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Danny Palmer is pharmacy procurement and systems manager
at the Luton and Dunstable Hospital NHS Foundation Trust |
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Carbon copies, facsimiles and paper invoices have traditionally been the tools
used in the procurement process in NHS hospitals. The introduction of electronic
commerce
(e-commerce) is changing this and is enabling NHS trusts to order the stock
they need more efficiently.
This article describes the installation and implementation of e-commerce systems
at the Luton and Dunstable Hospital NHS Foundation Trust (L&D). It also
describes some recent developments in ordering and invoicing technology and
some e-commerce practices that might be used in the future. Principles are
explained throughout, with the aim of making this article accessible to all
pharmacists and technicians, not just those specialising in procurement.
The past
As part of the traditional procedure for drug procurement at the L&D,
staff were typically expected to review an average of 500 suggested order
lines each day, manually. The orders, generated by the pharmacy computer
system, each required cross-referencing with usage data to produce just
a handful of daily orders. An average of 7,500 orders would be generated
each year, each of which would be faxed to the supplier, with a paper copy
posted as confirmation. Paper invoices were received either with the goods
(from wholesalers) or at a later date. They were processed manually, by
staff keying in the price of each product before the invoice was passed
to the finance department to be paid.
Realising that this was unlikely to be the most efficient way of working,
staff at the L&D carried out a review in early 2003. This highlighted
a number of problems with our procurement processes, all of which have
associated workload, financial and patient care implications. The problems
included:
• The provisional orders often contained many items that were not needed,
and missed out others that were required
• Faxed orders were not always received by the suppliers
• Heavy carriage charges were being incurred for delivering urgent orders
• Suppliers were querying orders because poor fax printing quality made
them illegible
• Incorrect goods resulting from poor quality orders led to us receiving
credits that needed to be processed and goods that needed to be returned
• Drug descriptions generated by our pharmacy computer system were not
consistent with the supplier’s naming format
• There was no mechanism for
confirming that the full quantities of medicines ordered would be supplied
• Multiple invoices from wholesalers for a single daily order were creating
extra work
Following this review, two key stages were identified where pharmacy staff
could potentially improve the process — generating more accurate
provisional orders from the pharmacy computer system and placing orders
with suppliers electronically.
First e-commerce steps
Generating provisional orders Before
e-commerce could be initiated, we needed to generate more accurate provisional
orders. At the time of the review, the pharmacy computer system had been
in place for over 10 years and was not set up to achieve its full potential
for order generation, and needed to be reconfigured. Order profiles,
based on historical usage data for each drug, were created. These were
used, together with data on supplier lead times, to generate an algorithm
which was incorporated into the ordering system. This made the process
more efficient and saved money, while maintaining a consistent supply
of drugs to patients.
Placing orders with suppliers Options for trading electronically (rather
than by facsimile and post) between the trust and the supplier were investigated.
The L&D decided to invest in an e-commerce system to supplement the
purchasing functions of the existing pharmacy computer system. The Windows-based
PowerGate system was chosen, which was compatible with our existing pharmacy
computer system. Powergate’s key function is that it creates an electronic
match between product lines on the pharmacy computer system and the supplier’s
catalogue held on PowerGate,
providing common coding between the trust and the supplier. Commonly, this
is done using a product’s European Article Number (EAN), a 13-digit
barcode unique to a specific drug and pack size from a specific manufacturer.
The electronic order, consisting of product codes and order quantities,
is sent from the trust to the supplier’s computer system. Electronic
invoices returned by the supplier use the same common coding that maps
back to the trust’s pharmacy computer system, removing the need for
invoice prices to be keyed in.
Using an e-commerce system The
PowerGate system was quick to install and was user-friendly. It did, however,
take some time to load electronic copies of each supplier’s product
catalogue onto the system and manually enter the EAN codes. Each supplier’s
unique identification number also had to be incorporated into the system,
and new trading relationships had to be formally agreed, set up and tested
before they could be used.
Different suppliers accept orders using different messaging formats or
protocols. At first, the most timely orders were those sent using the traditional
Electronic Data Interchange (EDI) format, in which orders are sent by trusts
across the internet to a third party organisation called a Value Added
Network (VAN) into an electronic pigeon hole. When the supplier connects
to the VAN and extracts the message, the VAN automatically notifies the
trust that the order has been received. Some suppliers can also send detailed
electronic confirmations and electronic invoices back through the same
pathway. Electronic confirmations are particularly valuable because procurement
staff are quickly alerted to any supply problems.
