Big Medicine

by Jim Rush

Purchasing, Managing and Distributing Federal Reserve Inventories

Elected officials, emergency managers, healthcare executives and public health officials are focused on protecting and treating patients who are, or will be infected by the H1N1 epidemic.

Government procurement officials now understand that all the money in the world can’t buy medical products that are unavailable due to high worldwide demand. The government also is recognizing that when worldwide demand for any commodity is very high, the supply chain simply cannot keep up with orders. It is becoming very clear that governments need to build reserve inventories to accommodate sudden spikes in demand.

Currently, there is less understanding that if hospital admissions surge, there will be shortages not only for obvious products like anti-viral medicines, N-95 respirators and isolation gowns, but for every item hospitals use in treating seriously ill patients.

Thus, I thought I’d suggest a methodology of proactive purchasing, managing and distributing America’s emergency relief supplies in meaningful quantities to sustain the healthcare industry and community mass care facilities during large-scale, long duration disasters.

This recommended system uses professional supply chain managers, healthcare distributers and logistics companies to purchase, manage, transport, distribute and account for Federal relief supplies, equipment and vaccines.

The first thing we need to realize is there are two very different management approaches to acquiring and distributing medical materiel.

The second thing to realize is that the Private Sector Healthcare Supply Chain manages Just-In-Time inventories for normal medical product demand and there are no meaningful medical reserve inventories to supplement and sustain the Healthcare Industry during extraordinary spikes in demand for supplies, equipment or services.

1.  Just-In-Time (JIT). The Private Sector healthcare supply chain managers do a great job in predicting the demand for medical materiel during normal times. During the past 30 years, supply chain computer models have become extremely accurate in predicting supply usage; locally, regionally and nationally.  While “predictive computer demand models” can predict seasonal spikes in demand for medical items which are “cold and flu” season- based, no computer can predict spikes in demand for medical material for disasters and epidemics.  This means in the Public Sector, there are no “Just in Case” Reserve Inventories of supplies, equipment or vaccines.  America has a Strategic National Stockpile (SNS), designed to assist Public Health departments as they respond to public health needs, but the SNS was never designed to support and sustain America’s Healthcare Supply Chain.  The difference between normal medical product consumption rates of medical materiel and the consumption rates associated with a large-scale disaster is astounding.  From a National perspective, patient admissions are currently modestly elevated as compared with a normal influenza season.  While there are backorders for selected medical products, these outages are manageable, at least over the short term.  On the other hand, if we see a 50%-100% increase in seasonally adjusted patient admissions over time, the healthcare industry’s supply chain may not be elastic enough to surge manufacturing in time to meet the demand.  It is becoming more and more obvious that the Government must plan to supplement medical materiel inventories for use by healthcare organizations during large scale and long term disasters. For maximum value and usefulness, these inventories should be purchased by the Federal Government under the Emergency Support Function (ESF)-8, Health and Medical Services, or ESF-6 Mass Care, Housing, and Human Services as described in the National Response Framework.  It is less important which ESF Agency purchases, manages and distributes disaster-related medical materiel than it is to have serviceable medical products and services available when needed.

2.  Reserve Inventories. Elected and appointed National leaders need to understand that “Preparing for unpredictable spikes in demand for medical items is predominately a Government responsibility.” Certainly, the Private Sector healthcare industry can help Federal planners develop stock listings of every medical supply and every item of equipment that will be needed during each planning scenario.  This process is called “requirements development” and although it’s a bit tedious, requirements development is very easy to do.  Developing requirements is easy but purchasing the medical materials and managing very high quantities of many individual supply line items without losing any items to expiration in storage, takes significant expertise and time.  The good news is that healthcare distributors are among the best in the world at managing medical materials in storage and at moving those materials where and when they are needed.  The only issues remaining are “who is going to purchase disaster-related medical materials” and “who is going to pay to manage these large inventories while they are held in reserve for future disasters.”  The answer is easy, since Private Sector business cannot invest in inventories which exceed normal demand; the Federal Government must invest in Federal Reserve Inventories (FRI).

This does not mean that the Government needs to set up a parallel healthcare supply chain.  Remember the healthcare supply chain is extraordinarily efficient at getting supplies and equipment from the manufacturer’s loading dock to healthcare organizations and retailers wherever they are needed.  More importantly, the velocity of medical supplies flowing through the supply pipeline each and every day means the healthcare supply chain can rotate huge quantities of FRI if the Government would just purchase it.

The Federal Government, under either HHS under Emergency Support Function (ESF)-8 Health and Medical, or FEMA under ESF-6, should purchase FRI and entrust its management to Healthcare Distributors to manage and distribute it when authorized. Hopefully, the Department of Homeland Security (DHS) will determine which agency must support the FRI soon.  For the purpose of this article, Federal Agencies will be referred to as “The Fed.”

By developing a FRI system, The Fed will assist healthcare and public health practitioners:

o       Save lives

o       Save money

o       Meet the 48 hour HHS post-exposure mass prophylaxis requirement

o       Improve stewardship of a National asset

o       Improve operations, inventory tracking and asset visibility

o       Reduce “in-transit” time to the affected jurisdiction’s healthcare organizations

o       Facilitate much faster dispensing and vaccination

o       Improve Public Health response

o       Improve citizen acceptance

Managing and Distributing Federal Reserve Inventories (FRI) of Vaccines, Medical Supplies

1. Concept of Operations: The Fed will use established, mature and proven Healthcare Distributor Supply Chains to store, manage (stock rotation and quality control), and rapidly distribute and account for all FRI materiel during declared disasters or public health emergencies.

