Strategic Overhaul of Pharmaceutical Drugs Sourcing

Strategic Overhaul of Pharmaceutical Drugs Sourcing

Introduction

EmpoweringCPO, a globally recognized procurement services company, dedicates itself to delivering unparalleled value to its clients by reshaping their procurement strategies. By employing intricate procurement analytics and intelligence, we provide solutions that align with our client’s unique business requirements, facilitating significant cost savings and efficiency gains.

In this comprehensive case study, we delve into a transformative project that we undertook for a leading healthcare provider grappling with a disorganized and inefficient pharmaceutical sourcing process. The project aimed to overhaul the client’s procurement strategy, implementing a centralized, streamlined system that prioritized data-driven decision-making.

Client Background:

A Fragmented Framework The client, a prominent healthcare provider, was wrestling with an ineffective and decentralized pharmaceutical sourcing model. The existing framework resulted from individual doctors’ and medical experts’ varied preferences for drugs and brands, leading to a disjointed procurement landscape. This model overlooked the importance of a comprehensive spend analysis, leaving potential savings unexplored.

Challenges: Standardization and Data Aggregation

Navigating this complex landscape required us to overcome two substantial challenges:

  • Standardization Across Stakeholders:Convincing an extensive and diverse group of doctors and medical experts to align their choices of drugs and brands was our first hurdle. This task required tactful negotiation and a clear demonstration of the benefits of standardization.
  • Data Aggregation and Analysis: The client’s sourcing data was dispersed among various sources and stakeholders. Our task was to collect, clean, and analyze this information, which included details about manufacturer deals, brand share, and spending across different business types.

Methodology: A Comprehensive, Data-Driven Approach

  1. Data Consolidation and Cleaning: Initiating our data-centric strategy required cleaning and consolidating all raw data into a single dataset. This meticulous process laid the foundation for an in-depth analysis of the client’s current procurement practices and provided insights into potential optimization areas.
  2. Clear Objective Setting: Each business type within the client’s operations had different needs and goals. For instance, we identified cost reduction as the primary objective for inpatient services. However, for clinic-attached and Outpatient services, we focused on maximizing profit margins.
  3. Steering Committee Formation: Collaboration and stakeholder buy-in are critical for successful organizational change. We established a steering committee composed of consulting doctors and medical experts, ensuring all voices were heard and factored into the decision-making process.
  4. RFP Pricing Worksheets: To facilitate transparent and efficient procurement, we created individual RFP pricing worksheets for each manufacturer. This strategic move ensured a systematic comparison of offers, enabling informed decision-making.
  5. Phased Approach to Spending: The client’s procurement spend across different formularies was immense. To manage this effectively and deliver quick, substantial results, we divided the spending into phases, beginning with high-spend formularies.
  6. Item Grouping Classification: Our team categorized drugs into branded and generic groups to ensure a balanced and cost-effective procurement mix.
  7. Client’s Bargaining Power Enhancement: Sharing the overall annual spending for all formularies with major vendors not only improved the client’s bargaining power but also helped secure more competitive deals and discounts.
  8. Negotiation and Allocation: Leveraging our expertise in supplier negotiations, we conducted intensive discussions with major vendors to secure higher bonuses and rebates, directly impacting the client’s bottom line.
  9. Performance Monitoring and Feedback Incorporation: We developed a user-friendly dashboard to monitor monthly spending and compliance, ensuring continual improvements. The feedback from the steering committee was also integrated into the final allocation decision, ensuring comprehensive stakeholder involvement.
  10. Data Consolidation and Cleaning: Initiating our data-centric strategy required cleaning and consolidating all raw data into a single dataset. This meticulous process laid the foundation for an in-depth analysis of the client’s current procurement practices and provided insights into potential optimization areas.

Results: A Testament to Data-Driven Procurement

Our phased, strategic approach to the RFP process yielded significant improvements:

  • Phase 1: Conducted in 2020-21, this phase centered on 70 high-spend molecules, resulting in an annual profit/savings increase of 18 MM AED. This phase demonstrated our data-driven methodology’s effectiveness, signaling a promising start to our strategic procurement overhaul.
  • Phase 2: In 2022-23, we revisited the 70 Phase-1 molecules and added 150 new molecules. The results were striking, with a profit/savings increase of 27 MM AED for Phase-1 molecules and 14 MM AED for Phase-2 molecules. This phase affirmed the robustness and scalability of our strategic procurement approach.
  • Phase 3: Projected for 2023-24, this phase includes 66 Phase-1 molecules, 144 Phase-2 molecules, and an additional 95 new molecules. The profit projection, based on different verticals’ consumption patterns, is set at 13 MM AED.

Beyond Financial Gains: Building a Resilient Procurement Framework

Beyond the significant financial gains, our approach delivered numerous strategic benefits. It resulted in enhanced supplier relationships, improved risk management, and increased diversity among suppliers. Furthermore, it created a more transparent and controlled procurement process that could be tracked and adjusted as necessary, leading to better resilience and preparedness for future sourcing challenges.

Conclusion

EmpoweringCPO – Transforming Procurement Landscapes

Through our strategic, data-driven methodology, EmpoweringCPO revolutionized the client’s pharmaceutical sourcing process, replacing a fragmented procurement landscape with a centralized, efficient system. The significant cost savings, improved procurement efficiency, and the resultant financial gains stand as a testament to EmpoweringCPO’s prowess in offering best-in-class procurement services.

Our services extend beyond mere cost savings; they optimize spending, enhance supplier relationships, and bring resilience to our clients’ procurement systems. This case study illustrates our commitment to empowering businesses with advanced procurement solutions. EmpoweringCPO stands poised to guide your business toward procurement excellence, transforming your challenges into opportunities for growth.

Strategic Overhaul of Pharmaceutical Drugs Sourcing

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Strategic Overhaul of Pharmaceutical Drugs Sourcing

EmpoweringCPO is a team of experienced sourcing and procurement professionals with hands on experience of having worked with many fortune 500 companies. The company was founded in 2011 and since then has executed multiple strategic sourcing projects and have achieved average savings of 10-12% so far. In addition to Strategic Sourcing their other offerings are Spend Analysis, Procurement Intelligence, Procurement Analytics, Best Cost Country Sourcing, Procurement Outsourcing, Built Operate Transfer, Supplier Diversity, Sustainable Procurement, Tail Spend Management, Item Master Optimization, Collective Buying, Compliance Tracking and Managed Procurement Services.

Compliance Management Tool

Compliance management is very critical as otherwise the procurement organization may run into a scenario where there is a huge gap between realized savings and reported savings. Many procurement functions estimate large savings numbers when contracts are signed. They also invest significant time and effort in negotiating contracts for necessary goods and services, only to have a third or more of their purchasing dollars flow outside those deals. Some of the obvious fall-outs of non-compliance and maverick purchases are:

  • Very high prices
  • Risk of losing out on volume discounts and rebates

As compared to the current contract that was finalized after the sourcing process, the tool helps in tracking:

  • Vendor Compliance
  • Price Compliance

The objective of this tool is to ensure that the orders are placed only with the vendors that were shortlisted after the sourcing process and at the same price that was agreed upon and negotiated during and after the strategic sourcing process.

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