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Predictive Analytics:

New Frontiers in Hospital

Pharmaceutical Inventory

Management

It’s 3:00 a.m. The adminis-
trator on duty gets a frantic
call from the pharmacy. “We
ran out of cytarabine! This
means no treatment for our
existing leukemia patients
and turning away ten newly
diagnosed with appoint-
ments tomorrow! My doctors
are screaming at me!
Panic sets in. The adminis-
trator thinks: “What if we
can’t get other hospitals to
lend us a supply? Do I dare BY PAUL R. DEMURO, PHD, JD. MBA, CPA,
access the ‘gray market’? Can AND RICHARD M. KLASS
we compound the drug our-
selves?”
A good inventory control moving from being a dispenser of pharma-
model can reduce such frenzied situations ceuticals to one involving medication ther-
and: apy management and many other analyti-
• Minimize total inventory costs, cal activities, such as pharmaceutical
including holding (interest rate) and order inventory management. If colleges of phar-
placement expenses. macy want their students to be able to
• Support just in time inventory levels – effectively compete in the marketplace,
having supplies when you need them and curricula in many of those schools will
stocking nothing else saves cash outlays, have to be updated to equip students with
and optimizes storage space. Remember, the necessary skills to be able to critically
over-stocking is just as bad as under-stock- analyze data. If they do not do so, if stu-
ing. dents continue to attend those schools,
• Ameliorate out-of-stock situations of their graduating pharmacists will have to
the most critical drugs, particularly those pursue such skills elsewhere, e.g. one
with no substitute alternative. Texas University is initiating an online cer-
• Minimize expired pharmaceutical tificate program in the pharmaceutical
waste. “U.S. hospitals and long-term care area which should help students develop
facilities annually flush approximately 250 many of these analytical skills. A
million pounds of unused pharmaceuti- Midwestern college has a new online phar-
cals down the drain” Mismanaged expira- macogenomics program, and is looking to
1
tion dates is a big cost driver. expand its offerings in the informatics
To build an inventory control model you area, recognizing the need for its students
will at a minimum need to: to be able to critically analyze data.
• Research the most utilized pharma- One South Florida data analytics com-
ceuticals, and those that are the most pany has recognized the increasing need
important to control. (aka, ABC for pharmacy data analytics professionals
Classification System) and is contemplating developing fellow-
• Analyze the optimal reorder point; i.e., ship type opportunities. Unfortunately,
determine the demand rate per period this company will probably have to part-
(days/weeks/etc.), and the lead time neces- ner with a college or colleges outside of
sary to receive a shipment. South Florida that will be able to provide
• Determine the safety stock required. graduates in the pharmaceutical space
•Identify available quantity discounts/ with the necessary data analytics skills.
rebates/return allowances/etc.
Predictive analytics is adding to the sci- Paul DeMuro, Of Counsel, Broad and
ence of inventory optimization. Basic Cassel LLP, can be reached at
inventory models, some available for free pdemuro@broadandcassel.com. Richard
via the Internet, “rely on adjusting inven- Klass, Vice President and Co-founder, KCI
tory retroactively, reacting to customer Partners, Inc., can be reached at
purchase habits that have already rklass@kcipartner.com.
occurred.” 2
Predictive analytics adds to inventory 1 Found at: http://www.sandiegocounty.gov/
model value. The discipline helps hospi- content/dam/sdc/deh/hmd/presentations/hmd_
tals “anticipate and coordinate inventory Pharmaceutical_Waste_Problem.pdf
acquisitions in response to expected price 2 G. Nakanelua (12/7/15), A Primer on
increases caused by shortages and infla- Predictive Analytics & Supply Chain
tion,” bargain for price decreases created Management. Found at: https://medium.com/
by market gluts, and recognize increased @gnakan/a-primer-on-predictive-analytics-
needs driven by seasonal patient intakes. supply-chain-management-d13ff459bf6a
3
Hewlett Packard Enterprises (July 26,
“Predictive analytics can also be used to 2017), Predictive analytics can help hospitals
reveal internal savings opportunities creat- and clinics meet current challenges and plan
ed by use and waste patterns as well as for tomorrow's healthcare needs. Found at:
inventory consolidation and standardiza- https://insights.hpe.com/articles/5-ways-to-cut-
tion.” 3 healthcare-costs-with-predictive-analytics-
The pharmacist’s role increasingly is 1707.html

6 November 2017 southfloridahospitalnews.com South Florida Hospital News