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PharMACE: Solutions for Managing Pharmaceutical Returns
Emily Laws, Senior Business Development Manager
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Solutions for Managing Pharmaceutical Returns
Emily Laws Senior Business Development Manager, Inmar 2
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We manage over $53 billion a year in commerce value
ABOUT INMAR 4,500 employees 35+ years of experience Engagement with over 109,000 manufacturers and retailer locations Processing more than 2.4 billion promotions each year Managing more than $3.4 billion in promotion settlement transactions annually Processing over a terabyte of data on an annual basis. We manage over $53 billion a year in commerce value
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INMAR IN THE EVERYDAY ECONOMY Fast, Integrated, Trusted
PROMOTION SUPPLY CHAIN HEALTHCARE When you use a coupon… When you return a product... When you fill a prescription... There is a high probability Inmar processes the redemption for the retailer, manufacturer or both… There is a high probability Inmar processes your return for the retailer, manufacturer or both… There is a high probability Inmar processes the script claim for the pharmacy… Inmar captures incentive amount and terms, shopper behavior, SKU level purchasing information, location data and hundreds of other attributes along the way… Inmar captures invoice amount, product list, return reason, location and hundreds of other data attributes along the way… Inmar captures prescription quantity, drug, patient, refill and hundreds of other attributes along the way…
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INMAR is improving the quality, efficiency and collaboration among retailers, manufacturers and trading partners everyday.
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Setting the Stage ‘80’s ’90’s ‘00’s
A thirty year challenge is the genesis of a relatively new industry ‘70’s ‘80’s ’90’s ‘00’s Few expiration dates Pharma reps carried re-stock in their trunks No hassle, no paperwork, no delay Prices relatively low Prescription Drug Marketing Act (PDMA) Without “car trunk currency” reps stopped visiting pharmacies and distributors Prices on the increase Costs of holding and processing returns in-house rising Movement from DIY to 3rd party New problem of short-dated products In 2002 HDMA publishes second study on unsaleables and the reverse distribution of pharmaceuticals 6
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Historical Growth of Rx Returns
VOLUME DRIVERS FINANCIAL DRIVERS Expiration dates PDMA Effect Short-dated product inventory increasing Returns grew at a faster rate than the industry as a whole Existing drug prices increased faster than general inflation New drug prices increased geometrically Overstocked In-house storage and handling of returns drove up business costs 7
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Other Sources & Causes of Returns
Package changes Reformulations NDC changes Recalled by manufacturer Withdrawn by manufacturer Discontinued by manufacturer Patent expiration Manufacturer changes to the product Buying group/ GPO / large customer changes
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The Financial Side of Returns
1-3% of total sales get returned 30% of returns have discrepancies Lack of item level serialization Lack of detail on batch returns Average size of discrepancy is 8% -12% Early deductions by some retailers Manufacturer responsibility for chargeback resolution Game of debits vs. credits 1-2% of returns are written off due to data collection errors 4.5% of all chargeback's remain unresolved
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Pharmacy Financial Flow
Typical Two Count Process Policy & Pricing Applied Policy & Pricing Applied Invoiced Product Product Mfr. /Agent Distributor Third-party Pharmacy Destroy Credit Credit/Check Manufacturer Distributor CYCLE TIME is Impacted by PROCESS TIME & TOUCH POINTS 10
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What Causes Pricing Discrepancies?
OPTIONS FOR INVOICE PRICING Retail List WAC (Wholesale Acquisition Cost) -% Acquisition Lot level Historical TIMING Price at the time of purchase Price at the time of returns RETURNS POLICIES NDC Lot Expiration Date Full or Partial Seal Quantity (some retailers want estimates, some exact) Multiple touches equal differences 11
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…And Can Result in No Credit
*Includes excess quantity, free/donated, return value not met, incomplete NDC (National Drug Code, returns not accepted. NOTES: Based on data from rive reverse distribution service providers, “first touch” only. Sum of percentages exceeds 100% due to study methodology SOURCE: HDMA Research & Education Foundation Survey Data 12
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One Touch Process 1 2 3 CHALLENGE:
Manufacturer experienced count discrepancies and variances on returns invoices from their trading partners causing deductions and chargebacks SOLUTION: Trading partners implemented a one touch returns program where both accepted the counts of the retailers’ returns processor RESULTS: The manufacturer saved $225,000 in fees and reduced $495,000 in discrepancies and variances 1 2 3 13
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Realized Results More players = less complexity
ONE TOUCH drives customer compliance Breadth of clients makes returns simpler, more efficient, and cost effective Less deduction research, resulting in a minimum of ½-1 FTE reduction on average Elimination of higher processing fees (either to another 3PL or in-house handling) Numerous productivity gains using ONE TOUCH Riddance of count discrepancies Remove the risk of lost shipments—diversion Reduction to the Carbon Footprint Minimization of deductions
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One Touch Key Points Policy and Pricing for each party is applied Real time data feeds enable faster credit reconciliation. Data is available online and via EDI 180 transfer with both retailer/wholesaler as well as manufacturer pricing. Full disclosure of data ensures accurate crediting and evaluation 75% of today’s RECALL RETURNS get sent back through the retailer, wholesaler and institutional community via their contracted “Returns Processor”
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Key Strategies to Reduce Cycle Time and Save Money
Utilize the One Touch Process Counts Match Transportation Reduced Touch Point Eliminated Collect Data and Analyze Information BENCHMARK! 16
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Benchmarking Can Help Identify Opportunities to Save Money
TYPE BASED ON PARTIALS EXACT COUNT SEAL REQD Generic Current price or lowest price billed in last 24 mths N Y Brand Current acquisition cost less 10% Lower of net wholesale price or contracted price at time of expiration Lower of current price less 5% or lowest contract price at time of return less 5% Lower of current price at processing or acquisition cost WAC at time of processing minus 10% Lower of current price or price paid Direct-lower of current published price at time of processing or original purchase price Original purchase price Lower of current or invoiced price Non-discounted WAC at time of purchase Price at time of purchase Current WAC minus 5% 17
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Inmar, the Best Partner for Your End-to-End Return Process
Environmentally Sustainable Return Tracking COLLABORATION Reduced Processing Fees Analytics & Reporting Increased Visibility
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Minimizing Deductions Relating to Returns
LOG deductions from past six months CLASSIFY AND ANALYZE deductions dollars by intentional or controllable SELECT largest preventable reasons ENGAGE sales & return processor to identify underlying factors COMMUNICATE financial impact often & early to management & others impacted
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Emily Laws emily.laws@inmar.com 336.770.1912
THANK YOU Emily Laws
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