1. 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

2. (SEINFELD CLIP)

3. 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

4. Where I Come From Massachusetts General Hospital
Founded in 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

6. 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

8. Definitions
Waste
Drug purchases that do not result in patient charges

9. 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

10. 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

11. Definitions (cont.)
Shrink =

12. Definitions (cont.)
Shrink
Inventory Losses

13. Definitions (cont.)
Known Shrink
Identified Inventory Losses

14. Definitions (cont.)
Unknown Shrink
Unidentified Inventory Losses

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

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

17. “Red Box” before: April 2012

18. Sorting Station after: June 2012

19. 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)

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

21. 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%

22. 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)

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

24. 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%

25. 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

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

27. 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

28. 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
$ ,612,635.14
$ ,400,873.39
$ ,809,344.89
$ ,714,754.56
$ ,294,607.01
$ ,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
$ ,879.28
$ ,721.49
$ ,026.34
$ ,872.61
$ ,276.51
$ ,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
$ ,018,875.65
$ ,100.46
$ ,620.24
$ ,044,109.28
$ ,152,465.88
$ ,155,005.15
Manual Adjustments
$ (122,326.75)
$ ,509.75 $
$ (0.00)
$ ,293,791.95
$ ,731,124.95
UBC Batch - ED
$ ,886.55
$ ,049.92
$ ,960.69
$ ,164.79
$ ,948.33
$ ,917.74
Inventory True-up
A/P (Credit)/Charge $ $ $ $
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
$ ,660.80
$ ,692.51
$ ,929.91
$ ,143.03
Return to Vendor
$ ,619.97
$ (1,330.00)
$ ,303.57
$ ,558.56
$ ,710.46
Ameridose "cycle count"
Transfer NONPHS
$ ,253.17
$ (1,238.97)
$ (3,171.41)
$ ,795.99
$ ,646.45
$ ,786.02
Waste
$ ,828.37
$ (4.83)
$ ,450.20
$ ,624.18
$ ,480.09
$ ,824,758.40
$ ,984,641.56
$ ,639,602.45
$ ,648,138.83
$ ,490,286.69
$ ,660,746.24

29. 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

30. Questions?