Magazine article Drug Topics

Pharmacy Supply Chain Opportunities Abound

Magazine article Drug Topics

Pharmacy Supply Chain Opportunities Abound

Article excerpt

Pharmacists who want to opt out of the traditional career path should keep an eye on Thomas Menighan in Gaithersburg, Md. The former pharmacy owner and onetime American Pharmacists Association president created a new specialty. His current company, SynTegra, audits drug manufacturers, wholesalers, and other links in the pharmaceutical supply chain.

"I spent my whole career either dispensing or somehow involved in dispensing," Menighan said. "After I sold my pharmacy operation in 2002 and began consulting, I realized that pharmacists had no assurance that what they supplied was a legitimate product. This venture is all about securing the supply chain."

SynTegra's original business plan targeted weak points in the supply chain where dubious products could be introduced as the real thing. But like most business plans, Menighan's initial efforts crumpled in the face of reality.

Just as SynTegra started operations in 2003 and 2004, the entire wholesale drug industry shifted its basic business structure. What had been a highprofit arbitrage business, buying low in one market to sell high in another market, was transformed into a feefor-service business. Menighan called it a sea change in the practices of pharmaceutical wholesalers.

For as long as anyone could remember, wholesalers had bought pharmaceutical products from manufacturers to resell at a healthy profit. Profits were so high that wholesalers offered an ever-growing menu of free services to chains, independents, and institutional pharmacies.

But fat profits also encouraged business practices such as channel stuffing, sharply boosting purchases at the end of a quarter or fiscal year to inflate revenues and profits. Following a series of financial scandals in the 1990s, drugmakers started paying wholesalers to distribute their products.

Wholesalers, in turn, began trimming the free services offered to dispensers. Supply chain audits were still needed, but drugmakers and wholesalers alike were more focused on contract performance and the operations. In the fee-for-service world, compliance with contract terms is vital to continued profits.

"An audit to review your operational measures and regulatory compliance is a very useful exercise," said Christopher Smith, executive VP and COO of wholesaler H.D. Smith. "One of the biggest issues is ensuring that you have consistent procedures and policies from distribution center to distribution center while making sure that all of your distribution centers meet appropriate state requirements. …

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