In Partnership With: AmerisourceBergen
Pharmaceutical distributors provide the medication for over 4.2 billion prescriptions annually in the U.S., but their role in the healthcare ecosystem has never been in the spotlight the way it is today. The COVID-19 pandemic is driving intense demand for fast, efficient distribution of pharma products.
Bob Mauch, EVP and Group President of AmerisourceBergen, said the global pandemic precipitated a 50 percent spike in demand, and resulted in “a great demonstration of the capabilities of the pharmaceutical supply chain.”
In this video interview, Fierce Pharma Publisher Rebecca Willumson talks with Mauch and with Chip Davis, President and CEO of Healthcare Distribution Alliance, about the impact of the pandemic on the pharmaceutical supply chain, the value of pharma distributors, and how the role of distributors is evolving in a dynamic marketplace.
Hear more from Mauch and Davis in this interview with Fierce Pharma. If you’d like more information, visit www.amerisourcebergen.com.
Rebecca Willumson: Hello everyone. I'm Rebecca Willumson. I'm the publisher of Fierce Pharma. And I'm here today with Bob Mauch, Executive Vice President and Group President of AmerisourceBergen, and Chip Davis, President and Chief Executive Officer of the Healthcare Distribution Alliance. Thanks to you both for joining me.
Bob Mauch: Thanks for having us, Rebecca.
Rebecca Willumson: So Bob, I want to start with you. Let's look back at the last 90 days. How well did the distribution industry handle the unprecedented demands of the COVID-19 pandemic?
Bob Mauch: It's pretty remarkable, Rebecca, honestly. It's something that when we think back, it's a great demonstration of the capabilities of the pharmaceutical supply chain and the distribution industry. But really, the demand was extraordinary and the pharmaceutical supply chain was resilient and effective.
Bob Mauch: And what I mean by that is if you remember back in March, there was a lot of concern. We had just become aware that there was a global pandemic. People, consumers of all kinds were buying things, whether they be paper goods or other consumer goods, it was a lot of talk about that in the news. At the same time, providers were also stocking up on medications because they just weren't sure how things would play out over the next several weeks.
Bob Mauch: So we saw a dramatic spike in demand. And for example, at AmerisourceBergen, where we would normally deliver four to four and a half million units of medication each night, during that time, it increased to six to six and a half million per night. So an increase of really 50% plus. And the work that we had done over many years to invest in our systems, in our capabilities, in our people and business continuity, really paid off during that time and really demonstrated that the effectiveness and the resiliency of our industry and of our businesses.
Bob Mauch: There were some shortages at that time, unfortunately, you remember that. There were lots of utilization of intensive care units and ventalation, and unfortunately, some of the products that were used in those situations came in short supply. But basically, everything that was available in the market, the distribution industry and AmerisourceBergen was able to get out to the patients and the providers as they needed.
Bob Mauch: And the resiliency that we saw really was in large measure to the business continuity measures that we have across our industry and taking care of our frontline associates. So also, in business, there's a lot of talk about remote work and people working from home. And we certainly have a lot of that at AmerisourceBergen, but we also have our frontline workers who were going into our distribution centers every day. And we had significant measures to make sure that those associates were safe so that they were able to continue their jobs. And by doing the role that they do on the front lines, making sure that medication was delivered, we were really able to meet the needs of consumers by having the medications available, and keep the resilience and effectiveness of the supply chain intact.
Rebecca Willumson: Okay. So how do distributors amplify value in the healthcare ecosystem?
Bob Mauch: Simply, Rebecca, distributors bring stability and cost savings to the healthcare system. And we do that on a continual basis and on an ongoing basis, and are always reducing costs. One of the things that your viewers may not know is that the distribution industry provides the medication for over 4.2 billion prescriptions annually. And we deliver those to 180,000 plus points of healthcare, often every single day.
Bob Mauch: So we carry this out seamlessly every day, invisibly in many cases. And this capability and the efficiency of this capability is something that was really out in front and something that for the first time, many people understood that our industry did every single day to make sure that those products get there.
