Watch the Date!
Written by MICKEY MCCARTER
PHARMACEUTICAL RETURNS BOOST THE BOTTOM LINE AND GIVES CREDIT WHERE CREDIT IS DUE.
The Defense Supply Center Philadelphia (DSCP) runs a program key to boosting the pharmaceutical budgets of military treatment facilities (MTFs) throughout the U.S. military—a program that enables defense pharmacies to return expired drugs to their manufacturers for credit.
Captain Alvin Blackmon III, chief of DSCP prime vendor customer operations, serves as manager for this pharmaceutical returns program. Blackmon said that the program has assisted pharmacies within DoD by saving them money. “From the standpoint of an MTF, ultimately most MTFs would have an expired drug and they could simply dispose of it,” Blackmon explained. “However, the returns program that we have allows the MTF to receive a credit on their prime vendor account. An MTF has to enroll in our program. It’s as simple as going to our Web site and putting in contact information and things like that and then submit it to us.”
The current pharmaceutical returns program is not mandatory for all military medical activities, Blackmon added, so a pharmacy chooses whether to sign up for the program or not. Once installations sign up, DSCP shares their information with the prime contractor under the contract, a company called Guaranteed Returns, based in Holbrook, N.Y.
Recently, DSCP extended the Guaranteed Returns contract, which was set to expire, until September 30, 2006. By that time, DSCP plans to have a new contract vehicle in place, according to Blackmon. At press time, Blackmon hoped to release a solicitation during the month of June and award contracts to multiple vendors, instead of just one, by the expiration of the contract held by Guaranteed Returns.
“We haven’t solicited a new contract yet, but it will give the MTFs the options to select the company they want to choose. Some MTFs feel like, ‘Hey, why should I go through one company?’” Blackmon said.
The new contract will be mandatory for all DoD MTFs. The current contract also provides non-mandatory service to pharmacies at the Department of Veterans Affairs (VA). Like with MTFs, the new contract will require VA pharmacies to sign up. “They will have options and they will have choices. No one wants to be forced to deal with just one company. What if there is a service issue or what if there are problems? People want to be given options,” Blackmon commented. “The new contract will have one-year options. Say you get into the contract for a year and you are not satisfied with the returns company. You then have the option to go to one of the other companies.”
Extending the contract to more than one vendor in no way reflects upon the performance of Guaranteed Returns, Blackmon emphasized. Rather, awards to multiple vendors are designed to appeal to pharmacies and make the requirement of signing up for the new contract more appealing to individual pharmacies. As for pharmaceutical returns, U.S. law stipulates how pharmacies or their contractors should package drugs for shipping. But the law does not require drug manufacturers to take returns on drugs in a pharmacy’s formulary that have expired. The drug companies do so voluntarily to make their product more appealing to both commercial and government pharmacies. If a product goes unused before its expiration date, then the pharmacy is not stuck paying the full cost of the product.
“The credit depends on the manufacturer,” Blackmon said. “It depends on what they want to give back to us for it. Say a drug costs $100. A manufacturer could be willing to give you say $80 for that return. That price is set by the manufacturer. We cannot dictate to the manufacturer how much credit to give us. Normally, this product would just be disposed of.”
Once an individual pharmacy has accrued $100 in credits from a vendor, then it could use that $100 to buy a $100 drug instead of tapping its budget for the purchase. “You are going to save money because you are using your credits,” Blackmon noted.
Many MTFs rely a great deal upon the services offered by Guaranteed Returns and other pharmaceutical returns companies, Blackmon said. The company can pack up expired drugs and ship them to a distribution center. From there, it determines which drugs can receive credit and which cannot. It will dispose of those that cannot, for a fee, and return the eligible expired drugs to the manufacturer for the appropriate credit.
Meanwhile, the company will track inventory of what is happening with the drugs at each stage. Pharmacies can access the inventory list through a Web site established by Guaranteed Returns. “Guaranteed Returns provides a Web site that you can go to, so you can monitor and see what is being disposed of and what is getting credit,” Blackmon said. “So you have visibility on the returns process. That’s something that not just Guaranteed Returns offers but its competitors do so as well.”
INCUMBENT VENDOR
Guaranteed Returns opened its doors in 1986, and it started assisting military facilities with their pharmaceutical returns right off the bat, said Bob Frechette, head of marketing for Guaranteed Returns. The company first received its current DoD/VA contract in early 2001.
“Every pharmacy—whether it is in DoD, Indian Health, Bureau of Prisons, VA—has a formulary. They have to keep certain stock items on their shelves,” Frechette told MMT. “These items could expire, be recalled, not be used, or the formulary could change and can no longer carry this product. So the pharmacy is kind of stuck with these products. A long time ago, the pharmacy would destroy the product on its own. “However, EPA, FDA and everyone else with initials stepped in and said we can’t do this anymore. It’s not proper. There were stories going back years ago where medications, vials, syringes and whatever were washing up on the shorelines. They had to do something about it,” he added.
So pharmaceutical returns companies stepped in to help act as the middleman between DoD and VA agencies and the drug manufacturers that would award credit for expired, recalled or cancelled drugs, all pharmaceutical returns.
Frechette, who is retired from the U.S. Air Force, gives the defense department high marks for how it handles its pharmaceutical returns. “Working with the DoD is a lot easier than civilian institutions, as the individuals there are going to be there when they say they are going to be there. You set a schedule and they meet the schedule. They are used to meeting certain guidelines,” Frechette noted. “The record-keeping is a little better than you would see in the civilian world, but in the civilian world, they keep tight records on pharmaceuticals also.”
