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Year : 2022  |  Volume : 8  |  Issue : 1  |  Page : 2-5

Low cost model of hospital pharmacy

Apex Trauma Centre, Sanjay Gandhi Post Graduate Institute of Medical Sciences and Nodal Officer, State Organ and Tissue Transplant Organisation; Super Specialty Cancer Institute and Hospital, Lucknow, Uttar Pradesh, India

Date of Submission05-Jan-2022
Date of Acceptance05-Jan-2022
Date of Web Publication12-Feb-2022

Correspondence Address:
Rajesh Harsvardhan
Head, Department of Hospital Administration, Dy. Medical Superintendent, Apex Trauma Center, SGPGIMS and Medical Superintendent, Kalyan Singh Super Specialty Cancer Institute and Hospital (KSSSCI and H), Lucknow. Nodal Officer, State Organ and Tissue Transplant Organization (SOTTO), Lucknow, Uttar Pradesh
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Source of Support: None, Conflict of Interest: None

DOI: 10.4103/jigims.jigims_1_22

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How to cite this article:
Harsvardhan R. Low cost model of hospital pharmacy. J Indira Gandhi Inst Med Sci 2022;8:2-5

How to cite this URL:
Harsvardhan R. Low cost model of hospital pharmacy. J Indira Gandhi Inst Med Sci [serial online] 2022 [cited 2022 Oct 2];8:2-5. Available from: http://www.jigims.co.in/text.asp?2022/8/1/2/338355

A customer is the most important visitor in our premises; he is not dependent on us; we are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not the outsider in our business. He is part of it. We are not doing him a favour by serving him, he is doing us a favour by giving us an opportunity to do so.

-“Mahatma Gandhi

Access to essential medicines at affordable cost is part of the fulfillment of the right to the highest attainable standard of health (in short: the right to health). So why do millions of people across the globe go without the treatments they need ????

The reasons are now becoming clearer– and the price and availability of medicines to those who need them are crucial factors. Prices for poor people are simply too high, and products are often not available. This may not be news to the sick and poor, but it has been news for those whose responsibility it is to ensure the health of citizens.[1]

In 2001, the World Health Assembly passed resolution 54.11 which requested the Director-General “to explore the feasibility and effectiveness of implementing, in collaboration with nongovernmental organizations and other concerned partners, systems for voluntary monitoring drug prices and reporting global drug prices with a view to improving equity in access to essential drugs in health systems, and to provide support to Member States in that regard.”

If we look into the facts, some interesting points were found to ponder, like one-third of the global population lacks reliable access to needed medicines. The situation is even worse in the poorest countries of Africa and Asia, where as much as 50% of the population lacks such access. While some 10 million lives a year could be saved by improving access to essential medicines and vaccines– 4 million in Africa and Southeast Asia alone– a major obstacle to achieving this has been price.

In developing countries, today, medicines account for 25%–70% of overall health-care expenditure, compared to <10% in most high-income countries. The cost of newer products with proven advantage over older medicines, such as antiretroviral, medicines for tuberculosis, and new antimalarial, limits access to medicines in resource-poor settings. Moreover, up to 90% of the population in low-and middle-income countries must pay for medicines out of pocket due to lack of social insurance and inadequate publicly subsidized services. Not only are medicines unaffordable for large sectors of the global population, but they are also a major burden on government budgets.

Duties, taxes, markups, distribution costs, and dispensing fees are often high, regularly constituting between 30% and 45% of retail prices, but occasionally up to 80% or more of the total. The higher the manufacturer's selling price, the more these elements increase the final price.

By the end of 20,017, over 50 surveys had been undertaken across the globe, from Cameroon and the Cook Islands to El Salvador, South Africa, and the Syrian Arab Republic. They have generated reliable evidence showing, for the first time, some startling facts about the affordability and availability of medicines. The results of these surveys revealed that in many low-and middle-income countries: medicine prices are high, especially in the private sector, availability is low, particularly in the public sector (including no stocks of essential medicines), treatments are often unaffordable (e.g., requiring over 15 days' wages to purchase 30 days' treatment), government procurement can be inefficient (e.g., buying expensive originator brands as well as cheaper generics), markups in the distribution chain can be excessive, and numerous taxes and duties are being applied to medicines.

