By Greg Beato
Picture a bright red plastic box. It
hardly looks like a piece of life-changing
health-care equipment.
And yet this humble-looking
container, roughly the size of a
banker’s box, is the core component of an
ingenious operation that enables a growing
number of people to treat or manage a wide
range of conditions and diseases.
The architect of the system is the Dispensary
of Hope, a 10-year-old social enterprise
based in Nashville. It functions much like
a food bank, except that the bounty it collects
and distributes consists of unopened
packages of prescription medication. Every
month, the organization sends out “Hope
boxes” to physician practices that participate
in the system. Each box comes with a pre-paid
UPS shipping label and a set of zip ties to close
it securely. “We have volunteers who call up
the physicians and remind them that it’s time
to donate,” says Julie Granillo, director of
donor outreach for the Dispensary of Hope.
“All their staff has to do is go into the sample
closet, pull any medications that have reached
the six-month mark, throw the samples in the
box, and sign a shipping manifest.”
The pharmaceutical industry distributes
an immense quantity of sample drugs to
US doctors. (As of 2004, according to one
study, the total annual value of pharmaceutical
samples came to $16.4 billion.) Many of
those products simply expire as they sit on
shelves in physicians’ offices. A big part of
the Dispensary of Hope model, therefore,
involves encouraging physicians to donate
samples that are six months away from hitting
their expiration date. (The industry
term for such drugs is “short-dated.”)
After filling a Hope box with samples,
staff members in a physician’s office
send it on to the Dispensary of Hope’s
10,000-square-foot warehouse in Nashville.
Along with short-dated products
that come in from physician practices, the
Dispensary of Hope receives donations from
makers of generic drugs. And it all adds up.
In 2013, according to Granillo, the organization
was on track to receive $14 million
in donated samples from physicians and
$49 million in surplus pharmaceuticals from
generic manufacturers. Measured by volume,
those donations are the equivalent of nearly
1.5 million 30-day prescriptions.
At the warehouse, interns from a local
pharmacy school sort the incoming medications,
and people from the Dispensary of
Hope log data about each medication into
the organization’s online inventory system.
“When a physician sends us short-dated samples,
it takes two days to get them to us via
UPS,” says Chris Palombo, CEO of the Dispensary
of Hope. “We process them in five
days at our facility, and it takes another two
days to get them out to one of our access
sites. So in less than ten days, we can get that
medication back out there, where it will be
used to treat patients.”
But the goal here isn’t just to allocate surplus
products on an ad hoc or one-off basis.
What distinguishes the Dispensary of Hope
from most other organizations of its kind is
that it has created a system—a comprehensive,
scalable, and sustainable way to collect
and redistribute soon-to-expire pharmaceuticals.
Because it aggregates medications from
a continuously expanding network of donors,
the Dispensary of Hope can predictably offer
a wide range of medications. The organization
also pursues an earned-income model
that results in other advantages. Nonprofit
clinics and pharmacies pay a fee to join the
Dispensary of Hope system, and that revenue
gives the organization the resources that it
needs to provide a reliable service—week
after week, year after year. “A lot of nonprofits
live and die by the grant,” says Granillo. “We
really focus on being a sustainable supplier
of medications for the clinics we work with.”
Logistics of Hope
The Dispensary of Hope grew out of the
efforts of Bruce Wolf, a Nashville-based
physician who organized people to collect
pharmaceutical samples from local doctors
for use at a free clinic where he volunteered.
Despite its humanitarian origins, though, the
organization is first and foremost a “logistics
company,” Granillo says. Palombo elaborates
on that theme: “It’s not enough to expect
people to donate because it’s the right thing
to do. People are thrilled to donate, but we
still have to create a system that makes it
easier, less risky, and cheaper to work with
us than to destroy the unused medicine.”
Each year, Palombo notes, an estimated
$10 billion worth of surplus medication goes
to waste. And that waste, he adds, represents
an important opportunity: “Across the
street from where it’s going into the garbage,
you may have a free clinic where a patient’s
quality of life is decreasing because he can’t
get the right chemicals and dosages.”
For health care providers, meanwhile,
expired medications create procedural headaches.
Once it was standard practice to dump
unused pharmaceuticals in the trash or to
flush them down the toilet. Now, because of
the environmental hazards associated with
those methods of disposal, state and federal
regulations require physician practices to
incinerate many types of unused medication.
