HDMA White Paper on Product Availability: Communication Guidelines for Managing Product Shortages in the Healthcare Supply Chain

Transcription

1 1 Communication Guidelines for Managing Product Shortages in the Healthcare Supply Chain

2 i Table of Contents Executive Summary 1 Background 4 Description of the Healthcare Supply Chain 5 Managed Marketplace 6 Product Supply Issues 7 Definition of Drug Shortage 7 Reasons for Product Shortages 8 The Manufacturing Process 8 Regulatory Oversight 9 Other Dynamics Impacting Product Availability 9 Recommendations Managing Product Shortages and Communications 11 Manufacturers 11 Healthcare Distributors 15 Independent and Chain Pharmacies 16 Health-System or Inpatient Pharmacies 17 Group Purchasing Organizations 18 The Food & Drug Administration and American Society of Health-System Pharmacists 18 Conclusion 18 Appendix 19 A: Product Shortage Communications 19 B: Glossary of Terms 22

3 1 Executive Summary Every day more than nine million prescription medicines and healthcare products are delivered to nearly 200,000 pharmacies, hospitals, nursing homes, clinics and other healthcare locations nationwide. 1 When the availability of any specific healthcare product is interrupted, there is a ripple effect throughout the supply chain. Every part of the healthcare supply chain ultimately plays a role in patient care, from the research and development of products, to their manufacture, wholesale distribution and delivery to the pharmacy or hospital dispenser. Whether caused by a raw material supply or manufacturing issue, an enforcement action, an increased demand issue, an economic factor, or an emergency response scenario, drug shortages are a challenge for the entire healthcare community. Product shortage issues are interrelated and a single product shortage is likely the combination of numerous factors. Shortages are exacerbated because they typically appear with insufficient warning and often require significant time and resources to manage when a particular therapy is in short supply. The number of new drug shortages has tripled since The University of Utah Drug Information Service (UUDIS) and the American Society of Health-System Pharmacists (ASHP) reported 267 shortages in 2011 across multiple product categories, including anesthesia drugs, oncology products, oral stimulants, antibiotics, electrolyte and fluid-balancing drugs and others (Figure 1). Approximately 80 percent of newly reported shortages were generic injectable products. Figure 1. Annual New Drug Shortages Number of Product Shortages Year Source: The University of Utah Drug Information Service (UUDIS) 1 By HDMA s distributor members

4 2 Much of the discussion is currently focused on sterile injectable products, because they comprise a disproportionate share of drugs experiencing shortages and demand for this class of products is expected to rise. Additionally, these products are typically used in acute care settings, where there are limited therapy alternatives. Industry research firm Datamonitor estimated that sales of injectable product formulations will increase an estimated $49 billion between 2008 and 2014, 2 while sales of oral formulations are estimated to decline by $10.9 billion. Factors driving the trend include therapeutic focus, molecule type and life cycle stage. IMS Health conducted a review and analysis of selected products on the U.S. Food and Drug Administration (FDA) and ASHP drug shortage lists as of October 7, 2011, and found most products to be injectables and multi-sourced generics. As shown below, 82 percent of the products in the IMS database are sterile injectables and 83 percent are multi-sourced generics without patent protection or other forms of market exclusivity. 3 Figure 2. Characterization of Products HDMA recently convened a Product Availability Task Force (PATF), a group of members and stakeholders to examine current product availability issues and offer voluntary communication guidelines and other collaborative solutions to a recognized problem facing the industry. This white paper provides a brief overview of the healthcare supply chain, product supply issues and current processes that can result in product shortages. It also offers guidance both on communication strategies for supply chain participants when a shortage is predicted or occurs, and on what elements a company may wish to incorporate in its own drug shortage allocation program. 2 Datamonitor, Benchmarking the Pharmaceutical Market by Drug Delivery to 2014 (December 2009) 3 IMS Institute for Healthcare Informatics, IMS National Sales Perspectives, September 2006-August 2011 in Drug Shortages: A closer look at products, suppliers and volume volatility (October 2011). Reprinted with permission.

5 3 Overall, product shortage issues are interrelated; a single product shortage may be the result of a combination of numerous factors. The solutions to a particular product s availability issues will likely depend upon the factors that are causing or contributing to the supply problem. All participants in the healthcare supply chain play a role, whether in preventing product shortages, in helping to expeditiously manage them or in helping to mitigate their impact when they occur. Key messages enforced in this document include: Complete, accurate and consistently conveyed communication between trading partners in the supply chain can mitigate the impacts of a shortage: o Communications should be targeted and purposeful to minimize the potential for panic buying or hoarding behavior; and, o Date of product availability should be emphasized wherever possible; Trading partners have an opportunity to work with each other on accurate demand forecasting to mitigate the potential for or impacts of a shortage: o Each of a manufacturer s customers across the supply chain distributors, GPOs, chain pharmacy and government purchasers should provide projections that are as accurate as possible during the contracting process; o A manufacturer should give advance notice to its supply chain partners when it decides to exit the market for a particular product; and, A company can manage a shortage period by allocation of limited product inventories based on historical demand patterns and purchase history. Collaborative relationships among supply chain trading partners are essential to help ensure a continuous supply of products without disruptions to patient care and are vitally important in managing and mitigating the impacts of existing shortages in supply.

