Reverse Logistics Service Providers Deal with Safety and Environment

Pharmaceutical CommercePharmaceutical Commerce - April 2009

Sustainability initiatives add to the complexity of managing reverse logistics for life sciences products

As supply chains seek to become more environmentally friendly, reverse logistics is taking on a broader scope. No longer positioned as just a means for handling product recalls and returns, the industry is adding “green” to the bottom line by offering pharmaceutical companies more sustainable and cost-effective methods for shipping back unsold Rx drugs from hospitals and pharmacies.

“From a recall perspective, the industry is continually facing changing regulatory requirements and increased scrutiny,” says Mike Rozembajgier, marketing manager at Stericycle (Lake Forest, IL), a business services and consulting firm specializing in, among other things, medical waste disposal and pharma recalls. He notes FDA is increasing field investigators around the globe to assist in protecting people against the severe damage that can be caused by non-compliance. “Overall, recalls are on the rise, and yet there is limited knowledge and awareness about the true impact that a recall of any size can have on companies from both a liability and brand perspective, especially when there is no recall plan in place.”

Experts concur that new and pending environmental requirements are a big reason why reverse logistics, once an afterthought in pharma, is now being taken quite seriously. Two bills introduced earlier this year in the House of Representatives to amend the Controlled Substances Act are seen as having a direct impact on consumer take-back programs, which have been hampered by the need to involve law enforcement to handle controlled substances. The Safe Disposal Act of 2009 (HR 1191), introduced by Congressmen Inslee (D-WA) and Moran (D-VA), would provide for disposal of controlled substances by ultimate uses and care takers through state take-back disposal programs. The Secure and Responsible Drug Disposal Act of 2009 (HR 1359), introduced by Congressmen Stupak (D-MI) with Smith (R-TX), provides for disposal of controlled substances in specific instances.

“There’s certainly an opportunity for our business in helping all segments of the pharmaceutical supply chain, including consumers, dispose of pharma products safely,” says Carrie K. Griffiths, director of corporate communications at WM Waste Management (Houston), a provider of trash and waste removal, recycling, and environmentally safe waste management services.

Both bills were referred to the House Committee on Energy and Commerce and House Committee on the Judiciary.

Meanwhile, the U.S. Environmental Protection Agency (Silver Spring, MD) is reportedly proposing the addition of “pharmaceutical wastes” to the federal Universal Waste Program, a move that would facilitate implementation of drug take-back programs on a wide scale. “These take-back programs would result in a decrease in the disposal of pharmaceutical wastes in municipal solid waste disposal facilities,” says Robert Schaltenbrand, director of strategic development, Guaranteed Returns (Holbrook, NY). “Guaranteed Returns is participating on an industry committee that is currently evaluating the entire rule.”

These and other proposed state and federal environmental regulations all have a financial impact on reverse logistics. The Reverse Logistics Executive Council (Reno, NV), an association of practitioners and academics, estimates reverse logistics costs account for approximately one-half of 1% of U.S. GDP. Throw in the patient-safety concern when a controlled substance is recalled — in an industry where 100% recovery is rarely achieved even for highly unsafe products – and you have the makings of a potentially painful hit to the bottom line if recalls and returns are not handled adequately.

“Current conditions are also requiring companies to focus more directly on core initiatives, many times leaving reverse logistics on the backburner,” contends Tom Marcellino, EVP, business development, Inmar CLS MedTurn (Winston-Salem, NC), a provider of reverse logistics and supply chain management systems to the consumer goods and healthcare markets. “Yet, the most important activity overlooked is an understanding that the reverse supply chain can contribute profits. And that many times outsourcing provides the focus and the profitability that otherwise would be overlooked when not a core competency.”

