Survey Results for Maximizing Pharmacy Savings

SureCost also wanted to gauge how well pharmacies perform these purchasing practices. To understand pharmacies’ existing practices, we conducted a “Smarter Purchasing Survey”. This white paper will summarize those results and explain how pharmacies can optimize their own purchasing.

Pharmacy Savings Solution: Purchase Beyond the Top 200

Successful pharmacies save more by harnessing smarter purchasing to shop beyond the top 200 and expand their vendor portfolio. Shopping outside the top 200 gives these pharmacies more options in a less competitive market (instead of limiting themselves to the same in-demand items other pharmacies focus on). Purchasing from secondary vendors opens up a variety of alternatives, drives greater pharmacy savings and gives them a back-up when drug shortages hit.

These pharmacies also leverage technology, such as pharmacy management systems, to integrate all vendor catalogs and purchasing data into a single system. With the right solution in place, they can easily compare updated prices and analyze the potential impact of purchases on vendor compliance. Smarter purchasing allows pharmacies to enhance how they make purchasing decisions, from a wider range of options, without compromising primary vendor compliance.

Receiving the Right Prescription Drugs

While vendor substitutions may be a regular part of pharmacy purchasing, vendors don’t always inform pharmacies about them. Pharmacies may receive unexpected substituted items—products they did not order—without even knowing it. When asked about vendor substitutions, over a quarter of respondents answered that substitutions had a “negative impact” on their pharmacy’s cost of goods sold (COGS). Nearly 8% admitted they did not know or didn’t have enough information to even conjecture about the impact.

Pharmacies may not realize they’re losing money, disrupting their inventory and adding additional work (e.g., updating records, relabeling products, contacting patients and healthcare providers). The additional expense will also increase a pharmacy’s COGS. Most importantly, when patients don’t receive the medication they expect, it can compromise their treatment plans and cause them to seek other providers.

Monitor Vendor Substitutions With Automation

Left to manual processes, checking every package against each purchase order is tedious and time-consuming. However, automation in pharmacy is a solution that flags vendor substitutions upon receipt and calculates the cost difference (including rare positive impacts) against the initial purchase order.

Automation in pharmacy management systems helps to verify receipt of the accurate amount of the right drug for the agreed-upon price (per the purchase order) and alerts staff about discrepancies. Pharmacies can then generate a report and other documentation needed to address the issue with their vendor.

Avoid Sudden Reorders

Based on survey responses, the majority of pharmacies order prescription drugs on the fly. Close to 90% reported having to reorder items unexpectedly, and nearly half reported doing it “often”.

Pharmacies may have to unexpectedly reorder items in reaction to spikes in market demand. In some cases, drug manufacturers can’t keep up with the sudden high demand, making products even scarcer. In recent years, continued generic drug pricing erosion has lowered manufacturers’ profit margins for some products, and they’ve stopped producing those drugs. This results in higher demand for other manufacturers to ramp up production to support the volume. Raw material shortages and temporary plant closures (due to inspection issues) have also driven drug shortages, leading to more sudden reorders.

Whether due to a vendor not filling an order on time or waiting too long to replenish inventory, regardless of the reason, sudden reorders increase costs and stress. Staff feel pressured to fill the patient’s prescription or anxious as they explain why they can’t do it. Noticing out-of-stocks at the last minute and taking time to find alternatives results in further delays in dispensing medication and to higher costs.

Vendors Honoring Agreements

Only about 38%—less than half—of respondents said that their vendors honor contracted prices all the time. For nearly 10% of these pharmacies, their vendor honors agreements “less than half of the time”.

Even for pharmacies that reported vendors honoring contracted prices “every time,” consistently validating pricing for every purchase requires a high level of visibility into procurement. They’re likely spending too much time on that process. Unfortunately, they may still be missing discrepancies between what they paid versus the expected price.

For pharmacies that are part of a group purchasing organization (GPO), discrepancies between GPO prices and the invoiced amount for contracted products add further costs. Wholesalers may not always reflect their contracted pricing, and they may have difficulty loading and keeping up with all contract price changes. Wholesalers missing these changes result in pharmacies paying more than they should for products. These pharmacies also have to monitor wholesale acquisition cost (WAC) to ensure they are being invoiced correctly.

Ensure GPO Pricing and Vendor Compliance

A smarter purchasing solution helps ensure consistent vendor compliance with negotiated prices, including primary vendor agreements, GPO and any secondary vendors. The immediate benefit of this technology is receiving alerts when pricing doesn’t reflect the GPO rate or a vendor fails to honor their contract price. Having all pharmacy purchasing data and history in one pharmacy management system puts the information at their fingertips. When an issue arises, pharmacies can easily report and document the problem with all relevant information.

These purchasing solutions also ensure internal compliance. Pharmacies can standardize purchasing across all team members and locations. Staff no longer have to worry about buying the “wrong” item; instead, they’re pointed to items that meet vendor compliance, internal compliance, tiered pricing for rebates or other conditions the pharmacy sets.

Paying for What You Receive

Nearly half of respondents said they are not paying for what they should receive. In other words, the value of their received goods is less than what they paid. It’s up to pharmacies to spot these errors. Yet there are several things they need to look out for:

• Wrong products
• Lower quantities
• Missing items
• Incorrectly priced invoices
• “Miss-picks” (i.e., billing the pharmacy for incorrectly filled items)

Guarantee Accurate Value of Received Goods

Pharmacies need an efficient management tool for cross-checking invoices against received items. They also need a method to store and easily access data for an electronic “paper trail” to promptly address errors with the vendors. That means an integrated pharmacy purchasing solution for a streamlined workflow.

This technology integrates with existing processes such as accounts payable and pharmacy management systems. With a single interface, pharmacies can easily compare invoices against purchase orders as soon as they receive items. This also allows fast three-way matching between purchase orders, invoices and received goods. Quick validation allows for prompt notification to vendors for correcting issues. It also saves time by assuring accurate information within pharmacy management systems and accounts payable. This is a helpful business practice that also ties in with DSCSA compliance.

Room for Improvement

Pharmacies that encounter the issues above miss out on potential pharmacy savings while losing time to inefficient processes that disappoint patients and burn out staff. Successful pharmacies have learned that smarter purchasing is essential to staying competitive amidst drug shortages, staff shortages and other challenges.

SureCost’s 2024 Smarter Purchasing Report collects and analyzes self-reported data from over 5,000 pharmacy professionals across the country. Their pharmacies encounter the same issues above, but they’ve harnessed smarter purchasing to overcome these challenges and thrive.

For example, the report revealed that 73% of these pharmacies’ savings were from purchases made outside the top 200. Those purchases saved retail pharmacies, on average, about $54K annually and LTC pharmacies nearly $78K.

Download the report now for additional strategies for pharmacy savings and success stories.