{"id":3013,"date":"2011-02-21T15:54:00","date_gmt":"2011-02-21T15:54:00","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/2011\/02\/21\/what-is-the-remedy-for-shortages-in-the-health-care-or-any-industrys-supply-chain\/"},"modified":"2021-08-10T11:14:11","modified_gmt":"2021-08-10T15:14:11","slug":"what-is-the-remedy-for-shortages-in-the-health-care-or-any-industrys-supply-chain","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-the-remedy-for-shortages-in-the-health-care-or-any-industrys-supply-chain\/","title":{"rendered":"What Is The Remedy For Shortages In The Health Care (or Any Industry&#8217;s) Supply Chain?"},"content":{"rendered":"<p>A Chicago Tribune article entitled \u201cDrug shortages prompt hospitals to use older treatments, pay more when they do find a supply\u201d from this weekend caught my attention. The article describes how hospitals are encountering major challenges with \u201cthe worst shortages\u201d of pharmaceuticals in at least a generation.<\/p>\n<p>The article implies that the causes of these supply shortages are primarily manufacturing issues and quality control problems that are apparently being increasingly discovered due to \u201cthe federal government\u2019s crackdown on drug safety.\u201d With reports of hospitals paying \u201cdouble or more for certain drugs because they are working with a supplier that normally doesn\u2019t supply them with large volumes of a product\u201d and the US government proposing \u201clegislation that would require drugmakers to give the FDA an early notification \u2018when a factor arises that may result in a shortage,&#8217;\u201d (i.e., the government doing the medical industry\u2019s supply chain visibility for them), I began to think: \u201cDoes health care procurement need its head checked for being so inept?\u201d<\/p>\n<p>Well, before making such a conclusion, I needed a second opinion.<\/p>\n<p>Doing a little research, I found that the American Society of Health-System Pharmacists actually had a set of formal guidelines on managing shortages in the pharmaceutical supply chain. Were these guidelines good? Could they be applied to other industries as well?<\/p>\n<p>Let\u2019s check the vitals of these guidelines together\u2026<\/p>\n<p>The guidelines start out by identifying 11 of the contributing factors of pharmaceutical supply chain shortages. Here are a few of those that I feel can be adapted to almost any industry (including yours):<\/p>\n<ul>\n<li><strong>Raw and bulk material unavailability.<\/strong> Disruptions in the supply of raw or bulk materials are especially problematic when the primary or sole source experiences production difficulties or discontinues production, affecting multiple manufacturers\u2026Availability<br \/>\nproblems can arise when armed conflict or political upheaval disrupts trade, animal diseases contaminate tissue from which raw materials are extracted, climatic and other environmental conditions depress the growth of plants used to produce raw materials, or raw materials are degraded or contaminated during harvesting, storage, or transport.<\/li>\n<li><strong>Manufacturing difficulties and regulatory issues.<\/strong> Drug product shortages can also occur when the primary or sole manufacturer of a drug product halts or delays production<br \/>\nin response to a Food and Drug Administration (FDA) enforcement action concerning noncompliance with current good manufacturing practices (cGMPs). Contributing<br \/>\nfactors may include antiquated manufacturing equipment, a shift of resources from maintenance of equipment and facilities to research and development, loss of manufacturer personnel experienced in production and compliance issues as a result of company mergers or retirements, cGMP-related problems with subcontractors who supply products to multiple pharmaceutical manufacturers, and limited FDA resources for timely inspections of manufacturing sites.<\/li>\n<li><strong>Manufacturers\u2019 production decisions and economics.<\/strong> Manufacturers\u2019 business decisions are based on a variety of factors, including the availability of generic products, market size, patent expiration, drug approval status, regulatory compliance requirements, and anticipated clinical demand. Occasionally, manufacturers temporarily or permanently reduce production quantities of certain drug products as they shift production efforts or reallocate resources to other products. A manufacturer\u2019s reasoned, sound business decision to discontinue production of a drug product because of insufficient financial return or a<br \/>\nhigh cost to correct manufacturing issues can cause an unanticipated, serious shortage, especially in the instance of a sole-source or medically necessary product.