You upload a purchase order, the vendor packs exactly what you ordered, and they ship it to your pharmacy. It should be that simple. Still, everyone makes mistakes—even vendors. They might accidentally pack the wrong items or incorrect quantities.
But what about vendors purposely sending pharmacies something different? What happens when a vendor intentionally substitutes another item and you receive something different from what you ordered? We’re not referring to an occasional mix-up; it’s a deliberate substitution, and it happens often enough to significantly impact pharmacies and their patients.
In this article, we’ll show you how widespread this issue is, what it means for your business and patients, and how to overcome this costly challenge.
The Cost of Vendor Substitutions
If the above scenario sounds unlikely, please read SureCost’s 2024 Smarter Purchasing Report. As in past years, it analyzes purchasing data from over 5,000 pharmacy professionals nationwide.
Among other pricey issues, this year’s report revealed that, on average, approximately 0.78% of this cohort’s generic purchases were unexpected vendor substitutions. That’s an even higher rate than the previous year. The rate was higher among retail pharmacies; some retail locations reported that vendors substituted nearly 8% of purchases.
Vendor substitutions increased these pharmacies’ COGS by 0.11% (another slight increase over the prior year). Maybe that sounds small. But does any pharmacy want to see any increase in their COGS for products they don’t want? At one retail pharmacy, a location with an annual generic spend of roughly $3M, their COGS increased by over $50K. This was just one cost to their bottom line.
Vendor Substitutions Impact Patients and Staff
There’s also the effect on patient health and customer relations. A substituted item means the item you ordered in the first place—the item your patients need—didn’t make it to your shelves. That compromises the patient’s medical treatment, affects their trust in your pharmacy, and puts you and your team in an unenviable position of explaining why someone can’t get their medication.
Maybe you catch the discrepancy and then have to initiate the process to get what you actually want. That means compiling documentation, contacting the vendor, and then waiting for the right product (or your money) back. Chances are (like many pharmacies facing rising staff shortages) you and your staff are overworked; you might not catch the issue or don’t have the capacity to promptly rectify it.
You and your team must now also account for inconsistencies in your inventory by updating records, relabeling products and informing patients and their medical providers. Between patients potentially seeking other pharmacies for their medication and the staff time lost playing catch-up, the costs are incalculable.
Spotting Vendor Substitutions Early
Since vendors don’t always inform pharmacies about these substitutions, and depending on how a pharmacy receives products, they’re easy to miss.
Receiving products—verifying the item, quantity, and product data—is already a tedious process. Checking every package against each purchase order consumes hours that pharmacy professionals don’t have. Spotting items that were never part of your purchase order adds another step, which compounds the difficulty.
As the Smarter Purchasing Report details, a unified purchasing solution empowers pharmacies to immediately detect and correct issues like vendor substitutions. Smarter purchasing allows you to harness a single solution for purchasing data across all vendors. Pharmacies don’t have to keep juggling purchasing data from different vendors across multiple interfaces or manually comparing packing lists against purchase orders.
With a smarter purchasing solution, when your pharmacy receives a substituted item, the technology automatically flags the discrepancy and shows the cost differential against the initial purchase order. You won’t miss unexpected vendor substitutions amidst all the other tasks on your plate. Instead, you receive an alert and have the purchasing data at your fingertips—from your initial purchase order up to the packing list.
You always have documentation ready to immediately address the issue with the vendor. You also avoid putting items you never wanted on your shelves. Better yet, you stop paying for those items and ensure you and your patients get the right products. Best-in-class smarter purchasing solutions go a step further: some pharmacies use the technology to block substituted items, preventing vendors from even including them in orders.
Harness Smarter Purchasing to Meet Other Challenges
Vendor substitutions are costly but manageable. And they’re far from the only issues that fit that description!
The 2024 Smarter Purchasing Report outlines multiple challenges for pharmacies. It also explains how competitive pharmacies leverage smarter purchasing to deliver high-quality patient care while sustaining financial success. Download the report now to learn more.
