Pharmacy Systemness, Part 1: The Case for Consolidated Distribution

By Mitch Wood |

Dispelling the Centralized Distribution Myth

Health systems are increasingly considering self-distribution to help reduce escalating pharmacy costs. And centralization is the form of self-distribution that many health systems consider first.

Traditional centralized distribution models rely on a hub-and-spoke infrastructure that connects a freestanding warehouse to the various points of care that require prescription drugs and supplies. These include departments within hospitals and alternate sites of care throughout a health system. This methodology offers several potential advantages:

  • Economies of scale by centralizing multiple service lines into a single distribution network
  • Low unit-of-measure distribution, which reduces waste
  • Less health system cash held in excessive drug inventories
  • Greater efficiency
  • Reduced labor

Centralized distribution can be an effective strategy for health systems that already have freestanding warehouse space available and ready to use. Just move in and set up the required technology and logistical systems to distribute the pharmacy products.

But what if no freestanding warehouse is available?

Most health systems don’t have an existing warehouse that’s ready to use. They would need to build or lease, which requires a substantial capital expense. With competition high for limited funds, health systems are more likely to pursue investments with higher potential returns—including strong revenue generators such as cath labs, cancer centers and radiology facilities.

So if the concept of centralized pharmacy distribution makes sense—but the capital investment in a new facility does not—is there a solution? That’s what we’ll look at in part two of this series.

In the meantime, for more information on reducing pharmacy costs and improving pharmacy systemness efficiency through consolidated distribution, download this white paper or contact us at www.pharmhs.com, solutions@amerisourcebergen.com or 877-892-1254.


About the Author

Mitch Wood

Managing Director, Supply Chain Consulting Services
AmerisourceBergen
View Bio