A. During normal operations: The Fed maintains oversight of all government owned materiel.  They also develop and share with distributors, a list of participating dispensing centers/immunization centers, as well as Public Health and healthcare entities to be supplied with FRI materials during a disaster. Maximum order quantities and other formulas such as “priority dispensing entities” can be established during this period.

B.  During Disasters: Upon requests from jurisdictional officials, The Fed releases FRI materiel into the appropriate healthcare distributors supply chains for distribution to the healthcare or public health entities requesting FRI.

C.  Post Disaster Accountability: The Fed and the receiving jurisdiction’s chief  fiscal officer obtains reports from distributors regarding which entities received FRI materiel by line item and dollar value.

(1) Distributor-provided FRI usage lists will serve as documentation for The Fed to request FRI replenishment dollars from Congress.

(2) The Fed will be able to quickly and easily develop post-disaster activity and accountability reports

2. Why use existing supply chains and logistics networks?

A.  Healthcare Distributors have the knowledge, competency and experience of moving millions of dollars in medical pharmaceuticals, vaccines, medical materiel from manufacturers to customers every day.

B.  Defense Logistics Agency (DLA) and the  Department of Veterans Affairs (VA) and HHS’ Supply Service Center have already established Prime Vendor relationships with the Nation’s major pharmaceutical and medical surgical distributors-the framework is in place.

C.  Distributor supply chains are already established and can do the job in an emergency.

D.  All customers’ addresses are already in the distributors’ system, so the interface for sustainment during disasters will be seamless.

E. Distributors will be out of their normal operating stock during the disaster-related spike in demand. The Distributors’ workforce can then distribute FRI stock instead of closing shop.

F. During normal operations, manufacturer supplies flow through this pipeline- the FRI materials can flow through the pipeline just as smoothly.

G. Distributors have highly developed supplier relationships with:

(1)     Pharmacy chains-Walgreen’s, Eckerd, CVS, etc.

(2)     Public health clinics

(3)     Military and VA hospitals and medical centers

(4)     Hospitals and medical centers

(5)     Nursing homes

(6)     Assisted living communities

(7)     Neighborhood health centers & urgent care centers

(8)     Prison healthcare centers

H.     Distributors have highly refined  systems to interface with logistics and transportation companies and maintain long-standing relationships with:

(1)   UPS

(2)   FedEx

(3)   Many other National and International logistics companies

(4)   Hundreds of other independent short and long-haul freight companies

(5)   Thousands of courier services

(6)   The FED should leverage this existing experience to obtain fastest point-to-point service during disasters.

Dispensing:

1.      Concept of Operations: Since the vast majority of Americans know where they normally get their medicines, use pharmacies for dispensing and physician offices and public health departments for vaccinations as the 1^st tiers of the dispensing and immunization systems.

2.      Why use the existing pharmacies as the disaster dispensing network?

A.  Pharmacists know their clients

B.  Pharmacies maintain automated records for all patients served in order to discover medication errors, contraindications, allergies etc.

C.  Pharmacies are tied into distributor networks and have alternate distributor arrangements if one is out of stock.

D.  Pharmacists know most of their clients’ family’s medical histories-this enables one family member to pick up courses of treatment for the entire family.

E.  Pharmacies can provide numbers of clients served, number of courses of treatment filled, age mix etc., for post-event epidemiological studies.

F.  Physician offices routinely provide immunizations and know those most in need

G.  Physicians know their patient populations and can best prioritize which patients get immunizations first.

Public Health Departments can manage the event from a Public Health and not a distribution prospective.

1.  Public health “At Risk” populations will receive better and more focused care, when the major portion of the population is being served through pharmacies, physician offices and other Healthcare organizations.

2.  Public health departments will be unburdened by serving Public Health clinics and facilities only.

3.  Public health staff can be utilized in public health activities instead of trying to compete with distributors.

4.  Public Health will have more Post-Disaster time to perform studies on the effects of the disaster, instead of reconciling bottles of medicines received to doses/vaccinations given to the entire population.

5.  Public Health officials can focus on anomalies and exceptions, instead of trying to manage distribution, dispensing and post event accountability.

6.  Public Health personnel are freed to provide a full array of public health services

Results:

1.  This initiative will provide better FRI management and distribution using very sophisticated inventory management systems. The FRI will:

A.  Remain perpetually fresh with state of the art stock rotation systems.

B.  Maintain its identity in storage as “Government Owned Material” (Ownership code “FRI.”

C.  Be ready for shipment in minutes-not hours.

D.  Be transported through an operationally tested transportation system of ground and air transporters as well as local couriers.

E.  Arrive at the right place within the shortest timeframe using established, redundant transportation systems.

F.  Get to exposed Americans and to Healthcare organizations within hours.

2.  This initiative will also:

A.  Meet HHS’s 48 hr. requirement for biological agent post exposure prophylaxis

B.  Provide the safest dispensing system for detecting contraindications, allergies etc.

C.  Provide timely feedback to FDA on adverse reactions and rapid transmittal of FDA Type I, II and III material complaints

D.  Provide better stewardship and accountability.

E.  Provide the fastest emergency movement, distribution, and dispensing of lifesaving pharmaceuticals, equipment, supplies and vaccines anywhere they are needed nationally and internationally.

Tagged as: emergency management, H1N1, Jim Rush, logistics, pandemic, supply chain