Access to health care is a fundamental human right, enshrined in international treaties and recognized by governments worldwide. However, without equitable access to essential medicines at affordable costs, the fundamental right to health cannot be fulfilled. Access to essential medicines is also one of the United Nations' Sustainable Development Goals. Hospital policies, procurement strategies, and medicine pricing are required to ensure that medicines are affordable. To ensure the rational use of medicines, high medicine prices are one of the biggest obstacles to access.

Almost all of the government-funded health-care organizations depend entirely on the government budget for the procurement of medicines and consumables and these medicines are provided free of cost to the patients. Many times, it was faced that this small amount of budget is not sufficient to cater a huge patient load, even for uninterrupted supply of basic and essential medicines, and there is not any scope of extra budget to procure high-cost medicines (antibiotics), surgical consumable items, implants, intraocular lens (IOL), mesh, etc., Hence, all these items need to be bought by the patient from outside pharmacy at a very higher and variable costs. Sometimes, due to the unavailability of these required items (medicines and consumables) within stipulated time, many surgeries need to be postponed, increasing the length of stay at the hospital that is one of the major causes of developing the Health Care associated Infections. These all factors eventually increase the burden on patient's pocket during their entire treatment process.

So, now it becomes the responsibility of the hospital administrators to develop a patient-friendly procurement and distribution system which would be able to supply all the range of medicines, surgical consumable items including disinfectant and crystalloid, reagents and implants, IOLs, at a very competitive and subsidized rate, for round the clock and at the same time, it must be self-sustainable, too.

  What is the Low-Cost Model of Hospital Pharmacy?? Top

There are very few government institutions that have “hospital supply chain management” of drugs and medicines, surgical goods, vendor-managed inventory (VMI), and outsourcing of patient care and services. Instead, they continue to have traditional store and purchase and accounts departments and have often failed to appreciate the power of “business process re-engineering.” The traditional store and purchase and accounts departments are not able to encounter the new age “challenges and opportunities” and are entirely dependent on funds from the government to procure medicines and consumables.

Business process re-engineering (BPR) is the radical redesign of processes to achieve dramatic improvements in critical aspects such as quality, output, cost, service, and speed. BPR aimed to help organizations fundamentally rethink how they do their work to improve customer service, cut operational costs, and become world-class competitors. BPR is influenced by technological innovations as industry players replace old methods of business operations with cost-saving innovative technologies such as automation that can radically transform business operations.

A low-cost model of hospital pharmacy deals with the procurement of drugs and medicines, disinfectants, lifesaving surgical goods, CSSD products, dressing materials, implants, IOL, VMI, and outsourcing of point-of-care services. It was designed and executed by Sanjay Gandhi Post Graduate Institute of Medical Sciences, Lucknow, to support the procurement, distribution systems, and realization of the cost of drugs and medicines including surgical goods and services on the principle of self-sustainability. It is a self-sustainable and unique model of its own type in the entire country and is now being adopted by many prestigious government organizations such as KGMU, Lucknow, Dr. RMLIMS, Lucknow, KSSSCI and H, Lucknow, GIMS, Greater Noida, and IGIMS, Patna.

  How can One, Set up and Run This Low-Cost Model of Hospital Pharmacy Top

Step I: Listing of high-cost medicines and consumable items

First of all, a comprehensive list of high-cost medicines, surgical consumable items, contrast media, suture materials, implants, IOL, surgical mesh, etc., needs to be prepared for which there is not enough budget provided from government and the same is being bought by the patients from outside pharmacy at a very higher and variable cost.

