Measure to Manage: The Known and Unknown Shrink in your Drug Supply Chain Claudio (“Clyde”) Pontoriero, CPhT Manager, Pharmacy Supply Chain Massachusetts General Hospital Department of Pharmacy

(SEINFELD CLIP)

Learning Objectives Explain the relationship between beginning inventory, purchases, issues, ending inventory—and shrink Delineate the concepts within the components of shrink— what prevents purchases from becoming issues Define the concept of unknown shrink—inventory you didn’t bill for and don’t know why

Where I Come From Massachusetts General Hospital Founded in 1811 - Third oldest general hospital in the United States. Oldest and largest hospital in New England Annual research budget exceeds $786 million - Largest hospital-based research program in the United States. Founding Member, along with Brigham and Women’s Hospital, of Partners HealthCare Partners HealthCare a Massachusetts-based not-for-profit health system 11 acute care hospitals Network of rehabilitation hospitals, skilled nursing facilities, physician organizations Teaching affiliate of Harvard Medical School State’s largest private employer

Where I Come From, cont. Massachusetts General Hospital 1,046 licensed beds 999 staffed 147 ICU 49,079 admissions (FY13) 295,721 patient days (FY13) $3.1B annual hospital operating expense (FY13) $180,693,768 drug spend (FY14 projected) Excludes blood, blood products, radiopharmaceuticals

Definitions Waste Drug purchases that do not result in patient charges

Sources of Waste Shipping errors: goods damaged in transit Poor rotation: drugs expiring in carousels and ADMs Cancelled patient orders (notably, IV waste) Duplicate patient orders (notably, short-stability meds) Misdirected deliveries Single Dose Vial J code units not administered/billed Manufacturer inefficiencies (e.g. GSK 250mg/2.5ml vial argatroban) Pain Service preferences (resistance to standardization) Theft/Diversion

Why waste doesn’t get much attention Partners System CFO MGH CFO MGH Budget & Finance Office Partners System Accountants MGH Chief Pharmacy Officer MGH Rx Administrative Director MGH Rx Financial Analyst MGH Rx Supply Chain Manager MGH Rx Buyer/ADM Tech

Definitions (cont.) Shrink =

Definitions (cont.) Shrink Inventory Losses

Definitions (cont.) Known Shrink Identified Inventory Losses

Definitions (cont.) Unknown Shrink Unidentified Inventory Losses

Definitions (cont.) Reverse Distribution Source of Credits to Offset your Drug Expense?

Definitions (cont.) Reverse Distribution Source of Data to Help You Measure Shrink

“Red Box” before: April 2012

Sorting Station after: June 2012

Sorting Station: Hazmed Instructions Pharmacy Satellite Accumulation Area (SAA): Medication Disposal Waste Credit BLACK BUCKET (Regulated HazWaste) YELLOW BUCKET (Chemotherapy Waste) RED SHARPS BUCKET (Medications Waste/Sharps) BLUE BUCKET (Medication Returns for Credit ) ALWAYS: Acetone Arsenic Trioxide USED/DAMAGED: Lindane Nicotine Nitroglycerin Warfarin Epinephrine (except Epi-pens) Chemotherapy (including partial vials) EXCEPTION: UNUSED Chlorambucil Cyclophosphamide Daunorubicin Melphalan Mitomycin Streptozocin MUST BE DISPOSED OF IN A Expired Pre-pack medications USED: Medications Glass Containers (partial/empty/broken) Broken Plastic Syringes & Needles Epi-pen Unused Expired Spoiled (left out of fridge too long) Non-chemotherapy Commercially available medications NOTE: Pre-pack medications are NOT allowed (cannot be returned for credit)

How many physical inventories do you do in a fiscal year? Question How many physical inventories do you do in a fiscal year?

Shrink % of Cost of Drugs Issued/IDTR’d/Sold MGH Rx Shrink: FY13 vs. FY12 FY2012 FY2013 Beginning Drug Inventory $10,709,894 $10,703,760 Add Drug Purchases +157,875,363 +164,046,739 Less Ending Inventory -10,703,760 -12,353,591 Equals Cost of Drugs Issued/IDTR’d/Sold 157,881,497 162,396,908 Actual Drugs Issued/IDTR’d/Sold (PHSWB1020Y & PHSWB1030Y) -148,448,866 -154,927,749 Shrink $9,432,631 $7,469,159 Shrink % of Cost of Drugs Issued/IDTR’d/Sold 6.0% 4.6%

MGH Rx Known Shrink: FY13 vs. FY12 Reverse Wholesaler Receipts* $1,166,892 $2,783,036 I.V. Waste 380,550 356,410 Known Shrink $1,547,442 $3,139,446 *FY12 figure is an estimate based on 2011 calendar year; FY13 figure includes a catastrophic oncology drug loss (door ajar over a weekend)

What percent of purchases do you waste? (What’s your shrink?) Question What percent of purchases do you waste? (What’s your shrink?)