6 4 Background Numerous reports have highlighted that the number of drug shortages is increasing, and that these shortages continue to be a major concern in the healthcare industry. Every sector of the healthcare supply chain plays a critical role in providing products that are continuously available for patient care. While manufacturers of pharmaceutical products play a crucial role in producing an adequate supply, healthcare distributors, pharmacies and hospitals play a key role in managing inventories and coordinating resupply to meet patient needs. Collaborative relationships among supply chain trading partners are essential to help ensure a continuous supply of products without any disruptions to patient care. Since the 2003 release of HDMA s Ensuring Product Availability A Recommended Voluntary Industry Guideline, the landscape has changed. For example, changing business practices to manage the cost of inventory and goods sold more effectively and efficiently has lowered total inventory levels in the channel. At the same time, manufacturing issues and regulatory factors are increasingly affecting product supply, especially for injectable products. Because of these changes, more robust and consistent communication is needed among supply chain participants to ensure drug shortage situations are not exacerbated and are handled in a manner that lessens the impact on patient care. HDMA recently convened a Product Availability Task Force to review past efforts related to product availability in light of ongoing experience managing inventory in an increasingly complex environment. ASHP, in cooperation with UUDIS and Novation, continues to operate a Drug Shortage Resource Center 4 with detailed information on drug shortages and how to manage them. The Food and Drug Administration (FDA) Center for Drug Evaluation and Research (CDER) also operates a drug shortage website. 5 ASHP and many other organizations, regulatory agencies and congressional committees have convened meetings, conducted research efforts and facilitated work efforts among members and with stakeholders to understand the scope of the issue and recommend solutions. With this background in mind, the HDMA Product Availability Task Force has guided the development of this white paper to help: Explain drug product shortages and outline reasons why they occur; Share expertise about the drug distribution system, explain and discourage potential panic buying; Improve the consistency and transparency of communications between supply chain participants when shortages do occur; and, Assist a company which seeks to improve its own procedures and decisions for distribution of scarce inventory. It must be emphasized that any recommendations provided are voluntary, and that each member of the supply chain must exercise its own independent business judgment in setting its individual policies and procedures. 4 American Society of Health-System Pharmacists, Drug Shortages Resource Center, 5 U.S. Food and Drug Administration, Drug Shortages,

7 5 Description of the Healthcare Supply Chain The domestic pharmaceutical market is growing increasingly complex. The raw materials used to produce finished pharmaceutical products are often sourced overseas. The manufacture of finished drug products may take place in the United States or abroad, either in company facilities or by contract manufacturers. Pharmaceutical manufacturers are tightly regulated by the FDA and follow current Good Manufacturing Practices (cgmps) and United States Pharmacopeia (USP) standards. The USP sets standards for the quality, purity, identity and strength of medicines, food ingredients and dietary supplements manufactured, distributed and consumed worldwide. Under some circumstances, USP standards are enforceable by the FDA. The discovery and development of pharmaceutical products are complex processes. Of 5,000 to 10,000 tested compounds, only 250 enter preclinical testing, five enter human clinical trials and one is approved by the FDA. 6 In 2010, the FDA approved 15 new molecular entities and six biological license applications, a 19 percent decrease from 2009 and the lowest total since There are a growing number of approvals for biologic pharmaceutical products which have increasingly exacting quality standards. According to market information services firm IMS Health, there are more than 650 active manufacturers of pharmaceutical prescription drugs in the United States. Manufacturers are operating in a global model for sourcing ingredients and developing branded and generic pharmaceuticals. Once a product receives approval and enters the market, typically it is distributed through a highly coordinated and tightly regulated supply system that is designed to provide maximum efficiency. Healthcare distributors provide daily delivery, high service levels and business efficiencies in this intricate supply chain, saving the healthcare system $42 billion per year. 8 Nearly 87 percent of all pharmaceutical product sales in the United States flow through HDMA distributor members. Each business day, HDMA member companies 9 ensure that more than nine million prescription medicines and healthcare products are delivered safely and efficiently to nearly 200,000 pharmacies, hospitals, nursing homes, clinics and others healthcare entities. These distributors order from approximately 1,100 manufacturers 10 to supply their distribution centers. On average, each distribution center carries 56,000 healthcare items, of which 23,000 are prescription pharmaceuticals and biologics. The remaining products are over-the-counter and herbal products, health and beauty aids, medical and hospital supplies, durable medical equipment and home healthcare items. The distribution centers are a combination of central and regional hubs that consolidate product received and ship to any of the nearly 200,000 customer locations PhRMA, Key Industry and PhRMA Facts, 7 Center for Healthcare Supply Chain Research, HDMA Factbook: The Facts, Figures & Trends in Healthcare (September 2011) 8 Center for Healthcare Supply Chain Research and Booz & Company, The Role of Distributors in the U.S. Healthcare Industry, (October 2011) 9 HDMA has 34 distributor members with a total of 155 distribution centers as of January, Includes both manufacturers of prescription pharmaceuticals, over-the-counter healthcare products and other related items 11 HDMA, The Vital Link in Healthcare [PDF file] (February 2012). Available at

