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 Table of Contents  
ORIGINAL ARTICLE
Year : 2022  |  Volume : 8  |  Issue : 1  |  Page : 48-55

A study on low-cost model of hospital pharmacy at a government healthcare teaching institute, as a feedforward measure of control


1 Department of Hospital Administration, SGPGIMS, Kalyan Singh Super Specialty Cancer Institute and Hospital, Lucknow; Institute Administration, GIMS-HRF, Greater Noida, Uttar Pradesh, India
2 Institute Administration, Government Institute of Medical Sciences, Greater Noida, Uttar Pradesh, India

Date of Submission30-Nov-2021
Date of Decision15-Jan-2022
Date of Acceptance25-Jan-2022
Date of Web Publication12-Feb-2022

Correspondence Address:
Ruchi Kushwaha
130, Greater Ganga Colony, Ganga Nagar, Meerut - 250 001, Uttar Pradesh
India
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Source of Support: None, Conflict of Interest: None


DOI: 10.4103/jigims.jigims_50_21

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  Abstract 


Introduction: There are very few government institutes that have “Hospital Supply Chain Management” of drugs and medicines, surgical goods, vendor-managed inventory, 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.
Methodology: A prospective analytical study was conducted from May 2021 to October 2021 at Hospital Pharmacy at a Government Healthcare Teaching Institute, wherein frequently prescribed antibiotics, whose multidrug resistance-associated protein was very high and patient needs to procure from outside medical stores were procured directly from the pharma companies through the rate contracts instead of local vendors. Further, these antibiotics were kept at hospital pharmacy for sale by applying minimal surcharges up to maximum of 10% of the purchased price and patients were requested to procure from it rather than outside pharmacy.
Results: Over the duration of 4 months, it was observed that revenue generated per month for the hospital pharmacy was between INR 8000/- and 14,000/- but at the same time, there was a remarkable reduction in out-of-pocket expenditure (OOE) of the patient, between INR 63,000/- and 2 Lakhs and there was more satisfaction among patients.
Conclusions: Based on the results, it can be safely concluded that it is the need of the hour for the government-funded hospitals to make a shift from the conventional system of procurement to this self-sustainable model of procurement. It will not only enable the hospital to be financially independent by reducing the need for budgetary support from the government but will also reduce the OOE of the patients leading to more satisfaction among them.

Keywords: Business process re-engineering, Government Institute of Medical Sciences, hospital revolving fund, maximum retail price, out-of-pocket expenditure, revenue


How to cite this article:
Harsvardhan R, Kushwaha R, Gupta R. A study on low-cost model of hospital pharmacy at a government healthcare teaching institute, as a feedforward measure of control. J Indira Gandhi Inst Med Sci 2022;8:48-55

How to cite this URL:
Harsvardhan R, Kushwaha R, Gupta R. A study on low-cost model of hospital pharmacy at a government healthcare teaching institute, as a feedforward measure of control. J Indira Gandhi Inst Med Sci [serial online] 2022 [cited 2022 Jul 3];8:48-55. Available from: http://www.jigims.co.in/text.asp?2022/8/1/48/338369




  Background Top


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). Hence why do millions of people across the globe go without the treatments. The reasons are now becoming clear and the price and availability of medicines to those who need them are crucial factors. Prices for poor people are simply too high and medicines and surgical consumables 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],[2]

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.”

One-third of the global population lacks reliable access to needed medicines.[1] The situation is even worse in the resource-constrained countries such as 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 South-East Asia alone – a major obstacle to achieving this has been expenditure on medicines and consumables.

In developing countries, today medicines account for 25%–70% of overall healthcare expenditure, compared to less than 10% in most high-income countries.[1] The cost of novel products with proven advantage over conventional medicines, limits access to medicines in resource-constrained settings. Moreover, up to 90% of the population in low-and middle-income countries must pay for medicines out-of-pocket due to the lack of social insurance and inadequate publicly subsidized services. Not only are medicines unaffordable for large sectors of the global population but also they are 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.


  Literature Review Top


By the end of 2007, 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.



  Need of the Study Top


The Government Institute of Medical Sciences (GIMS), Greater Noida, Uttar Pradesh, an autonomous Healthcare Teaching Institute under the administrative control of Government of Uttar Pradesh, entirely dependent on the government budget for the procurement of essential medicines and consumables and these medicines are provided free of cost to the patients. High-cost medicines (antibiotics), surgical consumable items, implants, intraocular lens (IOL), mesh, etc., for which there was not enough budget provided from the government, the same was being bought by the patient from outside pharmacy at very higher and variable costs. Sometimes, due to the unavailability of these required items 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 increases the out-of-pocket expenditure (OOE) of the patients during their entire treatment process.

