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- [00:00]
A
Hi everyone. This is Erica Spicer Mason with Becker's Healthcare. Thank you so much for tuning into the Becker's Healthcare podcast series today. So today we're going to talk about balancing margin shortages and 340B risk in 2026. And joining me for this conversation is AJ Ryvasecki, product director at Blue Site. AJ, it's great to have you on the podcast. Thank you so much for joining us.
- [00:23]
B
Oh, it's really great to be here. I can't say this is always everybody's favorite thing to talk about, but it's definitely been top of mind for me and everyone I talked to recently. So looking forward to getting to share that with everyone that's listening.
- [00:35]
A
Yeah. Well, I can say safely that our listeners are really going to appreciate your insights on these topics, even if they aren't always the most fun to talk about, as you said, but important nonetheless. But before we dive in, would you mind sharing just a little bit more about yourself, your background and the work that you're doing in healthcare?
- [00:53]
B
Yeah. So I'm actually a pharmacist by training. I'm still a licensed pharmacist. I spent the first 11 years of my career at a pretty large health system here in the Pittsburgh area. Most recently before coming to Blue Site, a pharmacy operations manager. So I oversaw a little bit to basically everything we'll talk about here today. I've been at bluesight now for about five years where I've kind of switched over to the role of working on product roadmap and development in and around all the areas that I used to worry about when I was in the healthcare space as a healthcare worker instead of a healthcare vendor. So I really focused on the same thing for my entire career about the past 15 years now, just kind of from the other side of the street.
- [01:39]
A
It's great to have that dual perspective. So, AJ great to learn more about you and excited to hear your take on some of these questions that I have today. So first I wanted to acknowledge just kind of the shift that we're seeing more broadly in our own coverage at Beckers and some of the conversations that we're having with leaders. But we're seeing that pharmacy procurement is kind of moving from something that's maybe a series of isolated purchasing decisions. And so I'd love to know what's driving that shift towards something perhaps more strategic. We're seeing this a leading system, so I would just love to know your your thoughts on how they're rethinking procurement.
- [02:19]
B
Yeah, I think, you know for years there has kind of been these work silos, whether it's within kind of the health system in general, and I mean, from where I sit or have satisfaction, pharmacy more in particular. But I think the two big shifts that I've seen are one, like, how does pharmacy become less of a cost center and more of a strategic driver for the organization? So that's been something that pharmacy departments in the healthcare world have been working on for years. And I think that we're kind of seeing this perfect storm of various problems coming together, which have almost forced that narrative forward, which is, okay, now we must do this. So how can we take this kind of confluence of problems and look at them from a more holistic level where I think, you know, previously we had our supply chain team that worked purely on getting contracts and buying drugs. We had a clinical arm that focused on the clinical initiatives. We had a regulatory compliance team that made sure that we were in compliance with all relatively needed things. Between compounding USP797,340B compliance, and what we're really seeing now is with the ever thinning margins on healthcare, the potential shift we're seeing, which was scheduled for this year and now is on ice again for a little bit of moving the 340B program to a rebate model is just a, we can't keep living with all these things in silos. So there's the kind of organizational thought that the only way we can keep functioning strategically as an organization is if we quit treating these things like three separate problems that need to be solved by different teams and start bringing them together. Because I can't optimize the margin driving aspect of our organization unless we're procuring the drugs at the best cost, at the best time. They're being done in a way that we know we can operationally access the price points we should. And we also need to be sure that we have confidence in the supply chain. So we see that kind of organ organizational change. And look, this isn't a podcast about the, the buzziness of AI, but I think the, the concept that AI has brought forward to everybody has been that data can no longer live in silos. So I see, I think we're actually seeing two things come together at the same time. The first being the operational nature of healthcare being like we need to operate more strategically and less in silos. And at the same time, whether people are using AI tools or not, it's kind of made everybody aware that bringing data out of silos and using it together in A more consolidated manner actually allows you to do that first thing. Any of the AI tools that are out there now, that's really the big selling point, right. Is how do I harvest new insights out of the data I already have by unsiloing it, and how can I accelerate that on siloing? So, to me, it's the dual nature of organizations know they need to unsilo these things in order to keep achieving the prime directive, which is providing healthcare to patients. They, they must get better at driving these initiatives forward while at the same time a shift that, hey, we don't have to live with our data in silos, and the only way we can achieve that goal is by bringing disparate data sources together. So a relatively long answer, but that's kind of my summary of, you know, what I'm feeling and seeing across the industry, whether it's me putting myself back in the seat at the hospital or looking from the outsider's perspective of how the vendors start to react to what the potential customers might need.