Green disposal solutions

With ever-changing regulatory requirements associated with healthcare products, experts emphasize the importance of pharma companies to ensure all aspects of drug recalls and returns are handled safely and cost-effectively. While the reverse side of the supply chain typically represented only 1% to 2% of total sales, in a suffering economy, every penny counts. “Manufacturers are looking at ways to minimize returns, match credits closer to actual value, expose inefficiencies in the returns process, and continue competitive return policies,” Marcellino says.

These and other factors are reportedly leading to additional emphasis being placed by reverse logistics providers on environmentally benign disposal practices. These companies claim they are well positioned to take all of the necessary steps involved in collecting and recycling of drug packages sent back to the manufacturer as a result of either recalls (where there is an FDA-mandated, or manufacturer-originated, retrieval of already shipped product) or returns (when out-of-date product is sent back to the manufacturer by agreement) to ensure an environmentally safe method of recovery. “Guaranteed Returns has and continues to support all environmental programs that local, state and federal agencies have established over the years to ensure the proper destruction and disposal of hazardous and non-hazardous waste material,” Schaltenbrand says.

Along the same lines, Stericycle reports it processed millions of pounds of waste-to-energy incineration in the U.S. last year, diverting non-hazardous specialty waste from being disposed of in landfills. “Stericycle offers creative solutions to provide eco-friendly disposal alternatives — such as recycling, separation of hazardous /non-hazardous components, and reuse - for manufacturers’ non-performing assets,” Rozembajgier says. “As a result of Stericycle’s Pharma Pail program at retail pharmacies in Canada, thousands of pounds of post-consumer pharmaceutical returns waste are being kept out of landfills or wastewater treatment systems.”

Stericycle recently acquired Strong Pharmaceutical Services, a division of Strong Environmental, which was formed to meet the unique disposal needs of the drug manufacturing industry. Strong specializes in managed destruction of clients’ pharma waste in a focused and responsible manner. “Stericycle and Strong can provide a variety of destruction services from standard non-hazardous, non-controlled waste to biologic, hazardous waste, both via incineration,” Rozembajgier explains. “A specialty waste analysis can also be performed to create solutions for unique waste situations.”

On the packaging side of the pharma business, environmental solutions are being developed that enable drug makers to reuse containers, saving them money and minimizing waste. A case in point is Entropy Solutions (Minneapolis), which offers a reverse logistics model that ensures a pharma customer’s purchased or leased temperature-management shipping system significantly minimizes packaging waste and drives down shipping and logistics costs. The Greenbox line features a reusable design which is said to provide customers with up to 100 times of reuse, and created with 100% recyclable, organic-based, non-toxic and fully biodegradable components.

Earlier this year, the thermal technology development company expanded the Greenbox line of temperature-controlled shipping products by introducing Pallet Shipper, capable of shipping 16 ft(3) of temperature-sensitive pharmaceuticals or biologics, and reusable more than 250 times. “Until now there have been very limited choices when it comes to shipping large quantities of temperature-sensitive goods, either traditional cardboard/gel pack shippers or expensive aluminum ones,” noted Eric Lindquist, president, “With our Greenbox Pallet Shipper, we are able to provide them durability

and longevity while being extremely cost-effective.”

Enhancing recall & return systems

While a large component of handling a drug recall is the physical processing and disposition of the product, even more important is tracking and information exchange of the recall data. Extensive government regulations and reporting requirements, along with an increased focus on pedigree, have increased the need for good tracking, visibility and control measurements, industry watchers say. These are all critical components for any reverse logistics process.

Nonetheless, a number of technical and business obstacles continue to impact unsaleable returned goods in the healthcare supply chain, as reported by the HDMA Returns Task Force (RTF) in a white paper published in January 2007. Industry members say efforts being made to improve processes and technology efficiencies for returned unsaleable healthcare products, such as leveraging technology to streamline data flow between trading partners and cutting down time between when a product is received, and when the manufacturer credits the retail pharmacy for it.

