Your pharmacy’s first priority will always be your patients, but you have to stay in business to serve them. Profitability must be a close second. This blog post examines some strategies long-term care pharmacies use to keep the right products in stock while maximizing the margins on those items.
Only Pay for What You Order
This may sound like common sense. Unfortunately, many pharmacies have found that’s not always the case. SureCost’s 2024 Smarter Purchasing Report discovered that pharmacies are not always getting what they pay for.
Many LTC pharmacies are paying for items they didn’t want, and they’re paying more than they should. Unexpected vendor substitutions—vendors substituting items in orders without notifying pharmacies—were as high as 6% on average among generic purchases. The average annual overcharge for GPO-priced items (i.e., GPOs invoicing above the contracted price) was over $100K. One pharmacy saw an increase in their COGS of nearly $40K. Another reported over $2.5M in GPO overcharges.
Pharmacies don’t have to bear these unnecessary costs. They don’t need to spend hours meticulously checking each item against purchase orders and invoices. An integrated purchasing solution unifies purchasing data from all vendors throughout the entire procurement process (from automatically scouting the best purchasing options and submitting a single purchase order for all vendors through receiving items and confirming correct orders up to validating invoices). A smarter purchasing solution means always getting the correct amount of the product you order for the agreed-upon price.
Greater visibility into purchases goes hand in hand with a strategic overview of utilization. With the right system in place, you can easily:
- Analyze usage to adjust quantities purchased
- Calculate the cost-effectiveness of different package options
- Evaluate shrinkage and see the impact on gross profit
Expand Your Vendor Portfolio
With an integrated procurement solution, pharmacies can also purchase from a wider range of vendors without compromising primary vendor compliance. More vendors means more purchasing options, sales/specials and opportunities to negotiate prices. You benefit from competitive pricing and have backup suppliers when a drug shortage hits.
This approach has led to significant savings for LTC pharmacies. When they began shopping outside the top 200 most commonly prescribed generics, these pharmacies saved nearly $78M on average each year. Products “beyond the top 200” accounted for almost 70% of their overall savings across all products purchased that year.
Because all vendor catalogs and purchasing data are part of the same solution, the system shows you the potential impact on compliance with your primary (i.e., how much you can buy from a secondary vendor while maintaining compliance). You can also forecast potential reimbursements based on buying higher volumes or see when items with a higher catalog price may be cheaper after rebates, for example.
Connect Purchasing and Inventory
Few businesses thrive on siloed processes, and pharmacies are no exception. Treating purchasing and inventory as separate areas of your pharmacy means wasting time, money and products.
If what you buy doesn’t “talk to” what you have on your shelves, you’re more likely to purchase more than you need, buy unnecessary items, or lose money on items left on the shelves and tossed in the spoilage bin. If you’re managing inventory by NDC alone and encounter a shortage, you won’t spot an alternate product on hand to dispense for the patient without reordering. If you’re managing more than one pharmacy or part of a network and can’t easily see inventory across each location, you may be placing purchase orders when you should simply be requesting inventory transfers.
Instead, harness an integrated solution. Of course, the ability to easily access both purchasing and inventory data in real time through a single interface will be a substantial time-saver. But smarter purchasing and inventory also streamlines processes, such as:
- Automatic updates to inventory when you receive purchases
- Cycle counts to monitor perpetual inventory based on accurate COGS
- Determine high-impact items and set restrictions based on purchasing strategy
- Notifications for alternative items on hand during shortages and before reordering
- Configure automated reorders based on min/max or other variables
- Request and confirm transfers between locations, including virtual “paper trail”
Unified purchasing and inventory means saving money on unnecessary purchases, efficiently using current stock, avoiding excess and spoilage and making decisions based on the true value of your inventory.
Beyond the Summary
SureCost works with long-term care pharmacies across the country. We see how they find the best purchasing options and optimize procurement. Even amidst soaring drug prices and other challenges, these pharmacies use these tactics to stay competitive in a crowded market while delivering high-quality patient care.
