Navigating Drug Shortages and Price Fluctuations

Pharmacies are no strangers to high drug prices and shortages. Yet these challenges are about to get even harder. This white paper will explain why price fluctuations and drug shortages will become even more costly and complex. Then, we’ll outline a strategy to mitigate the impact of these rising drug prices and shortages. We’ll also highlight how solutions like SureCost empower pharmacies to turn disruption into opportunity through smarter, tech-enabled purchasing. By incorporating predictive modeling, drug shortage solutions anticipate shortages before they occur— securing inventory, protecting rebates and maintaining patient care—rather than scrambling to react once supply is already constrained. It takes the right approach and solutions for navigating drug shortages, but pharmacies can succeed amidst these issues.

Manufacturers will compensate by launching new drugs with higher prices. They’ll also adjust their production portfolio to stay competitive in this new landscape. Commercial insurance plans will also change to gain similar advantages. Likewise, pharmacy benefit managers (PBMs) will update formularies to compensate for lower margins. Pharmacies should expect to see new, higher-priced drugs enter the market.

The Growing Impact of Pharmacy Drug Shortages

Drug shortages are also becoming more frequent and harder to predict. By the first quarter of 2024, the American Society of Health-System Pharmacists reported the highest number of shortages in nearly a decade. While that number has since decreased, there’s still a high rate of active drug shortages.

What causes record-breaking drug shortages? Obvious triggers include raw material shortages, supply chain issues with specific products or materials used to manufacture them and insufficient production to meet increased demand. Another factor is regulatory challenges (delayed inspections for overseas items, plant closures, etc.).

Artificial drivers also create real impacts. Companies stockpiling inventory create the impression of an actual shortage and affect supply and pricing. Manufacturers shifting their production portfolio means fewer manufacturers producing a larger percentage of products. That market compression pressures manufacturers to ramp up their volume, leading to issues with supply meeting demand (while allowing manufacturers even more control over what they can charge vendors).

Drug shortages now last 18 weeks on average (double the pre-COVID levels). A shortage of even one key item can disrupt patient care. The problem is so widespread that many healthcare systems convene standing committees to keep ahead of drug shortages.

The Problem With Traditional Pharmacy Purchasing Practices

The most common example of these outdated, detrimental purchasing practices is manually searching and comparing catalogs to find the best purchasing option. The pharmacy purchasing ecosystem is a web of vendors, prices, product codes and more data spread across multiple catalogs and purchasing interfaces. And that data changes constantly.

Without the right strategy and solutions to mitigate the impact of drug shortages, pharmacy teams cannot consistently find the best purchasing option, especially when the lowest price is just one factor to consider. Primary vendor compliance, potential reimbursement, actual COGS and availability are variables impacting every purchase. This is hard enough when staff are not scrambling to find the correct item during an unexpected drug shortage.

Over-reliance on a single vendor puts pharmacies at risk when supply issues arise or allocations shift. When that vendor encounters supply issues or adjusts allocations due to low supply, these pharmacies can’t get what their patients need. Plus, the more one wholesaler controls a pharmacy’s spending, the less negotiating power they have. Premier’s 2024 drug pricing index showed that hospitals sourcing 80% or more from one vendor paid 2.7% more on generics and 1.4% more on brand-name drugs than their multi-sourced peers.

Some pharmacy professionals may note that these approaches are “how we’ve always done it.” But they’re costly, inefficient, time-consuming and stressful. Manual processes, vendor over-reliance and other traditional purchasing methods can lead to:

Strategies for Smarter Pharmacy Purchasing

To thrive despite drug price increases, drug shortages and other long-term issues, pharmacies have to rethink purchasing. The best purchasing strategy is flexible enough to adapt to market disruptions and shifts in clinical demands. Successful pharmacies also harness solutions that streamline work and use automation to enhance how teams work (without micromanagement). Let’s examine the four pillars of smarter purchasing.

