Drug Shortages How to Survive with JustinTime Inventories

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Drug Shortages How to Survive with Just-in-Time
Inventories

• Fred Isse RPh, Operations Manager, Providence
  Home Infusion
• Portland, Oregon

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Welcome From Portland, Oregon
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(No Transcript)
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State of Affairs

• As of July 17th 2007 40 products listed on ASHP
  drug shortage website (40 OP 60 IP)

• Albumin (Human)
• Albuterol MDI
• Cefazolin Injection
• Cefoxitin Injection
• D5W Inj (Mini-Bag)
• 5-FU
• IVIG

• Indomthacin
• Methotrexate Inj
• Methylene Blue Inj
• Oxacillin Inj
• NaCl 0.9 Inj (Mini-Bag)
• NaCl 23.4 Inj
• Varicella-Zoster

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Objectives

• Understand the definition of Just-in-Time
  Inventory and reports that can be used to manage
  inventory
• Explain the difference between manufacturer
  backorders and wholesaler backorders
• Identify how the pharmacy can be proactive in
  management of a drug shortage
• Identify how the pharmacy can manage drug
  shortages
• Understand the Profit and Loss impact of drug
  shortages

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Flow
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Glossary

• Inventory Value

• JIT

• Cost Of Goods

• Demand

• Inventory Turns

• Therapeutic Equivalents

• Drop Ship

• Wholesaler

• Wholesaler Backorder

• Allocation

• Manufacturer Backorder

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Just-In-Time

• Definition
• JIT Just in Time
• An inventory strategy that reduces in-process
  inventory Wikipedia
• Systems that schedule materials (inventory) to
  arrive exactly when they are needed in the
  production process Money Glossary.com

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Inventory Turns

• Definition
• Inventory Turns
• The cost of goods sold divided by average level
  inventory on hand Logisticsfocus.com
• The number of times that a companies inventory
  cycles or turns over per year
  Supplychainmetrics.com
• Value between 16 30
• How to calculate Inventory Turns
• Inventory Demand Value Inventory Value 12

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Calculation Examples of Turns

• Example
• 1,500 Vancomycin Sold 350 left on the shelf
  12 51.4
• 65 Ciprofloxacin Sold 247 left on the shelf
  12 3.2
• Total Inventory turns for both items will be
• 1,565 597 12 31.5

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Variables needed for Turns Report

• Demand dollar value of individual items (drug and
  supplies)
• Inventory dollar value on the shelf
• These variables could be imported into an Excel
  spreadsheet and then calculate inventory turns

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How too Effectively Manage JIT

• Transit time
• Med Surg Distributors 3 to 5 business
  days.
• Pharmaceutical Wholesaler 1 business day.
• Direct 1 to 5 business days.

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How too Effectively Manage JIT

• Collaboration with account payable
• Review credit limits
• Review vendor statements for
  gt30 day invoice outstanding

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How too Effectively Manage JIT

• New Vendor Relationship
• Establish a realistic credit limit
• Establish key personnel from each organization
  for effective communication.
• OUTCOME
• Minimum credit holds or shipment delays due to
  past due invoices.

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Backorder Definitions

• Wholesaler
• Temp Out Item normally in stock but wholesaler
  is temporally out of stock
• Identify reason with wholesaler
• Here are some of the reasons why wholesalers have
  TEMP OUT items?
• Increased demand
• New item with no utilization history

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Backorder Definitions Cont

• Wholesaler
• Not Stock Item is not available from your DC
  (distribution center)
• Identify if another DC has product

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Backorder Definitions Cont

• Wholesaler
• Allocation Wholesaler limits the amount it will
  sell to its customers
• Drop ship Purchased and invoiced from
  wholesaler but shipped from manufacturer.
• Allocation control
• Normal distribution process.

