Returns Management/Reverse Logistics

Take Away the Incentives to Play Games

Why does the pharmaceutical industry need extended dating in this age of supply chain efficiencies? The goal of all participants in the pharmaceutical industry should be to reduce cost. Too much capital is tied into wasted inventory. Surplus inventory creates a liability for the Branded Rx manufacturers. With the cost of bringing new and innovative drugs to the market, this capital can be better deployed instead of dealing with unexpected returns.

Only when manufacturers take away the incentive to game the returns process will this problem go away. The key, again, is the manufacturer taking ownership of this problem and dealing with it in the following manner:

1) Track drugs by lot number and only accept returns at purchase WAC less 10%. In some cases, based on your product mix, it might make sense not to accept returns at all.

2) Remove the excessive dating that allows products to be returned up to a year after it expires. At the same time, shorten the dating from up to six months prior to expiring to only three months dating; this dating is more than sufficient if DOH is targeted correctly.

3) Manufacturers need to build into their next generation FFS agreements penalties if one of the wholesaler's customers violates a manufacturer's return policies and takes unauthorized deductions.