Bob Mauch: In terms of economics and cost savings. The distribution industry, through our inventory management processes, through our financial risk management, and the information technology and services that we provide, we save the healthcare system 33 to $53 billion a year annually. So as an example, if our industry did not exist, healthcare costs in the United States would be 33 billion to $53 billion higher.
Bob Mauch: And we do that through continued, innovation through process innovation, through technology innovation. We're always working to be more efficient, to provide more visibility into the supply chain, to mitigate any disruptions that might be there. And once again, in a very cost-effective and efficient way, we're able to get the medications out for those 4.2 billion prescriptions annually and to the 180,000 plus points of care, each and every day and in a very efficient manner.
Rebecca Willumson: Okay. So talk to me about how distributors can play a critical role in supporting patient safety?
Bob Mauch: Rebecca, protecting patient safety and access is really at the core of what we do as an industry. We're continually adapting and innovating through the changes that happen within the healthcare channels and where patients choose to get their prescriptions. In fact, in COVID-19, there were a lot of changes in the way that consumers sought healthcare. There were periods of time when health systems were generally completely shutdown, or doctor's offices were closed for a period of time. Or some consumers decided to get their prescriptions through the mail versus going into a retail pharmacy. And one of the things that we do as an industry is we provide access to medications in all of those settings of care.
Bob Mauch: So again, in a period of a pandemic when there can be some pretty big shifts in how patients choose to access their medications, the distribution industry is able to provide those medications at multiple sites and really are able to adapt to the changing desires of the consumers, as that moves on. One of the things that we really think a lot about is the way that we provide medications at the site of care, where the patients would like to access them, really increases adherence to those medications and therefore increases positive health outcomes and overall health economics within the healthcare system. So by making sure that the medication is where the patient wants it, that allows them to increase their adherence, which has really positive health outcomes and benefits.
Bob Mauch: And we also play a crucial role in safety by really focusing on the security of the supply chain. So for example, we buy all of our products only from the manufacturers. And through that, we're ensuring that there aren't any counterfeit or other adulterated products in the supply chain. So, protecting the safety and access is really at the core of what we do.
Rebecca Willumson: So to wrap this up a bit, we know the industry is changing very quickly. How do you think the role of distributors is evolving in this dynamic marketplace?
Bob Mauch: Yeah, patient needs are changing. Economic trends are really continuing to, to, to shape our partnerships. And as the regulatory frameworks are always under consideration, reimbursement schemes and the way that patients choose to access care is, as you said, absolutely moving very quickly and evolving. And this is really where our partnerships with our manufacturers, partnerships with providers, really allows us to innovate quickly.
Bob Mauch: So, we provide medication related to any site of care, and we can do that in a way that really meets the needs of the future trends. But what we really do is we focus on building trusted long-term partnerships, again with providers downstream and manufacturers upstream. So as things change in the marketplace, as the reimbursement landscape continues to evolve, we're very confident that because of the partnerships and the relationships that we have with providers and manufacturers, that we'll be able to meet those needs through our very highly efficient distribution capabilities.
Rebecca Willumson: So I want to shift gears a bit. You are a newly appointed chairman of HDA, congratulations.
Bob Mauch: Thank you.
Rebecca Willumson: Reflecting on 2020 and the response of COVID-19, what would you say you're most proud of?
Bob Mauch: The strength of our partnerships is really what has shined during the COVID-19 pandemic and really through what are uncertain times., If there was ever a moment where the strength of our partnerships was solidified and value created from those partnerships, it was during the COVID-19 pandemic. The strength of our relationships with manufacturers, the strength of our relationships with providers, and therefore the seamless communication that we had on a daily basis, allowed us to meet the needs and the significant demand surge that I talked about earlier. And then also, just managing demand over a long period of time now through COVID-19, is something that I'm very proud of in terms of what our industry has done during the COVID-19 pandemic.
