© 2010 Premier, Inc. 9/8/ NAVIGATING THE DRUG SHORTAGE CRISIS IN AMERICAN HEALTHCARE Coleen A. Cherici, RPh, MBA Director of Pharmacy Consulting 9/8/2015 0

Drug Shortages - National Crisis in Healthcare 9/8/ Drug Shortages Reported in First Quarter of 2011 by University of Utah Drug Information Service, greatly exceeds the rate experienced in 2010

Objectives Describe the major environmental and economic root causes of drug shortages Describe the major clinical and operations impact of drug shortages Describe the key strategies for avoiding a crisis mode when dealing with drug shortages Describe best practice in avoiding drug misadventures that might be caused by drug shortages 9/8/2015 2

The Problem Multifaceted industry wide problem with many root causes Member operations are impacted clinically and financially In % of drug shortages - injectable drugs Premier Survey (January to February 2010) –311 acute care respondents –90%: affected patient care –82%: delayed or caused cancellation in patient care intervention –100%: resulted in a higher cost of drug cost and staffing Institute of Safe Medication Practices (ISMP) Survey (July to Sept 2010) –Large survey looking at risk to patient care and safety American Hospital Association (AHA) July 2011 –Demonstrates that the Premier data collected 6 months accurately quantified the impact to acute care –Major impact continues to worsen

Drug Shortages - National Crisis in Healthcare Top Categories by Dollar Impact 9/8/2015 4

Quantify Impact on Pharmacy Expense 5

6 Quantify Financial Impact of Drug Shortages Most respondents have not measured financial Impact Only 19 hospitals in the survey were able to quantify dollars spent as result of drug shortages Those that could did not have a common methodology A review of the Premier data allowed for an extrapolation of cost for generic drugs that had a replacement substitute in the distribution channels –Cost to ALL Hospitals in the US is ~ $200 Million in 2010 –This cost does not consider the expense associated with clinical and operations labor needed to control the work associated with a load increase needed to safely control the shortage

The Causes Raw material quality issues –42% of sterile injectable drug shortages in 2010 –9% raw material Active Pharmaceutical Ingredient (API) concern –5% manufacturing plant shutdown due to quality issues Manufacturer economic issues –Financial decisions to discontinue products and limit volume of manufacturing volume in particular low margin products –18% of shortages in 2010 were due to product line discontinuation FDA enforcement of GMP and Plant inspections –The Nation expects high quality pharmaceuticals –Cost of maintaining requirements cuts into product margins –Unapproved Drug Initiative (2006) mandates submission of a New Drug Application containing clinical trial data to prove the safety and efficacy of products that were brought to market prior to more stringent approval processes

The Causes Just-In-Time Inventory Processes –Results in leaner inventory levels –All Supply Chain points for reserve are affected Manufactured product runs Distributor/wholesaler inventory on hand End User inventory on hand –API License ownership Gray Market Supply Intrusions –Drugs in short supply emerge in the gray market –Costs are tracked at 100 to 1000 times the normal price –Supply availability when approved distributors have no stock Change in Drug Use Patterns –Shortage for one drug may cause another’s demand to increase –Shift in demand is not picked up by other manufacturers –4% of 2010 shortages were as a result of this concern Hoarding by end users

How Can Premier Help Members Navigate Through the Drug Shortage Crisis? What is Premier doing about this growing problem? –Review data on backorders by supplier and drug –Published backorder status reports in Pharmacy Weekly Update –PharmacyConnect® Website on Drug Shortages –Resource contracts when possible to manufacturers that can supply –Premier and Members meeting with and other Professional Organizations –Premier Research Survey and Navigating the Drug Shortage Crisis Published in Economic Outlook Spring 2011 –Study the Unauthorized Gray Market that is proliferating as result of the deficiencies in the supply chain –Develop tools to measure expense and Impact on Pharmacy Expense –Development of an Advocacy Platform on Drug Shortages Support of S 296 Support GAO investigation –Help to Share Knowledge and Just-inTime Solutions