1. Managing Pharmaceutical Reverse Logistics
September 17, 2015
Hosted by the RLA Life Sciences Committee

2. Agenda Introduction Return Scenarios Returns Process Overview
Stakeholders
Landscape
Issues
Challenges
Opportunities
View into the Future
Q&A

3. Introduction Principal / Owner Bradford Rx Solutions since 2013
Focus on pharmaceutical distribution and reverse logistics
Deliver large ROI to clients
Finance background prior to 22 years Pharmaceutical experience
Audit and Financial Reporting
Managed several financial operations at McKesson
Reverse Logistics perspective from all supply chain partners
Privilege to create, build and sustain Reverse Logistics at McKesson for 13 years
Client base includes healthcare providers, reverse distributors, wholesalers and manufacturers
Business philosophy is entrepreneurial and disciplined
Business models must evolve
Reverse Logistics should be viewed as a business unit
Cross functional collaboration and integration is critical to success

4. Return Scenarios Wholesaler returns
Upon receipt (Damage, Ordered in error) - Returned to MFG
MFG initiated (Recall, Market Withdrawal) – Returned to MFG/MFG Provider
Wholesaler initiated (Overstock) – Returned to MFG/MFG Provider
Wholesaler initiated (Expired) – Returned to MFG/MFG Provider
Healthcare Provider (Pharmacy) returns
Upon receipt (Damage, Ordered in error) - Returned to Wholesaler
MFG initiated (Recall, Market Withdrawal) – Returned to Wholesaler/MFG/MFG Provider
Healthcare Provider initiated (Overstock) – Returned to Wholesaler
Healthcare Provider (Expired) – Returned to MFG/MFG Provider

5. Mature Returns Process

6. Expired Returns Process

7. Stakeholders Healthcare Providers (HCP) Wholesalers/Distributors
Initiate the return process for valuation, disposal and reimbursement
Overwhelming source of return volume within the industry
Wholesalers/Distributors
Primary financial conduit between HCP and MFG
Create programs with return providers and HCP
Return Providers
Outsourced reverse logistics partner for return by (HCP& Wholesaler) and return to (MFG)
Manage multiple data elements and processes (Product [NDC], MFG, returns policy terms, shipping or disposal requirements) which are unique to most MFG
Manufacturers (MFG)
Liable for product reimbursement according to terms and conditions of their policy
Initiate the reimbursement by check or credit to wholesaler, return provider or HCP

8. Landscape Highly regulated industry
Many agencies (DEA, EPA, FDA, DOT, State Boards of Pharmacy, State Health Dept.)
Return providers subcontract final product disposal for incineration
Impact of product traceability on reverse distribution not resulting in a sale
Large majority of stakeholders outsource returns processing
Generally viewed as non core business processes
Complex reverse logistic models to scan, value, reimburse and dispose Rx products
High product value and regulations increases product handling
Product value approx. $100 per unit
Mfg drive product eligibility and terms
Stakeholders are heavily dependent on each other to execute well

9. Stakeholder Issues Healthcare Providers (HCP) Wholesalers/Distributors
Unable to recover about 35-45% of expired product’s current value
Lack of resources for managing logistic and financial processes
Wholesalers/Distributors
Managing a financial reconciliation process and collection effort “outside” their network
MFG and HCP policies and actions may conflict
Return Providers
Regulatory burden continues & legislative/regulatory stakeholders lack full understanding
Success is heavily dependent on all other stakeholders performing well
Manufacturers (MFG)
Bear much of the financial responsibility yet have no control of the inventory
Reimbursement pricing is complex and critical to understand the source of the return

10. Challenges
Overall return volumes have moderately improved over the years but remain relatively constant due to variety of factors
Who or what really drives abandon scripts or inventory that expires on shelf?
Significant number of product scans increases cost and excessive reconciliations
Which scan is most accurate with most auditable process?
Regulatory disintegration creates ambiguity/inconsistency with compliance and increases cost
Which regulatory agencies and rules do I follow and what is the business risk I am willing to accept?
Data is not transparent to all stakeholders creating exceptions and rework
What can be done to identify the correct price for reimbursement from inception of return until final reimbursement?
Reimbursement values are highly complex since most returns are NOT from direct purchaser from the MFG
How does a MFG determine the price for a product that their wholesaler/distributors sells to the HCP?
Reimbursement process lacks EDI penetration with other order to cash processes
How can I reconcile to the product level in a paper credit or check environment?
Reverse logistic processes and reimbursement valuation are variable and unnecessarily complex
Where do I start and how do I remove cost without compromising a safe and secure supply chain?

11. Opportunities Logistics Data transparency and integration
Develop more collaborative relationships and business models with Stakeholders
Educate regulatory agencies on reverse logistics practices to improve rules/regulations
Data transparency and integration
Leverage technology to reduce duplicate processes and systems
Increase usage of EDI 812 credit reimbursement
Build more auditable processes to remove duplicative handling
Inventory inefficiencies and manual processes
Share data with stakeholders that drives more value to both parties
Utilize traceability for reverse processes where prudent
Decision tools at source of the return
Assist pharmacists in managing inventory and automating return processes
Provide more incentives for supply chain partners to be part of the solution

12. View into Future
Consolidations will continue to impact these Stakeholders
Margin pressures will force companies to reduce cost/profit leaks
Consumers will be a new stakeholder with take back initiatives
Industry needs cost savings to effectively fund “Take Back” processes
Product traceability can drive improvement beyond compliance
Emerging forward distribution models and specialty products will create new models and change economics of today’s models

13. Question & Answer What is on your mind now?
What could you do as a practical next step?
Where do you see opportunity for your company?

14. Contact Information
Scott Bradford
(817)
Will Kyzer Airport Business Development Director &
RLA Life Sciences Committee Chairman Anchorage Economic Development Corporation