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Related Experiment Videos

Evaluating group purchasing through a prime vendor.

L H Johnson, J D Herrick

    American Journal of Hospital Pharmacy
    |September 1, 1984
    PubMed
    Summary
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    Group purchasing of pharmaceuticals through a prime vendor significantly reduced drug inventory value by 30.1% and increased inventory turns by 55.3% for 17 community hospitals. This prime-vendor system improved cost-effectiveness and inventory management.

    Area of Science:

    • Health Services Research
    • Hospital Administration
    • Pharmaceutical Supply Chain Management

    Background:

    • Community hospitals historically faced challenges in managing pharmaceutical inventory costs and efficiency.
    • The need for collaborative purchasing strategies to leverage economies of scale was recognized.
    • Previous inventory control methods lacked comprehensive cost-effectiveness analysis.

    Purpose of the Study:

    • To evaluate the cost-effectiveness of a prime-vendor system for a drug-purchasing group of 17 community hospitals.
    • To assess the impact of the prime-vendor system on hospital pharmaceutical inventory value and turnover rates.
    • To identify specific cost savings and improvements in inventory control and purchasing practices.

    Main Methods:

    • Formation of a drug-purchasing group by 17 community hospitals in 1981.

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  • Solicitation of bids to select a single drug wholesaler (prime vendor).
  • Comparative analysis of inventory value and turnover rates before (1980) and after (1982) system implementation, using paired control hospitals.
  • Detailed cost analysis of inventory and operating expenses at a single participating hospital.

    • Main Results:

    • Participating hospitals reduced drug inventory value by 30.1% and increased inventory turns by 55.3%.
    • 72.8% of all pharmaceuticals (by dollar value) were purchased through the prime vendor.
    • A 39.2% reduction in the distribution center service fee was achieved.
    • Hospitals in the group demonstrated significantly greater improvements in inventory value and turnover compared to control hospitals.
    • Single-hospital analysis revealed direct savings (inventory investment, order handling) and indirect savings (carrying costs, payment processing).

    Conclusions:

    • The prime-vendor system proved highly cost-effective for the community hospital drug-purchasing group.
    • Implementation led to substantial reductions in inventory costs and significant improvements in inventory management efficiency.
    • Group purchasing via a prime vendor enhances operational efficiency and reduces overall pharmaceutical expenditures for hospitals.