Bob Mauch: Secondly, something that a lot of people don't know is the commitment to advocacy that we have at HDA and within the individual member companies. We spend a lot of time with state legislators, federal legislators. Focused on making sure that as policy changes, as policy ideas continue, that we're helping them make decisions or providing input to those decisions that make sure that patients continue to have the best access to pharmaceuticals that they possibly can.
Bob Mauch: And lastly, from an AmerisourceBergen perspective, I'm incredibly proud of our associates, 22,000 plus associates across the globe who have been working tirelessly through the COVID-19 pandemic. And not only from distribution, but also we have many associates who are direct patient care. We have delivery personnel who are out there every single day, making sure that medication is delivered. And we also have many associates who are working remotely and doing that very, very effectively. So I also want to thank all the fantastic associates at AmerisourceBergen.
Rebecca Willumson: Well, that's great. Well, thank you so much, Bob. And I think this is a good segue, so Ship, I'd like to move the conversation over to you. As the president of HDA, what do you want the pharma industry to understand about the value of pharmaceutical distributors in the marketplace?
Chip Davis: Yeah. Rebecca, thanks for the questions, good to be with you today. When I think about the value that pharmaceutical distributors provide, both within the supply chain and the healthcare system, there's two things that come to mind for me. One is commitment, and the other is resiliency. On the commitment side, I joined HDA in March just prior to the start of the pandemic here in the US. And I have been struck in that time by the shared commitment our members have as distributors to ensuring safe, secure patient access to medicines. That's very consistent with the experience I had when I was on the manufacturing side for about 20 years, both brand and generic.
Chip Davis: I also think that that commitment to patient access extends to the partnerships, the significant partnerships that distributors have, both with front end manufacturers and frontline providers, both pharmacists and physicians in healthcare systems, because I think what over time people are recognizing now is that distributors are really the spine or the backbone in many ways of the pharmaceutical supply chain. We connect those front end manufacturers to the frontline providers and without us, I can assure you, patient access would be compromised. So I really think that that commitment across the board to both patient health and to the partners, who are both absolutely vital, just as our members are, to ensuring that level of access.
Chip Davis: The other part of it is resiliency. I think we've all seen through dealing with COVID, that the supply chain, the overall healthcare supply chain, including the pharma supply chain, was absolutely put to the test, particularly early on. In the first 90 days, by way of example, we recently released a report in partnership with Deloitte through our foundation that assessed the pharmaceutical supply chain in the first 90 days of COVID-19, and the findings are essentially this. The supply chain was absolutely tested and it held up. It bent, but it didn't break.
Chip Davis: And I think there's a lot of reasons for that, and foremost above that is the network of partnerships that our members have and their logistical expertise. So they were actually able to adjust the supply of medicines across the country to deal in those places that created hotspots early on, like New York, New Jersey, the Pacific Northwest and other areas. And it was only because of that logistical expertise that our members were able to divert and move product from one area of the country to the other as cases were surging. So I think, certainly commitment and resiliency are the two things I think about when I think of the value that this industry provides.
Rebecca Willumson: So how are consolidation and integration impacting the distribution industry?
Chip Davis: Yeah, that's a great question. I think the short answer is, they're here and they're here to stay. So I think it's something that our members spend a lot of time factoring in as they continue to evaluate their business strategies. The reality is, I think, consolidation across many different aspects of the healthcare ecosystem, certainly on what I would characterize as the demand side. You've seen a lot of consolidation in the insurance industry by way of example, in the health system industry and the PBM industry, actually partnering in many ways with the insurance industry.
Chip Davis: So the buyers, if you will, or the demand side, there's a concentration of purchasing power. And I think our members, again, is that link between the manufacturing community and both the provider and the payers, is one that has to adjust and adapt to that. And I think what it's forced our members to do is evaluate their core competencies. They will always be that central link in ensuring that the product moves from manufacturers to provider, but they're also evaluating other core competencies and services that they may be able to provide. Whether it's in direct partnership, in business relationships with the pharmacy community, whether it's in specialized areas such as oncology and neuroscience, whether it's in the growth of personalized medicine and what does that mean for healthcare delivery. These are all areas that our members are looking at it on a regular basis and actually beginning to incorporate into their core business model.
