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WHITE PAPER

The Case for Pharmacy Supply Chain Automation and Optimization

Why health system pharmacies can no longer stagnate in the supply chain status quo

The pharmacy is one of the largest areas of expense for U.S. health systems.

Drug prices continue to rise, while complex pricing programs, tightening regulations and labor shortages strain operations. Yet many pharmacy teams still rely on disjointed processes and manual workarounds that increase risk and drive up costs.

Meanwhile, the medical/surgical supply chain has modernized through automation, real-time visibility and data-driven decision-making.

Pharmacy can no longer remain the exception. Leading health systems are applying automation strategies to transform pharmacy into a more efficient, resilient and strategic asset.

Pharmacy supply chain versus medical/surgical supply chain

A health system’s medical/surgical and pharmacy supply chains have traditionally existed as separate entities with their own teams, technology systems and workflows. This divide has placed pharmacy and medical/surgical on very different paths in the digital transformation journey.

The pharmaceutical supply chain: manual, complex, labor-driven

Without modernization, they struggle to keep pace with rising costs, drug shortages, workforce strain and complex regulations.

Health system pharmacies have historically been run autonomously with the expectation of justification for high costs. Therefore, what goes on behind the scenes, away from the patient bedside, has largely flown under the radar. If the pharmacy is generating revenue and keeping patients safe, it remains autonomous.

System/data silos and manual workarounds

Pharmacy teams manage drug procurement and inventory management within their own technology and workflow silos, often outside the health system’s enterprise resource planning (ERP) system and supply chain management (SCM) solution. Aside from basic purchase order (PO) processing, few efficiencies are gained.

With the mentality, “if ain’t broke, don’t fix it,” pharmacy has continued to rely on disjointed IT solutions and highly manual processes, including spreadsheets and even hand-written methods of inventory tracking.

While many use automated dispensing machines (ADM) and some employ drug carousel systems, robotics and other tools, the lack of integration creates data silos. Without a centralized SCM solution that connects inventory across locations — including drugs stored and managed manually — leaders lack a complete picture of inventory.

Additionally, the health system pharmacy supply chain ecosystem includes third-party providers, such as administrators (TPAs) that manage 340B compliance and vendors supporting FDA’s Drug Supply Chain Security Act (DSCSA). These operate in parallel, adding to the complexity.

“Managing the pharmacy supply chain is complex, and automation tools that can simplify key processes in the system have yet to be ubiquitously deployed in healthcare enterprises.”
American Journal of Health-System Pharmacy1
“So many of the decisions we face in hospital pharmacy start with just one angle of a complex, multi-sided problem. Until you connect all the pieces, it can be tough to get a clear picture of what’s changing and why it is important.”
Matt HebbardCo-Founder and VP of PharmacyQuicksortRx

Poor inventory visibility and control

With limited visibility into drug inventory, most pharmacy leaders don’t have an accurate picture of diverted and wasted drug products, including those that expire in storage and must be discarded. Without automated drug inventory tracking, health systems not only lose money and run the risk of shortages but also put patient safety at risk. They also risk compliance failures with government and industry regulations.

Reactive supply management

Pharmacy leaders must piece together disparate information to approximate what they have on hand, its location and what they need to avoid stockouts. By the time pharmacy teams piece together data from various systems and physical counts, the information is already outdated.

Risks and costs of pharmacy supply chain inaction

Manual processes, disjointed systems and the subsequent lack of drug inventory visibility result in substantial waste, cost and risks.

 
$806B
spent by U.S. health systems on pharmaceuticals in 2024 — a 10.2% increase from 20232
$5.4B
lost by U.S. health systems annually through waste of potentially viable medication3
$600M
spent by U.S. health systems managing drug shortages each year4
60%
of U.S. health systems surveyed fail to routinely monitor controlled substances PAR levels and make appropriate modifications5
1%
Less than 1% of medication inventory was judged to have full digital visibility in a study of six large U.S. health systems6

The medical/surgical supply chain: automated, streamlined, data-driven

The medical/surgical supply chain has rapidly evolved from manual and transactional to automated and strategic. Cloud-based SCM systems now integrate with core platforms, reduce manual work and offer end-to-end inventory visibility. This transformation has reduced waste, cut costs and improved resiliency and patient safety.

