The good news is that the number of Americans who are uninsured (without health insurance) dropped eight percent in the first quarter of 2014 compared to the same period in 2013. The bad news is that this means 41 million Americans are not insured, which often represents a lack of access to health services and medications. An ambitious program to address part of the access gap to essential medicines is being undertaken by the Dispensary of Hope, a social enterprise based in Nashville, TN.
The DoH was founded in 2003 by Dr. Bruce Wolf, an allergist who analysed his own practice's use and disposal of sample medications. He found that 30 percent of the sample medications went unused prior to expiration. In 2007, the DoH became part of the Saint Thomas Health network, which in turn is part of Ascension, the country's largest non-profit healthcare system, and the efforts to donate the unused samples to free clinics and pharmacies went national. Seven years later, the DoH confronts the challenge and opportunity of significantly scaling the efforts in providing access to essential medicines.
The Value Chain
The DoH receives and distributes short-dated samples or samples with less than six months before their expiration date. The collection, processing and distribution of short-dated samples requires a precision supply chain. As profiled in the Stanford Social Innovation Review's Winter 2014 Field Report, "An Rx for Surplus Meds," the baseline to the DoH's effectiveness is its ability to efficiently manage inventory, supply chain and logistics. The DoH considers itself a mission driven logistics organization.
The value created by the DoH is distributed upstream and downstream the supply chain. The supply of short-dated medications has evolved from 100 percent physician donated samples to today, where a sizable majority of medications are provided direct from pharmaceutical producers, predominantly generic manufacturers. The financial value for pharmaceutical companies created by donating to the DoH versus disposing of unused medications is twofold. Financially the benefits can be a direct savings by donating the drugs versus the cost of destroying the drug, as well as any tax benefit derived from a donation.
In the pharmaceutical industry, demand planning and supply forecasts are complex. When balancing the capacity with the anticipated demand for its products, the industry often errs on the side of demand, resulting in overproduction. Demand forecasting runs on two horizons: the long-term demand forecast is used when planning production capacity. Short-term demand forecast compares the level of current production calibrated to the supply chain. Additionally, distribution of the drugs must take into account the product's shelf life. Given the complexity; overproduction is not terribly surprising.
The turnaround from receiving donated medications, to distributing to a network access site (outpatient pharmacies, charitable pharmacies, federally qualified health centers or free clinics partnering with the DoH) is completed in less than 10 days. Currently the network consists of approximately 80 access sites in 16 states (those seeking access to medications should contact their local access site.) which the DoH is planning to significantly expand over the next 15 months.
The Challenge of Opportunity
Christopher Palombo, Chief Executive Officer of the Dispensary of Hope notes
while the operational focus of this project is a supply chain advancement, the efficient use of short-dated chemical compounds is admittedly a topic that would otherwise be pretty uninteresting to most. The Dispensary of Hope represents a bold new way to create health and improve patient access at very low cost. We transition billions of dollars in potential waste into creating better health outcomes for our sickest and most economically limited friends, family and neighbours. It is that purpose, the focus on the patient, which motivates and enlivens an otherwise rote topic -- moving boxes of pills to the right places, quickly.
To date the DoH program has benefited more than 280,000 individuals. As the organization and model has evolved, the contribution of generic manufacturers has grown to where more than 70 percent of its donated supply comes from generic manufacturers. The DoH receives a combination of donated physician samples and surplus pharmaceuticals valued at more than $60 million. This year the DoH received offers of pharmaceutical donations that would increase the supply handled by the DoH by more than tenfold.
"Ascension is extremely proud of the success of the Dispensary of Hope," said Anthony R. Tersigni, EdD, FACHE, Ascension's President and Chief Executive Officer. "Consistent with our Mission and Values, the Dispensary helps us deliver Healthcare That Leaves No One Behind not just throughout our integrated national health ministry but in communities all over the country."
According to Chris Palombo the ability of the DoH to scale their distribution network to absorb the potential supply is twofold. 1) A sustainable network: The distribution network is comprised of access sites which pay an annual fee between $7,500 and $12,500. With the goal of being self-sustaining within five years, the DoH is redesigning the fee subscription model. 2) A network build out: The DoH projects that by 2019 the number of access sites will need to increase its current footprint by three times to more than 200 access sites. Furthermore the increase in network scale is matched by an increase in economies of operational scale. As explained by the DoH, $1 dollar of overhead costs today accounts for $6 dollars of distributed medicines. If the goal of 200+ access sites is achieved, then $1 of overhead costs will account for $18 dollars of distributed medicines. (Figures provided by the DoH)
Towards that goal the DoH is in the midst of a capital campaign to generate commitments of $5 million, spread over a five year period, by January 1, 2015. To date the campaign has raised nearly $2.5 million in commitments but still has a sizable gap to fund.
The Challenge of This Challenge
Capital campaigns are seldom easy and the fight for share of wallet is a competitive and crowded space. The DoH's campaign predicament is unusual for a public health driven mission with a sustainable model a clear value proposition across the continuum of stakeholders. 1) Unfortunately, access to essential medicines is a much more discussed and influential topic in public health circles outside the boundaries of the United States than domestically. 2) Brand name pharmaceutical companies do offer programs to subsidize or provide at a reduced cost the medicines they produce but cross collaboration is rare. The idea of pharma industry being on the receiving end of a benefit is difficult for the public to accept due to "big pharma's" poor public perception. 3) (Lack of) access to essential medicines is to some extent an invisible problem. Those uninsured and needing medications, and unable to afford or otherwise access medications, may not be aware of their condition or unwilling to share their condition. Identifying, let alone mobilizing this population, presents difficulties.