- [06:04]
A
Yeah. A.J. i appreciate how thorough your answer was because it really does underscore the complexity that health systems are facing when it comes to not just procurement, what we're talking about here today, but just complexity with their data in general and this need for it to be better integrated. So I'd love if you could also just share an example of changes or even outcomes that organizations tend to see when they do take that more integrated approach.
- [06:31]
B
Yeah. One of the ways I think I can articulate it is essentially I'll answer two ways. One is what I'm seeing people do right now, and one is actually what we are helping people get prepared for prior to this year. So right now, we've actually started seeing people start pull together data about supply chain resiliency and pulling it into their purchasing decisions from a financial perspective. So to expand on that a little bit, you know, there's the idea of we want to optimize our procurement costs. Right. Just like you or I, if we're shopping on a weekend at the grocery store, you know, we're looking at all the different ranch dressings and picking the one that has the best price for the value that we need. We don't typically worry about if Hidden Valley is going to be in stock or not, but in the drug supply chain, you're. You're always worried about is there going to be a supply disruption. Whether you're making that at a P and T level is a clinical decision. You know, the pharmacoeconomics of what's the cost of procurement often isn't looked at in terms of and what's the relative supply chain resiliency of that item. So if I'm picking between various first generation cephalosporins, right, there's a formulary trade off cost between how much something costs and how available it's going to be. We typically haven't seen that be part of the discussion. What we're starting to see people do to start to bring it together is look at the ability to harvest huge data sets and say within a therapeutic category, what's the relative risk of supply chain disruption and from a therapeutic category to a drug class and so start to make some of those decisions with full information. So instead of just making an operational decision on we're going to go with vendor X because they have high availability or we're going to go with vendor Y because they have low cost. Whether it's from the clinical decision making standpoint of what first generation cephalosporin do we put on formulary or a we don't care, just pick the best option. From a procurement standpoint, people that are putting together those data sets to say Great, DrugX costs $1, Drug Y costs $2, I simultaneously can see the impact on my procurement cost and the relative risk of the supply chain of each of those things. What's the trade off I'm willing to make? And sometimes you pick the higher cost, but you have the defensible reason with why you do that. You understand the risks involved both from a cost and supply chain perspective. So it's a very kind of concrete way. We're watching people put together the data sets that we work with on a daily basis in the future. And we were kind of getting people prepared for this prior to the first of the year and will continue to is the notion of, you know, putting together data sets between the compliance and the financial aspects of the 340B program. Look, I don't have a crystal ball. I don't know when it's going to happen. But I know that there seems to be no slowdown in the push towards whether you want to call it a 340B rebate pilot or a 340B rebate model or just various manufacturers that are continuing to push for what some may consider legally ambiguous data sets to continue to access their prices. There becomes this high burden on marrying what you need to do to prove to someone like a HRSA auditor that your program has been compliant with everything within the 340B statute and all the financial and claims data that will need to be available for making sure you can access the price points that that that program provides. And so we're seeing even future thinking organizations start to think about how do they put that data together themselves? Or as ourselves and lots of other vendors were doing prior to the first of this year, ramping up efforts to pull that data together and make it available to 340B organizations in ways that let them start crossing those bridges of unsiloing their compliance teams from their financial teams.