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Backorder Definitions Cont

• Manufacturer
• Allocation - manufacturer limits the amount it
  sells
• manufacturer allocates to wholesaler who then
  allocates to pharmacy. (Example Infuvite)
• manufacturer allocates directly to pharmacy based
  on purchase history. (Example Zosyn)

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Wholesale Constraints

• Not stocked
• Wholesaler manages inventory turns based on
  demand

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Reason for Manufacturer Backorders

• Active Product Ingredient
• Logistic failures
• Shipping delays including US Customs
• Regulatory Issues lot rejection/voluntary
  recalls
• JIT
• Operational Issues
• Poor scheduling
• Lack of materials (eg labels glass containers)
• Raw material shortages (e.g. glass/plastic)

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Reason for Manufacturer Backorders

• Plant re-validation
• Increased demand
• Market shifts
• Competitors back order issues
• Example MVI, cefoxitin, vancomycin
• Unanticipated growth New studies
• Industry consolidation.
• Non traditional distributors

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Prevention
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Welcome From Portland, Oregon
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Drug Formulary

• Practical definition
• Preferred manufacturer for multiple source
  products that maximizes the benefits of your GPO
  or company specific contracts to positively
  impact your PL.

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Examples of Formulary
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Drug Formulary

• Development of Formulary
• When looking at manufacturers, identify
• Raw Product Reliability
• Backorder History
• Are they a manufacturer or distributor
• Are multiple product presentations available

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Drug Formulary PL Impact

• 1st and 2nd Tier items
• Proactive approach to deal with future backorders
• Way to manage costs
• Cefazolin
• Tier 1 contract price around 0.85 to 1.25 per
  gram
• Tier 2 WAC is around 5.00 per gram
• Vancomycin
• Tier 1 contract price around 4.50 to 5.75 per
  gram
• Tier 2 WAC is around 16.00 per gram

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Working with Wholesalers

• To minimize backorders, some helpful steps
• Give wholesaler usage data with a new generic
  (e.g. switching from brand to generic)
• Establish time line with wholesaler
• Usage data when switching wholesalers
• Usage data when converting from an existing
  generic to another

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Working with Wholesalers

• To minimize backorders, some helpful steps
• Identify wholesaler generic portfolio
• Less likely to be out of stock
• Establish with wholesaler how the backorder/stock
  outs are handled
• Do they bring in from another distribution center

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How to manage backorders
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Drug Shortage Websites

• ASHP
• PharmacyOneSource
• CDER
• Could be used with referral sources
• Dear HealthCare Professional Letters

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Tools

• Tools for management of Backorders
• Verify with manufacturer if product is on
  backorder
• Resource alternate wholesalers for same
  manufacturer
• Resource 2nd tier formulary item
• Create backorder report
• Go direct to manufacturer
• Therapeutic alternatives
• Wholesaler note field screens

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Backorder Decision Tree
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Backorder Decision Tree
YES
Note Shipping to central location or direct to
each DC helps determine transit time to your
pharmacy
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Alternate wholesalers

• Does your contract allow an alternate wholesaler?
• How do you manage utilization of secondary
  wholesaler?
• What safeguards are in place
• Profit an Loss impact
• COGs plus vs. COGs minus

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Resourcing 2nd tier item

• Ways to communicate to purchasing staff to stop
  using 2nd tier item
• Backorder report
• Scheduled purchasing meeting
• E-mail
• Safeguards in place to prevent over purchases of
  2nd tier item
• Daily reports from wholesaler
• Profit and Loss impact

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Backorder report

• An example of a report

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Advantages of going Direct to Manufacturers

• Advantages
• Your allocation is not dependent on the
  wholesaler example Infuvite
• Manufacturer has your utilization
• Shorter transit time (bypass wholesaler)
• Ability to have auto ship when product is released

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Disadvantages of going Direct to Manufacturers

• Disadvantages
• Higher cost due to no COGS minus
• Longer transit time
• Shipping cost if less than manufacturers
  shipping minimum.

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Therapeutic Substitution Tools

• Steps to evaluate the Impact of Shortage
• Demand of Product
• Stock on hand
• Established duration of backorder
• Short Term Impact
• Secondary wholesaler or distributor with pedigree
  papers
• Product waste control (no advance mixing)
• Prioritize patients
• Communication to staff

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Therapeutic Substitution Tools

• Steps to evaluate the Impact of Shortage
• Long Term Impact
• Resource ASHP
• Work with Medical Director for alternative
• PT or Formulary Committee
• Educate referral sources
• Communication to staff
• Identify impact to Profit and Loss

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Take Home Points

• Review of Flow Process
• Communicate Communicate Communicate
• Embrace backorders - it is part of our
  environment
• Develop processes to manage and prevent
• Patient care
• PL PL PL

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• Q A