HDA issues a report detailing recalls and returns
Many pharma marketers are indifferent to the subject of reverse distribution, according to trade-channel experts, until it’s pointed out that some 4% of pharma commercial inventory is involved—an estimated $13-billion portion of the industry. At that level, poor management of recalls and returns can impact quarterly revenue figures, while also representing a potential sinkhole of resources for manufacturers, wholesalers and dispensers alike.
These are some of the details analyzed by a new report from the Healthcare Distribution Alliance’s Research Foundation, “The Role of Reverse Distribution.” “Though forward distribution has been widely studied, we recognized there was a lack of an up-to-date, singular resource to describe the intricacies of reverse distribution,” said Perry Fri, EVP of industry relations at HDA and COO of the Foundation.
Some definitions: “returns” represents products that might be in overstock at a dispenser, and for which wholesalers are usually obliged to accept in return for a store credit. “Recalls” are products that, for a variety of reasons, are unsaleable, sometimes because of production flaws and sometimes because their regulatory approval has been withdrawn. (Parenthetically, the Stericycle Recall Index, compiled by that reverse-distribution company, reported a significant jump in recalls in 2017: up 12.5% in number over the previous year.)
A significant portion of returned product is resaleable: HDA estimates that 2.1% of overall pharma sales volume is resaleable goods, worth some $7 billion. Cumulatively, resaleable product is some 59 million units out of all reverse-distributed product flow of 120 million—a significant undertaking that mostly falls on the shoulders of wholesalers. There is a heightened interest in managing the return of controlled substances properly—due to the opioid crisis impacting the country—and pharmaceutical takeback programs are having an impact as well.
The report estimates that some $15-40-million could be removed from the reverse distribution process annually if redundancies could be eliminated. But the biggest looming factor is the impact of the Drug Supply Chain Security Act (DSCSA), which will mandate verification of returned product (before it re-enters distribution) by wholesalers after November 2019. That is causing a scramble, by HDA and others, to have IT systems in place to streamline the returns process.
The HDA Foundation report is free to registered HDA website users. It was sponsored by two reverse-distribution vendors: PharmaLink, Inc., and Guaranteed Returns, and researched by Kindler & Crimmins Associates, LLC, and Bradford Rx Solutions, LLC.