The NHS pharmaceutical supply chain: background and context

1
The NHS pharmaceutical supply chainbackground
and context

• Howard Stokoe
• Principal Pharmacist NHS PASA

2
Content

• background
• project structure
• phase 1 objectives, scope
• weaknesses and opportunities
• phase 1 outputs
• phase 2 focus, structure
• outputs

3
Background

• anecdotal evidence of poor supply chain
  performance
• growing number of concerns from hospital
  pharmacists about service levels
• no consistent measures in place against which to
  test this
• therefore an lack of meaningful, objective data
• concerns about the changing structure of the
  wholesaling market, particularly decrease in
  number of depots

.. there was a need to raise this up the agenda
4
Project structure

• project commenced in 2002
• project steering group established, reporting to
  NPSG
• phase 1 initial investigation (KSA MMM),
  involving key stakeholders
• phase 2 option appraisal, testing and trialling

5
Phase 1 - objectives
As-is analysis of current supply chain
arrangements for pharmaceuticals

• highlight weaknesses and opportunities for
  improvement
• develop draft performance indicators
• identify options for the future
  configurations/operation of supply arrangements

6
Phase 1 - scope
Inbound Supply
Wholesalers
Distribution
Short line stores
Hospitals

• Other stocks
• Fleet characteristics
• Third party
• Frequency
• Utilisation

• EDI
• Response
• Packaging
• Location
• Volume

• Stock policy
• Systems
• Order profile
• Capacity
• Location(s)

• Locations
• Systems
• Replenishment
• Throughput
• Inventory

• Demand patterns
• Service levels
• Order size
• Availability
• Price/cost

Parallel imports
HOSPITAL
W A R D S
Short Line Store
Distribution
Supplier / Manufacturer
T
Wholesaler
7
Weaknesses

• dependence on a limited / decreasing number of
  full line wholesalers 
• limited use of information technology
• - generates costs through additional activities
  to manually administer the supply chain
• l - limits the visibility across the supply
  chain 
• sporadic and inconsistent collection of
  information prevents
• - comparison between wholesalers
• - knowledge transfer between high-performing
  trusts and their colleagues 
• focus on price as indicator for cost of supply
  prevents analysis of underlying issues 

8
Opportunities

• use existing tools for data analysis and
  interaction with supply chain partners
• negotiate additional attributes of supplier
  performance within strategic supply chain
  agreements 
• review current supply channels and research
  alternatives eg electronic marketplaces 
• automate simple manual steps to free up staff
  time for higher value activities

9
Phase 1 outputs

• Strategic options
• fostering wholesalers as partners
• increase participation in e-Marketplaces
• do-it-yourself

See report at www.pasa.nhs.uk/pharma/
10
Phase 1 outputs (cont.)

• Tactical options
• ward box assembly by wholesalers
• incentivised contracts/penalty clauses
• vendor rating tool
• electronic ordering and invoicing
• bar code use for receipt and ward stock
  re-ordering
• contracts instead of contracts
• supply chain co-ordinator
• robot dispensing
• nighttime delivery
• payment on account

11
Phase 2

• Objectives
• to critically examine the options identified
• to develop action plans to trial and implement
  tactical options, where appropriate
• to develop the optimum business model(s) for
  future supply arrangements, focusing on the type
  and nature of contractual relationships between
  the players.

12
Focus and structure
NPSG
PROJECT STEERING GROUP
Strategic options
Improving pharmacy practice
Performance measurement
Automation
13
Outputs performance measurement

• KPIs drafted
• mix of supplier and trust measures
• stakeholder consultation
• positive responses
• definition and formulae developed
• target levels to be agreed
• implementation issues remain to be addressed

14
Performance measurement (cont.)

• Draft KPIs

• Lines items delivered on time, in full
• Incorrect items received
• Incorrect quantities received
• Variation from contracted lead time
• Timeliness of order placement
• lines returned vs lines ordered
• Documentation (present/complete/accurate)

• invoices matched 1st time
• invoices paid electronically
• of orders sent electronically
• Timeliness of payment
• Stock turn
• Line orders involving manual intervention by
  pharmacy staff

15
Improving pharmacy practice
To examine the logistics, communications and
financial processes that affect efficiency in
both the internal and external supply chain for
medicines held as stock in hospitals and develop
good practice recommendations

• is there a best practice for each of the
  processes within the order cycle? 
• is there an optimum relationship between re-order
  levels, re-order quantities, order frequency,
  stock holding and efficiency? 
• how can suppliers meet the current needs of
  hospital pharmacies and what can hospital
  pharmacy do to help? 
• what role can third parties such as PASA, NHS
  Logistics and trust finance and audit staff play
  in improving supply chain efficiency? 
• which practices in hospital pharmacies should be
  recognised as best practice and which should be
  made redundant?

16
Automated dispensing

• supply chain as well as clinical drivers
• a number of robots already installed in trusts
  increasing interest in the NHS
• initial guidance being prepared on
• - decision-making around automation
• - template documentation for preparing a
  specification
• - advice on preparing a business case
• subsequent guidance will be developed to help
  trusts with
• - tendering and contracting
• - implementation and best practice in use

17
What does all this meanfor the pharmaceutical
sector?

• an agreed and consistent set of performance
  measures as a tool for improving both wholesaler
  and trust performance
• improved practices at trust end easier to do
  business with
• an opportunity for industry to review its own
  supply chain practices
• an opportunity to forge new types of
  relationships, based on greater supply chain
  visibility

18
Conclusions

• most work to date has focused on tactical
  improvements
• more work remains to determine choice of
  strategic option(s)
• engaged with stakeholders, especially via BAPW
  and ABPI
• a partnership approach - Avon, Gloucestershire
  and Wiltshire Richard Ward
• pilot programme Frank Hill