Software cuts through costly hospital pharmaceutical procurement

24 July 2018
The University of Sydney has developed a software program which could significantly reduce the amount spent by the nation's hospitals currently estimated at more than three billion dollars a year.

The ground-breaking software, which streamlines the pharmaceutical purchasing process, is also expected to free up hospital staff for activities more closely related to patient care.

The software was developed in conjunction with Sydney’s Westmead Hospital by Dr Aldo Saavedra, a Senior Research Scientist with the University’s Faculty of Health Sciences, and Dr Erick Li, a senior lecturer in the Business School’s Discipline of Business Analytics.

The new system will replace a laborious and time consuming process of selecting the most cost effective pharmaceuticals by manually comparing spreadsheet information on thousands of products with prices that sometimes vary on a monthly basis.

“There are several thousand lines of pharmaceuticals that are procured and managed across Westmead, and pricing for each is influenced by market dynamics i.e. competition, patent expiry, supply chain and government policy,” said the hospital’s head pharmacist, David Ng.

“With a monthly spend of around $ 3 million, the objective of our pharmaceutical procurement is to ensure that essential medicines are available uninterrupted and at the most cost-efficient price,” Dr Ng said. “Given the number of product lines and pricing variances, we needed a decision support tool.”

Dr Ng and his team turned to the University of Sydney because of its established business, technical and analytical expertise as well as its commitment to the development of what has become known as the Westmead precinct.

This project became a good flagship for showing how we can actually use data to improve something very simple like choosing the best medication.
Dr Aldo Saavedra

The University’s Dr Saavedra and Dr Li, found a manual purchasing process made highly complex by constantly changing supplier discounts, government subsidies and competing branded and generic products.

As an example of this complexity, Dr Li pointed to the trade-offs staff were forced to make when choosing between rebate brands and the non-rebate brands. “In some cases, the hospital stayed with the rebate brand to avoid losing an accumulated rebate reward; whereas in other cases, the hospital was able to capitalise on low prices offered by non-rebate brands.”

“Our system is able to organise all the information from the wholesaler’s price books, quickly run the data for a particular medication and determine the lowest price on the market,” Dr Li said. “Importantly, we can take into consideration the complexity of the rebate contracts.”

One estimate puts Westmead’s cost savings at nearly 5 per cent.

The University team sees the new system as an example of how data can be better utilised in hospitals for the benefit of patients and staff.

“This project became a good flagship for showing how we can actually use data to improve something very simple like choosing the best medication, which was very laborious with a procurement officer literally sitting there and comparing excel spreadsheets to find the best value,” said Dr Saavedra.

“When I started working at the hospital everyone talked about keeping the lights on. That’s all the budget allowed for. Nobody was trying to introduce better practices. So with our little tool we have been able to show the value of data,” he said.

With some modification, Dr Saavedra and Dr Li say that their procurement software could be installed in any hospital in the country potentially saving Australian taxpayers many millions of dollars.

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