- [10:34]
A
Great examples. AJ I really appreciate you elaborating there. And you touched on two topics where I want to go just a little bit deeper. First, I know you mentioned in your example you you had touched on supply chain resiliency. And we know the drug shortages have become really a persistent reality for most pharmacy teams. So I'd love to know a little bit more about how integrating predictive shortage data into those procurement workflows can actually change purchasing decisions. And how should leaders balance supply risk with cost and reimbursement as well?
- [11:04]
B
Yeah, I wish I had a magic bullet answer to the second question to the first question. We're never going to stop supply chain disruptions as long as the economics and manufacturing and distributing drugs are what they are, it's what's going to happen. Right? And so it's more about how do you take those predictive signals, get early warnings. And my goal here would be to start switching our thinking from warnings like everything's a disaster that must be responded to to just part of the normal workflow. And so we're really thinking of is how do we use this kind of predictive nature not to say, hey, go buy up all the stock so it doesn't affect you or how to go time the market. We're thinking like this is a pervasive issue. Just like going back to my grocery store example, sometimes you can't get things. Your favorite coffee creamer might not be available for a long time. Whatever. It's about having the workflow so you're not scrambling, so you're making the right decision so you're prepared when ultimately supply chain disruptions do happen. So taking the financial aspect out of it for a second, there's a huge operational cost of having to be really reactive to drug supply disruptions and shortages. If you can prepare, know that hey, in 30, 60, 90 days there might be a disruption in the supply and you can start having conversations with stakeholders early. Where can you use a different medication with no impact to patient care and just kind of let it Be a pharmacy driven thing. From a swap out perspective, where do you want to engage people such as like anesthesia providers to have a plan in place before things happen and have everyone on board. So when you need to make that switch, it's non disruptive, it's not a operational cost to people's days and times, it's not a shock to the people who are providing care and you kind of are. Unifying the entire response plan across the health system and where it ties into finances is kind of going back to what I was saying previously. It's just understanding the risk. Right. And knowing what your trade offs are going to be. And I think that's really where we're seeing the push on that, on that front is going in with eyes wide open doesn't necessarily always need to be a push to the bottom to buy the cheapest item if you're willing to accept a higher price for better supply chain resiliency. And we typically my company, we don't sell to manufacturers. We're not technically manufacturers on our customers. But by being in this industry, I've certainly had plenty of conversations with drug manufacturers in pharma who look at one of their weapons, their compelling differentiators, as one of those differentiators being like, yeah, great, we know we're not the cheapest, but we make sure that when our customers, AKA hospitals and health systems need supplies available to them, they've had a problem of communicating that and being able to let people have visibility into that type of information on a real time basis when they're making purchasing decisions. We don't have any plans at the moment. I certainly don't. But from a health system perspective, as you're making those decisions, we are highlighting it, right? If I'm choosing between manufacturer A and B and one has price point A and one has price point, I guess I should do price point one and price point two. I have the ability to see am I willing to make that trade off? Will I accept a little bit higher upfront cost because they have a more resilient supply chain? I think long term we'll see. Maybe manufacturers start to help us mitigate the overall shortage problem by being willing to produce more if they can see that they can get those price points because people are willing to pay for it. Now look, that's a very pie in the sky macroeconomic supply and demand assessment of the entire situation. And maybe I'm naive, but that is one of the things we aim to do here is by showing that that that balancing act that what I'm willing to pay for what value I get is transparent to health systems that we can start to mitigate the number of supply chain disruptions that people actually experience.
- [15:22]
A
Yeah, AJ thank you so much. And I want to get to some closing thoughts here. But before we do, another piece from your early examples, I wanted to hit on too, was going back to this 340B potentially facing rebate model changes. And so from your point of view, as those model changes, if they were to take place and if there were to be increased audit scrutiny here, how could this unified or integrated data approach help pharmacy teams stay compliant while also protecting their bottom line too?
