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HOSPITAL PHARMACIES MAKE 78% OF 1986 DRUG PURCHASES FROM WHOLESALERS

Executive Summary

HOSPITAL PHARMACIES MAKE 78% OF 1986 DRUG PURCHASES FROM WHOLESALERS, which represents a five percentage-point increase over purchases made through wholesalers in 1985, according to the just-released 1987 edition of the Lilly Hospital Pharmacy Survey. Based on responses from 2,167 hospital pharmacies, the survey found that "overall, 78% of pharmaceutical purchases by hospital pharmacies were made from wholesalers during 1986 (up over 20% from the 1983 figure)." Federal hospitals, which acquired 7% of their drugs from wholesalers, were the only group to decrease wholesaler purchasing from 1985 levels, reporting an 11% decline in wholesaler purchases. "The use of depot and contract purchase agreements probably accounts for this low federal figure," the report comments. The survey found that for-profit hospitals ordered 90% of their pharmacy goods through wholesalers, up from 87% reported in 1985, and private, nonprofit facilities bought 81% of their pharmaceuticals from wholesalers, up from 76% in 1985. Government institutions purchased 71% of their pharmacy stock from wholesalers, 3% more than the prior year. In terms of bed capacity, increased reliance on wholesalers was seen in all bed ranges except hospitals with more than 499 beds. Wholesale purchase among the larger hospitals remained static with 55% of purchases being made from wholesalers in both 1986 and 1985. Smaller hospitals showed the greatest percentage gains from 1985, with the under 50 bed group increasing wholesaler purchases from 80% to 88% and the 50-100 bed range hospitals going from 80% to 87%. A comparison of those large hospitals (over 499 beds) purchasing over 20-39% of goods from wholesalers with hospitals purchasing between 20-39% of drugs from wholesalers found that the hospitals with greater wholesaler use increased their inventory turnover rates more substantially from 1985 levels. "Hospitals buying between 20-39% (Group I) of their pharmacy department needs from wholesalers reported . . . higher values for both inventory and purchases for 1986 than for 1985; however, their inventory turnover rate rose from 8.5 to 8.6 times, suggesting slightly improved inventory control," the report states. In comparison, "hospitals that bought more than 39% (Group II) of their pharmaceuticals and related items from wholesalers showed excellent control of inventory investment." The wholesaler oriented hospitals had an average inventory turnover rate of 11.7 times per year, compared to 10.5 times in 1985. Inventory in the Group I hospitals increased 19% from 1985 levels of $571,346 to $679,869 while the inventory in the wholesaler-oriented hospitals decreased from $352,362 to $350,753. The Group I hospitals also had hefty purchase increases (up 20% at approximately $5.8 mil.), while the wholesaler oriented hospitals increased purchases more moderately (up 10.7% at $4.1 mil.). The report comments that "statistics also indicate that median wholesaler purchases increased from 80% to 85% in the wholesaler-oriented hospitals" from 1985 to 1986. Median purchase levels in the Group I hospitals decreased from 35% in 1985 to 30% in 1986.
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