Measure to Manage:

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 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

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. Sourcesof 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

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

21. MGH Rx Shrink: FY13 vs. FY12

22. MGH Rx Known Shrink: FY13 vs. FY12 *FY12 figure is an estimate based on 2011 calendar year; FY13 figure includes a catastrophic oncology drug loss (door ajar over a weekend)

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

24. MGH Rx Unknown Shrink: FY13 vs. FY12

25. Reverse Distribution Trend *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 INPATIENT WASTE FY 2014 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

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?