<\/li>\n<li><strong>Industry consolidations.<\/strong> Manufacturer mergers often result in decisions to narrow the focus of product lines or move a production line to a new facility, resulting in the discontinuation or delayed availability of drug products. Mergers between two companies that manufacture similar product lines typically result in single-source products. As the number of manufacturers of a product decreases, resiliency in the supply<br \/>\nthe chain also decreases, making product supplies more vulnerable.<\/li>\n<li><strong>Inventory practices.<\/strong> Communication and transportation efficiencies throughout the supply chain have allowed inventory reductions at all levels. Most manufacturers, distribution centers, and health systems use \u201cjust-in-time\u201d inventory management to reduce the cost of inventory on hand and optimize cash flow. This strategy is recognized as sound business management for all stakeholders, but an unexpected shortage at any point in the supply chain can significantly affect the end user and patient.<\/li>\n<li><strong>Unexpected increases in demand and shifts in clinical practice.<\/strong> Occasionally, the demand for a drug product unexpectedly increases or exceeds production capacity. This may occur when a new indication is approved for an existing drug product, when usage patterns change in response to new therapeutic guidelines, when a substantial disease outbreak occurs, or when unpredictable factors influence demand.<\/li>\n<li><strong>Natural disasters.<\/strong> Natural disasters can have a profound effect on the availability of drug products. Damage to manufacturing facilities, particularly those that are the sole source of a drug product or category of products, is likely to cause long-term shortages.<\/li>\n<\/ul>\n<p>After reading this, my blood pressure returned to normal levels, with me getting some confidence that the healthcare industry actually had some procurement savvy for managing drug shortages. However, my temperature rose once more when I got to a section entitled \u201cPhased approach to planning for drug product shortages.\u201d<\/p>\n<p>In this \u201cplanning for shortages\u201d section, I was a bit appalled by a figure that illustrated the process for dealing with shortages. Guess what the first step was\u2026<\/p>\n<p>It was \u201cDrug shortage identified.\u201d<\/p>\n<p>In other words, no action is taken until a shortage is identified. That\u2019s a little late to start figuring out what to do, don\u2019t you think?<\/p>\n<p>Though the guidelines themselves state that \u201cHealth systems should develop a <a href=\"https:\/\/lms.nextlevelpurchasing.com\/course\/view.php?id=6\">contingency planning<\/a> strategy to prepare for the possibility of a prolonged drug product shortage. Although it often is not possible to predict when shortages will occur, the process for dealing with them can<br \/>\nbe defined in advance,\u201d the rest of the guidelines do not describe such a proactive approach but rather a reactive approach.<\/p>\n<p>Compounding the insanity is the guidelines\u2019 recommendation against increasing inventory in anticipation of a predicted shortage (generally, when done well, an effective strategy in competitive industries). The report points out the downsides of such stockpiling \u2013 it may direct quantities to a location where they are not needed instead of a location where they are and it may result in spoilage\/obsolescence due to overbuying \u2013 but it doesn\u2019t address the upsides, which include sparking a demonstrated demand in the supply chain that would compel manufacturer\u2019s to beef up production. This recommendation kind of promotes a \u201clet\u2019s all be screwed together\u201d approach rather than one in which the smartest health care procurement system comes through for its patients while the dumber ones fail (and might actually learn a procurement lesson in the process).<\/p>\n<p>As we teach in our online course, \u201c14 Purchasing Best Practices,\u201d risks should be identified and strategies be put in place to mitigate those risks <span style=\"text-decoration: underline\">in advance<\/span>.<\/p>\n<p>With this recent reading that I\u2019ve done, I have to say that I\u2019m a little disappointed with drug procurement in the healthcare industry \u2013 an industry that has taken strides to improve its procurement practices but, apparently, still needs a prescription for better procurement performance.