MGH Rx Unknown Shrink: FY13 vs. FY12 $9,432,631 $7,469,159 - Known Shrink -1,547,442 -3,139,446 = Unknown Shrink $7,885,189 $4,329,713 Unknown Shrink share of total Shrink 83.6% 58.0%

Reverse Distribution Trend Time Period Consolidated Return Value* Change Calendar year 2011** $1,166,892 Calendar year 2013*** 2,380,386 104.0% Annualized based on YTD 6/1/14 2,713,230 14.0% *Includes both creditable and non-creditable returns **Last full calendar year before MGH Rx waste initiative ***First full calendar year since MGH Rx waste initiative

Question Are you involved in a meaningful relationship with your reverse distributor?

Known Inpatient Waste FYTD March 2014 TYPE NOTES 13-Oct 13-Nov 13-Dec 14-Jan 14-Feb 14-Mar 14-Apr 14-May IDTR TO VLTWSTE SQ report $6,854.75 $7,379.55 $11,885.29 $6,681.68 $5,914.74 $5,416.66 $10,689.46 $6,658.79 IDTR TO VLTWSTE-SP $193.23 $7,098.58 $117.93 $496.59 $655.85 $333.95 $98.62 $181.67 IDTR TO WASTE $34,752.69 $38,589.49 $139,693.87 $37,271.93 $32,053.59 $47,729.48 $75,182.48 $45,553.58 IDTR TO WASTE-SP $27.70 $202.90 $0.00 WFRx INVENTORY ADJ EXPIRED Manually generated report with SQ avg costs $5,727.72 $3,416.85 $3,400.05 $245.10 $1,008.11 $922.53 $684.55 $417.73 OMNICELL WASTE $40,142.00 $44,415.00 $65,505.21 $43,171.68 $43,588.56 $57,678.22 $40,493.53 $46,097.09 TOTAL   $87,698.09 $101,102.37 $220,602.35 $87,866.98 $83,220.85 $112,080.84 $127,148.64 $98,908.86 Entered by techs, therefore bookable on P&L: $53,480.09

Waste is in the Budget and Known Shrink is on the P&L Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Inpatient MG7734 Patient Issues - Expense $ 3,612,635.14 $ 3,400,873.39 $ 3,809,344.89 $ 3,714,754.56 $ 3,294,607.01 $ 3,569,607.73 Patient Returns - Expense $ (8,917.46) $ (17,617.95) $ (298,951.54) $ (13,554.39) $ (11,617.94) $ (54,618.58) Patient Issues ED - Expense $ 124,879.28 $ 179,721.49 $ 149,026.34 $ 148,872.61 $ 129,276.51 $ 218,346.27 Patient Returns ED - Expense $ (35,160.30) $ (69,380.57) $ (47,089.02) $ (47,719.89) $ (30,760.33) $ (86,813.74) Cycle Count Adjust $ (725,230.67) $ (1,117,484.28) $ (771,073.58) $ (1,097,623.90) $ (980,948.75) $ (1,672,853.10) Cycle Count ED- Adjust $ (94,284.55) $ (104,878.78) $ (116,928.96) $ (101,007.13) $ (98,445.12) $ (120,296.62) IDTRs $ 1,018,875.65 $ 980,100.46 $ 977,620.24 $ 1,044,109.28 $ 1,152,465.88 $ 1,155,005.15 Manual Adjustments $ (122,326.75) $ 4,509.75 $ - $ (0.00) $ 3,293,791.95 $ 1,731,124.95 UBC Batch - ED $ 104,886.55 $ 101,049.92 $ 105,960.69 $ 105,164.79 $ 99,948.33 $ 138,917.74 Inventory True-up A/P (Credit)/Charge $ 407.82 $ 114.66 $ 187.83 $ 45.79 Influenza - Occ Health Charge $ (13,063.96) $ (1,232.84) NPSOFT Medsource receipts $ (139,954.36) $ (129,016.85) $ (41,534.62) $ (13,066.68) $ (15,363.50) $ (85,894.51) Manufacturing receipts $ (110,620.95) $ (125,446.61) $ (109,564.61) $ (177,078.48) $ (133,829.73) $ (134,055.00) CM1200 $ (793.31) $ (10,579.84) $ (9,271.12) $ (2,762.36) $ (14,737.18) Adjust costs $ (91,685.47) $ (4,952.68) $ (3,310,601.52) $ (1,075,106.47) Sampling *1 $ 4,660.80 $ 4,692.51 $ 3,929.91 $ 4,143.03 Return to Vendor $ 121,619.97 $ (1,330.00) $ 29,303.57 $ 44,558.56 $ 27,710.46 Ameridose "cycle count" Transfer NONPHS $ 32,253.17 $ (1,238.97) $ (3,171.41) $ 6,795.99 $ 18,646.45 $ 6,786.02 Waste $ 41,828.37 $ (4.83) $ 44,450.20 $ 38,624.18 $ 53,480.09 $ 3,824,758.40 $ 2,984,641.56 $ 3,639,602.45 $ 3,648,138.83 $ 3,490,286.69 $ 3,660,746.24

Practical Tips Measure your shrink to make it less intimidating Shrink = what you don’t charge for Use your reverse distributor to identify waste Educate staff to show importance of properly documenting waste Monitor inventory utilization Data is power – difficult to ignore

Questions?