Reverse Spells Headache Relief

At Jack Ramage's previous employer, Albertsons (www.albertsons.com), the drugstore chain successfully switched from handling its own expired and recalled pharmaceuticals to outsourcing the work to an external provider. As director of pharmacy logistics for Wisconsin's Aurora Health Care (Milwaukee, www.aurorahealthcare.org) system, he has lead a similar transition that has succeeded in "taking a lot of the handling concerns away," he says.

Aurora is made up of 13 hospitals, nearly 100 clinics and more than 120 retail pharmacies. Among its diverse hospital services, Aurora has cardiac and cancer treatment programs as well as psychiatric care. The organization relies on a wholesaler, AmerisourceBergen (Chesterbrook, Pa., www.amerisourcebergen.com), for the supply of all of its pharmaceuticals. Ramage oversees and manages that contract, dealing with any inbound issues. Capital Returns (Milwaukee, www.capitalreturns.com)—the same organization he worked with at Albertsons—handles reverse logistics for Aurora's retail pharmacy operations.

The organization's hospitals follow a different process for returns. "That's more because we don't presently have an internal mechanism to manage the credit process for them," says Ramage.

Hospital pharmacies are quite different from retail pharmacies, handling "caps" and "tabs," and not a lot of liquids. Hospital pharmacies also deal with a large number of injectables, with different costs and different return policies for billing.

"All of our retail pharmacies fall under one umbrella," says Ramage."We are able to hire one person to manage the credit reconciliation-process with the manufacturers. Our 13 hospitals are all distinct business units."

Inbound orders go directly to the wholesaler. For monitoring, if necessary, Aurora uses San Diegobased Premier, Inc. (www.premierinc.com), a group purchasing organization, to make sure it is being charged the contract price consistently. Each product batch has a lot number and an expiration date. Neither the wholesaler nor Aurora tracks that electronically. It's all done visually.

"If you scan the bar code on a bottle of pharmaceuticals," explains Ramage, "it will pick up the NDC (National Drug Code) of the product, not lot and expiration. I think that's something that's hoped to be accomplished with RFID [radio frequency identification]. But currently I don't know anyone that has that information embedded into bar coding."

Aurora's pharmacies do quarterly returns through Capital. People in the stores walk their shelves on a monthly basis, looking for expired product. They remove the appropriate product from active inventory by putting it in a box and totally removing it from the active dispensing system. If the pharmaceutical needs to be replaced, the system will re-order it. If it's an item that's no longer dispensed, the stores will make sure it's not re-ordered.

"We do an alert for the stores," says Ramage. "On a monthly basis they get a report of items within their inventory that have not had a prescription filled on that drug in over five months. In some cases some of those may be expired or near expiration so they can react on that basis. Other items may be pharmaceuticals for which they no longer have a patient, so they can send an email and try to move it to another store."

Expiration is not the only reason for pharmaceutical returns. There are drug recalls, withdrawals and damaged goods, as well.

"There may be mandated or voluntary product recalls," explains Claude Dance, vice president sales and marketing for Capital Returns. "We work with both trading partners on that. For the pharmacy, we'll bring all recalls back to our facility, quantify them, provide a compliance report to them so they know that the involved drug is now out of their supply chain, and then we'll move the product to the manufacturer for evaluation, compliance and effectiveness checks with the FDA [Federal Drug Administration]."

Damages are a small percent of Aurora's reverse logistics operations. "We don't get credit for those," notes Ramage. The manufacturers don't give credit for re-packaged product either. If Aurora fills a prescription, and a patient never picks it up, it's designated as repackaged product.

Physically handling the returns is straightforward. Aurora's pharmacy personnel use the Capital Returns web site to order return boxes and labels. There are three classes of drugs: non-controlled, controlled substances and scheduled substances. Each requires different packaging and forms. Some have to be bagged and sealed. Scheduled substances require a Drug Enforcement Administration (DEA) form to be filled out. Capital Returns asks how many boxes are needed and sends them along with shipping labels. When shipments are ready, they move to Capital via UPS.

From the shipping labels Capital's system knows what is in the cartons. It stages the shipments on pallets, processing all Aurora Pharmacy returns together at one time.

"That's so all of our returns get grouped to a particular manufacturer," says Ramage. "It's not individual stores making returns, which is to our advantage since some manufacturers won't issue a credit unless you reach a certain threshold of returns. If we were doing 120 individual store returns, we might not meet that threshold."

In final processing at Capital Returns pharmaceuticals travel through its conveyor system and are sorted into appropriate-waste streams: hazardous material, controlled substance or normal destruction. Capital keeps all of the necessary paperwork on destroyed drugs on file. As Dance notes, Capital Returns effectively manages less than 2% of Aurora's total inventory but helps maintain the least amount of pharmaceuticals required within their supply chain.

"We believe," he says, "that happens by looking at timely and accurate information, the inefficiencies that previously took place, and then working collectively to streamline the supply chain—part of which is to provide appropriate reconciliation between the trading partners."