<\/p>\n<p class=\"p1\"><b>Recommended Reading<\/b><\/p>\n<ul class=\"ul1\">\n<li class=\"li1\"><a href=\"https:\/\/www.certitrek.com\/nlpa\/news\/purchasing-articles\/contingency-plans\/\">Contingency Plans<\/a><\/li>\n<li class=\"li1\"><a href=\"https:\/\/www.certitrek.com\/nlpa\/news\/purchasing-articles\/force-majeure-clause\/\">Is Your Force Majeure Clause Too Weak?<\/a><\/li>\n<\/ul>\n<p><b>Recommended Resources<\/b><\/p>\n<ul class=\"ul1\">\n<li><a href=\"https:\/\/lms.nextlevelpurchasing.com\/course\/view.php?id=21-2\">Improving Quality in the Supply Chain<\/a><\/li>\n<li><a href=\"https:\/\/lms.nextlevelpurchasing.com\/\">Procurement Strategy Development<\/a><\/li>\n<li><a href=\"https:\/\/lms.nextlevelpurchasing.com\/course\/view.php?id=17\">Executing a Global Sourcing Strategy<\/a><\/li>\n<li><a href=\"https:\/\/lms.nextlevelpurchasing.com\/\">Tactical vs. Strategic Procurement Splits<\/a><\/li>\n<li><a href=\"https:\/\/lms.nextlevelpurchasing.com\/products\/procurement-in-2025-five-megatrends-and-their-implications\">Procurement in 2025: Five Megatrends and Their Implications<\/a><\/li>\n<\/ul>\n<p class=\"p3\"><span class=\"s1\"><a href=\"https:\/\/lms.nextlevelpurchasing.com\/\"><b>NLPA Learning<\/b><\/a><b>:<\/b>\u00a0Looking for authoritative procurement templates, tools, webinars, and more? Stop trying to create resources from scratch and start taking advantage of having exactly what you need right at your fingertips in\u00a0NLPA Learning.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A Chicago Tribune article entitled \u201cDrug shortages prompt hospitals to [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":3998,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3013","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.13 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Is The Remedy For Shortages In The Health Care Supply Chain?<\/title>\n<meta name=\"description\" content=\"The guidelines start out by identifying 11 of the contributing factors of pharmaceutical supply chain shortages. 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Here are a few of those that I feel can be adapted to almost any industry.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-the-remedy-for-shortages-in-the-health-care-or-any-industrys-supply-chain\/\" \/>\n<meta property=\"og:site_name\" content=\"Next Level Purchasing Association (NLPA)\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/NextLevelPurchasing\/\" \/>\n<meta property=\"article:published_time\" content=\"2011-02-21T15:54:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-08-10T15:14:11+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/11\/nlpa-images-008.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1600\" \/>\n\t<meta property=\"og:image:height\" content=\"1067\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Galo Matagay\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:site\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Galo Matagay\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-the-remedy-for-shortages-in-the-health-care-or-any-industrys-supply-chain\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-the-remedy-for-shortages-in-the-health-care-or-any-industrys-supply-chain\/\"},\"author\":{\"name\":\"Galo Matagay\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa\"},\"headline\":\"What Is The Remedy For Shortages In The Health Care (or Any Industry&#8217;s) Supply Chain?\",\"datePublished\":\"2011-02-21T15:54:00+00:00\",\"dateModified\":\"2021-08-10T15:14:11+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-the-remedy-for-shortages-in-the-health-care-or-any-industrys-supply-chain\/\"},\"wordCount\":1258,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\"},\"articleSection\":[\"Procurement\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-the-remedy-for-shortages-in-the-health-care-or-any-industrys-supply-chain\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-the-remedy-for-shortages-in-the-health-care-or-any-industrys-supply-chain\/\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/what-is-the-remedy-for-shortages-in-the-health-care-or-any-industrys-supply-chain\/\",\"name\":\"What Is The Remedy For Shortages In The Health Care Supply Chain?\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#website\"},\"datePublished\":\"2011-02-21T15:54:00+00:00\",\"dateModified\":\"2021-08-10T15:14:11+00:00\",\"description\":\"The guidelines start out by identifying 11 of the contributing factors of pharmaceutical supply chain shortages. 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