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Published on 1 January 2005

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E-procurement: a UK hospital pharmacy view

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George Gannon
Pharmacy Operations Manager

Allan Karr
MRPharmS MBA
Pharmacy Business Services Manager
University College London Hospitals Trust
London
UK
E:George.Gannon@uclh.nhs.uk

E-procurement is only one aspect of e-commerce. It is the critical part of e-commerce that facilitates trade between businesses and, in certain cases, will allow organisations to create new opportunities for trading in different ways. In its simplest form, e-procurement could just be used to transfer the information on an order electronically, as opposed to using the telephone, fax or post. However, the more advanced applications of e-procurement systems include a wide range of useful operational tools, such as e-tendering, e-contracting, e-fulfilment, e-sourcing, e-invoicing, e-auction (or reverse auctions) and e-ordering. The advanced utilisation and sophistication of e-procurement is the reason why there is a great deal of interest in adopting e-procurement practices. The potential to make further savings while improving the efficiencies in the supply chain and, therefore, ultimately benefiting patient care cannot be ignored.

The current situation

Since the early 1980s, hospitals in the UK have had a fragmented approach to adopting and implementing the dispensary and stock management aspects of pharmacy computer systems.

In the past 7–10 years, many of the pharmacy system suppliers have tried to move away from MUMPS-based legacy systems. Instead, they have concentrated their efforts on producing Windows-based pharmacy systems with greater clinical and prescriber focus. The race to develop a fully integrated electronic prescribing system is clear. Any developments towards the “stock management” backoffice functionalities, such as e-procurement, have largely been ignored. This lack of recent attention to e-procurement and other backoffice systems is becoming problematic. Whereas pharmacy led the NHS with its IT solutions 10 years ago, this is not the case anymore. Most UK hospital pharmacy IT systems currently have out-of-date systems that are no longer sufficient to meet the modern operating needs of fast-changing organisations.

Regrettably, the clinical and prescribing aspects of UK pharmacy systems are in most cases also not sufficient. E-prescribing appears to be generally led by large US-based IT systems suppliers. These suppliers have systems that are moving away from a simple Windows-based environment to a fully relational front- and back-end systems. This type of system architecture should enable them to cope with the complexities of healthcare computing well into the 21st century.

The existing UK pharmacy computer systems are also unable to communicate information between individual hospitals that use different systems. Interestingly, even hospitals on the same pharmacy computer system have limited potential to share information. The fragmented approach to building drug files and the lack of agreed national sector standards make integration arduous. Modern e-procurement platforms offer a potential solution to the problem of communicating information across fragmented systems. They are able to link up with legacy systems as well as modern pharmacy systems whenever they are developed.

Objectives

Standardising drug codes (UKCPRS)
The UKCPRS (UK Standard Clinical Products Reference Source) programme is developing a national coding infrastructure that will soon be completed and implemented across the whole NHS. This is an essential development, as it will enable those in the supply chain to describe the same product in the same manner. Each product will be linked via an e-centre to their own unique EAN (European Article Numbering) product code. The EAN product code will be the cornerstone that will be used to facilitate most future e-commerce developments.

Hospitals with advanced supply chain needs will not be able to take full advantage of further technological advances, which could include batch tracking and expiry date monitoring, until standard codes are in place. A standard code is also required before we can, it is hoped, revolutionise the healthcare supply chain with radio-frequency identification (RFID) tagging of products.

Functional specification for e-commerce
The national Pharmacy Business Technology Group (PBTG) is a subgroup of the National Pharmaceutical Supplies Group (NPSG) and is supported by the NHS Purchasing and Supply Agency (PaSA). PBTG acts as an advisory group to the NHS pharmacy service and industry, and has been set up to encourage the adoption of e-commerce to meet government targets on this initiative. The PBTG is looking to develop a functional specification for e-commerce in the NHS with agreed standards. The specification should include messaging standards and approved gateway methods for trading with the NHS. Once developed, there will be a requirement to communicate this information to potential providers and encourage their development of IT solutions. This top-level approach will, it is hoped, generate a more standardised level of operating.

E-procurement providers
As the development of the wide range of pharmacy computer systems is not directly managed by NHS trusts, access to e-commerce initiatives is currently limited. There are, therefore, no easy paths to create a “buy-side” e-procurement platform. This type of development would require large investments by the NHS. We are, therefore, forced to look externally for alternative methods of development. Currently, e-enablement for hospital pharmacy in the UK is provided by a couple of sources, a “sell-side” platform (SSP, developed by AAH) and an “independent service provider” (ISP, developed by Tecsol) platform.

Sell-side platform
Mediate, superseded by Medicator (web-based), offers an e-enablement pathway to trading using e-commerce but is owned and managed by a leading commercial pharmaceutical wholesaler (sell-side type of model). The pharmaceutical wholesaler will anticipate a purchasing commitment from a hospital and/or supplier or other commercial benefit, to ensure that costs are covered and that their business strategy has developed further.

Independent platform
A few independent companies that are not directly involved in the supply chain may be interested in developing a more in-depth integration capability than wholesalers. If they did, then a more bespoke and advanced e-procurement system may be possible, rather than what is currently provided. Development by an independent provider may have more functionality for hospitals than for the supplier, both operationally and strategically.

A variation on this approach is now emerging that presents the advantage of being independent and having an in-depth integration with hospital pharmacy IT systems. In this approach, the independent provider would seek to pay for their systems development costs by asking medicine suppliers to pay a small fee to fund the system. In return, the host would provide guaranteed payment and cash flow to suppliers as a benefit. It is effectively a buy-side solution, but hosted by an ISP. This solution would also give buyers access to online supplier catalogues, which would be mutually beneficial.

This approach allows the hospital greater flexibility to alter their supplier for noncontract lines, whether sourced from distributor, manufacturer or wholesaler.

The benefits of e-commerce
The benefits of e-commerce are well established. All industries that have advanced supply chains use e-commerce to improve efficiency, increase customer service, reduce errors and have faster lead times.

Improved management decisions are possible with better forecasting of demand. Analysis of purchasing trends, price optimisation and better supply chain visibility help drive down operating costs and stock holding. A well-developed e-commerce solution will eventually lead to a closer relationship with suppliers. This relationship may lead further to the development of vendor-managed inventory (VMI) to improve supply chain management.

Procurement staff roles will radically change with time. They will be released from their administrative burden, and should be able to focus on some of the more complex strategic procurement decision-making that will be required. Access to a more visible supply chain means an improved and more responsive customer service.

E-commerce cannot be simply implemented, as it consists of a whole range of business activities linked by the need to make information electronically available throughout the supply chain. This access to information can then be exploited for the business benefit of each organisation. E-commerce can be used as a powerful tool to gain competitive advantage, improve internal efficiencies and tie in customers to use specific services or products.

E-commerce can also be used to alter the current way we trade, tender or contract. New and novel processes and systems are possible. The way we do business could be very different in coming years.



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