8 6 Pharmacy customers are able to reduce their operating costs by carefully managing inventory and capital requirements. Distributors purchase and store the pharmaceutical and other health-related products and then deliver them in customized orders, lowering the pharmacy s risks and costs of holding inventory. Distributors assume the credit risk, extending sizable credit lines to their many customers, and carry the inventory until their downstream customers place orders for the specific products needed. Distributors keep records, manage inventory, provide information and technology services, offer financial and provider management assistance and regulatory-compliance systems. Pharmacies generally place orders for prescription medicines by 8 p.m. each day and receive deliveries from their distributors the next morning. A typical pharmacy stocks between 2,000 and 5,000 Stock Keeping Units (SKU) and has nearly 7,500 pharmaceutical SKUs accessible for delivery in less than 12 hours because of distributors. 12 The average distribution center processes 1,965 orders each day. During the last decade, changing business practices have resulted in greater inventory efficiencies in the channel. On average, distributor warehouses maintain 30-day inventory levels. This number varies by product based on demand, seasonality, cost and other factors. Pharmaceutical products with special handling requirements typically have shorter cycle times. Managed Marketplace All stakeholders in the healthcare supply chain operate in a managed market environment, with third-party payers (public and private) responsible for defining specific terms and conditions to manage cost and meet the needs of an evolving patient population. Trade relationships in the supply chain also are complex. Manufacturers and distributors have sophisticated contracts in place that outline the information, services and inventory level information the distributor will provide to the manufacturer, creating visibility between a manufacturer and distributor for production forecasting and inventory planning purposes. These contracts, often referred to as fee-for-service or inventory management agreements, generally encourage more robust and transparent communication between trading partners. Downstream, distributors routinely perform due-diligence efforts before establishing a contractual relationship with any customer. This includes (but is not limited to) verifying current licensure status with the appropriate Board of Pharmacy. Many institutions and other healthcare providers choose to participate as members of group purchasing organizations (GPOs) to realize savings and efficiencies. GPOs are legally defined entities that aggregate purchasing for their members and use the large volumes to negotiate discounts with manufacturers, distributors and other vendors. Hospitals and other healthcare providers gain access to product at certain pricing through GPO contracts. According to the Healthcare Supply Chain Association (HSCA), 13 nearly every U.S. hospital uses GPO contracts for their purchasing functions, with about 72 percent of purchases made by hospitals through GPO contracts. There are more than 600 organizations in the United States that participate in some form of group purchasing. About 30 of the 600 are very large GPOs that negotiate sizable contracts for their members HDMA, The Vital Link in Healthcare [PDF file] (February 2012). Available at 13 Healthcare Supply Chain Association, Frequently Asked Questions, 14 Healthcare Supply Chain Association, Frequently Asked Questions,

9 7 After a group purchasing contract is created, individual GPO members may still decide which product is most appropriate in each circumstance and make the corresponding purchase decision. Hospitals and other healthcare providers physically receive the product through the healthcare distributor with whom they have a distribution contract. The distributor must administer the GPO contract so the hospital or other GPO member receives the correct pricing that was negotiated between the GPO and the manufacturer or other vendor. In addition, many community pharmacies may have contractual relationships with distributors. For example, chain community pharmacies typically contract for multi-source generic products with a limited number of manufacturers. Independent pharmacies also may contract for multi-source products through their distributor or GPO. In summary, today nearly $310 billion in pharmaceutical products are manufactured and distributed through a complex, highly coordinated supply system, with manufacturers, distributors, pharmacies and other healthcare providers committed to patient safety and access to medicines. Supply chain efficiency has continued to increase in the past decade, with total supply chain inventory decreasing. This has led to measurable benefits, including lower operating costs and less waste. Product Supply Issues As widely publicized in the media and well known among industry stakeholders, the number of product shortages has tripled in the past five years. There are two primary resources for data about product shortages: the FDA CDER Office of Drug Shortage and the ASHP Drug Shortage Resource Center. The FDA website 15 lists fewer drug shortages than the ASHP Drug Shortage Resource Center website, 16 because FDA s definition of what constitutes a drug shortage has a more narrow focus on a product s medically necessary use. Definition of Drug Shortage For the purposes of this white paper, the broader definition used by the UUDIS is used. A product shortage occurs when: [Total] supply does not meet demand for a drug on a nationwide or regional basis for a period of time that necessitates changing the practice of treating the patient. 15 U.S. Food and Drug Administration, Drug Shortages, 16 American Society of Health-System Pharmacists, Drug Shortages Resource Center,

