How does a 13-hospital health system cut $7.5 million in pharmacy costs—without sacrificing quality or patient experience? For MultiCare Health System, a nonprofit health system based in Washington, the answer lies in a sophisticated reimagining of the pharmacy supply chain.
Tyson Frodin, PharmD, MHA, Assistant Vice President of Clinical Pharmacy, Pharmacy Supply Chain, and Technology at MultiCare, led a sweeping transformation that achieved a 24% reduction in inpatient drug spend and set a new industry benchmark. In this exclusive interview, Dr. Frodin breaks down the strategic moves, cultural shifts, and data-driven partnerships that delivered multi-million-dollar savings—while improving patient access and experience, especially in rural communities. Whether you lead pharmacy operations or simply want a blueprint for supply chain excellence, this is the inside story you need.
MultiCare’s journey to pharmacy supply chain excellence began out of necessity and vision. Dr. Tyson Frodin explains: “MultiCare, we’ve definitely been on a journey to become world class, and that’s one of the things that we’ll continue to drive moving forward, is how do we become not only a world class pharmacy enterprise, but a world class health system that drives significant improvements in care for our patients and populations.”
Several converging factors made pharmacy supply chain optimization a high-stakes imperative:
-Rising drug costs: With $375 million in annual drug spend, even small efficiency gains meant big dollars saved. -COVID-19 disruptions: The pandemic exposed weaknesses in procurement, inventory, and rural hospital support. -Expansion into rural markets: MultiCare’s growth into Idaho, Montana, Alaska, and Oregon required new strategies for small, remote hospitals.Dr. Frodin’s rural roots shaped his focus: “The thing that brought me to MultiCare was the opportunity to have MultiCare grow into northern Idaho, Western Montana, Alaska, as well as Oregon... my experiences as a chief operating officer and director of pharmacy in critical access hospitals really lend themselves to helping this expansion and growth over other rural facilities across those other states.”
Rural hospitals are not just small, isolated facilities—they are essential strategic partners for health systems. Dr. Frodin emphasizes that these facilities, often operating under cost-based reimbursement, can be leveraged to optimize patient flow and finances:
“Right now there’s over 700 hospitals, rural facilities that are at risk for closing. That concerns me because those are my friends, my family. If you understand the ins and outs... being cost-based reimbursed, having access to swing bed, they can be a huge blessing to larger healthcare organizations, especially when looking at, well, how do I get rid—I don’t want to say get rid of—how do we transition patients that are in acute care setting, that are eating up our length of stay and our DRG? Well, if you have that relationship with a critical access hospital... you then can swing those patients.”Key benefits of integrating rural hospitals into the pharmacy supply chain:
-Shorter inpatient stays at large hospitals: Transition patients to swing beds in rural facilities, freeing up acute care beds and reducing length of stay. -Cost recovery and reimbursement: Administer high-cost medications in critical access settings for cost-based reimbursement. -Enhanced patient experience: Patients recover closer to home, minimizing family disruptions and travel costs.“From that standpoint, it really enhances the patient experience by being able to get the emergency treatment that’s needed upfront to get them stabilized and then go back home... where family members can go and visit and help provide that support that’s needed for them to recover faster and better.”
The first and perhaps most crucial step was building a centralized, coordinated purchasing structure across all MultiCare hospitals. Before Dr. Frodin’s tenure, purchasing was fragmented, with each hospital operating independently. He changed that:
“Within six months, we achieved close to $650,000 in savings by just selecting the best preferred product across our system. It drove savings, but with MultiCare being a 340B eligible entity, it also helped our 340B team clean up our crosswalk and enhance accumulations across our health system and get better 340B pricing.”
Why don’t all health systems do this? Dr. Frodin is candid: “I think a lot of it is, it might be something that’s easily overlooked. It’s just one of those things that you would assume that it’s already being done. But it also is quite a significant lift... We committed to that. We saw the value in doing that, and it was easy to see the success from that with the savings that we were able to achieve over that initial six months.”