That works in the Dispensary of Hope’s favor:
It isn’t cheap or easy to cremate a case of aging
antibiotics. “Physician practice managers
are telling us they destroy between $40,000
and $70,000 of medicine in a year,” says
Palombo. “Between the staff time it takes
for the inventory and de-logging process, and
the destruction process itself, it can end up
costing $10,000”—per year, per practice. The
Dispensary of Hope offers a more economical
way to deal with soon-to-expire medications.
It covers the cost of shipping medication to
its warehouse, and it assumes responsibility
for most of the paperwork.
To an increasing degree, the Dispensary
of Hope obtains medications not only via
Hope boxes, but also directly from pharmaceutical
companies. “We have several
generic manufacturers that are opening up
their entire inventory to us, not just surplus,”
says Granillo. Take the example of
Mylan, a company that distributes generic
medications in more than 140 countries. In
the past year, Mylan has contributed products
to the Dispensary of Hope that have a
total wholesale value of about $30 million.
Leaders at Mylan see the organization as a
strategic ally. “Our mission is aligned with
the Dispensary of Hope’s ongoing efforts to
expand access to medicine through distribution
to underserved communities,” says
Tony Mauro, president of North American
operations at Mylan.
The Dispensary of Hope offers the same
kind of predictability and value to the distribution
side of the equation as it does to
the supply side. For decades, entities known
as medical surplus recovery organizations
(MSROs) have procured and distributed unused
medical equipment and pharmaceuticals.
Many MSROs essentially operate in an
opportunistic fashion: When a hospital or a
manufacturer has devices or drugs that it no
longer wants, an MSRO will redirect that material
to an appropriate recipient. Typically,
MSROs allocate surplus material to organizations
in countries where basic medical supplies
are scarce. The Dispensary of Hope, by
contrast, works with US-based health-care
organizations and serves as a steady, comprehensive
source for specific medications.
In short, it resembles a commercial pharmaceutical
distributor.
A Network of Access
The Hope Dispensary of Greater Bridgeport
is a joint project of two hospitals and several
community health clinics located in and
around Bridgeport, Conn. And, as its name
suggests, its existence owes a great deal to
the Dispensary of Hope. (The two organizations
are separate, however.) The Hope
Dispensary fills about 375 prescriptions per
month, and it depends on the Dispensary of
Hope to do so. Today, it gets up to 75 percent
of its pharmaceutical inventory from that organization.
“More and more medications are
becoming available through the Dispensary
of Hope,” says Christine Toni, dispensary
coordinator for the Bridgeport organization.
In the United States, there are thousands
of safety-net health care organizations—
free clinics, community health centers,
nonprofit pharmacies, and the like. The
Dispensary of Hope has built its distribution
network around facilities of this kind,
and it has done so very selectively. The network
includes about 80 “access sites” in 16
states. “We do a lot of work to qualify the
sites we work with, making sure they have
the right processes and controls in place,”
says Granillo. Each access site pays a flat
fee of $7,500 per year to join the network.
In return, it receives unlimited access to
the Dispensary of Hope’s inventory, which
typically includes about 1,100 varieties and
strengths of medication. Using the organization’s
Web-based system, pharmacists at
each access site place weekly orders to obtain
the products that their patients need.
To finance its work, the Dispensary of
Hope relies partly on grants and donor contributions.
But it covers about 50 percent
of its operating expenses through the fees
that it collects from access sites. And as
the organization adds more sites to its network—
it recruits about three new ones per
month—those fees will reach a level where
they cover the bulk of its costs.
Increasing scale on the supply side is no
less important for the Dispensary of Hope.
As the organization expands its donor network,
it will be able to increase the quality
of service that it provides to its access sites.
The potential for growth in this area is high.
Today, for example, the organization works
with about 1,000 physician practices—yet
there are more than 98,000 such practices
in the United States.
Another growth opportunity for the organization
may come with the rollout of the
Affordable Care Act. Because the number of
people with insurance will increase, pharmaceutical
companies are likely to boost
their production levels—and the volume
of surplus medication will go up as a result.
Palombo, moreover, anticipates that between
20 million and 35 million people will
remain uncovered by insurance, even after
the new law goes fully into effect. “We know
the surplus will be there. We know the need
will be there. And at the end of the day, we’re
going to be there, too,” he says.