10 8 Reasons for Product Shortages The reasons for drug product shortages are numerous, complex and interrelated. A shortage is, most fundamentally, a lack of adequate supply of a particular drug product to meet medical need. Shortage situations most often originate at the manufacturing level and then reverberate throughout the pharmaceutical supply chain and broader healthcare system. The solutions to a particular product s availability issues will likely depend on the factors that are causing or contributing to the supply problem. 1. The Manufacturing Process Pharmaceutical manufacturing is an inherently complex endeavor. FDA cites product quality and other manufacturing-related issues as major reasons for existing shortages. 17 These issues can include but are not limited to any of the following: Product quality problems, such as contamination with particulate matter or precipitates (that may result in cessation of or decrease in production and/or recall of existing product); Manufacturing issues, such as equipment failures or scheduled down time to upgrade facilities; Insufficient manufacturing capacity; Raw material/active pharmaceutical ingredients (API) supply issues, particularly of foreign-sourced material where supply could be interrupted due to geopolitical factors and/or if API is not available from the only single source; and, Disruptions in the supply of drug product components or packaging (labeling, excipients, etc.) Suppliers cite production-related issues and increased demand as the top reasons for shortages, rather than raw material or quality issues. 18 Older, sole or limited-source injectable products are particularly vulnerable to shortage situations because of limited production capacity, long manufacturing lead times, and the complexity of the manufacturing process. 19 Economic factors also can influence a manufacturer s decision to cease or curtail production. Many of the products in short supply are older, difficult to manufacture and not especially profitable. 20 Relevant economic concerns include: Lack of redundancy fewer firms making multiple products on existing manufacturing lines; Reallocation of manufacturing resources to other products (including new formulations); Unfavorable economies of scale and/or prohibitively high costs to comply with FDA requirements or inspectional demands; and, Discontinuation by API or other critical component suppliers which may eliminate alternative supply options or cause significant time and resources for manufacturers to find approved alternate sources. 17 U.S. Food and Drug Administration, Frequently Asked Questions About Drug Shortages, See also U.S. Food and Drug Administration, FDA Webinar on Prescription Drug Shortages (September 30, 2011). Available at 18 IMS Institute for Healthcare Informatics, Drug Shortages: A closer look at products, suppliers and volume volatility (October 2011) 19 U.S. Food and Drug Administration, Drug Shortages, 20 See the ASPE Issue Brief, Economic Analysis of the Causes of Drug Shortages for a more comprehensive description of the underlying factors in the current shortages of sterile injectable oncology products. ASPE, Economic Analysis of the Causes of Drug Shortages (October 2011). Available at

11 9 2. Regulatory Oversight The actions and requirements of FDA and other regulatory bodies can impact product availability. For instance, most drugs are subject to FDA pre-approval of an application. Further, changes to an existing FDA-approved application, such as those involving adding new API sources, new equipment or new manufacturing processes also may require FDA pre-approval, potentially slowing production if approval is delayed. Regulatory and enforcement initiatives also may impact product availability. For example: A critical FDA inspection of manufacturing facilities could identify cgmp deficiencies that must be remedied before production can continue; DEA quotas on controlled substances can limit production capacity; and, Changing USP standards can affect availability if manufacturers must change processes and possibly obtain FDA approval. 3. Other Dynamics Impacting Product Availability Depending on the situation, other factors may result in a short-term disruption or extend an existing shortage situation. Although not usually the root cause of any shortage, these dynamics are worth understanding: A domino effect, as increased demand for related or alternative product causes shortages for those products and there is a delay as manufacturers ramp up production to meet sudden increases in demand; Panic buying/hoarding behavior that exacerbates a potential shortage, creating artificial demand, additional cost and waste in the system if product is unused and returned (See Figure 3); Contract awards that produce large demand shifts in a short period of time; Severe inventory demand disruptions which are exponentially greater than predicted normal variation in demand and supply. Examples could include: o An existing product receives FDA approval to treat a new disease or condition; o New product sales dramatically exceed expectations; o Inaccurate manufacturer demand forecasting; and, o Off-label prescribing; Theft/losses that create temporary, spot shortages; and, Emergency preparedness and response: o Natural disasters may disrupt product availability on a local, regional, national or global level; and, o Unusual disease outbreak, pandemic, or other severe public health emergencies may impact product availability due to increased demand.