- [15:56]
B
Yeah, I think what it actually does is it couples both activities into one. So one of the things we've been trying to aim for and obviously we ended up not needing to pull the trigger, but we were starting to pilot with some customers with how do we wrap all that into, into all one piece and not make it an extra burden? So if the rebate model were to go forward, the idea is that you take pharmacy medical or pharmacy claims data and you must submit it back through a third party to prove that it was a approved use of the 340B medication and then you get paid back. So same as a mail in coupon versus an upfront discount, just total shopping analogies today. And so to do that, you actually need access to what underlies a transactional audit from a compliance perspective. So it's really, how can I couple those two things back together so that I can be fully audit defensible when I'm submitting that claim through a third party or through to a manufacturer, ultimately to get my rebate back, which is necessary to protect the intent of the 340B program, which is to extend the reach of the healthcare system, the ability to stretch resources, while at the same time knowing that not only is that claim that I submitted, I've been using the term bulletproof, but I really mean audited down to its core. But by virtue of doing that in the first place, if a auditor from HRSA comes back into our organization, I don't have to be worried, I don't have to be ready to, I don't have to go spin up a whole nother process to go get myself ready for an audit, because I've been doing it all along. So really what I think is in general it's going to push us further towards the perpetual audit readiness and ourselves or other vendors that are kind of thinking about the future, thinking about how can we do this in a way, how can we prepare people for this rebate pilot in a way not only that takes some of the operational burden off their plates, but also makes them more compliant, ready at the same time, while becoming more efficient at both. And that was a little bit esoteric, but that's just because I don't have any concrete examples because we haven't actually had to do it yet. But that's very much how we're conceptualizing it is how can we use one workflow to solve both problems?
- [18:19]
A
Oh, absolutely. And it signals how your organization is looking ahead, AJ and it's helpful for our listeners, no doubt. And by the way, appreciate the grocery and retail analogy. They resonate with me. So hopefully our listeners too. But AJ it's been a great discussion today. Just one final question for you as you're looking ahead. What do you think pharmacy leaders should prioritize right now to build a more resilient and financially sustainable procurement approach?
- [18:47]
B
Yeah, I think it's really about build by partner and like it's something in the product world that we do all the time. What do we build on our own? What do we partner people with? What do we go by? I think it's understanding that all three of these things are coming together, tighter controls on costs. Look, I can sound like any big city financial consultant. Reduce costs, increase revenue, be more solvent, whatever, but think about that, right? We understand that going forward there's going to be increased pressure to decrease your cost, to increase margin where it is applicable, at the same time doing so with the variable of supply chain. So take a hard look at each of those three domains that, you know, kind of in total make up the procurement ecosystem. Like thinking of procurement in this terms of like the actual cost of buying things, the supply chain of those things, and maintaining compliance with what you buy, that kind of makes up the procurement umbrella. And take the next 612 months as we have kind of the stay of execution from the delivery of the rebate model, which will really throw things into a bit of a rethinking and think how are we going to do this? What parts do we bring in or bring inside and can we can build on our own? What points do we find the right people to partner with or buy solutions and and is really using this time to make sure that you understand these are the challenges we're facing and look at the options that are out there and prioritize what matters most to your organization. You have a seven person nonstop data engineering team to predict your own shortages. You'd be in the minority but great. Maybe that's not what you need to focus on, but it's kind of taking a look at your organization and figuring out which of those three domains makes the most sense to focus on first.
- [20:39]
A
Really sound advice, aj I want to thank you again so much for your time today and for sharing all of your insights with Becker's listeners. Thank you again.
- [20:48]
B
Thanks for having me. Look forward to being back at any time.
- [20:51]
A
We look forward to it as well. And we'd also like to thank the podcast sponsor for today Blue site listeners. Be sure to tune into more podcasts from Becker's Healthcare by visiting our podcast page@beckershospitalreview.com.