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Strategic drug purchasing: a role for the hospital pharmacist

Michael Baehr
Dr rer nat
Pharmacy Department
University Medical Centre Hamburg-Eppendorf
E: [email protected]

The hospital pharmacy guarantees a rational (ie, scientifically and economically ­reasonable) drug supply for the patient. Hospital pharmacists have continually extended their traditional tasks – for instance, in drug production, purchasing and logistics. Consequently, today’s hospital pharmacy can offer a wide range of clinical services for patients, doctors and nursing staff. This includes the production of specific drugs, the preparation of individual cytotoxic drugs and of solutions for total parenteral nutrition, therapeutic drug monitoring, the development of therapy guidelines and consultation with and training of doctors and nurses regarding all aspects of pharmacy.

Hospital pharmacists can make a major ­contribution to medication safety and to ­economic use of drugs if they work directly within the ­therapeutic team and provide their services directly to the patient.

While this knowledge is asserting itself more and more, the increasing concentration of the ­hospital market and professionalisation of purchasing places in question whether the hospital pharmacist should continue work on traditional tasks such as ­purchasing and logistics.

Purchasing in today’s hospitals
Definitions of modern purchasing processes ­distinguish between strategic and operational ­purchasing, with separation based on both ­organisation and personnel.

Strategic purchasing is responsible for added value and includes:

  • Continuous or project-related market analysis.
  • The real purchasing process, consisting of analysis of the status quo, formulation of specifications, standardisation, bundling and tendering of large volumes.
  • Contract management.
  • The active influencing of internal processes and costs.
  • Cost control.

Operational purchasing comprises:

  • Purchase order processing.
  • Disposition.
  • Invoice management.

The role of the strategic buyer takes into account prices, product assortment and processes of the enterprise. This role has changed from simply ­placing orders to being a key player – the ­individual who continually bears in mind the enterprise’s ­commercial strategies and processes, as well as its total expenses.

The strategic buyer works closely with the ­executive board and has clear competence ­regarding clinical consumers. As well as lowering prices, ­strategic purchasing aims to improve service and quality, lower process costs, increase materials availability, and improve customer satisfaction. Basic methods of achieving these goals are standardising product assortments, creating long-term supplier contracts, cutting the number of ­suppliers and grouping orders to cut operational purchase costs.

It is also necessary to develop manufacturer-neutral material specifications and standards in ­connection with users, and to fix a clear ­purchasing strategy. Strategic purchasing must develop a strong customer orientation and present itself as the key player for change management.

In German hospitals, drug purchasing is the responsibility of the hospital pharmacist. ­Previously, purchasing of ancillary goods such as medical devices, diagnostics, food, technical devices and services was assigned to specialised hospital departments. However, today purchasing is increasingly done by a central purchasing department.

Purchasing of medical devices
Increasing pressure on resources has led to ­German hospitals carrying out a large number of ­purchasing projects utilising external consultants – for ­example, GÖK Consulting AG is currently reporting on more than 45 purchasing projects, mainly in the area of medical devices. Such initiatives can allow reductions of 7–30% in material and of 10–25% in ­process costs, as well as reductions in the number of articles and of suppliers by 20–55% and 30–70% respectively.

The main economic results have been attributed to the standardisation of products and the concentration of suppliers. This is easily understandable, given the fact that the medical devices market is characterised by a wide variety of articles, low ­product transparency and insufficient article structuring. During the last ten years systematisation of products has begun, along with the gaining of insight into structured purchasing and logistics. It is frequently hospital pharmacists who have taken on this task.

Purchasing of drugs
In contrast to medical devices, drugs have been systematically managed for decades by hospital pharmacists, considering all aspects of strategic ­purchasing. Standardisation in coordination with physicians is undertaken by a drug committee ­managed by the hospital pharmacist. The committee’s decisions are limited to questions concerning active substances. The pharmacy decides upon a certain product, determined by scientific and pharmaco‑economic criteria. Only the products of the hospital formulary are available for ward doctors; prescriptions beyond the standard are reserved for senior physicians, and these are only implemented with a valid reason and following a check by the ­pharmacist. The latter is cost-controller and ­consultant for ­doctors and nursing staff.

This process allows the provision of a choice limited to 1,500 products, including all packet sizes; this is sufficient for a hospital up to maximum care level.

Such an approach forms the basis for efficient purchasing. In our clinic, 80% of all drug costs are attributable to only 19% of the products of the ­hospital formulary. Thus, purchasing is concentrated on a small number of products and suppliers. In 2004, our hospital had 2,664 active suppliers. Of these, fewer than 10% (257) delivered drug to the hospital pharmacy, although drug turnover was approximately 30% of the overall material turnover.

