Can hub-and-spoke transform medicines supply in the UK? The jury is still out
Community pharmacy’s flat funding settlement in England is linked to ‘efficiencies’ to be made through the hub-and-spoke model. With a consultation on the model on the cards for 2020, it is time to reconsider whether its benefits stack up.
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When an exciting innovation comes along, hopes can rise quickly, and unrealistically, to a ‘peak of inflated expectations’. However, when it becomes clear that the new technology will not deliver as quickly as the public expects, interest wanes into a ‘trough of disillusionment’. Over time, the innovation’s benefits become clearer and the ‘slope of enlightenment’ leads up to a ‘plateau of productivity’, where the innovation becomes a mainstream concept that delivers the goods. So, how far along this cycle has the hub-and-spoke dispensing model reached? There is no simple answer to this question, but, broadly speaking, progress has been limited.
In a hub-and-spoke dispensing model, the prescription is assembled in a central ‘hub’ before being distributed to a ‘spoke’ pharmacy, which makes the final supply to the patient. The concept has been in place in many industries — particularly in transportation and logistics — for many years, but the phrase ‘hub and spoke’ first entered mainstream use in UK pharmacy in 2015. The then Department of Health’s funding cut proposals were predicated to a significant degree on achieving efficiencies through the introduction of these new dispensing models,.
So much to consider
On paper, hub-and-spoke dispensing in community pharmacy makes sense. The sector has a growing dispensing workload and, if it is to take on more clinical services, it needs to create the time to provide them. Community pharmacy also has a professional responsibility to constantly improve what it does. So if — and I stress the word ‘if’ — hub-and-spoke dispensing can provide a safer and more efficient system, we are duty bound to consider it.
Hub-and-spoke dispensing alone is just one way of embracing new technology, so we must look at the bigger picture: there are many options to consider. We can automate locally by putting a robot in a pharmacy; we can centralise supply supported by automation; or we can adopt one of two forms of hub-and-spoke dispensing: intra-company, where the hub supplies to branches of a multiple, and inter-company, where a pharmacy outsources elements of its dispensing to a third party.
This is not a question of whether hub-and-spoke should be employed — this is a question of what is right for a particular pharmacy
And then there are the different forms of dispensing, such as standard pack dispensing and individual dose dispensing. As such, we have, broadly speaking, four models of automation and two forms of dispensing — effectively eight different scenarios that we need to consider. This is not a question of whether hub-and-spoke is effective and should be employed. This is a question of which way of working is right for a particular pharmacy.
For many years, some in the community sector have been thinking about how this could work, but we wondered how much independent community pharmacy owners understood about the model. So, in 2016, the National Pharmacy Association (NPA) established a research group, led by independent pharmacy contractor Mike Hewitson, to consider the implications of introducing hub-and-spoke dispensing in the UK. The group commissioned a literature search, surveyed more than 400 of NPA members, visited a hub, and interviewed 20 experts from sectors such as pharmacy, law and logistics in the UK and around Europe.
While this research suggested some opportunities, it highlighted barriers that would need to be overcome, particularly in relation to inter-company hub-and-spoke dispensing. These include the risk of introducing new process errors; lack of clarity on the ownership of problems between the hub and the spoke; longer lead times; new costs; an impact on procurement margin; a reduction in system resilience; and problems caused by restrictive distribution arrangements.
The report suggested that a number of ‘enablers’ would have to be introduced to support any introduction of hub-and-spoke dispensing, including electronic repeat dispensing, original pack dispensing, professional standards for hubs, model contracts to protect the interests of independent pharmacies, and increased commissioning of clinical services by the NHS.
The report considered the economics of an independent pharmacy spoke outsourcing much of its dispensing to a large hub. The spoke would have to find a way to resource its use of the hub — through a service fee or share in procurement margin. How would the spoke secure the income needed to fund the hub? The most obvious source would be the additional income associated with redeploying the pharmacist to deliver more clinical services, but there are still not sufficient funded services to make this work.
Hub-and-spoke arrangements could only ever deliver efficiencies to pharmacies if they include the majority of medicines
And hub-and-spoke dispensing would give even more market power to the major wholesalers at the expense of regional wholesalers and independent pharmacy contractors. With direct to pharmacy (DTP) schemes — in which manufacturers use a limited number of wholesalers to hold their stock — and other restricted supply arrangements so firmly embedded, hub-and-spoke dispensing will only work well for vertically integrated companies. So, it’s not just the supply of medicines being centralised; market power is being centralised too. Hub-and-spoke arrangements could only ever deliver efficiencies to pharmacies if they include the majority of medicines; this would drive purchasing towards the big three wholesalers, to further weaken the buying power of independent pharmacies. As a result, for reimbursement, this could increase, rather than decrease, overall costs to the tax payer.
The model should have delivered by now
We have also investigated models of automation from around the world, and we have collected evidence and interviewed pharmacists in the Netherlands, Sweden, Denmark, the United States, Canada and elsewhere. It is important to note that, globally, there has been very limited adoption of inter-company hub-and-spoke dispensing for automated dose dispensing. For standard dispensing, there is even less experience and evidence.
The technology required to support hub-and-spoke dispensing has been available for years. The large vertically integrated pharmacy companies are sure to have inside knowledge on how this technology operates in other countries, and they have a strong commercial imperative to deliver efficiencies year on year. The NPA thinks that, if there really were big efficiencies to exploit, perhaps these companies would have made a real success of hub-and-spoke dispensing years ago, and so perhaps embracing this model may not deliver significant returns.
Of course, community pharmacy should continue to explore what this model and any other innovations could offer, and the adoption of the inter-company hub-and-spoke model as a viable option for dispensing cannot be ruled out. We understand that some businesses already deploying an intra-company system have reported significant benefits within their operations. However, we should be realistic and draw on a credible evidence base, and we want to stay at the head of thinking in this area.
What pharmacy owners and the government must do
Business owners should make decisions on hub-and-spoke dispensing, based on many individual factors. Will they be accessing the inter- or intra-company model? What is the pharmacy’s existing capacity? What level of efficiency could be reached? Are there opportunities for new services? It is important that no one — neither pharmacy leaders nor the Department of Health and Social Care — should make unevidenced assumptions in relation to cost, ability to release capacity, or safety.
And, if the government believes that hub-and-spoke dispensing has a future in pharmacy, it must do more to allow independents to engage with the model on a level playing field with the larger companies. As a start, it must ensure that manufacturer-controlled supply restrictions, which stifle competition along the supply chain, are swept away. With DTP and other limited supply arrangements gone, there would be a real choice of hub providers, and a competitive environment that works for independents and the NHS.
The flat funding settlement for community pharmacy in England — as part of the latest contractual framework agreed in July 2019 — appears to be linked to ‘efficiencies’ to be delivered though hub-and-spoke dispensing. Perhaps some are still in a ‘peak of inflated expectations’ in relation to this technology. While many have seen opportunities for dose dispensing, we do not foresee large-scale inter-company hub-and-spoke dispensing across the sector any time soon.
Gareth Jones, head of corporate affairs, National Pharmacy Association
Citation: The Pharmaceutical Journal DOI: 10.1211/PJ.2020.20207501
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