• Pharmaceutical Inventory Management

The pharmaceutical distribution industry is characterized by strict regulations, sophisticated product tracking and advanced reporting to a variety of governing bodies. Regulations laid out by the Drug Supply Chain Security Act (DSCSA), FDA, DEA and other associations such as VAWD, are constantly updating in order to meet the complex demand of the industry, changing consumer habits and adhere to new scientific research while still working under the main goal of keeping consumers safe. If it sounds like a complicated supply chain, that’s because it is. To reduce the stress of trying to stay on top of this complex industry, it’s important to find a software vendor that provides the right functionality for managing pharmaceutical inventory and distribution, can help automate processes, manage financials and adhere to compliance standards. In addition to functionality and expertise for the distribution of pharmaceutical inventory items, the ideal software vendor is one that has relationships with other industry experts, is a member of pharmaceutical trade associations, has partnerships with other solutions and regularly participates in pharmaceutical industry conferences and seminars to always be up-to-date on what is happening in the market.

One of the reasons why the pharmaceutical industry is so complex, is because of the various properties associated with pharmaceutical inventory. For example, instead of simply managing a product code, description, unit of measure (UOM) and pricing, distributors are also required to track lot numbers, dosages, product families, NDC#, GTIN, strength, schedules, limits and more. Below we explore some of the important pharmaceutical inventory properties that you need to manage and how you can track them in Blue Link’s pharmaceutical distribution software.

Product Code

Just like with any product, you need to create product codes for the pharmaceutical inventory items maintained in your inventory management system. Among other things, you can use this information for looking up product details and when associating products on a purchase order, sales order or quote. Since products codes are for internal purposes only, your business can choose whichever format you want, but for pharmaceutical wholesale distributors, a good idea is to use the NDC number as your product codes.

NDC Number

A product’s NDC number (or National Drug Code) is the unique number given to a product by the FDA. This number is unique to a specific product – no matter what UOMs you’re selling the product in.

Brand, Strength and Dosage

Tracking a product’s brand, brand description, strength and dosage is all important information used in Transaction Reporting (T3). The DSCSA requires that all trading partners in the supply chain not accept pharmaceutical products unless the trading partner they receive the product from can provide specific information about the product’s history. To meet these needs, Blue Link includes transaction history (product/lot tracing/ownership information) of each specific product/lot and automatic tracking of information stored to one level back and one level forward.

UOMs

Units of measure or UOMs, are the different package sizes inventory is available in. For most wholesale distribution businesses, inventory items will be available in multiple UOMs. For example, you may sell by case, by bottle, by each or by pallet. It’s important to set-up default units of measure which are the smallest unit of measure you will be inventorying any given product. You can then easily choose a different UOM category depending on the customer and order.

Product Family

Product family is important for managing the quantities of groups of products (known as product families) that you sell to your customers. Association of a product family to a product is important for Suspicious Order Monitoring (SOM). Monitoring the quantities of specific families that are sold to an individual customer is a requirement of SOM.

Dosage for Ratio

In Blue Link, the Dosage for Ratio information is important to help manage the ratio of pharmaceutical vs. non-pharmaceutical products on a sales order. This allows distributors selling non-pharmaceutical items (such as bandages, gauze, etc.) to companies such as pharmacies, to manage the pharmaceutical vs. non-pharmaceutical sales to that customer.

pharmaceutical distribution software guide

Pricing and Pricing Contracts

A product’s pricing dictates how much any given customer will pay for an item. Price contracts in Blue Link allow you to set-up different levels of pricing at the customer or product level. Price contracts may be based on specific customer terms, special discounts, limited time offers or other factors. If you have multiple price contracts for one product, you can decide whether to pull pricing information based on the “Best Price” or “First Price” found in the list of potential prices for the product and customer. There is always the option to override the price if you have the right user permission levels.

UPC Code

In many instances when selling to pharmacies, distributors will also sell non-pharmaceutical products. These products will often have a UPC code or Universal Product Code attached. A UPC code is a barcode made up of 12 numeric digits that are uniquely assigned to each item for easy identification using barcode scanners. For pharmaceutical distribution businesses, the use of barcode scanning helps to improve warehouse management operations and reduces the human error associated with manually receiving, picking, packing and shipping products.

GTIN

A pharmaceutical product’s GTIN number comes from the manufacturer and contains the manufacturer’s identifier and NDC number. Each UOM for a particular inventory item will have its own GTIN number.

2D Datamatrix

Just as the UPC code for non-pharmaceutical products is used to generate a barcode for scanning purposes, pharmaceutical products are now required to have a 2D Datamatrix barcode that includes important information about the specific item. The requirements dictate that each product’s smallest unit for sale must contain a 2D Datamatrix barcode containing four elements;

  1. GTIN
  2. Lot Number
  3. Serial Number
  4. Lot Expiry Date

Pharmaceutical software like Blue Link has scanning functionality that allows the user to scan the barcode and depending on the specific function being performed, “parses” the information so it can be used. This scanning functionality prevents the need for manually keying in important information such as lot and lot expiry information, improving efficiency while reducing data entry errors. The barcode is also used in saleable returns verification (another DSCSA requirement).

Lot Number and Lot Costing

A product’s lot number comes from the manufacturer and is used to track specific lots/batches of products. The lot number is assigned to a batch of manufactured product and used throughout the supply chain to  track which customers received which product/lot and when they were received. The date these specific items were received and supplier they came from are also tracked, allowing you to monitor products from the supplier to your own warehouse and ultimately to the customer. The cost (COG) associated to the lot is dependent on the price paid at the time of receipt. In the case of a product recall, businesses can identify pharmaceutical inventory items by their lot number. The lot number of a product is also used in managing the transaction history of each product (another requirement of the DSCSA).

Warehouse Locations

Managing warehouse locations from within your pharmaceutical distribution software stores information on which warehouse you want to receive pharmaceutical inventory. Once you receive product into a specific warehouse, you can then transfer it to another location at a later date. In the pharmaceutical industry, many wholesale distributors receive all product into a “quarantine” location for quality control purposes, preventing the products from being allocated/shipped without proper QC. Once the items have been cleared, they are then sent to various other warehouse locations.

Drug Schedule and Limits

A drug’s schedule dictates how the product is classified at the Federal and State level. The DEA designates a product schedule when the product is first developed. Each schedule is based off a drugs medical value and potential for abuse – therefore, drugs which have a higher potential for abuse will have a higher schedule. The schedules range from I to V with I having the highest potential for abuse and addiction. Although the DEA has designated products as “Schedule I”, no legal pharmaceutical distributor will ever sell these products, as they are normally illegal (i.e. heroin, LSD, ecstasy). Many states set their own drug schedules, however, this schedule cannot be set lower than the Federal schedule. A pharmaceutical product’s schedule is important because a business requires different licenses for the sale and purchase of different drug schedules. This is in addition to other State specific regulations such as VAWD which is a specific certification sometimes required by a state to buy/sell scheduled drugs. Some distributors set limits on the volume of products that their customer can buy. Within Blue Link, user’s set-up a product’s schedules and limits based on customer ship-to locations. The system will then automatically prevent users from selling a quantity of products over the customer’s limit.