Hospital supply chain and materials managers work to ensure proper equipment, devices, pharmaceuticals and other pertinent items are where they need to be, when they need to be there. Responsible for the second largest cost in a hospital's operating budget, materials managers are also tasked with overseeing efficient purchasing, use and inventory budgeting while still maintaining the highest care quality.
Here are 10 of the latest updates and trends in healthcare material management.
1. Logistic and distribution partnerships were the top strategies materials managers used to control spend in 2013. Hospital supply chains can account for up to 40 percent of a hospital's operating budget, making it only second to labor in hospital expenses, according to a report in Materials Management in Health Care. The development of new technologies and the necessity for hospital supplies means supply chain costs are positioned to continuously grow. To help deflect rising costs, materials managers are finding strategies to cut spend while optimizing outcome. The UPS 2013 "Pain in the (Supply) Chain" survey found logistic and distribution partnerships and health IT investments were the two top strategies supply chain professionals used to manage cost.
2. A new FDA requirement, unique device identifiers, is slowly being phased in, improving the ability to track devices as they move through the supply chain. In September, the U.S. Food and Drug Administration issued a final rule requiring most medical devices to be labeled with a UDI, a numeric or alphanumeric code that allows for easier tracking of individual devices. The UDI rule was written in response to the Food and Drug Administration Amendments Act of 2007 that amended the Food, Drug and Cosmetic Act, requiring the FDA to institute a unique device identification system for medical devices. UDIs are being phased in over the next seven years in multiple stages. The idea is that UDIs will allow for quicker review and analysis of device-related adverse events, which will also help manufacturers, distributors and providers more effectively manage recall situations. Additionally, being able to track individual devices can enhance device use documentation in electronic health records, clinical information systems and data registries and databases. The FDA has approved three agencies to issue UDIs: GS1, Health Industry Business Communications Council and ICCBBA. GS1, the first agency to be accredited to issue UDIs, released a guideline to help facilitate their implementation.
3. Over the past 10 years, medical device recalls have increased 97 percent. Recalls can throw a wrench in the flow of hospital supply chains, requiring resources to be reallocated to address the recall and remove the item or drug off the floor. While the numbers may be startling, the FDA attributes part of the increase in device recalls to specific efforts by the Center for Devices and Radiological Health to improve medical device safety as well as increased and improved awareness and reporting by manufacturers, which is an overall benefit for patient safety.
4. Device recalls have prompted a "recall sprawl," affecting a wider geographic spread of people. The number of recalls affecting the entire country increased from 49 percent in Q2 2013 to 81 percent in Q4 2013, the highest rate in the last seven quarters, according to the ExpertRECALL Index. This increase is due to the globalization and increasing connectedness of the world, according to Kevin Pollack, vice president of recalls at ExpertRECALL. As information is more quickly communicated across borders, recalls happen more quickly, increasing the volume of recalls at any given time, he says.
5. The FDA will soon require all device-related adverse event reports to be filed electronically. In February, the FDA issued a final rule requiring manufacturers to electronically submit medical device adverse event reports, effective Aug. 14, 2015. Previously, manufacturers could choose whether to submit event reports on paper or electronically. The FDA said electronic submission of reports cuts paper costs and allows the agency to more quickly analyze and communicate important information.
6. Optimal supply chain management necessitates cooperation between materials managers, clinicians, executives and finance leaders. Clinically integrating a supply chain — incorporating all appropriate hospital parties into discussions, interventions and processes of the supply chain — can help deliver high quality outcomes while maintaining low costs. Bill Barber and Michael Costante of MedAssets offer the following four strategies to achieve a clinically integrated supply chain: harness senior leadership support, engage and educate physicians on their role in the supply chain, reduce product variation and follow-up with clinicians on relevant data and intervention outcomes to keep everyone in the loop.
7. Device companies' outlook of the industry is cautiously optimistic and possibly linked to subtle sales increases in 2013. In 2013, only 11.2 percent of medical device industry professionals in North and South America reported their sales increased by more than 20 percent, according to a report from Emergo Group, a global medical device consulting group. However, 15 percent of professionals in the Asia-Pacific region reported their sales increased by more than 20 percent. This difference in sales increase may be reflected in each region's outlook on the future of the device industry, according to Emergo. Approximately 31 percent of respondents from the Asia-Pacific region indicated "very positive" views for the future, while approximately 48 percent of respondents from North and South America indicated only a "somewhat positive" view.
8. The average revenue among the five highest-grossing device companies in 2012 was $18.73 billion. Johnson & Johnson had the highest revenue numbers of medical device manufacturers worldwide for FY 2012 at $27.43 billion, followed by GE Healthcare at $18.29 billion and Siemens Healthcare at $17.54 billion, according to Medical Product Outsourcing magazine. Medtronic and Baxter International rounded out the top five, with $16.20 billion and $14.20 billion, respectively.
9. Supply chain professionals' salaries are on the rise. In Healthcare Purchasing News' 2013 Healthcare Supply Chain Management Survey, the average supply chain salary increased 5 percent from the previous year's survey, jumping from $83,391 to $88,342. Material management salaries have steadily grown over the past nine years, with slight dips in 2006 and 2008, most likely due to the effects of the economic recession. From 2004 to 2013, the average supply chain salary increased by 41.1 percent. Individuals who received a raise in 2013 reported an average compensation increase of 3.3 percent. More than half of respondents — 52 percent — reported feeling "somewhat secure" in their jobs, compared to 36 percent feeling "very secure" in their jobs.
10. Pharmaceutical companies are scaling back payments to physicians who promote their drugs. Eli Lilly & Co. cut speaker payments 55 percent from 2011 to 2012, from $47.9 million to $21.6 million, and Pfizer cut speaker payments 62 percent, from $22 million in 2011 to $8.3 million in 2012. At the same time, the Physicians Payment Sunshine Act, or Open Payments, is currently being phased into action. This provision of the Patient Protection and Affordable Care Act requires applicable manufacturers and group purchasing organizations to report payments, transfers of value, ownerships or investment interests to CMS in efforts to induce greater transparency in the industry.