Vendor Diversification

By diversifying their sourcing through an expanded vendor portfolio, health system pharmacies unlock a wider range of products, competitive pricing, bulk discounts and more opportunities to negotiate terms.

This is too much for pharmacy teams to accomplish without the right tools. Diversification without data is chaos, but diversification with automation provides a competitive advantage.

Resilient Workflows and Inventory Management

As discussed above, staffing shortages are real and on the rise. Smaller teams are managing more patients and greater workloads. They’re also left with siloed data and complex processes.

An integrated purchasing solution streamlines pharmacy purchasing and inventory management to build a staffing- resilient workflow. It uses automation to standardize workflows, centralize PO management and task assignments and eliminate back and forth between departments. It also scales with pharmacy teams, even when teams get smaller.

For example, by automating checkpoints, a team member can quickly and confidently move an order from a worksheet to a purchase order. For recurring orders, they may program the system to automatically submit orders at certain times or days designated by that user.

Data-Driven Inventory Management

Inventory should work hand in hand with purchasing. Otherwise, pharmacies miss low stock, depleted items or expired products and fail to replenish on time. They may place unnecessary orders and end up with excess stock that goes unsold or spoils on shelves. Overstock is a business liability, while understock delays care. Ineffective pharmacy inventory management prevents staff from working at “the top of their license” and saddles them with an often tedious task.

An integrated purchasing and inventory management solution enables data-driven inventory forecasting. Pharmacies can plan ahead without relying on “gut decisions” and guesswork. Decisions become proactive instead of reactive. Instead of pharmacy teams scrambling to order after discovering they’ve run out, staff can plan ahead using accurate, real-time data. Combining historical data and real-time views of inventory, including its actual purchased value, allows pharmacies to right-size their inventory and adjust stock levels “on the fly.”

Confident Compliance

Vendor agreements are key to profitability. Ensuring compliance means avoiding penalties, but optimizing compliance, making the most of an agreement’s terms, leads to huge savings.

In other words, compliance isn’t just about avoiding penalties; it’s about making smarter decisions faster. But contracts are hard to manage manually. A primary vendor’s generic compliance ratio can be updated monthly. A sudden drug shortage or price spike can push just a few purchases off-contract and instantly diminish compliance from 95% to 89%.

Vendor agreements function like a second payer. They can drive up to 6% of drug spend back to a pharmacy’s bottom line. But pharmacies have to hit generic ratios, brand targets and source tiers (as spelled out in all the “fine print”). Missing by even a few points means eliminating the rebate.

An integrated purchasing solution tracks compliance continuously and provides real-time updates on progress, including how generic spend needs to be adjusted. These systems integrate contract terms and requirements. That information, when combined with the pharmacy’s purchasing data, allows the solution to:

The system also flags non-compliant SKUs at the product-group level before submitting a purchase order (not weeks later). Automated recommendations for the lowest net-cost items keep pharmacies compliant, so they’re never forced to choose between price and rebates.

Smarter Pharmacy Purchasing in the Field

Guardian Pharmacy Services provides a useful case study for implementing these strategies.

As drug shortages worsened due to post-COVID-19 supply chain interruptions, Guardian needed access to a diverse vendor portfolio. They also wanted a solution for integrated data to make informed purchasing decisions and to automate their processes to save time and reduce errors. That’s when they implemented SureCost.

By leveraging SureCost’s drug shortage solutions, Guardian has achieved greater efficiency and improved purchasing strategies through reliable supply chain management. They always maintain a consistent supply of medications, mitigating the impact of drug shortages. They continue to see cost savings and improved resource allocation. Staff can now focus on patient care (not administrative tasks).

The Future of Pharmacy Purchasing

It’s unlikely that prescription drug products will get cheaper or become more abundant. Fortunately, as we’ve seen, health system pharmacies can take steps to meet these challenges. However, it takes the right planning and putting the right drug shortage solutions in place. SureCost gives pharmacy teams the visibility, flexibility and automation needed to make every purchasing decision count.