12 10 Figure 3. Impact to Demand from Product Recall and Supplier Backorder The above graphic shows the impact on ordering patterns resulting from a product recall and the domino effect from an anticipated shortage. A product recall of acyclovir in fall of 2009 triggered an unusually large ordering period lasting more than six months. Multiple manufacturers received orders for product beyond historical purchase patterns. Once other suppliers launched a similar product, ordering patterns returned closer to previous patterns. In this data from one distributor, all of the orders above the red line resulted from artificial demand. (These reflect orders received, but not necessarily fulfilled.) Any one of these factors may create or exacerbate a shortage situation that requires consideration of alternative treatments for the patient, whether long term or short term. Depending on the patient population undergoing a specific course of treatment, the chronic or acute nature of the medical condition and the therapeutic alternatives available, certain shortages will have a more severe patient impact. From patients to clinicians and on up the supply chain, the key focus is on the duration of the shortage to make the most informed decisions. Product shortage issues are interrelated and a single product shortage may be the result of a combination of numerous factors. Further, the solutions to a particular product s availability issues will likely depend upon the factors that are causing or contributing to the supply problem. The remainder of this document will focus on the communications about and management of product availability and product shortages within the supply chain between individual trading partners and key stakeholders.

13 11 Recommendations Managing Product Shortages and Communications All participants in the healthcare supply chain play a role, whether in preventing product shortages, in helping to expeditiously manage them or in mitigating their impact when they occur. The manufacturer bears the primary responsibility for drug product shortage prevention, allocating the available product and managing communications. Other stakeholders should work with manufacturers to help avoid or manage shortages at the patient level. Although none of these other stakeholders can unilaterally resolve any of these issues, communication is a critical component of managing a drug shortage. The value of communication among all supply chain participants and healthcare providers cannot be overstated. Information normally needed by stakeholders includes: The reason for a shortage; Estimated duration of the shortage; Potential alternate sources; Potential alternate therapies; and, Allocation parameters (including limits and processes from manufacturer and distributor). If a manufacturer has instituted an allocation plan for distribution to their customers due to a product shortage, how the manufacturer communicates that information to its trading partners also is very important. Communication should be consistent, accurate and timely, using the established FDA and ASHP drug shortage websites and directly to stakeholders using appropriate methods. Similarly, distributor communication to downstream customers also is important and should be consistent, accurate and timely. Technology can be a valuable tool in communicating product availability issues. Although manufacturers must consider the potential risk that communications may cause stakeholders downstream to focus on protecting and enhancing inventory position, effective communication can assist in averting panic-buying and/or hoarding, especially of medically necessary products. The following illuminate steps in managing product shortages and communicating about product availability. Manufacturers The FDA encourages companies to provide notifications about any issues that could lead to a shortage. The FDA works to communicate information about shortages based on information provided by the manufacturers, and will work directly with a manufacturer to take appropriate steps to address quality and regulatory barriers that may have caused or contributed to shortage situations. Except in certain circumstances for sole-source and medically necessary products, manufacturers are not required to report information about shortages to FDA, and are not required to report the reasons for shortages or the expected duration of shortages on the FDA website. However, this information is necessary for stakeholders to manage product shortages when they occur and helps determine strategies employed based upon the nature of the shortage and how long it is expected to last. Manufacturers can report any information to drugshortages@fda.hhs.gov, as well as to the ASHP Drug Shortage Resource Center. In some cases, confidential communications with the FDA is necessary to protect proprietary information and reduce the risk of panic-buying in cases where medically necessary products may be in short supply until the agency and manufacturer can resolve shortage issues. Communication strategies for these products may require special attention to lessen impact of a shortage on patient care.

