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Pharmaceutical sourcing: How to manage drug shortages & backorders

Long a challenge in pharmaceutical sourcing for physicians' practices, drug shortages became even more problematic during the COVID-19 pandemic as the demand for care escalated and the global supply chain collapsed.1 Medication shortages increased by 36.6% from 2017 to 2020, reaching 276 last year, the American Society of Health System Pharmacists (ASHP) reported.2 According to the ASHP's 2021 Pharmacy Forecast, nine of 10 pharmacy leaders expect issues like international trade restrictions, pandemics or climate change to further increase the potential for more drug shortages.3,4

Not only do backorders impact patient care, but they also strain staff. When a critically needed medication is not available, administrators must search for an alternative drug that is in stock and available for shipping. If a practice needs to source the alternative medication from another distributor, it can mean increased paperwork, extra fees and delayed dispatch times.

While you can't control medication shortages, you can plan ahead so that you're ready when one occurs. With a proactive pharmaceutical sourcing plan, you can keep delivering quality patient care.

Causes of drug shortages

"There is no crystal ball for predicting drug shortages, but the frustration that is caused by a backorder or shortage can be alleviated quickly when a practice understands that there can be a variety of reasons behind backorders," says Trevor Keeler, director of pharmaceutical field sales at McKesson Medical-Surgical.

Generics are particularly susceptible to medication shortages because there are often no redundancies built into the drug manufacturing process, such as separate production lines. If a manufacturing line goes down within one manufacturer, production could stop for multiple products, not just a single medication.

Raw material problems can also cause shortages because manufacturers cannot make medications without the active pharmaceutical ingredient (API).5 "You can't quickly ramp up existing supply," says Ann Gapper, VP of Rx category management at McKesson Medical-Surgical. Recalls, manufacturer delays and increases in demand with limited suppliers cause medication shortages as well.

Half of the drugs in short supply are injectables, including analgesics, sedatives and paralytics, used for intubating critically ill patients.6 "There's a lot more complexity in manufacturing injectables versus oral solids, which often requires longer lead times," Gapper says.

The complexities of production, combined with tight profit margins, also limit the number of manufacturers of generic injectables, the ASHP says, and this lack of capacity often leads to medication shortages. Fewer than seven manufacturers make most of today's injectables and more than one third of these are made by just one or two manufacturers. In many cases, a manufacturer controls more than half of the market share for a particular injectable, according to the ASHP's Guidelines on Managing Drug Product Shortages, which means if they stop manufacturing the medication, the available supply dwindles.7

Practices have also recently struggled with shortages caused by issues related to the COVID-19 pandemic, like:

  • Manufacturing interruptions
  • Inability to get the active pharmaceutical ingredient or finished dosage form sourced from countries that were heavily impacted by the pandemic
  • Shortages in items used for treating COVID-19
  • Closure of a product line to increase the supply of a more critical medication
  • Media mentions of items like drugs that were being investigated to mitigate COVID-198

However, shortages existed well before the pandemic. Previous shortages have been caused by natural disasters, power grid outages and other interruptions.9 

Effects of a backorder supply chain

When quality issues like component failures arise during the manufacturing process – as they often do – production stops and shortages result. In instances where there are few competitors, the supply disruption cannot be absorbed by other companies and demand outpaces supply.

"This causes a domino effect with backorders across the manufacturers... They cannot keep up with demand as customers try to switch to items that are available," says Jessica Grier, Rx operations manager at McKesson Medical-Surgical. In some cases, only one manufacturer makes the medication and no alternatives for production exist. As a result, practices struggle to obtain a supply at all.

Mitigation & pharmaceutical sourcing strategies to alleviate drug shortages

With some advanced planning, your practice can be ready for the next medication shortage. Keeler offers the following tips.

  • Identify your most ordered products and understand any nuances such as seasonality or location-specific needs
  • Cross-reference your most ordered items with clinically acceptable substitutes. Your distributor can help you
  • Store this list in a centrally located site so that your administrative staff have easy access and can generate a purchase order
  • Review your storage capacity. Can you store an extra day of product? If so, increase your stocking levels, especially if there is a pandemic surge in your area or a big storm like a hurricane is possible
  • Look ahead to your patient caseload and identify your product needs in advance, especially for treatments that may require an item on backorder. Then, either increase your order for that product or order the approved substitute pharmaceutical

Your distributors can also be key allies in the fight against medication shortages. Keeler points out that distributors can suggest alternative products or methods of shipping to help reduce the shortage's impact on patient care.

"Having open and 'often' conversations with your distributor is imperative for identifying quality alternatives at an acceptable price point, and sometimes your rep may know more than the technology," Keeler says.

Your distributor can consolidate information from manufacturers to provide you with the latest information on shortages, their causes and their expected durations. McKesson Medical-Surgical regularly communicates with manufacturers to forecast the potential impacts of backorder supply chains to its customers. When a pharmaceutical goes on backorder, McKesson contacts other manufacturers to identify potential substitutes for the back-ordered product and, if possible, begin to increase inventory.

Unfortunately, if there is only a single source for a back-ordered medication, McKesson, like other pharmaceutical distributors, may have to resort to allocating the product. When this happens, the team of procurement specialists works closely with the manufacturer to understand the impact on clinicians and develops potential mitigation strategies with the manufacturer.

Developing a backorder mitigation strategy that creates inventory stability lessens the impact that drug shortages have on patient care and on your staff. Working with an expert like your local distribution representative also reduces the administrative burden on your practice.

Backorders may never go away, but effective pharmaceutical sourcing strategies do help minimize the pain.

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