Clinical processes and safety
Important factors during drug purchasing include not only pharmaceutical quality (eg, purity, bioavailability, mechanism of drug release), but also the impact on unit and process costs of the qualities of the active substance and of drug formulation. Thus, pharmaceutical competence concerning purchasing is absolutely required. Examples of consequences for the medication process include:

  • Once-daily versus multiple intake: antibiotics which must be taken only once daily may have a higher price per unit but lower therapy costs compared with antibiotics that must be administered several times a day.
  • Prefilled syringes versus multivials: heparin preparations in multivials may have a lower unit price compared with those available in prefilled syringes. Lower process costs and potentially better medication safety of the latter must be weighed against the higher price per unit.
  • Fixed combinations versus free combinations of monopreparations: the higher unit price of a fixed combination (eg, piperacillin and tazobactam) must be weighed against the additional process costs and potential for medication errors if the free combination of ampicillin and sulbactam is used.
  • Intolerance of preparations: many IV drugs contain benzyl alcohol. The fact that this preservative is harmful to babies must be taken into consideration for purchasing decisions. Fat components are responsible for tolerance with propofol preparations. Lower price must be weighed against patient comfort.
  • The taste of oral drugs: just in the field of paediatrics, compliance depends on taste. Oral penicillin juices can taste quite bitter and will generally not be taken by children. A higher unit price is justified if the formulation improves compliance.

However, even if active substance and pharmaceutical form are beyond dispute, a purchasing decision can influence the medication process considerably. In particular, one has to ­examine whether drug labelling and appearance fit in with the available assortment. Wrong decisions at this point can lead to considerable problems in ­medication safety:

  • “Look-alike” errors can easily appear due to manufacturers’ desire to signal corporate identity on products (ie, if the design of packs and labels is very similar). Single-sourcing of generic products brings with it a major risk to medication safety, because confusing medications is very easy. This is one of the grey areas of the standardisation issue.
  • “Sound-alike” errors can appear when product names are very similar (eg, Zytotec and Cytotect). The danger of “sound-alike” mistakes increases especially with generic names. In our clinic, we have changed back to the original supplier for some generic cephalosporin preparations, because even well-trained staff could not always distinguish between such drug names as ceftazidim, ceftriaxon, cefazolin and cefuroxim (see Figure 1).


These are just a few examples of factors which must be considered for drug purchasing and which underline the pharmacist’s central importance in the purchasing process.

Make or buy?
Whenever the purchase of a product is under ­consideration, the option of in-house production must be also considered. The ongoing capacity for drug production within the hospital pharmacy has a permanent impact on the price situation. ­Opting for in-house production of generic drugs – eg, fluconazole or ciprofloxacin – is at least a purchasing decision which only the hospital pharmacist can make.

Drug shortages
Ongoing globalisation is leading to a dramatic ­concentration of the pharmaceuticals market. This results in decreasing customer orientation and supply shortages. An inflexible quantity structure and supplier portfolio can lead to clinical problems. Despite clear contracts and promises regarding delivery, it is increasingly the case that leading manufacturers cannot keep to their delivery obligations. Thus, a hospital pharmacist is needed who can operate quickly and make purchases based on expertise.

Improving purchasing by co-operation
The specific factors described above mean drug purchasing requires the hospital pharmacist to be a strategic buyer. In the future, a single hospital’s market clout will no longer be sufficient if economic goals are to be achieved. According to Philip Profeta, corporate director of purchasing at the University of Rochester, USA, no hospital will be able to survive in the future without connection to a purchasing group, including the domain of drug purchasing.

Standardisation of drugs within a purchasing group is a major efficiency potency and the basis for considerable savings in other areas. Standardisation decisions must be carefully considered, in collaboration with medical and nursing staff. This process is supported by the professional pharmacist, in the role of moderator and expert in the field of product alternatives and suppliers.

Material groups can be organised among pharmacists involved, reducing individual workload and ­creating space for more intensive discussions. The author has been a member of a purchasing community, organised by six university pharmacists, since 2002. The factors underlying this organisation’s ­success are:

  • A high degree of internal exchange.
  • Similar objectives and strategies.
  • Similar workload for each member.
  • Well-prepared purchasing negotiations with pharmaceutical companies.
  • Concentration on “A-products”.
  • Consideration of modern forms of contract.
  • Contract control.

The power of demand and strategic value was clearly increased by working in unison compared to working alone. In comparison with other university medical centres operating on their own, a clear advantage could be achieved in terms of pricing ­levels, and further advantages could be gained with the use of innovative forms of contract (such as capitation and frame contracts).

The purchasing group’s success is based on ­having a concrete schedule for preparations, negotiations and strategic workshops. Detailed contract management and control ensures the community’s reliability. Co-operation is not limited to the purchasing ­process: in addition to benchmarking of prices, extensive benchmarking of pharmacy services was developed, aimed at process standardisation to allow the best possible practice in every enterprise.

Just as is the case with drug logistics, drug ­purchasing is part of the hospital pharmacy’s core business. ­Without direct influence on purchasing decisions, hospital pharmacists can neither deploy their pharmaco‑economic expertise nor guarantee medication safety. The hospital pharmacist fulfils all the requirements of a strategic buyer: market knowledge and pharmaceutical knowhow, respect for the different interest groups, and experience with purchasing tools such as standardisation and supplier marketing.

The hospital pharmacy of the future will ­possess both a “front office”, with clinical pharmacists ­working directly on the ward, and an efficient “back-office” supplying information, producing individual preparations and handling logistics as well as purchasing. The pharmacist with purchasing expertise will work in the back office as a strategic drug buyer. Within the scope of purchasing co-operation, such a pharmacist will work on specific material groups, including a large amount of products.

Thus, the pharmacist will be responsible for negotiation, contract management and cost control for his or her specific material group.

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