When supplier strategies can disrupt healthcare providers’ delivery of care
By Curtis Rooney
Last October, the Health Care Supply Chain Association (HSCA), the American Hospital Association (AHA), and other leading hospital advocacy groups and individual hospitals sent a letter to Genentech urging the company not to disrupt the traditional distribution channels for its cancer therapies Avastin, Herceptin and Rituxan. The AHA and others discouraged the change “so that our hospitals can focus on providing the best care for their cancer patients.” A new survey of hospitals and academic medical centers commissioned by HSCA member Novation paints a troubling picture of what the Genentech policy change has meant:
- Sixty-three percent of Genentech customers said that the current delivery scheme is less reliable than the previous one.
- Ninety-three percent said that they had experienced no issues with the previous distribution model.
- Eighty-eight percent now report a delay in patient treatment because at least one of the drugs was unavailable.
- Eighty-one percent are confirming that the change is having a “moderate to significant impact” on their historic budgeted expenses.
Genentech, a unit of Roche, has said that the reason for going to exclusive specialty distribution was to protect supply chain integrity and product supply and to save money. The company had previously tried to make this change in 2006, but quickly reversed course due to the hostile response of its customers. Observers, however, suggest that this latest decision is unlikely to be reversed.
HSCA’s letter to Genentech addressed the company’s concerns over product integrity and product supply management. The letter stated that these issues were addressed by Congress when it enacted the Drug Supply Chain Security Act of 2013. Title II of the Act, known as the Drug Quality and Security Act (DSCSA), provides for, among other things, the implementation of uniform drug pedigrees for the protection of the supply chain against counterfeit and and/or diverted drugs. The new law became effective January 2015. As noted above, 93 percent of those surveyed had experienced no issue with the previous distribution model.
On product supply, the drugs in question do not appear on any of the drug shortage tracking websites maintained by the U.S. Food & Drug Administration (FDA), the University of Utah or the American Hospital-System Pharmacists. The Novation survey, however, indicates that 88 percent now report a delay in patient treatment because at least one of the drugs was unavailable. The survey says that more than 25 percent of respondents indicated the distribution change has had a negative impact on patient care, resulting in delays and even cancellations in patient treatment due to drug availability.
Prior to its policy change, Genentech used approximately 75 distribution centers to handle these important products, with healthcare facilities receiving shipments daily. Genentech began using just a few wholesalers that maintain significantly fewer distribution centers and typically use common carrier companies such as FedEx for delivery. Many of these specialty distributors are actually divisions of some of those same larger wholesalers.
Novation estimates that the change will cost U.S. hospitals more than $300 million. In fact, 87 percent of hospital respondents reported a negative financial impact on their organizations, with 57 percent saying the impact has been significant, according to the Novation survey. Included in those increased costs are changes in inventory, complications in shipping logistics at hospital pharmacies, and the fact that courier services that drop the supplies off at a general loading dock do not take back the packaging material, thereby increasing waste and disposal costs to hospitals.
At least one health care system has fought back in a tangible way. Ascension Health, one of the nation’s largest hospitals systems, banned Genentech sales representatives from visiting its 1,900 hospitals and clinics around the country. Others may follow. In the meantime, companies doing business in the healthcare space may be wise to embody the “First do no harm” spirit of Hippocratic Oath. Although Hippocrates might shrug at the thought of non-physicians not following this admonition, others may more easily draw a straight line that connects companies to policies that put profits over patients.
Curtis Rooney is president of the Healthcare Supply Chain Association, www.supplychainassociation.org.