14 12 To help prevent product shortages, a manufacturer is encouraged to focus on accurately forecasting demand and maintaining internal quality assurance and other practices that address product shortages. Demand forecasting requires certain information from a manufacturer s customers, including distributors, GPOs and chain drug and government entities, such as the Department of Defense or Veterans Administration. Each should give accurate projections when determining which products are attached to a contract. Ideally, a manufacturer should provide advance notice to supply chain participants whenever it decides to exit a market for any drug. 21 Fee-for-service and inventory management agreements guide distributors in providing inventory level information to manufacturers (often through Electronic Data Interchange, or EDI) so that future manufacturing needs can be met. Manufacturers may consider: Regularly monitoring contractual agreements to ensure they are accommodating changing customer needs for products on an ongoing basis; Monitoring customer orders to prevent excessive order quantities; Working with trading partners to improve sales forecasting for operations planning, including working with large purchasers to examine procurement/contracting/formulary practices/seasonality that can produce large spikes in demand; Publishing operating schedules for year-end and holiday periods that allow customers to order sufficient quantities to cover these periods; Implementing internal inventory practices to reflect the likelihood of raw material/manufacturing disruptions as well as the level of finished goods inventories downstream in the distribution channel; and, Evaluating distribution practices to weigh internal cost/service tradeoffs against the impact on the total distribution channel, not just a single department (e.g., the use of airfreight may cause one department to be over budget, but it also can avoid shortages/lost sales). For product discontinuation or manufacturing issues, ideally a manufacturer would: Provide prior notification to the FDA when any product is planned for discontinuation; 22 Work closely with FDA to meet the agency s standards for targeted inspections of facilities; Work closely with FDA to resolve potential shortages; Contact FDA confidentially when there is an issue with a single API or manufacturing source in order to explore additional sources; Consider contacting FDA for a confidential discussion of alternatives and implications of the shortage; and, Develop and implement contingency plans for products vulnerable to shortage in collaboration with FDA. 21 Current regulations require that a sole manufacturer of a drug that is life sustaining, life supporting or intended for use in the prevention of a debilitating diseases or condition, notify FDA of any interruption in manufacturing. U.S. Food and Drug Administration, Applications for Food and Drug Administration Approval To Market a New Drug; Revision of Postmarketing Reporting Requirements Discontinuance [PDF file], 78 Federal Register 243 (December 19, 2011) 73. Available at 22 U.S. Food and Drug Administration, Applications for Food and Drug Administration Approval To Market a New Drug; Revision of Postmarketing Reporting Requirements Discontinuance [PDF file], 78 Federal Register 243 (December 19, 2011) 73. Available at In Draft Guidance issued in February 2012, FDA encourages manufacturers of all prescription drug or biological products to voluntarily notify the agency of issues that may result in a shortage or potential disruption in supply of that product in the U.S. market. U.S. Food and Drug Administration, Draft Guidance for Industry on Notification to Food and Drug Administration of Issues That May Result in a Prescription Drug Shortage; Availability (February 27, 2012). Available at articles/2012/02/27/ /draft-guidance-for-industry-on-notification-to-food-and-drug-administration-of-issues-that-may#p-3

15 13 When a product shortage does occur, the manufacturer should activate a shortage management and communication plan to manage product availability. Communication is intended to minimize the impact of a shortage on patient care and avoid unintended consequences such as hoarding or panic buying. The manufacturer s shortage management and communication plan could include: Communicating internally so that timely, accurate and consistent messages are provided to and by all employees who have contact with purchasers and medication providers; Communicating externally on a regular basis with consistent messaging to all trading partners and the FDA/DS, ASHP/University of Utah database on the reason for the shortage, anticipated resolution and other information 23 that allows trading partners and healthcare providers to create alternatives for patients during the shortage; Using standard methods of communicating supply information with trading partners, such as the HDMA order-to-cash guidelines for EDI; Using commonly understood industry terminology (see Glossary in Appendix) on packing slips for products not shipped; and, Informing trading partners when a product will be unavailable based on the inability to fulfill the most recent open purchase order, using EDI 855 Purchase Order Acknowledgment and EDI 856 Ship Notice/Manifest to improve speed and accuracy of communication: o Informing trading partners at the same time; and, o Updating data routinely. As part of the drug shortage management plan, when low supply is encountered, a cascading view of the steps a manufacturer may take includes: 1. Allowing short-term backorders to occur and managing them against upcoming in-transit and off-quarantine schedule deliveries; 2. Consolidating the product s inventory or distribution sites to better manage the inventory. This option may impact delivery times, which should be considered; 3. Shipping directly to customers to shorten delivery time through the supply channel, keeping in mind billing and inventory tracking arrangements; 4. Placing the product on backorder status with estimated time of arrival (ETAs) or projected ETAs and offering alternative product selection through customer service (if available in the manufacturer s product portfolio), ASHP and FDA Drug Shortage websites or local representatives; 5. Rationalizing select SKUs during an adverse period in order to optimize manufacturing capacity; 6. Expediting freight and delivery services. The manufacturer may elect to express shipments to end customers, supply chain partners or its own distribution facilities, depending on the critical nature or need of the product; and, 7. Implementing allocation of product. 23 See Appendix A for a summary of the key elements of information typically requested by downstream trading partners.

