UPS and Endo Pharmaceuticals Go Live With Controlled-Substances Ordering

Pharmaceutical CommercePharmaceutical Commerce - November/December 2010

The implementation, executed with IT vendor Axway, has shaved nearly 18 days off order cycle times

For nearly 30 years, the US Drug Enforcement Administration has required documentation for transactions involved controlled substances, which are primarily pain or neurological products with narcotic effects. The process has added difficult administrative burdens to manufacturers and their trading partners, and can interfere with the timely delivery of needed medications to patients. Recognizing these problems, DEA has worked with manufacturers and distributors to develop what is called the Controlled Substances Ordering System (CSOS), an all-electronic recordkeeping system.

CSOS was finalized in 2006, but its take-up by industry has been slow in recognition of the complexity of the IT issues. Recognizing both the challenges and opportunities of the process, Endo Pharmaceuticals (Chadds Ford, PA) and its distribution services provider, UPS Healthcare Logistics, began working with DEA in 2004 and then piloted a system in 2009.

In April 2009, UPS’s CSOS system for Endo Pharmaceuticals went live for a pilot customer — a large wholesale distributor serving pharmacies across the country. Now, Endo, UPS and Axway are ready to share the behind-the-scenes story of how CSOS was born at Endo, and their vision of what the future holds for others in the industry that choose to embrace CSOS.

A commitment to change

DEA Form 222 is a familiar document for any company involved in the manufacturing, ordering and order fulfillment of Class II controlled substances. The decades-old manual ordering process was designed to verify that all parties involved in the transport and receipt of Class II controlled substances are who they claim to be, thus securing the supply chain. Unfortunately, Form 222 also meant an order cycle time of anywhere from 14 to 21 days, a major drawback for retailers and pharmacies not in the business of lengthy delays in fulfilling customer orders.

With a large percentage of its business involving controlled substances, Endo Pharmaceuticals has completed more Form 222s than the company cared to count. Handling distribution for Endo, UPS well understood the challenges of this form. The promise of an easier and more efficient cycle time was one appeal of CSOS for the company; another was pioneering the next frontier in industry change, and putting a system into place before customers even asked for one.

Working together since 1999, Endo and UPS have built a collaborative supply chain partnership. The company’s distribution is handled out of a UPS healthcare facility strategically located in the central US, enabling products to reach 75% of Endo’s customers across the country within two business days. In 2005, when Endo was ready to move forward with CSOS, approaching UPS for a solution was a natural decision.

The journey to CSOS wasn’t easy. Endo faced several challenges, especially in terms of finding technology that would work for CSOS while also meeting the stringent requirements set forth by Endo, UPS and the DEA. For its part, UPS was challenged with building a new and vastly different system from its original LMS (UPS’ enterprise management system). This new system had to handle CSOS ordering while maintaining the highest levels of security. It was at this stage that UPS brought Axway on board.

Already a recognized leader in CSOS solutions, Axway was awarded the prestigious Healthcare Distribution Management Association (HDMA) iBusiness Solution Award in 2006. HDMA recognized Axway’s CSOS solution for its ability to deliver cost control, increased security and greater visibility into controlled substance transactions, while simultaneously ensuring DEA compliance.

Hard changes

While the DEA cleared the way for CSOS, it did not mandate it, meaning that companies were left with a choice on whether to proceed. They were also left with the challenge of interpreting and adhering to very strict guidelines. A key success factor of Endo’s CSOS initiative was its strong relationship with the DEA. Endo had been working with the agency as early as 2004 and became part of the original working group focused on the CSOS initiative. Another key factor was Endo’s relationship with UPS, which involved a commitment from both companies to change together based on the changing needs of the healthcare industry.

“We decided to move forward with CSOS anticipating the need to get ahead of the curve to better serve our customers, and being among the first companies in our industry to do this, we faced both challenges and opportunities,” said Daniel Carbery, SVP, Endo Pharmaceuticals. “We learned that the keys to implementing CSOS were not only having a good plan and being focused, but also being flexible, accountable and customer focused.”

In practice, the Axway CSOS solution links to the LMS system, which comprises systems for order management, warehouse management and accounts-receivable functionality. Endo, UPS and Axway pass information among each other via EDI, requiring encryption and firewall issues to be resolved during the implementation.

Axway’s CSOS solution takes the complexity associated with ordering controlled substances and enforces a simple workflow that accurately models DEA requirements and intentions. Customers can create an order, certify the order and submit the order from inside the seller’s portal, their desktop or via electronic data interchange. All orders are verified as required by the DEA and then inserted into the order fulfillment workflow of UPS’s LMS system. This capability saves UPS time and money by preserving their investment in LMS while ensuring that the correct order process is followed.

“Axway’s CSOS product enables UPS, and clients such as Endo, to significantly reduce operational expenses and fill orders quickly while safeguarding security and compliance. Axway values its long term relationship with UPS, and continues to collaborate with UPS to quickly and efficiently address supply chain technology needs,” says Ruby Raley, Director Healthcare Solutions, Axway. “Much like the business collaboration between Endo and UPS, Axway and UPS work closely together to deliver solutions that meet customer needs and expectations.”

The operational payoff

A little over a year after the first CSOS order was shipped from Endo to the pilot customer, many benefits of the new electronic solution have been realized. For starters, the previous order cycle time of 14 to 21 days has been reduced to 3-5 days. This is a major advantage for this wholesale distributor in serving its customers and reducing inventory on hand. The days of urgently shipping Form 222s are over; now they can ship CSOS orders same-day — a capability that wins them high marks from customers.

Endo itself is seeing the benefits of CSOS. Reports that must go to the DEA detailing CSOS order information now can be uploaded electronically into the DEA’s system, saving Endo the tedious process of developing and submitting manual reports each month. And the lead times the pharma company is able to save its customers are translating into deeper customer relationships.

This collaborative CSOS solution has proven itself. Endo has more customer CSOS implementations in the pipeline and is fielding numerous inquiries from customers looking to get on board with electronic ordering.

Director of UPS Healthcare Logistics Dan Gagnon adds, “With CSOS, we see a tremendous opportunity for the pharmaceutical industry not only to shrink order cycle times, but eventually controlled substance inventory, an important advantage for pharmacies and retailers operating in a demand-driven industry. The key in the healthcare supply chain is to have a strong willingness for collaboration and be ready to take advantage of new innovations. Doing so ensures companies like Endo will remain on the cutting edge and the healthcare system as a whole will reap the benefits.” PC

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