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Kevan Wind and Phil Aubrey act as medicines procurement specialist pharmacists for the London and Eastern areas |
Procurement of
pharmaceuticals and non-pharmacy items are different and this is usually
acknowledged within the NHS and the Purchasing and Supply Agency (PaSA).
However, a series of initiatives from government aimed at reducing
the non-pay spend within the NHS has targeted drug purchasing. The
resulting standard approaches to
procurement, advocated regularly to trusts by external consultants, are
often problematic when applied to pharmaceuticals. Why should this be?
In supermarket procurement, if there are no baked beans on the shelf
then customers can use spaghetti hoops. It is not an exaggeration to
state that the end result of a pharmaceutical supply failure, where demand
is highly unpredicatable, can be fatal. The “just in time” principle
has worked well for many manufacturing industries where demand is constant
but has caused problems in the pharmaceutical supply chain. This places
huge demands on buyers and requires clinical expertise to suggest alternatives
in times of shortage. As a result, pharmacy procurement specialists often
have to source alternative supplies — at short notice — from
overseas.
A licensed pharmaceutical product is always required as a preference
as it gives a much higher assurance of quality, but limits the sourcing
options (and makes purchasing medicines a specialised skill). The sourcing
of unlicensed products is more complex and appraising suppliers and products
is a vital skill that requires pharmaceutical knowledge.It is not only
quality that is regulated but price, too. The workings of the pharmaceutical
price regulation scheme are complex and it is essential that buyers understand
the ability of companies to modulate their prices across a product range
allowing price manipulation that skews markets.
Buyers in pharmaceuticals also have to deal with a large number of stock
lines (maybe 5,000) including raw materials for production and packaged
medicines with varied storage requirements. Another feature of the pharmaceutical
buyer is a close working relationship with colleagues in quality assurance.
Innovation
The pharmaceutical industry is known for its product innovation, with
Big Pharma living or dying on its ability to produce the next blockbuster
product. There is therefore an inexorable market trend away from traditional
medicines to new patent protected therapies which provide improved treatment.
The inception of the National Institute for Health and Clinical Excellence
(NICE) has furthered this trend. The NHS must now implement NICE guidance.
There is, by definition, no direct competitor for a patented product
although, by using clinical expertise, therapeutic substitution can sometimes
be used to increase purchasing leverage. Buyers therefore have to use
a wide supplier base to obtain all these unique products and often have
their choice about supply channels made for them.
The market for pharmaceuticals is driven by promotional activity. Big
Pharma invests in large numbers of sales representatives. Doctors, pharmacists
and nurses prescribe medicines, but most are relatively insensitive to
cost (and thus exhibit inelastic demand). Patients are the ultimate consumer
but without direct-to-consumer marketing they have limited power. Government
has the money but does not have the expertise or power to direct prescribers.
It does however attempt to influence them via independent bodies like
NICE and the National Prescribing Centre.
Within secondary care, where buyers have some scope to negotiate price,
there is use of strategic methods to improve buyer power by use of collective
purchasing via consortia or regional groups or strategic arrangements
such as the Pharmacy Market Support Group. Other advantages of these
arrangements include information sharing, developing purchasing strategies,
conducting joint vendor ratings and educating members with little purchasing
experience.
Buyers in secondary care pharmacy also have a huge advantage — they
have the ability to control demand side through a formulary and medicines
and therapeutics committee. The Audit Commission recognised the part
that procurement plays in overall medicines management in “A spoonful
of sugar”. Procurement pharmacists working within the hospital
environment can liaise closely with clinical pharmacy and medical staff
involved in this process. This is a much more effective control on medicines
spend than any buying initiative but requires a full grasp of the therapeutic
issues involved.
Stakeholders Stakeholders (eg, NICE) in the pharmaceutical supply chain have recently
increased dramatically. Decision-making by stakeholders who may have
conflicting agendas and who have no direct connection with the pharmaceutical
supply chain can have a major influence on its efficiency and effectiveness.
It is important that pharmacy procurement staff have a knowledge and
understanding of all stakeholders and what their main agendas and influences
are. It is only then that procurement strategies can be formulated to
ensure effective and efficient procurement.
A standard procurement approach is to rationalise the supplier base,
consolidate demand and develop a close relationship with the remaining
suppliers. For the reasons given above this is problematic with pharmaceuticals.
Pharmaceutical manufacturers are huge multinationals. The UK represents
only 3.8 per cent of global spend on medicines and globalisation has
meant that companies tend to be less flexible than previously. Suppliers
and manufacturers are increasingly using a single channel for distribution
and limiting the buyers scope for consolidation.
It is important that everyone involved in pharmaceutical procurement
realises just how different it is now. Many of the standard procurement
approaches are not effective when applied to the pharmacy model and may
actually be dangerous. This is why quality and safety underpin all our
decision-making and means that generic procurement policies should be
introduced with the utmost caution.
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Hospital Pharmacist