It should be noted that there are costs associated with using VANs. Within
a year of implementing an e-commerce system, the L&D would typically
expect to pay about £1,500 to £2,000 in VAN charges. Trusts
that had adopted PowerGate (which is itself associated with installation
and maintenance charges) and were unable to pay VAN charges found themselves
only able to trade with wholesalers who had their own direct messaging
formats and individual suppliers who had the ability to receive orders
by e-mail.
Following the initial set-up of an e-commerce system, it is important to
maintain and update the EAN codes and electronic supplier catalogues accurately,
particularly at the time of
contract changeovers. Contracts for medicines purchased by NHS hospitals
can be downloaded from the NHS Purchasing and Supply Agency (NHS PASA)
website ready for the start of the new contract period. However, since
few pharmacy computer systems are able to upload contract data automatically,
this is usually done manually. At the L&D, we have partially automated
the process by exporting the contracts onto an Excel spreadsheet which
contains the product EAN codes. A Windows barcode font and an Excel macro
(ie, an automated set of commands) are used to produce a printed copy of
the contract together with EAN codes that can be entered into the pharmacy
computer system using a simple barcode reader. This speeds up data entry
and reduces the risks associated with manual input.
Benefits Implementing an e-commerce system has helped us solve many of
the
procurement problems highlighted in our review and enabled us to improve
our
working relationships with wholesalers and individual suppliers with e-commerce
capabilities. It has also released over 10 hours of staff time per week
from the purchasing process. This has given us time to manage contracts
more actively, improve stock profiling, structure savings strategies for
our top-expenditure lines and keep up to date with new developments as
they emerge.
Pharmacy Messaging Service
In 2003, the eGovernment Interoperability Framework (eGIF) imposed a change
in electronic messaging protocols within government bodies that directly
impacted on the way that PowerGate sent messages to suppliers. In response,
NHS PASA and
PowerGate’s supplier (then called TecSol) worked on a collaborative
project, developing the Pharmacy Messaging Service (PMS). Launched in late
2003, PMS allows trusts to send e-GIF-approved orders to one central exchange,
which forwards them to suppliers in the required format. This replaced
the more complex “one to many” trading relationships (ie, one
trust to many suppliers) with a “one-to-one” relationship with
the PMS exchange.
When PMS was first launched, it was mainly only wholesalers who could receive
electronic orders directly from it. A number of trusts set up their systems
to send their orders by automated fax to suppliers who could not receive
electronic orders.
Some suppliers had traditional EDI and invoicing capabilities. As the PMS
evolved, a number of direct trading relationships were developed using
a computer language for sending secure electronic data transactions across
the internet, that does not require trusts to use a VAN. This language
is called commerce extensible markup language (cXML).
A large number of suppliers were encouraged to receive e-mail orders rather
than faxed orders. This basic form of e-commerce involved setting up their
systems so that they receive an e-mail alert when an order is waiting to
be downloaded from the PMS exchange. When the order (as a pdf file) is
extracted, the PMS updates the relevant pharmacy department to say that
the order has been received.
In late 2005, NHS PASA initiated a pilot study to investigate using the
PMS as a single NHS messaging service. It provided funding for some of
the orders of hospitals using another type of e-commerce system,
Medecator (supplied by AAH) as well as PowerGate orders, to pass through
the PMS. In 2006, PMS moved from being an NHS PASA initiative into a commercial
offering to suppliers from GHX UK (previously
TecSol). PMS is now available free of charge
to NHS trusts in the UK, following
collaboration between GHX UK and pharmaceutical wholesalers (with the support
of the members of the British Association of Pharmaceutical Wholesalers).
This paves the way for PMS to develop as a single exchange for both Medecator
and PowerGate users, which currently accounts for about about 70 per cent
of NHS hospital pharmacies. It is hoped that this will encourage more suppliers
adopt electronic trading practices (200 have already done so).
Future issues
National strategies to help trusts and suppliers get the most out of the
available technology and to encourage those who are not using e-commerce
to do so, are also progressing. For example, a project is planned to develop
a national toolkit for using both Medecator and PowerGate.
It should be noted that Medecator and PowerGate originally developed from
the recognition that existing pharmacy computer systems are not enabling
users to move away from paper-based purchasing systems. However, most e-commerce
systems operate as external add-on modules with no mechanisms for the main
pharmacy computer system to take advantage of the electronic confirmations
and data sent by suppliers.
Expected short-term developments in e-commerce systems include tools to
address some of the issues related to managing the supply chain. Contract
management tools, internet-based supplier catalogues, high-level supply
chain analysis and a “green lane” for orders with electronic
goods receipt notes (enabling trusts to receive whole deliveries onto their
system without having to count each line manually) have all been suggested,
with a view to e-commerce systems leading the future in hospital pharmacy
procurement. |
Hospital Pharmacist