Originally viewed as a back-office function, medical/surgical supply chain modernization was driven by the need to cut costs. Unlike pharmacy, health systems were quick to invest in SCM technologies that improved efficiency and generated savings.

Health system leaders were willing to invest in new technologies for procurement and inventory management if they were proven to deliver greater efficiency and cost savings – and they did.

Core system integration and process automation

Many medical/surgical supply chain teams manage all supply inventory in one centralized SCM solution integrated with their ERP and EHR systems. Leveraging RFID, barcode and mobile-tracking technologies, the SCM solution automates item-level tracking from receipt through use, capturing data that is seamlessly shared with core systems (ERP, EHR).

Real-time visibility and control

With this automated, data-driven ecosystem in place, supply chain teams have real-time visibility to all medical/surgical supplies through the SCM dashboard.

Using this data, supply chain leaders can strategically and proactively optimize inventory levels to maintain supply availability while avoiding the costs, waste and risks that come from overstocking.

High-dollar inventory optimization

The maturity of automated technology and data-driven capabilities, with fewer staff resources allocated to manual tasks, has enabled supply chain leaders to turn their sights on optimizing inventory management for spend categories beyond medical/surgical supplies, most notably, high-risk, high-dollar physician preference items (PPI).

Through the integration of SCM and EHR systems and the deployment of AIDC technologies (RFID, barcode readers, etc.) in procedural areas, supply chain teams have gained real-time visibility into implants and devices. In doing so, they have driven out costs and waste while enhancing patient care through improved expiry and recall management. Automated item-level data capture at the point of use (POU) also enhances scanning compliance to increase billable charges and resulting revenue.

Continuous modernization

Proven gains in cost control and patient safety have encouraged more investment in automation and modernization.

This includes shifts from on-prem systems to cloud-based solutions, construction of consolidated service centers (CSC) equipped with advanced automated technologies (e.g., conveyor systems, co-robots), and the application of artificial intelligence (AI) tools to predict risks and minimize disruptions.

Proven benefits of medical/surgical supply chain automation

Seamless system integration, widespread process automation and real-time analytics/insights in the medical/surgical supply chain increases efficiency, lowers costs and enhances patient care and safety:

 
$21.2M
Mercy’s estimated cost savings from inventory management improvements7
$17M
reclamation of uncharged supplies by Parkview Health8
$1.4M
savings from on-hand inventory reduction by Sanford Health9
50%
reduction in manual work by Parkview Health10
30%
reduction in on-hand inventory value by Concord Hospital11

Converging factors compelling pharmacy supply chain modernization

As health system executives battle rising drug prices, ongoing drug shortages, a shrinking pharmacy workforce, and increasingly complex pricing programs and regulations, they are examining pharmacy operations more closely. This scrutiny has exposed deep inefficiencies and waste, prompting a shift toward modernization and automation.

Drug shortages and rising costs

The American Hospital Association (AHA) refers to the “alarming and worsening three-part trend of rising prices for existing drugs, new drugs being introduced at record-high prices and shortages for many critical drugs.”12 The American Society of Health-Systems Pharmacists (ASHP) recommends health systems have in place a plan to address the influx of ultra-high-cost drugs such as cell and gene therapies.

Turning to drug shortages, on any given day, visitors to the ASHP website will see hundreds of active shortages, with nearly half (49%) having begun in 2022 or earlier. When asked for the reasons behind these shortages, over half (55%) of drug manufacturers surveyed said the causes were unknown or they would not provide the reasons.13

Regulatory and compliance pressures

As if pharmacy supply chain regulations and pricing structures weren’t already complex enough, new and revised requirements have made compliance even more challenging for health system pharmacy teams.

