By Gary Giger, Director of Operations, Cotiviti Retail
Not long ago, the primary focus was securing competitive pricing and ensuring product availability. Today, pharmacy procurement teams must navigate volatile drug pricing, persistent shortages, reimbursement pressure, supply chain disruptions, and increasingly complex manufacturer agreements. These pressures are exactly why procurement teams are leaning more heavily on data and contract analytics to stay ahead of them.
In this first installment of our four-part series, we’ll look at escalating challenges and the resulting shifts in role and focus for pharmacy buyers.
Persistent shortfalls and shrinking suppliers
Drug shortages have become a long-term reality rather than a temporary disruption. Recent industry data shows that shortages are lasting longer than ever, with many carrying over year after year.
At the same time, manufacturing has become concentrated among fewer suppliers, many located outside North America, creating vulnerability whenever raw material shortages, unplanned discontinuations, or complex production processes disrupt the line.
“More than 40 lifesaving drugs have been in shortage for over 3 years, with 5 of those drugs being in shortage for more than 10 years.” — Pharmacy Times
Buyers must also balance two often competing priorities in every manufacturer’s relationship: securing competitive pricing and ensuring reliable supply. This tension is most visible in the generic drug market, where intense competition has driven prices and manufacturer margins down sharply. When a product is no longer profitable, some manufacturers discontinue it altogether, and pharmacy retailers and their customers absorb the resulting disruption.
Evolving focus
What makes the situation more challenging is that pharmacies cannot simply pass these additional costs on to customers or payers. Reimbursement frequently remains unchanged even when acquisition costs increase dramatically.
As a result, pharmacy organizations are increasingly turning to data-driven strategies to focus on:
- Maintaining reliable supply
- Managing cost inflation
- Monitoring manufacturer performance
- Improving contract oversight
- Identifying operational leakage
This raises several important questions for pharmacy procurement leaders to address.
“The average duration of a drug shortage has grown to over 5 years, up from 4.3 years in 2024 and roughly 2 years in 2019.” — U.S. Pharmacopeia
Questions worth asking
Critical assessment is prerequisite to tackling these challenges with clarity and specificity. Pharmacy buyers should be able to form strategic answers to questions like:
- What supply-side challenge is having the greatest impact on our organization today?
- Has our definition of procurement success changed in recent years? If so, what metrics matter most today?
- What capability has become most important for our teams that wasn’t a priority five years ago?
- How can our pharmacy partners, including manufacturers, wholesalers, and consultants, better support us in addressing these challenges?
Final thoughts
The organizations that succeed are not necessarily those that negotiate the lowest prices. They are the organizations that consistently execute against their agreements, monitor their supply chain risks, and use data to identify issues before they become financial losses.
In today’s environment, procurement is no longer simply a purchasing function. It has become a strategic driver of both profitability and patient access.
In part two of this four-part series, we’ll take a closer look at how drug shortages become a financial problem. Don’t miss it!
About the author
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Gary Giger is Audit Director at Cotiviti, where he leads the Retail Pharmacy Group, delivering analysis and advisory services to chain retail pharmacies across the United States. With over 30 years of management experience spanning international and domestic post-audit engagements across industries in the US, Europe, Australia, and Asia, Gary brings a rare vantage point grounded in deep transactional data and real-world client outcomes. |
