Understanding the Effects of Drug Shortages on Hospital Purchasing

Post by QuicksortRx on May 17, 2024
Understanding the Effects of Drug Shortages on Hospital Purchasing

Hospital revenues have seen better days. A Kauffman Hall report found roughly half of all hospitals ended 2022 with negative profit margins. Though things turned around considerably in 2023, most healthcare organizations still have not caught up with their pre-pandemic numbers. 

Adding fuel to the fire, drug supply chains have witnessed unprecedented disruptions, with shortages causing widespread issues for patients and providers across the country. Almost one-third of hospitals have reported delaying, skipping, or issuing fewer prescriptions as a result. 

In addition to the financial burden and potential patient care consequences, frustrations from health systems and pharmacies trying to mitigate medication supply issues have compounded for more than a decade despite high level attention from HHS, the American Hospital Associaton, the FDA, the New York Times, and even the White House.   

1. Limited prescription supply, inventory control challenges, and higher costs 

Simply put, drug shortages lead to restricted supplies at every level. As medications become scarce, increased competition drives up prices on what’s available on the market.  

As a result, hospitals treating acutely ill patients may need to procure alternative medications or therapeutic equivalents. Limited availability and increased demand for these substitutes can drive up costs, especially if hospitals must source drugs from secondary suppliers or specialty distributors. 

Managing inventory disruptions caused by drug shortages brings significant overhead related to inventory monitoring, storage, and logistics. Hospitals around the country have invested in advanced inventory management systems, allocating more resources to maintain adequate stock levels, track expiration dates, and minimize medication waste. 

Supply chain redundancy and resilience measures — such as stockpiling essential medications, diversifying supplier networks, or implementing alternative sourcing strategies — have added to the already intimidating list of duties required of these essential institutions. While these steps can enhance preparedness and reduce vulnerability to disruptions, they require upfront investments and ongoing maintenance and are not offset with additional revenue. 

2. Increased workloads for purchasing teams  

Recent disruptions in the pharmaceutical supply chain have impacted even some of the most vital areas of care, including 15 cancer drugs in short supply. Since interruptions to care can have serious consequences for patient outcomes, purchasing teams must scramble to identify where these medications are available and fill the gaps to minimize disruption to treatments like chemotherapy. Such efforts can involve extensive research, negotiation with suppliers, and coordination with other healthcare providers to identify available supplies and suitable alternatives. 

Additionally, purchasing teams have had to coordinate more frequently with suppliers to obtain information about the status of deliveries and anticipated timelines for restocking. All of this demands additional time and effort while ensuring compliance with regulatory standards and quality assurance protocols to safeguard patient safety.

How effective is your pharmacy team at managing costs? Download our free drug cost management checklist.

3. Limited group buying power

The various factors contributing to prescription supply chain issues, such as manufacturing problems, regulatory issues, and market dynamics, reduce group buying power among providers as they struggle to secure an adequate and sustainable supply of essential medications at reasonable prices. 

Group buying power — often leveraged through group purchasing organizations (GPOs) and bulk procurement agreements — enables healthcare providers to take advantage of favorable negotiated terms with pharmaceutical companies and distributors. By pooling their purchasing volume, health systems can often receive lower prices and better terms for the drugs and medical supplies they need. Drug shortages disrupt this process by limiting the availability of certain medications, thereby reducing GPO leverage. 

Shortages further fragment this unified front by forcing hospitals to compete for limited supplies, delivering care to underserved communities that might lack the resources or bargaining power to effectively navigate the complexities of the pharmaceutical market. As a result, they often end up paying higher prices or being unable to access critical medications altogether, potentially leading to compromised patient care.  

4. Changes to inventory management 

Ultimately, drug shortages force health systems to assess how they manage their medication inventory levels and procurement. To mitigate the risk of relying on a single source, health systems might diversify suppliers, increasing their chances of securing the drugs they seek or obtaining alternative sources of medications during supply chain disruptions. 

In other cases, hospitals might opt to maintain higher levels of inventory for critical medications to buffer against potential shortages or delays in supply. This strategic stockpiling could help ensure a reserve of essential drugs is readily available to meet patient needs during periods of disruption. However, stockpiling during shortages creates more scarcity, leading to exacerbated issues across the industry. 

One proactive solution that doesn’t add to existing shortages is to adopt advanced forecasting and planning techniques that anticipate changes in demand patterns and help pharmacies adjust inventory levels accordingly. Real-time data on drug shortages and inventory management can empower pharmacy buyers to make better purchasing decisions, more effectively monitor prescription supplies, and identify opportunities for cost savings.  

5. Reworking treatment plans 

When shortages occur and medications are unavailable, there are significant effects. Purchasing teams may be forced to buy drugs with similar therapeutic effects that clinicians and pharmacists identify as potential alternatives, which will lead to providers needing to alter treatment regimens, dosages, and orders to ensure efficacy and safety.  

Health systems must also adapt in several ways. For example, hospitals might need to develop or update clinical guidelines and medication protocols to accommodate changes. Care teams then must rely on these guidelines to make informed decisions about alternative treatments or dosage adjustments based on the available supplies. 

In cases where specialized medications are affected — such as with cancer drugs in short supply — hospitals might need to convene multidisciplinary teams involving specialists, pharmacists, and other healthcare professionals to carefully review treatment options and make informed decisions to implement effective, comprehensive protocols. These teams must collaborate to ensure that alternative care plans align with contemporary standards and patient preferences — requiring extra bandwidth to help the entire health system make the right decisions.  

Stay on Top of Drug Shortage Developments With Real-Time Data

No matter what prescription shortages you’re facing, understanding the exact areas of impact is paramount to ensuring your hospital is ready to handle them. To do so, one thing is crystal clear: You need the right data. 

The QuicksortRx platform, which includes its shortage intelligence service, provides health systems with the real-time information, advanced purchasing insights, reporting functions, and active monitoring to help teams navigate shortages. Want to see our platform in action? Contact us today for a demo. 


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Post by QuicksortRx on May 17, 2024
QuicksortRx provides timely, transparent, and actionable guidance to help health systems make better pharmacy procurement decisions.