Submitted by LCollins on
Navigating the Storm: Financial Stewardship & Inventory Management Strategies
Staying afloat amid rising drug shortages and political movements
Professionals in a ship

The issue of drug shortages is an enduring problem, dating back to the early 1920s with the first traceable shortage being insulin. National tracking of drug shortages began in 2001, highlighting the persistent nature of this challenge. Despite over a century worth of awareness and opportunity, patients and healthcare providers continue to grapple with drug shortages. Although the idea of “drug shortages” is not exclusive to certain regions or facility type, each healthcare entity navigates these overlapping challenges in its own unique way, reflecting the widespread but varied impact of this ongoing issue.

We started the first quarter of 2024 by breaking historical records, reaching an all-time high of 323 active drug shortages, with nearly half being generic sterile injectable (GSI) medications. The challenges in patient care due to interruptions in GSI availability, coupled with financial implications, are significant. It's estimated that hospitals collectively spend upwards of $600 million per year managing drug shortages. This includes direct costs associated with more expensive, non-preferred products, increased labor costs due to alternative preparation requirements, higher operational carrying costs from increased standard stock amounts, and perhaps most frustratingly, waste once the shortage is resolved.

While no product interruption is ideal, some are more understandable than others. These include manufacturing delays due to equipment maintenance or repair, precautionary batch failures due to suspected quality control issues, or natural disasters. On the flip side, shortages caused by single-source producers dominating the market, significant violations leading to an FDA Form 483, or a diluted product margin resulting in negative value-added situations across multiple manufacturers are less palatable within a fragile system responsible for the health of a nation.

More recently, in response to these concerns, the U.S. Department of Health and Human Services (HHS) released a jointly sponsored white paper titled "Policy Considerations to Prevent Drug Shortages and Mitigate Supply Chain Vulnerabilities in the United States." In this white paper, HHS emphasized the importance of developing and implementing a collaborative, shared accountability model for drug shortage prevention. This model consists of two key components: the Manufacturer Resiliency Assessment Program (MRAP) and the Hospital Resilient Supply Program (HRSP).

The combined program aims to enhance market transparency for GSIs, promote volume-based purchase decisions with a sustainability focus rather than a "race-to-the-bottom" approach, and improve reliability by incentivizing investments in supply chain resilience and diversification. This includes initiatives such as expanding domestic manufacturing and production of key ingredients. However, there's also the potential for hospitals to face penalties under this framework.

Although an official statute has not yet been enacted into law, this is a critical issue. Institutions should take this opportunity to thoughtfully develop and refine clear processes and policies for managing drug shortages at the local level. The following factors should be considered when constructing your inventory management plans during a shortage and preparing to understand your financial position throughout.

Important discussion points to consider when developing your drug shortage management process:

  • Work closely with your external pharmacy procurement stakeholders. Vendors such as drug manufacturers, wholesalers, and Group Purchasing Organizations (GPOs) can be invaluable partners. Each partner has the potential to add significant value to your organization.
  • Internally, build relationships with key stakeholders across all care areas that may be impacted by a drug shortage. This ensures you understand who can be involved in developing a detailed mitigation plan.
  • Determine the appropriate level of inventory for your facility and establish protocols for adjusting standard stock amounts during a shortage. This is a crucial component of financial stewardship during a shortage. Avoid panic-buying all available products in every dose and size to prevent product wastage and tighter constraints caused by a bullwhip effect.
  • Conduct frequent huddles with purchasing team members to maintain a consistent understanding of product availability in the market. Daily structured huddles, even if brief, are ideal. Provide broader communication on a weekly basis to all pharmacy leadership for situational awareness, with meaningful escalation as needed. For larger Integrated Delivery Networks (IDNs), establish a system-level committee to review new, active, and pending mitigation plans.
  • Organize a response process for activating a drug shortage plan and proactively plan mitigation strategies when monitoring indicates a potential shortage. Start discussions early with key pharmacy staff and select providers to determine preferred treatment alternatives. Do not assume that a pending shortage will be automatically communicated to the relevant stakeholders.
  • Leverage your informatics and automation technologies to alert and guide providers to the shortage mitigation strategy, ensuring that any available product is reserved for patients who need it most.
  • Identify ways to stretch your current supply to benefit as many patients as possible. Strategies include reducing automated dispensing cabinet PARs, strategically planning compounding for products that contain more than one dose, and shifting inventory from low-use to high-use areas. Work with key internal stakeholders to ensure changes are made with full awareness, for instance in the previous examples, ensure billing units do not result in overcharging during batch preparation of doses or that a PAR reduction does not interfere with urgent response protocols.
  • Finally, revisit partnerships and how they can support you during drug shortages. Partners such as wholesalers, GPOs, and manufacturers can collaborate on plans to purchase short-dated products that would otherwise be wasted or enroll in commitment programs that ensure sustainable product availability through predictable and consistent volume needs. Both approaches can reduce your financial burden during shortages, with commitment programs offering proactive shortage prevention; understanding that these programs are most impactful prior to a shortage occurring.