Because military professionals working at MTFs have vital missions to fulfill, they often do not have the time to take on tasks like returning expired or recalled pharmaceuticals. Guaranteed Returns will send people to those installations to scan their shelves and determine what drugs should go back to their manufacturers. The company also will pick up drugs that have already been packaged for return.
The work performed by pharmaceutical returns then saves time, which in turn can save operating funds, but also wins credit from the drug manufacturers. “They used to destroy the expired product,” Frechette said. “So they were throwing money away. But now, we can actually go after these returns and capture money for it. They get money back into their account, which helps them with their budgets.”
Although the drug manufacturers’ offer returns benefits to all of their customers, Frechette agreed that DoD could come out a little bit ahead on returns as compared to some civilian pharmacies due to the purchasing power it gains from its size. “The industry that is out there—Pfizer, Merck all of these folks—the reason they are giving credit back is because they are trying to keep their customer base,” Frechette noted. “They hope that if they give you credit back for this product, you are going to keep using them. The manufacturers out there are really trying to help everybody out, whether it is government, industry or the mom-and-pop store down the street. They are really trying to help everybody out.
“With the government, since they do buy at such a low rate, we are able to give them a better deal. We can capture more money for them because it’s not as high a cost on the back end,” he added.
Pharmacies also have been turning to other companies to provide assistance with pharmaceutical returns, despite the national contract vehicle in place with Guaranteed Returns. The DSCP plan for the new contract would ease any concerns with this through awards to multiple vendors, but Frechette argued in the meantime that pharmacies were not using the best option available when using another company.
“When you contract with Company X, you have no recourse in case of a problem. If they do something wrong and you don’t like it, you have to call their 800 number and you have to wait in line and you have to fight the system with them,” Frechette submitted.
“With Guaranteed Returns and the fact that we have the government contract, if there is an issue and a problem, and you can’t resolve it with us—and you should be able to resolve it because anyone can contact us anytime—but if we can’t solve it then you can always go to DSCP. You have an avenue, whereas with local contracts you really don’t.”
Guaranteed Returns’ competitors, of course, hold a different view.
OPENING THE DOORS
Pharma Logistics, based in Mundelein, Ill., provides pharmaceutical returns services to several prominent military medical facilities, including Walter Reed Army Medical Center in Washington, D.C.
Michael Zaccaro, president of Pharma Logistics, said that his company has provided service to DoD and VA for the 10 years that it has been in business. Zaccaro believes DoD has a lot to gain by opening the door to other vendors on the prime pharmaceutical returns contract.
Zaccaro believes in taking a more proactive approach to the problem of expired pharmaceuticals than many of its competitors. This involved expanding its range of services beyond simply pursing credits for expired drugs, he explained. “About two years ago, we decided to begin to treat the problem and not the symptoms. By that, I mean that expired pharmaceuticals are fundamentally a purchasing error. While that is not always the case and while there are some items that historically are going to expire with the best of inventory management practices, we began to see that if we could baseline and trend our customers’ expired pharmaceuticals, we could better help them manage their inventory,” Zaccaro said.
While Pharma Logistics provides traditional pharmaceutical returns services, the company also leverages the trends that it discovers to empower better management of inventory at each individual pharmacy, Zaccaro said.
Each company client receives a personal account on the company’s Web site. Pharma Logistics can set up as many secure individual accounts for each pharmacy as required. “On an ongoing basis, we give our clients—including Walter Reed and all of the VA clients—access to our Web site and the dynamic reporting function on the Web site,” Zaccaro explained. “That allows them to go in there and for any period of time—the last return, the last five years worth of data, whatever it may be—they can query that data to find out exactly what items they are expiring on a regular basis, what are the high dollar items they are expiring, what generic class those items are in, and more.”
Using a series of reports to analyze such data, pharmacies can learn how to improve management of their inventories and then make decisions on drug purchases based on their needs and trends reflected in the management reports.
Pharma Logistics gains an advantage over competitors through the use of these tools, Zaccaro argued, and through its ability to recover credits for DoD facilities outside of the United States. “When you are talking about these overseas Army bases, one of the areas that they struggle to recover credit on right now, if they are receiving any credit, is on controlled substances because the DEA [Drug Enforcement Agency] does not allow the re-importation of controlled substances back over the borders,” Zaccaro explained.
Thus such bases generally destroy expired product rather than gain credit for it. But Pharma Logistics has methodologies for recovering credit for those items instead, Zaccaro insisted, but he did not elaborate to protect his company’s methods.
Zaccaro could point, however, to past performance of recovering credits that other pharmaceutical returns companies had neglected. When Walter Reed Army Medical Center hired Pharma Logistics, the company reviewed the hospital’s past accounts to see if any outstanding credits remained. “A lot of times, returns companies will tell a customer that they are going to receive X amount of dollars, and without a dedicated customer service—or what we call reconciliation—department following up on those credits, a lot of times, those credits go unachieved, if you will,” Zaccaro said.
After conducting some due diligence at Walter Reed, Pharma Logistics immediately discovered $70,000 in credits waiting for release to the hospital from one vendor.
Zaccaro said his industry has to evolve away from its traditional model and into an improved partnership with its clients to become more effective and useful. “We have taken that model and said, while that was good enough 10 years ago, it’s not good enough anymore,” he insisted. “We are really looking to separate ourselves by helping our customers provide more effective inventory management. A lot of that is Web-driven.” ♦