Many people do not know that the prescription drugs in their medicine cabinets have quite the tale to tell. Its’ story ends with them, the consumer, a regular Joe going in to fill a prescription at a local pharmacy. The beginning of the tale? Well, that’s slightly more complicated. You know as a pharmaceutical wholesale distributor that the drug sitting snug in their cabinet has come a long way from the time it was made. For every single prescription drug a person takes, the product has passed through at least four different companies to end up at their local pharmacy – it starts at the manufacturer, the manufacturer then sells it to you, the pharmaceutical wholesale distributor(s) who then sells the product to either other distributors or a network of pharmacies. The pharmacies then offer it to their clients. The requirement to track each drug throughout its journey along the supply chain is why the pharmaceutical distribution industry is one of the most complex and highly regulated systems to exist.
With every member of the supply chain, additional fees and markups get added to the cost of the drug, which is why the prescription drugs that end up in the consumer’s hands have such a high value. In fact, the costs of prescriptions drugs became so high in the 1960’s that health plans were not able to accommodate coverage and so companies called Pharmacy Benefit Managers (PBMs) rose to cover these prescriptions on behalf of the insurance companies, and in turn, the pharmacies that sell the drugs. OptumRx is one of the three major PBMs still in existence today. PBMs are responsible for negotiating drug prices to keep costs down for end consumers and to push the most effective drug out of the many options available on the market. While not everyone agrees with the existence of PBM’s (since they also make a nice profit from insurance companies through what’s called spread pricing), they are an important part of this convoluted cycle today to keep costs down for the end consumer.
So where do pharmaceutical wholesale distributors fall into this cautionary tale? Well, back in 2016, OptumRx introduced a compliance rule that restricts pharmacies within its network from accepting product from wholesale distributors, unless those wholesale distributors are Verified-Accredited Wholesale Distributors (VAWD) certified. OptumRx first announced this requirement in August 2016 but at the same time granted an extension to distributors to achieve their VAWD accreditation. Although not every pharmacy requires its distributors to be VAWD certified, it establishes your wholesale distribution business as a trustworthy trading partner in the US pharmaceutical market and opens the door to do business with more pharmacy customers. 21-months after the extension was granted, OptumRX ended the extension for almost all distributors that sell to their network of pharmacies and are still not VAWD certified. As of July 5th, the company decided to provide many, if not all distributors another extension which will retroactively be effective from June 30th through August 31st. This new extension was likely due to the law firm Frier Levitt seeking to file a class-action suit against OptumRx for unfairly ending the original extension. Even with this new extension, however, distributors who will not be able to make the new VAWD deadline by August 31st are positioned to lose clients, the integrity of their products and millions of dollars in revenue as it restricts the pharmacies they can sell to and will end with many of them having to shut down their doors for good.
For those who are unfamiliar with the U.S. accreditation, VAWD, read this blog post to learn what is required of businesses to achieve the accreditation.
Whether you agree or disagree with OptumRx’s decision, as a pharmaceutical wholesale distributor, you need to have accurate data to capitalize and maintain your position in the growing market and adhere to quality control and industry regulations. It is not unlikely that we will start to see a trend where more and more pharmacies work solely with VAWD-accredited companies, and so it is important for distributors to achieve their VAWD accreditation to remain competitive in the market.
The VAWD accreditation process cannot be achieved overnight. In fact, the accreditation takes several months to complete, which makes it all the more important for candidates to be fully prepared for the rigorous reviews to avoid having to re-apply. The time it takes to complete the program is greatly impacted by a facility’s readiness. Once you have achieved the accreditation, it is valid for 3 years which means maintaining the integrity of your data is also an important factor.
Feeling overwhelmed? Yes, the accreditation process will not be easy but the key is to start! The longer you delay the process, the more you put your distribution company at risk. Why live with that unsettling feeling? The first step a pharmaceutical wholesale distributor can take is to implement the right industry-specific pharmaceutical ERP software with advanced abilities for “maintaining inventories and records of all transactions regarding the receipt and distribution or other disposition of all drugs and devices” to help meet the VAWD criteria faster and to maintain the accreditation for years to come.
“VAWD accreditation is considered to be the “gold-standard” for distribution companies across regulatory agencies and trading partners within the supply chain. It requires adherence to specific standards spanning purchasing, sales, inventory control and more – the right pharmaceutical ERP is crucial in achieving VAWD accreditation.” – Sumeet Singh, President, Five Rivers RX
Automation is Key
Having the right industry-specific functionality in pharmaceutical ERP helps businesses to not only comply with VAWD requirements but also help to meet the requirements of DEA, FDA and the DSCSA efficiently and accurately. The key to making your life a bit easier when it comes to maintaining compliance is automating your processes. The below pharmaceutical specific ERP features help to do this.
- Lot tracking (traceability) – Blue Link offers lot tracking functionality as part of an all-in-one inventory and accounting ERP solution. Lot tracking, or batch tracking, allows for product traceability to keep track of which customers received specific groups (or shipments) of items and when they were received. The supplier and date these items were purchased are also tracked allowing managers to track an individual group of products (or shipment) from the supplier to their own warehouse and ultimately to the customer. Lot tracking is a core component in achieving FDA / ISO / CFIA compliance for many businesses. This feature of Blue Link ERP also allows users to perform lot costing – tracking actual costs instead of FIFO or average.
- Serialization – Blue Link is in the process of developing SNI Serialization features. Specific functionality will include:
- Ability to identify a product as Lot Controlled, Serialized, or both Lot and Serialized (a requirement by the DSCSA)
- Ability to relate the Unique Serial Number with its applicable Lot Number
- Ability to scan GS1 Datamatrix barcodes that include the NDC Number, Serial Number, Lot Number, and Expiration Date and parse the number so it can be stored and retrieved as applicable.
- Inventory Control – Robust inventory management features such as backorder fulfillment, warehouse transfers, EDI integration, multiple units of measure, inventory counts and more!
- Contact Management (CRM) – Track customer/vendor information and communication with a single point of entry into the system, store unlimited contacts, log communication, automate emailing etc.
- Suspicious Order Monitoring (SOM) – Ensures distributors are in compliance with DEA laws. You can view average single or monthly order total amount or quantity of product by NDC #.
Learn more about advanced pharmaceutical features.
Download the below Case Study to learn how Blue Link customer IPD was able to achieve VAWD accreditation using the above pharmaceutical-specific features.