Incentive Programs and Choosing a Manufacturer

Experts expand upon incentive programs that are used by medical facilities to encourage drug manufacturers to provide supplies in a timely manner and in sufficient quantities, in addition to providing a consumer perspective when choosing a reliable producer.

Troy Trygstad, PharmD, MBA, PhD: Erin, you mentioned earlier incentive programs. So, if we’ve got a marketplace failure to bring something to market that’s needed, you can penalize or you can incentivize. Give us an example of an incentive to a manufacturer or somebody in the supply chain. What might that look like?

Erin Fox, PharmD, BCPS, FASHP: That’s a good question. I mean, it could be monetary, it could be moving along an application, prioritization. But you have to be careful to not make the incentive so enticing that you might end up with even more shortages.

Troy Trygstad, PharmD, MBA, PhD: Interesting. So you create an incentive to reduce shortages. You’ve now created this odd incentive to create shortages, is that what you’re saying?

Erin Fox, PharmD, BCPS, FASHP: Right. Yeah, you need to be careful of that. If you offered a company say a priority review for an NDA [new drug application], that’s really valuable. The company could even sell that to another company. So I think that’s where you have to be a little bit careful. I think another way to incentivize could be star ratings. So hospitals have star ratings, and, as a patient you don’t want to go to a 1-star hospital if you can go to a 5-star hospital. We don’t have that transparency into manufacturers and how well they do their job. And I think if we had a little bit more of that, I would be willing to pay more if I knew who was making my product, that they’re doing a good job. Because I know I’m going to have to spend less time on labor at my organization.

Troy Trygstad, PharmD, MBA, PhD: More information that rates. So the Angie’s List of drug shortages would be: The percentage likelihood of this facility going down is X.

Erin Fox, PharmD, BCPS, FASHP: Sure, or even just basic information: this company has invested in renewing their lines. This company has a really nice quality record with the FDA. The FDA knows. This is very visible to FDA, the quality differences between manufacturers, and it’s completely a black box for the people that purchase medications, because the label on the vial is not the name of the company that actually made your product in many, many cases.

Troy Trygstad, PharmD, MBA, PhD: So, Rich, it sounds like Erin is making the argument that consumerism should be an aspect of the supply chain. You’re a purchaser. Where’s your marketplace, and can you walk with your feet?

Richard Montgomery, RPh, MBA: I agree with that, and I think we look at it as goodwill and establishing relationships. If we know company X is going to be transparent and tell us what’s going on and where the shortages are, when it comes down to do we buy their product or somebody else’s product, we’re going to talk to the people that are transparent. And sometimes it gets contractual and other things can get involved. But if it’s just apples to apples, we’re going to go with the company we have faith in, and we know that they’re going to help us.

Troy Trygstad, PharmD, MBA, PhD: Interesting. So it’s not necessarily, then, a commodities marketplace the way you’re describing it. You’re actually talking about judgments you’re making based on risk corridors, since you’re a purchaser.

Erin Fox, PharmD, BCPS, FASHP: Yeah, except we don’t have as much information as we need right now.

Troy Trygstad, PharmD, MBA, PhD: Sure. You’re an uninformed consumer, but you’re a consumer nonetheless.

Erin Fox, PharmD, BCPS, FASHP: Exactly.

Troy Trygstad, PharmD, MBA, PhD: And so what other types of information would be helpful to you?

Richard Montgomery, RPh, MBA: Well, (a) who’s making it, (b) where are you sourcing your API [active pharmaceutical ingredient]. And I have no qualms about it, but if I need to know there’s a typhoon coming that’s going to hit the coast of India—I might have a problem; we would like to know a little bit about that. I’m not that deep into the manufacturing process.

Troy Trygstad, PharmD, MBA, PhD: Right, but there’s a reason that Amazon and Microsoft have server farms all over the world, right?

Richard Montgomery, RPh, MBA: Exactly, and that’s what we’re talking about is redundancy and who’s going to be able to supply the product in time of need and in time of shortage. That’s what we need to know.

Troy Trygstad, PharmD, MBA, PhD: And you said API again. API, remind me, is?

Richard Montgomery, RPh, MBA: Active pharmaceutical ingredient.

Troy Trygstad, PharmD, MBA, PhD: Do we have situations like with lithium in the drug marketplace where raw material shortages could be a real issue?

Richard Montgomery, RPh, MBA: Sure, yeah.

Troy Trygstad, PharmD, MBA, PhD: A couple that come to mind are helium, lithium. Anything in the API space that could be problematic?

Richard Montgomery, RPh, MBA: Well, yeah. We had the problem I’m not sure how many years ago when we had the tainted API with the heparin products.

Troy Trygstad, PharmD, MBA, PhD: So something contaminated that particular…

Richard Montgomery, RPh, MBA: It was contaminated coming in, which threw us into shortage and was a big crisis, and actually—you talk about unintended consequences—forced the FDA to inspect overseas more than they were. And I think that was something that happened. But, yeah, I mean, who knew? We just found out that it was a contaminated product, and then finally when they broke the news that it was all the way out here with the raw material and it wasn’t a manufacturing hiccup, I think that was enlightening.