Reduce drug return costs
Every pharmaceutical drug has an expiration date, and those dates sometimes arrive while the product is still sitting on the shelf in the store or pharmacy. Drug manufacturers have to collect these drugs from retailers, credit the retailers, and send the drugs to an incineration facility. There are multiple touchpoints along this reverse journey, every one of which is carefully monitored, documented, and governed by state and federal regulations.
Qualanex handles the whole reverse logistics process for dozens of the world’s leading pharmaceutical companies. Based in Libertyville, Illinois, the company handles returns due not only to product expiration but to drug recall, product damage, and other reasons. There are very specific rules for these returns: if a bottle is unopened, the retailer gets one refund amount. If it’s been opened and half the pills sold (in a pharmacy context), another amount. Retailers have to submit very detailed reports to receive refunds from manufacturers—and every manufacturer requires different data on the return reports.
If the manufacturer is slow in processing returns, large retail chains often proceed to issue a debit memo to the manufacturer for the amount that they believe they should be refunded for the return. However, they may not adhere to the manufacturer’s return rules and debit the manufacturer for a larger refund claim than they are due. When this happens, the pharmaceutical company has to either settle or challenge the retailer, which is a huge administrative headache.
“There are millions of dollars at stake with these returns, so manufacturers are eager to process returns quickly to avoid these unauthorized debit memos,” says Dan Ezell, Executive Vice President of Business Development at Qualanex.
Qualanex was thus under tremendous pressure to make the whole return process move as quickly as possible. However, one piece of the process was outside its control and slowed everything down: electronic data interchange (EDI). EDI vastly improves the speed and accuracy of information exchange in complex businesses processes such as reverse logistics, but Qualanex relied on third-party EDI providers, which introduced delays and high costs.
Manufacturers sent their varied and complex EDI requirements to Qualanex, which relayed them to the EDI providers. If they had questions, the EDI providers relayed questions back to the manufacturer by way of Qualanex. With all the back and forth, setting up a new product-return process could take a month or longer.
Additionally, the EDI suppliers had insufficient monitoring and controls in place to catch errors. When errors did arise, it was time-consuming and expensive to diagnose and resolve them. “We were completely at the mercy of these EDI vendors,” says Robert Goll, Director of Information Technology at Qualanex. “We thought about bringing the whole EDI process in-house, but it was too expensive to set up an integration infrastructure on-premises for jobs that only ran a few times a day.”