 
The CMS 340B Drug Pricing Program

requires health system pharmacies to comply with the complexities of reimbursement claims and manage the associated administrative tasks. Purchasing drugs under the correct pricing model – 340B, wholesale acquisition cost (WAC) or group purchasing organization (GPO) contract – in an ever-changing environment of patient, physician and location eligibility requires constant oversight.

The Drug Supply Chain Security Act (DSCSA)

requires all trading partners, including health systems, to use electronic systems to track prescription drugs, including their unique serial numbers, lot numbers, expiration dates, and National Drug Codes (NDC). The DSCSA’s enhanced drug distribution security requirements have heaped on more confusion related to drug ownership and covered entities, further complicating 340B program compliance.

USP General Chapter <800> standards

impact how health system pharmacies receive, compound, store, manage, administer and dispose of hazardous drugs (HDs). To achieve compliance, health system pharmacies must identify and track all HDs in inventory, document new entries, and perform annual risk assessments for each dispensed drug.

Workforce challenges

Health system pharmacy teams are managing costs, shortages and compliance complexities with increasingly limited staff available to carry out the work. According to the 2025 ASHP Pharmacy Forecast report, there has been a 500% increase in unfilled pharmacy residency positions over the past five years while there has been a greater than 30% decline in pharmacy school enrollment over the past decade.14

Lack of pharmacy supply chain technology modernization and workflow automation has forced health systems to rely on human resources to perform manual, time-consuming inventory management tasks. With longer hours and mounting workloads, more than half of pharmacists (51%) report burnout driven by poor work/life balance.15

Many hospital pharmacies face workforce shortages, leaving limited personnel to oversee inventory processes. These shortages lead to overburdened staff, reduced attention to detail, and a higher likelihood of errors in procurement and record-keeping.16
“The final phase of the DSCSA presents significant operational hurdles, but a meaningful opportunity to strengthen digital capabilities across pharmacy operations. By aligning physical product handling with electronic data in real time, pharmacy teams can build safer, more efficient workflows that support compliance and patient safety. In addition, health systems can streamline procure-to-pay processes, collaborate with partners to resolve compliance exceptions, and accurately identify recalled products, all within a single platform.”
Alex KinneCommercial Operations DirectorTraceLink

How automation is enabling pharmacy supply chain modernization

Through implementation of cloud-based SCM solutions integrated with pharmacy core systems (ERP, EHR) and standalone technologies (ADMs, carousels), health systems are centralizing, automating and optimizing pharmacy operational, clinical and regulatory processes for unprecedented efficiency, accuracy, cost savings and compliance.

Optimize inventory levels and manage disruptions

Leveraging an enterprise-wide SCM solution, pharmacy leaders gain a complete picture of drug inventory in real-time, including items stored in automated dispensing technologies, storage rooms and clinical departments. Robust analytics provide actionable insights, enabling leaders to proactively mitigate supply chain disruptions and drug shortages (e.g., reallocate inventory, stock approved substitutes).

Reduce costs, waste and safety risks

Complete drug inventory visibility helps align supply with demand, reducing costs from overordering, overstocking and hoarding. It supports the transition from subjective PAR and min/max levels to strategic inventory management decisions based on objective data.

Centralized tracking also ensures temperature-sensitive drugs remain within proper storage conditions and supports efficient and effective recall management. The ability to quickly identify expired, compromised or recalled drug products, and remove them from inventory, enhances patient safety.

Improve staff efficiency — and satisfaction

Automated drug inventory management reduces time and labor-intensive manual tasks, easing pharmacy workloads and improving supply chain accuracy. Digital capture of barcode or RFID data and the SCM solution integration with core systems (EHR, ERP) replace manual data entry and documentation.

With standardized digital workflows, pharmacy teams gain actionable insights — like rising demand or approaching expiries — allowing them to shift from tactical execution to strategic decision-making. Staff resources saved through automation are reallocated to patient care activities.