16 14 Product Shortage Allocation If a product shortage results in implementing an allocation program that limits shipments of available product, a manufacturer may consider the following measures: Launch the allocation program for the finished goods inventory as close as possible to the communication of a shortage to trading partners, FDA and ASHP; Consider the potential benefits of maintaining a central pool of inventory: o Product may be shipped to medication providers via direct or drop ship;* o Product may be held for emergency shipment; *Note the internal order processing and other customer service requirements needed with drop-ship options, and work with wholesale distributor to manage. Ensure allocation programs are user-friendly, fair and adequately communicated to all stakeholders. The allocation program should: o Be based on the normal historical customer demand before the shortage; o Allow multi-distribution center (DC) customers to determine how to divide the total company allocation among their DCs and adjust contractual agreements accordingly; and, Communicate about the product shortage following earlier guidance. A sample list of critical information is listed in the Appendix.

17 15 Healthcare Distributors Healthcare distributors play a crucial role in providing timely and accurate information to their customers about product availability. Most manufacturers do not communicate directly with pharmacies. As such, distributors have developed communication methods and processes to inform their customers about product availability, including electronic communication via websites, online portals, EDI, , fax, phone, tote stuffers, sales handouts, etc. Distributors are focused on receiving timely and accurate product shortage communications from manufacturers, using EDI whenever possible to streamline information flow. In a product shortage situation, a distributor will want to: Work with trading partners upstream to manage available inventory and to improve sales forecasting for operations planning; Communicate the information provided by a manufacturer to its customers in a timely and consistent manner using recommended industry terminology (see appendix). o Consider more frequent communications during a shortage period to closely align with manufacturer communications. Include product availability information on shipping documents that is actionable by the customer; Instruct customers to call the distributor (rather than the manufacturer) if additional information is required, unless otherwise noted on the shipping documents; Maintain accurate and timely product availability information for its customers; Stay up-to-date on drug shortages through the ASHP Drug Shortage Resource Center and the FDA Drug Shortage website; Consider implementing customer programs that limit shipments of shortage products, especially when the product is subject to a manufacturer allocation plan; Consider the impact on product availability (and, therefore, patient care) resulting from unusually large purchases, as well as restrictions on using available inventory to supply other customers; and, Maintain due diligence in new and existing customer accounts to mitigate risks of unintended consequences such as downstream hoarding during a shortage situation. o Allocating limited product inventories based on historical demand patterns and purchase history can be an effective method to manage through a shortage period.

18 16 Independent Pharmacies Independent pharmacies are typically initially notified of a product shortage through the ordering system or on the invoice received from the distributor or other supplier, which states product not available. Shortages are handled in different ways, depending upon the nature of the product (i.e., available from multiple manufacturer sources (multisource) vs. a branded or other product available from a single source of supply). For multi-source products, independent pharmacies may work with their distributor or supplier to replace the shortage item with a different package size of the product from the same manufacturer if offered (which may prevent potential patient confusion resulting when a substituted product looks different than the usual medication), or with the same product from a different manufacturer. If all generic preparations of this multi-source drug are unavailable from the primary wholesale distributor/supplier, then the pharmacist will generally consider: Using a different licensed and authorized distributor or supplier; Using the brand name product; or, Contacting the prescriber to consider a different dosage form or to discuss therapeutic alternatives. In a single-source drug product shortage, the pharmacist may attempt to order various package sizes, including unitdose products. If the shortage persists, the independent pharmacy might attempt to order directly from the manufacturer. If this method is unsuccessful, a different strength of that branded product may be ordered to allow the pharmacist to provide the prescribed dosage of medication to the patient. Finally, the pharmacist may contact the prescriber to inform him or her of the shortage and to discuss therapeutic alternatives. (See steps below regarding communications with area physicians and with affected patients about alternative therapy, relevant for both chain and independent pharmacy.) Chain Pharmacies In chain community pharmacy, drug shortages may be communicated directly from the drug manufacturer s national account representative to the pharmaceutical buyer at the chain s corporate office. With smaller businesses, a product shortage may be communicated via or text file from the manufacturer and/or distributor. In larger chains, company-owned distribution center(s) are the main sources of supply directly to the store, usually twice per week. Some products are sourced directly from the manufacturer. Stores often have a backup provider, such as a local distributor, from which they may supplement needs on a daily basis. In a product shortage situation, inventory management across stores and across distribution centers becomes paramount, often controlled through internal allocation methods. Several steps must be taken to provide the patient with information about continuing therapy: Alternative therapy (or therapies) for the unavailable product need to be carefully researched, therapeutically and clinically matched, and selected with proper communication to pharmacists at the store level so they are prepared to educate both patient and physician if a change in treatment is necessary due to a product shortage; Ensuring the supply of alternative therapeutic product includes review of drug utilization of the unavailable product as well as the alternative selection(s) to determine that adequate inventory levels are maintained at internal distribution centers and at stores during the anticipated shortage period; Pharmacists may contact area physicians to notify them of the shortage and to discuss suggestions for alternative therapy and rationale of selection;

