Navigating the Complexities of Vendor Substitutions in Pharmacy Purchasing

Understanding the impact of vendor substitutions on inventory management helps ensure an optimized and efficient approach to pharmacy purchasing. 

Navigating the Complexities of Vendor Substitutions in Pharmacy Purchasing
Danielle Dinglasan

Danielle Dinglasan

Product Marketing Manager at SureCost

In this intricate landscape of pharmacy inventory management, a subtle yet impactful challenge arises: the art of tracking vendor substitutions. Picture this scenario: vendors quietly replace a product before shipping it out, catching pharmacies off guard. It’s not quite the same as the occasional mix-up where the wrong item finds its way onto pharmacy shelves. No, this is a phenomenon where substitutions occur behind the scene, under the radar. 

The Annual SureCost Smarter Purchasing Reports provide insights into the habits of SureCost customers and unveil revelations that send ripples through their pharmacy. In the 2022 Smarter Purchasing Report, it was revealed that a staggering 8% of total items purchased by SureCost customers turned out to be substitutions. 

The type of substitutions are a wide span, with brand-to-generic substitution taking center stage. This year, we focused our lens on vendor substitutions exclusively within the generics category. We dissected reasons like dosage form, strength and package size changes. 

SureCost customers encountered these vendor substitutions in around 0.74% of their generic purchases. An apparently small fraction, but a deeper dive reveals a spectrum. Some pharmacies were hit by substitutions at a jaw-dropping rate of 7.45%. The impact of these covert replacements isn’t always apparent at first glance. A 0.74% substitution rate can translate into heightened costs. 

the impact of vendor substitution in pharmacy purchasing

The Impact of Vendor Substitutions on Pharmacy Profitability

We’re talking about notable expenses, a ripple effect that reverberates through the pharmacy’s bottom line. An average increase of 8 basis points, soaring to a peak of 3.5% in certain cases. Crunch chose numbers and you might find some pharmacies shelling out over $35,000 annually, all thanks to these undercover substitutions. Importantly, these changes also affect patients who unknowingly receive different items. 

Raising awareness about vendor substitutions is crucial. Such substitutions can impact a pharmacy’s profitability if a higher-cost or lower-reimbursement medication is swapped in. SureCost addresses this by displaying costs and tracking predicted product prices. If an unexpected substitution occurs, the system highlights it, allowing prompt communication with the vendor. Moreover, preventing substitutions altogether saves time, resources and the hassle of updating records, relabeling products and notifying patients or healthcare providers. 

Simplify Your Pharmacy Purchasing and Inventory Processes

In the intricate world of pharmacy inventory management, vendor substitutions can either strengthen or weaken the fabric of success. With SureCost, pharmacies gain the tools to navigate this terrain effectively. After submitting purchase order worksheets through SureCost, pharmacies can track when a purchase order has reached each stage: vendor acknowledgement of receiving the purchase order, shipped order, vendor invoice received and if your pharmacy submitted acknowledgement of receiving the products. 

If a vendor is non-compliant and invoices more than the contracted price, ships more or less quantities than expected or doesn’t ship the correct item, SureCost will display a flag to alert the pharmacy at the specific stage. Pharmacies will also receive an automated vendor substitution report displaying a list of items that were substituted, indicating which purchase order and vendor. 

The 2023 Smarter Pharmacy Purchasing Annual Report

The revelations of the 2023 Smarter Purchasing Report shed light on the profound impact of these covert shifts in the pharmaceutical landscape. By focusing on vendor substitutions within the generics category, we’ve dived into the details to understand the reasons and ramifications behind these changes. 

Armed with this knowledge, pharmacies can now approach vendor substitutions with greater vigilance, armed with tools like SureCost to navigate the complexities. As we continue to unveil the impact of vendor substitutions, it’s clear that awareness and proactive management are key to ensuring both financial stability and patient well-being in the ever-evolving world of pharmaceutical purchasing. 

Dive into our full Annual 2023 Smarter Purchasing Report for insights on vendor substitutions and more smart purchasing strategies. Read the full report here! 

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