availability problem? The answer is usually the latter. 

The other metric is alignment — the same idea of purchasing the wrong product, but at a facility level instead of an individual buyer level. We’ll see situations where 8 of 10 hospitals moved to the generic, but they all moved one at a time over several months and a few hospitals have been left behind. It is vital that health systems be able to assess their pharmacy supply chains at both the facility and enterprise level to set system-level strategy and be competitive going forward. Without a shared strategy or central team supporting these facilities, you will inevitably have facilities taking separate but similar paths and leaving opportunities on the table. 

Q: What makes system alignment so important?  

MH: It's important for lots of reasons. As health systems consolidate and grow their buying power, they want to be able to leverage their size. But if you have 10 hospitals without any coordination between them, you can't leverage that in the market. You can't dedicate your volume to the manufacturers, wholesalers, and GPOs that will give you the best products and services at the best prices. 

As systems mature and add cross-facility capabilities, there are also real physical and analytical consequences to the higher number of SKUs or NDCs you purchase. SKU reduction has been a priority supply chain has been pushing for years. If everybody is buying the same product, you can more easily predict how much volume you're going to need over time and what your costs are over time; you can consolidate storage; and you'll have a clearer picture of the whole medication management chain. If you are buying 10 different NDCs, there is a lot of manual consolidation to do for shelving, EHRs, for inventory and dispensing systems, 340B accumulations, and returns and expirations. It can be a mess. 

From a supply availability standpoint, the way these products are supposed to flow through wholesaler channels also depends on consistency. If everybody is buying different products, you're going to have three packages of every flavor on the shelf instead of 30 packages of what you actually want, and your wholesaler won’t have a good idea of how much to hold in stock for you. Wholesalers and distributors are managing a complex supply chain up stream that also aims for some level of “just-in-time” efficiency. If they can’t predict what you are buying, they may be more likely to end up short.

Q: How would a hospital know it was having problems with pharmacy buyer compliance and alignment?

MH: There are a few ways they find out. One is they get a GPO, consultant, or wholesaler report noting that a few months prior, a buyer purchased the wrong product. The report identifies what that consultant feels the buyer should have purchased and what it cost the system. Unfortunately, there's essentially nothing that can be done about this error because you're finding out about it after so much time has passed and you've lost all the context about why the buyer did what they did. Was it an availability issue? Drug shortage? Lack of information and internal coordination? It will be impossible to determine that "why" if you are 90 days out.  

This is problematic as it gives the hospital few opportunities to correct that buyer if there was an information or coordination issue that needed to be fixed. If you can catch this issue in real time, you can react by physically stopping or returning the order and making the correct purchase. You get the opportunity to notify the buyer, understand their reasoning behind a purchasing decision, and help prevent it from happening again. We’ve come into health systems that were very loosely organized, but by establishing that real-time accountability loop, we can help line things up quickly and make a real impact.

Q: What are hospital pharmacy buyers doing well to best ensure purchasing compliance? 

MH: In the health systems we work with, buyers are doing a great job of buying what they believe they're supposed to buy. They are not going into the wholesaler and just throwing a dart. If they aren't buying a specific contracted item, they typically have a reasonable explanation why. Perhaps they've found an item they believe is a better product or there's an availability issue. When you talk to them, they're not uninformed about their strategy and availability issues. 

The organizations we work with that are doing the best in the market have a central decision-making body. Once purchasing decisions and strategy are centralized, you start seeing improvements rapidly. When you have the right people in the room doing the work and great downstream communications, once a decision is made, it can be followed easily. As health systems move to centralized inventory platforms like those from BD, Omnicell, and Tecsys, the ability to push these decisions out across the enterprise is almost instant. 

Purchasing compliance is another area where I think our team at QuicksortRx has been super effective. We can either recommend a strategy to our hospital partners or ask what strategies they want to use, then help them maximize it at scale. 

Post by QuicksortRx on October 25, 2023
QuicksortRx provides timely, transparent, and actionable guidance to help health systems make better pharmacy procurement decisions.