Stericycle, which provided resources to aid HDMA in the development and publication of the white paper, says it is working with industry, distributors and other third-party service providers to identify current best practices in the areas of returns, recalls and withdrawals, and reverse logistics. “Stericyclehas established best practices to help manufacturers efficiently manage the reconciliation process, enabling clear and accurate reconciliation, visibility to ‘work-in-progress,’ and the ability to manage count discrepancies in an efficient manner,” Rozembajgier says.

For example, Stericycle demonstrated its commitment to developing expanded capabilities by launching its Debit Memo Service (DMS) last year. “DMS allows clients to quickly and systematically reconcile 3PL (third party logistics) Debit Memos to actual process data (physical product received) and create the necessary short payment forms, as designated by the wholesaler,” Rozembajgier explains. The result supports shorter debit memo processing time and enables potential re-allocation of resources. “In the DMS pilot study, Stericycle enabled a manufacturing client to reduce internal overhead by 3 FTEs (full time employees),” he says.

Some 3PLs are leveraging their large retail and wholesale scale to drive costs out of the returns process for both trading partners. One potential solution offered in the HDMA report is adopting a one-count arrangement, referring to a drug return process that would reduce multiple handling and system redundancy, thus driving costs from the supply chain. By comparison, the traditional two-count returns process results in multiple entities touching the product, each one adding cost.

“While some predict that the one-count process is not likely in the near future, Inmar CLS MedTurn has already made it a reality with a program called the “One Touch Advantage,” Ashley Kermann, product manager at Inmar CLS Medturn, says.

By servicing a large share of the wholesalers and retailers in the healthcare industry, Inmar CLS MedTurn touches the returned product first. “Many of our manufacturers, in collaboration with their trading partners, have made the innovative leap of agreeing to a one-count process and eliminating transportation costs, sharing destruction costs and receiving more real time data feeds for faster credit reconciliation purposes,” Kermann says. “This approach not only provides financial benefits, but also is an environmental sustainability best practice by eliminating a leg in the transportation and reducing carbon footprint which creates value for both retailers and manufacturers.” Eliminating touch points also alleviates the risk associated with shrink and counterfeit.

One Touch Advantage is supported by highly automated systems that provide the documentation and quality assurance necessary to meet government regulatory requirements, Kermann says. “Most decisions are computer aided to drive accurate decisions regarding the proper waste stream at the lowest level of detail - the item level.”

With ever-changing regulatory requirements for product disposition and recall management, not to mention growing concern regarding counterfeit and diverted product, a pharmaceutical returns program must incorporate policies and programs that control the risk associated with these governmental and environmental changes. Which is a big reason, experts say, why reverse distributors are reporting notable increases in the number of drug companies utilizing their services. An increase of more than 200% utilization of core services to assist manufacturers in supply chain related activities “is testimony that Guaranteed Returns has viable solutions for the manufacturers as well,” Schaltenbrand says.

A competing service is offered by Guaranteed Returns, called the One & Done Program, which is the multi-sourcing of product processing. “This is a trend that has gained traction due to the inefficiencies and multiple handling costs that are encountered in the supply chain,” Schaltenbrand explains. “Guaranteed Returns has been successful in setting up over 70 trade partner agreements with manufacturers allowing Guaranteed Returns to destroy the product at station and electronically report processing data (EDI 180) to the trade partners, thus eliminating shipping costs and duplicate processing costs at either the manufacturer or its return goods agent expense.”

Indeed, companies specializing in handling drug product returns and recalls concur they are well positioned to handle every aspect of reverse logistics, including notification and response, processing and tracking, compliance and reporting. They offer various turnkey solutions which can be customized to handle recalls of any size and scope.

“We believe we can enable the elimination of non-value added activities, thus driving out unnecessary costs,” Rozembajgier says, adding that Stericycle partners with approximately 200 pharma manufacturers to deliver total supply chain visibility and robust, independent data that drive common objectives. “Stericycle’s investments in quality and technology have resulted in meaningful business improvements and significant savings for our customers.” PC

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