Step II: Provision of seed money

In the next step for the procurement of listed items, a provision of seed money must be in place. It can be taken on loan basis that will be returned once this model of low cost, in-house pharmacy reaches its breakeven and becomes self-sustainable. A separate dedicated bank account to be opened up in a nationalized bank to carry out all the transactions pertaining to it.

Step III: Procurement of medicines and consumable items

High-cost medicines, contrast media, surgical consumable items, suture materials, implants, and surgical mesh are to be procured directly from the pharmaceutical companies at most competitive and subsidized rates instead of local vendors, through due institutional mechanism. Here, having own rate contracts for each and every item is of utmost importance. This system blocks the middleman on its own and medicines from manufacturers reach end users directly, like Walmart.

Step IV: Central receiving and storage

Once the item is procured and received, it needs to be stored safely under supervision. For which a dedicated store having provision of the cold store must be in place. Proper documentation/stock verification is to be done here.

Step V: Application of surcharges

This is one of the indispensable steps to make the system self-sustainable. A very nominal surcharge, depending on the type of hospital can be applied by ensuring that the final medicine sale cost after application of surcharge never exceeds the MRP of the item.

Step VI: Establishment of peripheral/satellite counters

Few peripheral/satellite counters need to be established based on the size of the facility. Usually, one counter is sufficient to cater three floors of in-patient wards. One counter must be for outpatient department and daycare patients. Initially, efforts should be taken to request the patients to procure medicines from these peripheral/satellite counters rather than outside pharmacy, completely on their free will.

Step VII: Maintaining daily sale record, refund adjustment (if, any)

Medicine sale records should be maintained on the register and on computer system, as well on a daily basis. Various policies should be drafted and documented for refund (if any), for waived off amount by appropriate authority, issuance of medicines on credit basis under various government schemes, operational in organizations.

Step VIII: Stock verification and maintenance of balance sheet at the end of the month

Stock verification for each item must be done at the end of each month. Profit and loss statement, based on daily sale record to be maintained. To observe the progress of the system, whether it is in the right direction or not, small exercise can be done by the following formula:

  • Reduction in Out of Pocket Expenditure for patients = Maximum Retail Price of medicines/consumables-final sale cost after application of surcharges
  • Revenue generation for in-house pharmacy = final sale cost after application of surcharges-purchased cost.

It is the need of the hour for the government-funded hospitals to adopt the concept of BPR and rethink and develop a system of the procurement and distribution of medicines and consumables that will aim to develop a system that can ensure continuous uninterrupted supply of medicines and consumables, must be more pocket friendly for the patients, and at the same time, it must be self-sustainable too.

Asia's leading cancer hospital, the Tata Memorial Hospital, Mumbai, adopted the concept of BPR because they wanted to cross-subsidize treatment between paying and nonpaying patients to wean itself off government funding. It was also said that health-care facilities need to be self-sustainable to thrive, and that is why the Tata Memorial Center in Mumbai, which is considered to be the apex institute for cancer care and research in South Asia, is going to be experimenting with a new financial model.[2]

As we all are aware that post pandemic, the government is running out of fund; hence, this is the right time to make a shift from the conventional system of procurement to this self-sustainable and low-cost model of procurement. It will not only enable the hospital to become financially independent by reducing the need for budgetary support from the government but will also reduce the OOE of the patients on accounts of medicines. It will also build trust and bring satisfaction among patients toward government hospitals.

This low-cost model of pharmacy, a step toward making government institutions self-sustainable, at least in the area of supply and distribution of medicines and consumables, will definitely contribute to making India, AATMNIRBHAR, one of the most ambitious schemes of our Hon'ble Prime Minister.[3]

  References Top

Available from: https://www.who.int/medicines/areas/access/OMS_Medicine_prices.pdf. [Last accessed on 2021 Dec 27].  Back to cited text no. 1
Available from: https://www.investindia.gov.in/atmanirbhar-bharat-abhiyaan. [Last accessed on 2021 Dec 27].  Back to cited text no. 3


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