Whether you’re a retail pharmacy chain or an independent pharmacy, your supply chain is your lifeline. It’s how you get the drug products you need to take care of your patients and run your business.

But industry changes are demanding that you get more out of your pharmacy supply chain, says Todd Kleinow, vice president of strategic distribution and operations at McKesson. He says you can use your supply chain to improve patient outcomes, reduce your operating costs and grow your business operations.

In this edition of Ask a Supply Chain Expert, we asked Kleinow how your pharmacy can apply lessons he’s learned from running McKesson’s distribution network to improve your own supply chain performance.

What are you responsible for in your role at McKesson?

Kleinow: Our team implements strategic solutions in our pharmaceutical distribution network to enhance the long-term supply chain needs of our retail pharmacy customers. We spend a lot of time looking at robotics, automation and other types of material-handling systems that can reduce redundant or manual tasks. That lets our people focus on critical work that adds more value for customers.

Is that something you have in common with your retail pharmacy customers?

Kleinow: Absolutely. It’s the same challenge. As business grows and prescription volume increases, how can you become more productive to control your operating costs, yet maintain your level of quality and service? Our network is a reflection of what’s happening with our pharmacy customers.

What industry dynamics are putting pressure on the retail pharmacy supply chain?

Kleinow: I see three big ones. First is reimbursement. Payment rates for drugs are flat or down. And fees to gain access to preferred networks are up. Pharmacies are looking to their supply chain to reduce costs and increase revenue. Second is consolidation. When pharmacy chains merge, how do you create economies of scale in their combined supply chain? And if you’re an independent across the street from a merged chain, how can you use your supply chain to compete? Third is compliance. Whether it’s maintaining the stability of a new specialty drug or tracking a single pill bottle from the manufacturer to the end user, your supply chain needs to comply with a growing number of rules and regulations.

What operational challenges do you hear from retail pharmacies in regards to their supply chain?

Kleinow: Fluctuating product service levels cause significant impact to the supply chain all the way to the end patient. When a pharmacy places an order for an item and it is on manufacturer backorder, short supply or out of stock, it has consequences for the pharmacy’s patient and business.

How can retail pharmacies overcome those challenges in supply chain management?

Kleinow: I think data is the key. Retail pharmacies need access to data that tells them where in the supply chain the breakdown is that created the service problem. It could be a shortage of raw materials that make up a drug. It could be a shortage of the drug itself. It could be a seasonal supply-and-demand issue. It could be that you’re placing orders too late in the day or night to make the next day’s delivery. When you know what your problem is, you can deal with it immediately and then make changes in your supply chain to avoid the same problem in the future. A short-term example would be ordering an alternative drug when the data says your original is out of stock. A long-term example would be stocking up on a drug that you know will be in short supply based on trends you see in your data.

How can retail pharmacies use their supply chain to improve patient outcomes?

Kleinow: First and foremost is making sure the right drug is available to your patients when they need it. That’s the level of service they expect and that you should expect from your supply chain. The pills may end up being a different brand, a different color or a different size. But your patients are getting the drugs they need to improve their lives. The other way it can help outcomes is by getting the pharmacist out from behind the counter and talking with patients. Like I said earlier, it’s a lot like our distribution network. Pharmacists do redundant and manual tasks that technology can replace through automation. Counting pills and putting them in a bottle is the most obvious thing. If your pharmacy moved even 50 percent of its prescriptions to an automated central fill facility, imagine the time you would free up for your pharmacists to consult with patients about their health status.

How can retail pharmacies use their supply chain to reduce their operating costs?

Kleinow: One way is inventory management. Rather than having drugs sitting on your shelves tying up capital, you can have your distributor act as your backroom. Your distributor can store what you need and carry the cost until you need your drug. You can order your drug and have it the next day, ready to dispense to your patients. That’s getting more important, as many new specialty drugs are coming with price tags in the tens of thousands of dollars.

How will the daily life of a supply chain leader at a retail pharmacy be different five years from now?

Kleinow: Well, again, if you look at what we’re experiencing in our distribution network, it will be about automation. Low unemployment and more open positions have made it more difficult to attract and retain talent. If you couple that with script growth due to the aging population, supply chain leaders are going to have to look at ways to reduce redundancies and eliminate manual tasks. They are going to have to maintain service levels without adding costs. The retail pharmacy supply chain leader of the future will have to be highly skilled at using technology to manage inventory, lower overhead costs and increase productivity.

What do you enjoy most about working with retail pharmacies on their supply chain processes?

Kleinow: We learn from our pharmacies, and our customers learn from us. We’re both trying to reduce costs, increase quality and provide a better experience for customers. Our teams visit retail pharmacies every day. We know the business of pharmacy and the levers that can improve overall performance. We’ve learned a lot over the past 185 years from our pharmacies, and that has made us stronger. I believe our pharmacies would say the same thing about us. The result has been getting medications into the hands of pharmacists faster and at a lower cost. And that ultimately benefits our primary customer: the patient.

Related: Learn more about McKesson’s pharmaceutical distribution services for retail pharmacies

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McKesson editorial staff is committed to sharing innovative approaches and insights so our customers can get the most out of their business solutions and identify areas for operational improvement and revenue growth.