March 23, 2020
The recent coronavirus from China has disrupted more than the health of its victims. The epidemic has shaken stocks, halted parts of the economy, and unsettled the global supply chain for all kinds of industries. Because of quarantines, prevention measures, and spreading hospitalizations in China, manufacturing companies have faced closures for periods of time, forcing other manufacturers and producers downstream to halt production as well. Hyundai, the world’s fifth-largest carmaker, suspended production lines at some of its car factories. Apple’s manufacturing hub, Foxconn, was shut down for weeks as a preventive measure for its warehouse workers, a move some say could cost the company five million iPhone sales.
The growing threat and uncertainty have many pharmacy owners worried the supply issues will affect them soon, and for good reason. Nearly half of pharmaceuticals and 80 percent of chemical ingredients in all US drugs are imported—the majority of those coming from China. The country’s monopoly on our pharmaceutical supply even has US defense officials calling it a national security risk. In a letter to the FDA, two Senators voiced the anxiety of many healthcare professionals on this issue: “Given the strain this virus has placed on China’s healthcare system, we are concerned there could be reduced resources available to US healthcare providers that rely on products manufactured in China.”
In response, some pharmacies are trying to pinpoint medications that will be affected by Chinese manufacturing slowdowns, hoping to pile up stock. Some worry prices will become too high as supply suffers shortages.
In times like these, owners shouldn’t panic, said Mark Waltrip, RPh, manager of trade relations at PBA Health, an independently owned, VAWD-accredited distributor and pharmacy services organization. “Trying to predict supply chain changes and maneuvering your inventory could result in overstocking and overpaying, since we don’t know what is going to happen,” he said.
“Instead, trust that the supply chain will work itself out to keep supply going.” Most suppliers have policies in place to deal with unforeseen incidents that could cause supply disruptions. For example, they often keep up to four to nine months of inventory to minimize chances of a shortage. These buffers allow adequate time to keep supply flowing while suppliers seek alternative measures should the incident outlast the safety stock.
Waltrip also noted that the large wholesalers are continuously shopping the market to make sure they have consistent supply. “The only time this fails to meet the customers’ needs is if there is a market-wide shortage,” he said.
Although shortage situations are out of pharmacies’ control, there are a couple moves you can make to keep your business profitable and your patients safe. Most importantly, pharmacies should never attempt to secure medicine from any supplier without thorough vetting since not all suppliers are the same, even though they may have the appropriate licenses.
“It may be tempting to reach for the most inexpensive or cheaper items from secondary suppliers to fill the gap, but do a thorough analysis prior to purchasing the pharmaceutical,” said Nicholas Smock, PharmD, MBA, president and CEO of PBA Health. “Always get the ‘pedigree’ and track-and-trace documentation on the medications you are purchasing and ask yourself, ‘Would I dispense these to my family or friends?’ If the products have been bought and sold through a number of pharmacies and/or distributors, it should have you question the quality of the products you are purchasing.”
China has a recent history of distributing contaminated drugs, including the blood thinner heparin, which killed 149 Americans in 2008, and the recently recalled blood pressure medication Valsartan, which was found to contain a cancer-causing substance. Pharmacies should also keep an eye on substitutions, which may kick in without your knowledge and end up costing you. If you have automatic substitution turned on, your supplier may send you a different NDC during times of shortages and the substituted product might be substantially more expensive.
Sometimes, though, price hikes are inevitable. And pharmacies should be prepared to pay more. But having the right wholesaler partners will help you find the best path forward. “Whether it’s caused by a coronavirus, a recall, or a shortage of manufacturers, the supply chain is always at risk of disruption,” Smock said. “So pharmacies should always partner with legitimate, authentic, and honest suppliers who can guide them through the process when supply wavers.”
This article was published in our quarterly print magazine, which covers relevant topics in greater depth featuring leading experts in the industry. Subscribe to receive the quarterly print issue in your mailbox. All registered independent pharmacies in the U.S. are eligible to receive a free subscription.
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PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy side of their business. The company is a member-owned organization that serves independent pharmacies with group purchasing services, expert contract negotiations, proprietary purchasing tools, distribution services, and more.
PBA Health, an HDA member, operates its own VAWD-certified warehouse with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products.
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