In the light of the above, there was a perceived need 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, and IOLs, at a very competitive and subsidized rate, for round the clock, and at the same time, it must be self-sustainable, too. Hence, subsequent to ample research in this field, the concept of having the hospital revolving fund (HRF), a low-cost pharmacy model, came into existence.


  Introduction Top


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 the 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.

There are very few government institutes 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.[1]

HRF deals with the procurement of drugs and medicines, disinfectants, life-saving surgical goods, Central Sterile Supply Department products and dressing materials, implants, IOL, VMI, and outsourcing of point of care services. HRF was designed and executed by Sanjay Gandhi Postgraduate Institute of Medical Sciences (SGPGIMS), 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 Dr Ram Manohar Lohiya Institute of Medical Sciences, Lucknow and SSCI and H, Lucknow, GIMS, Greater Noida and IGIMS, Patna.

Aim and objectives

With the above background, a study was conceptualized to develop a Low-Cost Model of Hospital Pharmacy at a Government Healthcare Teaching Institute (GIMS, Greater Noidaas a feedforward measure of control with the objective/s. (1) 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 at a very competitive and subsidized rate, round the clock, while working on the “Principle of “Self-sustainability. (2) To improve price transparency, advocate for appropriate medicine distribution policies and monitor their impact. (3) To help the hospital to be financially independent by reducing the need for budgetary support from the government; and (4) To reduce the OOE of the patients, occurs on medicines and consumables.


  Methodology Top


A prospective, analytical hospital-based study was conducted at a newly established HRF pharmacy counter, near hospital central pharmacy, outpatient department (OPD) block of the GIMS, Greater Noida, for the duration of 6 months from May 10, 2021, to November 10, 2021. Wherein, subsequent to the approval from the competent authority, a HRF unit was established at GIMS, Greater Noida, and other concurrent activities were performed in a step-wise manner [Table 1].
Table 1: Steps for set-up and execution of low cost model of hospital pharmacy

Click here to view


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

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

Step II: Provision of seed money

For the procurement of listed items, seed money was taken from institute's fund on a loan basis that needs to be returned, once this model of low cost, in-house pharmacy reaches to its breakeven and becomes self-sustainable. A separate dedicated bank account was opened up in a nationalized bank to carry out all the transactions pertaining to HRF.

Step III: Procurement of medicines and consumable items through RC

Initially, high-cost medicines, contrast media, surgical consumable items, suture materials, implants, and surgical mesh were procured directly from the pharmaceutical companies at subsidized rates through the SGPGIMS-HRF-rate contracts instead of local vendors, through due institutional mechanism. The process of having own rate contracts was also carried out simultaneously.

Step IV: Application of surcharges

This is one of the indispensable steps to make the system self-sustainable. A very minimal surcharges up to maximum 10% of the purchased price was applied, by ensuring that the final HRF sale cost, after the application of surcharge must not exceed the multidrug resistance-associated protein (MRP) of the item. HRF sale cost after application of surcharges on purchased price and MRP of few medicines which were taken for the study are as follows [Table 2]:
Table 2: List of medicines with their purchased price, MRP, and HRF sale price

Click here to view


Step V: Establishment of hospital revolving fund counter

A peripheral HRF counter was established just outside Hospital Central Pharmacy at the OPD clock of the hospital. The counter was kept opened from 9:00 a. m. to 05:00 p. m., excluding Sundays and holidays for the sale of abovementioned medicines.

Step VI: Sale of medicines from hospital revolving fund counter

Patients were requested to procure these above-listed medicines from HRF counter rather than outside pharmacy, if they wish to. DIGITAL mode of payment was encouraged for the same.

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

Medicine sale record was maintained on the register and on computer system, as well on a daily basis. HRF policies were drafted & documented for refund (if any), for waived off amount by appropriate authority, issuance of medicines on credit basis under various government schemes, been operational at GIMS, Greater Noida.

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

Stock verification for each of the item was done at the end of each month. Profit loss statement was made based on a daily sale record. Concerned persons were requested to transfer the amount, waived off by appropriate authority or against items issued on credit basis under various government schemes into HRF bank account, at the end of the month. This is a very important step to make the system self-sustainable.

Step IX: Analysis of data

Data analysis was done using the formula, as follows:

  • Reduction in OOE = MRP- HRF sale cost
  • Revenue generation = HRF sale cost- purchased cost.



  Observations and Results Top


Reduction in out-of-pocket expenditure for the month of July 2021

For the month of July 2021, maximum collective reduction in OOE of patients was for injection. colistin (INR 28,640/-), followed by injection meropenam (INR 18,200/-) while it was minimum for injection linezolid (INR 104/-). Overall reduction in collective OOE for July 2021 was INR 63,368/ [Bar Chart 1].



