This is an abbreviated version of a story edited for the print edition of Modern Healthcare. Read the original article published online March 9.
Hospital systems now routinely deal with an uncomfortable number of drug shortages, so they're forging direct relationships with manufacturers, and buying directly from the source when the usual channels dry up.
There were 185 drugs in shortage as of the fourth quarter of 2015, and the figure has averaged about 257 since the start of 2011, according to the University of Utah Drug Information Service. Some of the products in short supply are vital, such as epinephrine, administered with CPR to reverse cardiac arrest.
Group purchasing organizations work to build reliable contracts to avoid shortages, and distributors strive to have sustainable supply lines. But sometimes there's little either can do, often because only a few manufacturers produce a product. But in some cases, health systems are able to procure them from manufacturers—if they have the right relationships in place and the logistical sophistication to handle the orders.
Quan Pho, vice president of pharmacy for Centura Health, a 17-hospital system based in Englewood, Colo., said he has contracted directly with manufacturers for as many as 100 items that are frequently hard to get. “Creating this (relationship) is a way for us to mitigate those issues that come along pretty much every month,” Pho said.
John Feucht, system director for pharmacy services at Akron, Ohio-based Summa Health System, said the system maintains direct accounts with a number of manufacturers. For pre-filled emergency syringes, which are prone to shortage, Summa has about six items on backorder that Feucht expects will be allocated to Summa ahead of being released to wholesalers.
Manufacturers have been using direct accounts more frequently amid persistent shortages, veering from a distribution model long dominated by companies such as AmerisourceBergen, Cardinal Health and McKesson Corp. Some drugmakers will intermittently pull their products from distributors when manufacturing issues strain their supply.
For providers, these one-off orders often cost more because the drug is in such high demand. But the orders aren't frequent enough to make a dent in the system's bottom line, and “the need of the product outweighs the cost of the product,” Pho said.
The drugs also represent a fraction of the hundreds of thousands of items that are available on contract with his GPO. Pho said he communicates openly with the GPO and his pharmaceutical distributor when he veers from those contracts.
Still, direct purchasing “disrupts this historic relationship between GPO, distributor and manufacturer,” said Jamie Kowalski, a Milwaukee-based healthcare supply chain consultant.
Emily Lightfoot, senior vice president of health systems at AmerisourceBergen, said in an e-mail that the company focuses on “fair and equitable” distribution when a product is in shortage, taking order history and utilization into consideration. She expressed doubt that manufacturers of those products would have enough inventory to distribute them directly to providers.
But Feucht said manufacturers will prioritize providers based on brand loyalty and purchasing history. Distributors “make their money by moving product,” he said. “If they don't have a robust allocation system, or if their allocation system is not in alignment with the manufacturer's allocation system, it becomes problematic for the end user.”