19 17 Depending upon the severity of the situation or the nature of the illness being treated, pharmacists may want to take a proactive approach to notify patients of the impending shortage. This will provide time for patients to contact their physician so that the physician may contact the pharmacist to suggest or prescribe alternative therapy before the patient s refill comes due; and, Crafting communications for the affected patient. Efforts are made to provide valid information to the patient on the unavailable product, but sometimes the when and why questions become a challenge, without adequate product availability knowledge. Health-System or Inpatient Pharmacies Hospitals and health-systems routinely rely on many medically necessary or single-source products to care for patients, many of whom are critically ill. Early identification of drug shortages is important to facilitate the assessment, planning and communication that must take place to ensure seamless patient care. Institutional pharmacies monitor reports from distributors, GPOs, manufacturers, FDA and ASHP to identify shortage situations that are likely to impact patient care in various segments of the institution. Because a product shortage impacts both operations and therapeutic decisionmaking, comprehensive planning and communication steps should address both areas. Pharmacy staff generally leads a multidisciplinary team that will take the following actions: An operational assessment, typically done by the pharmacy department, will examine shortage details, determine remaining stock, identify alternative sources of the product in shortage, analyze purchase and use history, estimate time until impact and identify supply of alternative drug products; A therapeutic assessment performed concurrently with the operational assessment will determine the primary affected patient population and identify any therapeutic alternatives; After collecting necessary operational and therapeutic information, the team will conduct an impact analysis by examining therapeutic differences, prescribing, distribution and administration processes and financial ramifications to estimate the shortage s impact on patient care; Using the collected information, staff creates a final plan that addresses operational, therapeutic and ethical issues while meeting the institution s patient care standards. This plan is approved by the Pharmacy and Therapeutics committee when the shortage represents a significant impact on patient care (e.g., alternatives therapies are less effective than the drug in shortage); Sustained communication throughout the health-system is necessary for the duration of the shortage. The shortage team uses the most effective means available to inform all affected staff of the shortage, the date of impact, identified therapeutic alternative, and any temporary guidelines and procedures necessary for maintaining patient safety and quality of care. Communication means may include , order-entry and decision support systems, staff meetings or other established internal communication routes; and, Once informed, staff ensures that the plan is implemented. This includes information technology system changes, technological changes (e.g., bar coding), inventory system changes, and new procedures. ASHP s 2009 Guidelines on Managing Drug Product Shortages in Hospitals and Health-Systems are available online at the ASHP Drug Shortage Resource Center.

20 18 Group Purchasing Organizations Each Group Purchasing Organization (GPO) has its own strategy for communicating supply problems to their respective members or clients. In general, GPO executives strive to develop close working relationships with the manufacturer contacts that are responsible for the assembly of product shortage information and to communicate that information to their customers. GPOs also work closely with distributors on product shortage issues. GPOs use a variety of mechanisms to communicate this information to members. Communication vehicles include notification; website postings; website hyperlinks to manufacturer sites; hyperlinks to FDA and ASHP product shortage information websites; and, discussions at various local, regional, and national member meetings. The Food and Drug Administration CDER Drug Shortage Program and American Society of Health-System Pharmacists (ASHP) / University of Utah Drug Information Service The FDA Drug Shortage Program and ASHP/UUDIS have been instrumental in communicating information about drug shortages. We encourage these parties to continue to: Communicate information about product shortages to all stakeholders via their websites; and, Encourage physicians, pharmacists and other healthcare providers to report product shortages to these two databases in collaboration with trade and professional associations. All supply chain parties are encouraged to exercise due diligence in buying practices to minimize unintended consequences. ASHP offers Guidance for Purchasing Drug Products in Short Supply within the ASHP Guidelines on Managing Drug Product Shortages. Key industry participants should work together to educate healthcare professionals and patients on issues related to product shortages. Conclusion Implementation of these voluntary communication guidelines and examination of other practices should help the healthcare industry mitigate the impact of product shortages, improve communications when shortages occur and encourage coordinated recovery from product shortage situations between trading partners. Due to the unique nature of each product shortage and the complexities of the underlying causes, it will take strong relationships between trading partners, open channels of communication and controlled discipline among supply chain partners to mitigate their effects. Regardless of the root cause(s) of any shortage, it is a shared responsibility among all supply chain partners to manage available inventory to meet patient need to the fullest extent possible and to recover from the shortage in the most expedient manner possible.