Reduction in out of pocket expenditure for the month of August 2021

For the month of August 2021, maximum collective reduction in OOE of patients was for injection clindamycin (INR 32,016/-), followed by injection colistin (INR 28,000/-) while it was minimum for injection hydrocortisone (INR 150/-). Overall reduction in collective OOE for August 2021 was INR 97,494/ [Bar Chart 2].



Reduction in out of pocket expenditure for the month of September 2021

For the month of September 2021, maximum collective reduction in OOE of patients was for injection colistin (INR 140,000/-), followed by injection clindamycin (INR 27,600/-) while it was minimum for injection hydrocortisone (INR 450/-). Overall reduction in collective OOE for September 2021 was INR 195,430/ [Bar Chart 3].



Reduction in out of pocket expenditure for the month of October 2021

For the month of October 2021, maximum collective reduction in OOE of patients was for injection Colistin (INR 34,720/-), followed by injection clindamycin (INR 16,284/-) while it was minimum for injection hydrocortisone (INR 180/-). Overall reduction in collective OOE for October 2021 was INR 78,960/ [Bar Chart 4].



Revenue generated during July 2021

For the month of July, 2021, maximum revenue generated with the sale of injection meropenem (INR 3421/-), followed by injection amoxyclavum (INR 2511/-) while it was minimum for injection hydrocortisone (INR 11/-). Net revenue generated for July 2021 was INR 7958/ [Bar Chart 5].



Revenue generated during August 2021

For the month of August 2021, maximum revenue generated with the sale of injection meropenem (INR 4286/-), followed by injection amoxyclavum (INR 2835/-) while it was minimum for injection hydrocortisone (INR 03/-). Net revenue generated for August 2021 was INR 11,161/ [Bar Chart 6].



Revenue generated during September 2021

For the month of September 2021, maximum revenue generated with the sale of injection colistin (INR 6028/-), followed by injection amoxyclavum (INR 2700/-) while it was minimum for injection hydrocortisone (INR 10/-). Net revenue generated for September 2021 was INR 13,955/ [Bar Chart 7].



Revenue generated during October 2021

For the month of October 2021, maximum revenue generated with the sale of injection amoxyclavum (INR 2970/-), followed by injection meropenam (INR 2820/-) while it was minimum for injection hydrocortisone (INR 04/-). Net revenue generated for September 2021 was INR 7662/ [Bar Chart 8].



Reduction in out of pocket expenditure versus revenue generated over the duration of the study

n the present study, over the duration of 4 months of establishment of HRF counter and sale of medicines, it was observed that revenue generated per month for the hospital pharmacy was between INR 8,000/- and 14,000/- but; at the same time, there was a remarkable reduction in OOE of the patient, ranges between INR 63,000/- and 195,430/- per month [Bar Chart 9].




  Discussion Top


Initially, the model was initiated with high-cost injectable and after gaining a positive response from patients and HCW, now the same is being expanded to cover the entire range of medicines and consumables in a phase-wise manner. Supply of medicines and consumables under various government schemes, operational at GIMS, such as AB-PMJAY, JSSK is also being done by HRF.

Like this low-cost model of hospital pharmacy, i.e., HRF, the present study is also new in the field, hence the author could not found any relevant research done in this field but one of the articles was present, stated that Asia's leading cancer hospital, Tata Memorial Hospital, Mumbai, wanted to cross-subsidize treatment between paying and nonpaying patients to wean itself off government funding. It was also said that healthcare facilities need to be self-sustainable to thrive and that is why Tata Memorial Centre 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],[3]

In this financial model, over the duration of 18 months, the institute started charging a surcharge on cancer medicines sold to patients who are paying for treatment at the hospital. Tata Memorial Centre treats close to 67,000 new cancer patients every year. Around 30% of patients are treated completely free of cost, another 30% pay between 5% and 20% of their bills, and 20% of patients pay between 25% and 50% of their bills. The hospital had been able to follow this model primarily because its marge patient load and high medicine consumption allow it to bargain better and procure drugs at lower prices from pharmaceutical companies.[2]


  Conclusions Top


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.

This 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.

Hence, it is 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 built trust & bring satisfaction among the 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 in making India, , one of the most ambitious schemes of Honorable Prime Minister.[3],[4]

Financial support and sponsorship

Nil.

Conflicts of interest

There are no conflicts of interest.



 
  References Top

1.
Available from: https://www.sgpgi.ac.in. [Last accessed on 2021 Dec 15].  Back to cited text no. 1
    
2.
Available from: https://www.who.int/medicines/areas/access/OMS_Medicine_prices.pdf. [Last accessed on 2021 Dec 15].  Back to cited text no. 2
    
3.
4.
Available from: https://www.investindia.gov.in/atmanirbhar-bharat-abhiyaan. [Last accessed on 2021 Dec 15].  Back to cited text no. 4
    



 
 
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Abstract
Background
Literature Review
Need of the Study
Introduction
Methodology
Observations and...
Discussion
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