Chip Davis: So I think it's a really, it's an exciting time. It creates that consolidation you asked about. It creates both challenge, but it also creates opportunity. And I think it's something that our members are going to continue to be focused on in the years ahead.
Rebecca Willumson: So tell me, how are you thinking about personalized medicine and the role of distribution going forward?
Chip Davis: Sure, sure. I think it's another key issue for our members as we move forward., In some ways we've made incredible advances in personalized medicine, and yet I've heard some people refer to it in terms of the overall construct of the evolution of personalized medicine, that we're really only at the end of the beginning. I think if you look at some of the treatments and the vaccines in particular that are being developed to deal with COVID, this is a whole new area of science that we're going to learn an incredible amount about moving forward. Not just applying those lessons learned in the area of vaccination, but in larger treatments overall.
Chip Davis: So I think what it means for our members is that they have to assess the way they've historically done things, and recognize that as medicine becomes more targeted and more personal, that bulk shipment of medicine is not going to be the only way to move product in the future and move therapeutics in the future. I think that's required our members to consider things like direct-to-patient delivery systems and modalities. It's also required our members to think about things in the areas of things such as patient compliance and adherence programs, many of which have been built up within our member companies already.
Chip Davis: I think the other thing that it really requires is, particularly for some of the maybe smaller healthcare systems or the community or independent pharmacy segments all across the country, is they often need counsel and expertise. So you're actually seeing wholesalers serve in the capacity, or in an advisory capacity I should say, to many people throughout the health care ecosystem to help them identify ways to drive greater effectiveness and efficiency in the system. And I think you'll see that to be a continuing and increasing trend amongst our members moving forward.
Rebecca Willumson: So to close this out and wrap everything up, tell me, what does the future hold for distributors?
Chip Davis: Well, I actually think as we all come through and hopefully we're doing everything we can currently in the context of COVID and we're really literally on the precipice, as we talk here today, hopefully for the approval of the first traunch of vaccines. So hopefully, as we begin to move through the onset of vaccines and begin to come out the other side of COVID, I would submit that we're going to be spending, as we get to the other side of it, several years moving forward from a policy perspective. Talking about the resiliency of the supply chain, I alluded to that a little bit earlier. And what are the things that we have to do from a continuous improvement perspective to deal with either the next pandemic or epidemic or natural disaster that's going to test the healthcare system.
Chip Davis: I think that's a policy issue or a policy dialogue if you will, that's going to take place here in Washington. It's also going to take place across all state capitals. Everything from how the national stockpile is populated and replenished, where folks can go, where purchasers can go when they're actually running low on inventory. It will relate to the pharmaceutical supply chain, but it's also going to relate to the medical surgical area, and in particular things around PPE, by way of example.
Chip Davis: I think for our members what that means is that it's going to be very, very critical for us to be a visible, constructive voice in that dialogue. We need to make sure that the efficiencies and effectiveness that are driven by our members is understood by policymakers. We're going to have to make sure to be candid in this political environment that we separate fact from fiction. Because the facts about the value that our members provide to the healthcare system overall, and to patients in particular on a daily basis, is absolutely astounding. But we're going to have to make sure that that is appreciated and understood, and to be candid, is even further leverage moving forward as we address some of these resiliency issues where there was an opportunity for improvement, so that we're better prepared next time as an overall ecosystem than we were in the early days of COVID here in the US.
Rebecca Willumson: Very good. Well, that's all the questions that I have for you. I want to thank you so much to both of you for joining me. This was a great conversation.
Chip Davis: Great. Thanks, Rebecca was great to be with you.
Bob Mauch: Rebecca, thank you very much for having us.