“Better digital visibility can minimize disruption from recalls and decrease waste. Technology vendors and health systems must collaborate to develop improved automation and systems to make medications on hand more digitally visible.”
American Journal of Health-System Pharmacy17
“Automation plays a critical role in numerous facets of the healthcare industry, but hospitals especially can benefit from waste reduction features. Real-time alerts and expiration tracking help providers to make use of the medications they have — even while shortage rates climb in other areas.”
USA Today18
“Expanding technology provides opportunities to advance clinical practice; improve personalized patient care, patient safety, and financial viability; and optimize pharmacy practice workflows.”
American Journal of Health-System Pharmacy19

Enhance regulatory compliance

Automated item-level data capture of drug products in the SCM solution facilitates compliance with regulations and helps health system pharmacy teams navigate pricing/reimbursement. The solution enhances the efficiency and connectivity of the entire pharmacy supply chain by consolidating data and streamlining operational workflows across internal systems and third-party partners, such as TPAs and DSCSA compliance providers.

DSCSA tracking

Comply with track and trace requirements by efficiently tracking lot number, expiration date, ASN and NDC, as well as full product pedigree in accordance with DSCSA regulations, including pharmaceutical sales and transfers to non-affiliated facilities.

340B pricing

Maximize all 340B eligible purchases and minimize WAC purchases.

USP <800> standards

Gain complete visibility to accurately identify all HDs from receipt through storage, management and use and produce evidence of compliance when The Joint Commission (TJC) conducts an accreditation survey.

Conclusion

Once seen as optional, pharmacy supply chain modernization is now essential for cost containment, operational efficiency and patient safety. As drug shortages persist and regulatory complexities grow, health system leaders must move beyond outdated, manual processes to adopt automation, real-time tracking and advanced analytics.

By implementing an enterprise-wide SCM solution for process automation, a health system can gain complete drug inventory visibility, proactively manage supply disruptions, and ensure compliance with evolving regulations. Elimination of human touchpoints reduces staff burden, improves accuracy and enhances patient care and safety.

Now is the time for pharmacy leaders to follow suit by leveraging technology to optimize resources, strengthen resiliency, and drive better outcomes for both patients and healthcare organizations.

Sources

  1. Freeman-Muhammad S, Chipman-Ashley R, Martin RE 3rd, Williams J, Prochazka A, Dumitru D, Greszler C. Impact of connected dispensing technology with advanced analytics in a multicenter health system. Am J Health Syst Pharm. 2024 Nov 22;81(23):e760-e769. doi: 10.1093/ajhp/zxae198. PMID: 39012031; PMCID: PMC11581993
  2. U.S. Pharmaceutical Spending Growth, 2024, American Journal of Health-System Pharmacy, https://academic.oup.com/ajhp/article/82/14/806/8117945?login=false
  3. Elisabeth M. Smale, Toine C.G. Egberts, Eibert R. Heerdink, Bart J.F. van den Bemt, Charlotte L. Bekker, Waste-minimising measures to achieve sustainable supply and use of medication, Sustainable Chemistry and Pharmacy, Volume 20, 2021, 100400, ISSN 2352-5541, https://doi.org/10.1016/j.scp.2021.100400
  4. Policy Considerations to Prevent Drug Shortages and Mitigate Supply Chain Vulnerabilities in the United States, U.S. Department of Health and Human Services, April 2, 2024, https://aspe.hhs.gov/sites/default/files/documents/3a9df8acf50e7fda2e443f025d51d038/HHS-White-Paper-Preventing-Shortages-Supply-Chain-Vulnerabilities.pdf
  5. Bastow, S. S., Borrelli, E. P., Lucaci, J. D., Nelkin, H., Graves, A., & Hays, A. (2024). Insights from a National Survey on Controlled Substance Diversion Practices in U.S. Hospital Pharmacies: Opportunities for Enhanced Surveillance and Compliance. Pharmacy, 12(6), 183. https://doi.org/10.3390/pharmacy12060183
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  10. Parkview Health case study, Tecsys, https://www.tecsys.com/customer/parkview-health
  11. Supply Chain Efficiency and Cost Savings Begin at the Point of Use, Tecsys, https://infohub.tecsys.com/e-book/supply-chain-efficiency-and-cost-savings-begin-at-the-point-of-use
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