Pharmacy Supply Chain vs Traditional Supply Chain
Across the U.S., many health systems have transitioned to managing pharmacy purchasing under non-pharmacy supply chain leadership. This structure is thought to be optimized for efficiency, cost control, and standardization across a wide range of clinical and non-clinical products.
While this framework works well for commodities like gloves, IV tubing, and surgical instruments, it does not drive optimal value from medications. To succeed, organizations must integrate traditional supply chain best practices with the clinical, operational, financial, and regulatory oversight that is unique to pharmacy.
What Makes Pharmacy Supply Chain Different?
A traditional supply chain focuses on standardizing products, negotiating pricing, and ensuring availability. These efforts rely on tools like enterprise resource planning systems and group purchasing organizations (GPOs). Success is measured by cost savings, contract compliance, and how efficiently products are used by clinical teams. This structure is effective for products where clinical input is minimal and the primary value lies in cost and availability. While pharmacy must adopt these same principles, it must also address the additional complexities that come with medications:
Clinical Nuance
Clinical nuance matters because decisions about which medications to purchase and how to manage them are shaped by rapidly evolving evidence and patient-specific safety and efficacy needs.
Revenue Cycle
Revenue cycle complexity is significantly greater in pharmacy because, unlike most hospital supplies, medications are billed at the line-item level. Each dose must be individually documented, accurately coded, and linked to a specific patient encounter in both the EHR and billing systems. This level of specificity directly impacts reimbursement, and even small inaccuracies can result in denied claims, lost revenue, or ineligibility for 340B savings.
“The complexity is in the billing rules and the coordination required to apply them,” explains Maxie Friemel, Senior Director at Visante. “Medications move through so many systems and teams that small discrepancies multiply quickly. Fixing pharmacy revenue cycle is as much about alignment and communication as it is about coding.”
Regulatory Burden
Regulatory burden in pharmacy is substantial, as medications are overseen by multiple bodies and regulatory requirements, including the DEA, DSCSA, the 340B Drug Pricing Program, and state boards of pharmacy. Compliance requires controlled substance tracking, full drug traceability, split-billing accuracy for 340B discounts, and licensed staff to manage procurement and reconciliation, all of which must be embedded into daily operations.
Dynamic Pricing & Availability
Dynamic pricing and availability add another layer of complexity, as medication costs fluctuate daily across thousands of line items and vary by class of trade, including inpatient, outpatient, and specialty settings.
Unlike traditional non-pharma procurement—where organizations can lock in pricing for multiple years and rely on static ERP data—pharmacy procurement operates in a constantly shifting environment. Medication pricing changes regardless of contracting, requiring continuous optimization and far more resource-intensive management. Dynamic pricing and availability add another layer of complexity, as medication costs are fluid across thousands of line items and vary by class of trade, including inpatient, outpatient, and specialty settings.
Pharmacies must also manage products from multiple vendors, each with its own pricing structures, availability limitations, and distribution channels. Combined with frequent drug shortages driven by manufacturing issues, supply disruptions, or shifts in demand, these factors require constant monitoring and agile response, making procurement, inventory planning, and timely patient care increasingly challenging.
At a Glance: Pharmacy Supply Chain vs. Traditional Supply Chain
| Dimension | Traditional Supply Chain | Pharmacy Supply Chain |
|---|---|---|
| Primary Objectives | Standardize SKUs, negotiate contracts, reduce unit costs, ensure availability | Maintain availability while optimizing clinical outcomes, regulatory compliance, and revenue integrity |
| Decision Drivers | Cost, utilization rates, contract compliance | Evidence-based clinical protocols, patient safety, efficacy, reimbursement eligibility, regulatory risk |
| Billing Relationship | Supplies typically bundled into procedural or departmental charges | Medications billed at the line-item level, tied to patient records, dosage, and coding for accurate reimbursement. |
| Regulatory Oversight | May include FDA or CMS for certain devices, but generally limited | Subject to DEA, DSCSA, 340B Drug Pricing Program, state boards of pharmacy — with daily operational and documentation requirements |
| Procurement Pattern | Episodic bulk purchasing, predictable pricing, commodity-focused | Continuous, patient-driven demand with volatile pricing, frequent shortages, and channel-specific access limitations |
| Systems & Tools | ERP platforms, inventory control, GPO contracts | Also requires split-billing software, regulatory reporting, EHR/EMR integration, payer-specific tracking |
| Workflow Integration | Parallel to clinical care; materials support | Embedded in clinical care; pharmacy touches every dose, order, billing line, and audit trail |
| Organizational Model | Led by supply chain or shared services | Requires pharmacy-led governance with strategic partnership from supply chain |
Why Medication Supply Chain Models Deliver Better Results
The issue isn’t that the supply chain lacks capability or commitment; nor is it that items such as surgical implants or diagnostic devices operate without clinical involvement. Pharmacy differs in that it’s a continuous, high-volume function where clinical, operational, and financial demands converge daily. Organizations that give pharmacy full medication supply chain accountability see measurable benefits, including:
- Stronger financial performance through improved charge capture, reduced revenue leakage, optimized 340B participation, and tighter alignment between pharmacy operations and billing.
- Greater agility to manage drug shortages, pricing volatility, and regulatory changes while rapidly adjusting workflows to protect care continuity and financial stability.
- Improved clinical quality by aligning purchasing decisions with evidence-based, patient-centered care.
- Expanded scalable services such as infusion and specialty pharmacy, enabling growth, new revenue streams, and broader support across all care settings.
“Once pharmacy leads its own supply chain, organizations start to see opportunities they didn’t even know were there (better reimbursement, stronger 340B performance, smoother workflows). It creates a foundation that supports everything from daily operations to enterprise growth strategies,” says Friemel.
Key Takeaways: Elevating Pharmacy Supply Chain to Elevate the Entire Health System
If your organization still routes medication purchasing and supply chain governance through traditional channels, it’s time to reassess that approach. Empowering pharmacy to lead its own supply chain unlocks value that otherwise goes unnoticed. This model strengthens financial performance, reduces risk, enhances compliance, and directly improves patient care.
Pharmacy isn’t just another supply chain category. It is a clinical, operational, and financial engine. And when it’s equipped to lead, the entire health system benefits.
If you’re ready to strengthen your pharmacy supply chain model, Visante can help. Our experts partner with health systems to build governance structures, optimize revenue integrity and drug contracting, enhance compliance, lower medication spend, and design pharmacy-led supply chain strategies that drive enterprise-wide results. Reach out to our team to get started.
Subject Matter Experts: Jim Lund, Angela De Ianni, & Maxie Friemel