Chapter 04: Managing Drug Purchases and Inventory

Title

Chapter 04: Managing Drug Purchases and Inventory

Files

Loading...

Media is loading
 

Identifier

AndersonR_01_20040518_C04

Publication Date

5-18-2004

Publisher

The Historical Resources Center, Research Medical Library, The University of Texas Cancer Center

City

Houston, Texas

Topics Covered

The University of Texas MD Anderson Cancer Center - Building the Institution; Leadership; On Leadership; MD Anderson History; MD Anderson Snapshot; Growth and/or Change; Institutional Processes; Devices, Drugs, Procedures; The Business of MD Anderson; The Institution and Finances; Building/Transforming the Institution; Working Environment

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

Disciplines

History of Science, Technology, and Medicine | Oncology | Oral History

Transcript

Roger W. Anderson, PhD:

So Mr. Gilley liked the idea and one of the emphases there, when we sold the management contract to that hospital, was that we said we would do it very cost-efficiently. And in fact we did and we did it through purchasing, we did it through drug utilization review, only to the scratching of the surface as to what we’ve done now here since. But one of the things I expressed to Mr. Gilley during my interview, and I remember it very well, was that I asked the question as to how drugs were purchased here and inventory managed. And he didn’t know too much, but when he looked into it, and I explained what we were doing, I think he wanted me immediately for that. (laughter) And that had to do with the fact that we were still buying through state purchasing contracts and we always have, to this day, abided by all the purchasing guidelines of the state but in reality we do our separate purchasing now using our own -- even though we’ve but we do our own purchasing through a local wholesaler which was really relatively new then. We had done it with this private company in Columbus, one of the first in the country, and Mr. Gilley loved that idea because it involved both better contracts and a much better inventory. Higher inventory turnover rate meaning that you tie up much less money on the shelf, and then he could keep the money, and he liked that. And so --

Lesley Williams Brunet:

And were there problems with the state purchasing? When I worked on the McKinley interview it seemed like there was a lot of correspondence about that.

Roger W. Anderson, PhD:

Oh, yeah.

Lesley Williams Brunet:

The quality and --

Roger W. Anderson, PhD:

It was very... bureaucratic, as you could guess. It was a purchasing commission -- purchasing and general services commission, and they managed all the contracts and they did it as a big group and then they would have the directors of pharmacy come up there, maybe twice a year, and you would theoretically review all of them but this is probably a list of 3000 line items and quite honestly it was impossible to do any kind of a review. And so, when I first got here, I could see by the prices that I was familiar with back in our little hospitals back in Columbus that we were buying for maybe 30% cheaper there than they were paying here. And so I expressed that to Mr. Gilley and that got his attention very quickly. And so it was even really almost after Mr. Gilley’s time because he retired not too long after that but we would then form the -- actually we got some legislation passed, actually in the early ‘80s, and I forget if it was ’81, ’82, or ’83, somewhere in that time period, actually when the oil crisis was hitting Houston and in fact Texas.

Lesley Williams Brunet:

Which one?

Roger W. Anderson, PhD:

Well, yeah, there are many. But anyway, we got a state legislation passed that allowed us to buy off of state contracts if we were part of a purchasing group. And so we artificially created one for a few years by combining MD Anderson with Health Science -- not Health Science Center, with the Student Health Center at University of Houston which is really quite strange but we did that and somehow we knew -- aside from all that which is interesting to this day, today, not connected with the buying group but the pharmacist over at the University of Houston Health Center is my daughter. (laughter)

Lesley Williams Brunet:

Oh, I didn’t know that.

Roger W. Anderson, PhD:

Today but she has nothing to do with our buying group.

Lesley Williams Brunet:

What is her name just so I’ll --?

Roger W. Anderson, PhD:

Kathy Head (sp?). Her last name is Head now. Married name.

Lesley Williams Brunet:

Kathy with a K?

Roger W. Anderson, PhD:

Yes, with a K. Yeah. But she wasn’t there then. She was nine years old then but still, she is a pharmacist and she’s over there running that pharmacy now. But anyway, so we formed that buying group and I think it was on average an immediate cost savings of close to 25%.

Lesley Williams Brunet:

That’s quite a bit.

Roger W. Anderson, PhD:

Of all of our purchases. By buying through our own contracts, through the wholesaler, and we increased the inventory turnover rate from something like 6. That may not relate --

Lesley Williams Brunet:

Days?

Roger W. Anderson, PhD:

No, since times a year you use up your whole inventory. But we increased it from six to 24. So when it’s 24 it means that every two weeks, basically, you’re using up your entire inventory, and now today it’s over 40, so what that really means to the financial people is that you buy the inventory but you use it and sell it and get paid before you really have to pay. And the financial people love that. You don’t pay anything for the drugs sitting on your shelf.

Lesley Williams Brunet:

Right. And of course a lot of these drugs are incredibly expensive.

Roger W. Anderson, PhD:

Horribly expensive. It was then and it’s even more now. But anyway, so we did do that in the early ‘80s. I think that was a remarkable -- and Mr. Gilley wanted that from me when they first hired me, and one of the first probably big successes financially -- I think our bigger successes really were that we turned around the issue of drug delivery time, responsiveness, and started a much closer relationship with the medical staff. And you know, a couple years -- it might have been even three, after I got on board then McKinley did leave, he did a great job in that assistant position. I never felt that he wanted to put his -- you know, he didn’t want to tell me how to do it. It was great to work with him and I have always respected that and it was helpful to have his perspective on those things, of all his years of time before I got here.

Conditions Governing Access

Open

Chapter 04: Managing Drug Purchases and Inventory

Share

COinS