After centralized purchasing, the next lever was upgrading pharmacy automation to enable perpetual inventory management and waste reduction. MultiCare invested in:
-Pharmacy carousels at all sites -Automated dispensing cabinets (BD Pyxis MedStations) and anesthesia carts -Health Site Inventory Optimizer (HSIO) for advanced data analyticsThese technologies allowed MultiCare to:
-Track inventory in real time -Identify and eliminate unused or expired medications -Reduce carrying costs and stockouts (to less than 0.8%) -Engage nursing in more efficient workflows“By doing that, we were able to reduce stockouts to less than 0.8% across our entire system, really improving nursing workflows. Nursing was super engaged and super excited about that work. As well as reducing our overall inventories and reducing our waste... we’re able to reduce that dramatically.”
The real breakthrough came from leveraging best-in-class data analytics to identify hidden savings opportunities and optimize supplier relationships.
Dr. Frodin partnered with QuicksortRx, a specialized pharmacy spend analytics platform. Here’s how it worked:
“They did the analysis, identified about a $1.25 million opportunity for MultiCare and we hit the ground running... because we’d already created that centralized coordinated purchase structure, and had done the legwork to update our pharmacy automation... we were able to triple that savings value that first year. Instead of saving $1.25M, we saved $3.5M that first year, and it’s been an amazing opportunity and it continues to drive about a 12 to one ROI for MultiCare.”
The cumulative result: $7.5 million in acute care pharmacy savings over 2.5 years, and a 24% reduction in inpatient pharmacy spend—compared to the industry’s 7% benchmark for similar organizations.
With superior data, MultiCare could now select the best vendors for every line of business. Notably, they added Mark Cuban’s Cost Plus Drugs Marketplace (For Business) as a secondary wholesaler for retail pharmacy, yielding another $1.8 million in savings.
Dr. Frodin breaks down the rationale: “With the data analytics that we used, we could see where [our GPO and wholesaler] were increasing pricing and where they were making their money. When it comes to the retail space, looking at oral generic solids... that’s where they’re making a lot of their markup. So by utilizing data analytics... it made it easy for us to be able to identify savings opportunities with other strategic partners.”
Key partnerships included:
-Mark Cuban Cost Plus Drug Company: Used for retail, oral generics; significant cost reductions versus legacy wholesalers. -Meg (online platform): Used for inpatient generic IV injectables, buying excess manufacturer stock at a discount. -Direct-to-manufacturer deals: Data analytics enabled MultiCare to quickly compare utilization and pricing, making direct contracts viable and efficient.The next evolution: building an Integrated Services Center (ISC), a central warehouse sourcing directly from manufacturers.
Dr. Frodin explains the logic and potential: “We can purchase directly into that hub direct from a manufacturer. And when manufacturers are shipping direct to you, they’re bypassing all the admin fees from your traditional wholesalers and GPOs, and they can pass that enhanced savings onto us as an organization. And so we’re seeing anywhere from 15 to 20% increased savings, even based off of any of the GPO pricing or 340B pricing that we’re seeing out there.”
“If you’re having all that brought in centrally and sending it out on one truck versus having one truck per each service line, just on the logistics piece, you can save a ton of money for your organization.”
When does a central warehouse make sense? Dr. Frodin advises that a 500-bed system is the tipping point for strong ROI, but organizations with robust ambulatory or specialty pharmacy programs can benefit at smaller sizes—especially if they centralize additional services.
MultiCare’s pharmacy supply chain transformation is a playbook for any U.S. health system feeling the pressure of rising drug costs and tight margins. The essential steps:
-Centralize purchasing and standardize processes. -Invest in perpetual inventory and automation. -Deploy advanced data analytics to benchmark and identify opportunities. -Leverage data to pursue new vendor relationships and direct sourcing. -Consider integrated distribution hubs as your system grows.As Dr. Tyson Frodin says: “We’re all in this together. Any opportunities we have to collaborate and work together, it’s time well spent... Looking to emulate what MultiCare has achieved? Please feel free to reach out.”
For more stories and strategies from the frontlines of healthcare supply chain, follow the American Journal of Healthcare Strategy and connect with Tyson Frodin on LinkedIn.
This article is informed by a podcast interview with Tyson Frodin, PharmD, MHA, Assistant Vice President, Clinical Pharmacy, Pharmacy Supply Chain and Technology, MultiCare Health System. For complete resources and links, see the episode notes.
