When Endo Pharmaceuticals decided to automate and streamline the industry's traditional but cumbersome and time-consuming manual ordering system, it knew which 3PL to team up with.
It's not uncommon in business to find that the trailblazers and ultimate winners are those companies that don't follow the rules. But rules are one thing, compliance is another. And when you're dealing with the regulations of the Drug Enforcement Administration, strict adherence to the letter of the law is not optional. But just how you comply is up to you. And Endo Pharmaceuticals has found that automating the ordering and delivery of controlled substances not only satisfies the government but is a sure path to success.
The DEA has permitted electronic ordering of Class II controlled substances since 2004, but relatively few pharmaceutical manufacturers, wholesalers and retailers have taken advantage of it, according to Dan Gagnon, director of global strategy for UPS Healthcare Logistics, which is very definitely involved with the process.
UPS operates quite a number of secure warehouses with concrete vaults in which it stocks the products of clients such as Endo. Using a Controlled Substance Ordering System, or CSOS, 3PLs like UPS Healthcare Logistics receive orders from their customers, pick and pack, ensure the licensing scheme mandated by the DEA is in order, then make delivery to the end customer.
In the case of Endo, that's usually the large retailers and wholesalers, says Gagnon.
If the process duplicates the traditional manual distribution process, what's the advantage? Cycle times are significantly improved, according to Gagnon and Steve Cowan, vice president of supply chain at Endo. Just how much depends on the order and the parties involved, but in some instances as many as 18 days have been shaved from order cycle times, Gagnon says. And that's a huge bonus for customers.
It's not uncommon now, says Cowan, that an order can shipped the same day it's placed with Endo. Under the former process, which Endo began doing away with in 2008, orders were either faxed or snail-mailed by customers. They then were sent by the same cumbersome process to the warehousing services provider. Finally, they were shipped to the customer. Paper, specifically DEA Form 222, dogged the process every step of the way. Every transaction in the process, from order to fulfillment, had to be accompanied by the form, Cowan says. It's designed to verify that all parties involved in the transport and receipt of Class II controlled substances are who they claim to be, thus securing the supply chain.
Endo knew software was available to automate the CSOS process, says Lisa Walker, associate director, Customer Service and Distribution, at Endo. The pharmaceutical company knew the industry was heading toward electronic solutions and Endo wanted to be a leader in that change, she says, so it approached UPS, a partner since 1999.
UPS Healthcare Logistics, a part of UPS Supply Chain Solutions, has established 25 dedicated healthcare-compliant facilities around the world, and works closely with manufacturers on such industry initiatives as drug serialization and specialized temperature-sensitive logistics.
Nevertheless, UPS had to construct a vastly different system from its original LMS system. The new system had to handle CSOS ordering while maintaining the highest level of security. At that point, UPS brought in Axway, a global software company to provide the backbone for the e-ordering system. Axway had already been recognized in the industry for its ability to deliver cost control, increased security and greater visibility into controlled-substance transactions, while simultaneously ensuring DEA compliance, Gagnon says.
Endo's CSOS system went live in April 2009 for a pilot customer - a large wholesale distributor serving pharmacies across the country.
Axway's CSOS solution takes the complexity associated with ordering controlled substances and enforces a simple workflow that accurately models DEA requirements and intentions, says Ruby Raley, director of healthcare solutions at Axway. Customers can create an order, certify the order and submit the order from inside the seller's portal, their desktop or via electronic data interchange. All orders are verified as required by the DEA and then inserted into the order fulfillment workflow of UPS's LMS system. This capability saves UPS time and money by preserving their investment in LMS while ensuring that the correct order process is followed.
"Axway's CSOS product enables UPS, and clients such as Endo, to significantly reduce operational expenses and fill orders quickly while safeguarding security and compliance," says Raley. "Much like the business collaboration between Endo and UPS, Axway and UPS work closely together to deliver solutions that meet customer needs and expectations."
Obviously, Endo and UPS benefit from the faster turnaround time because the amount of inventory kept on hand is significantly reduced. But retailers benefit as well, says Gagnon,. They are not in the business of storing controlled substances, so the certainty in delivery is reassuring to them. The pharmaceutical business, from wholesalers to distributors to pharmacies is demand-driven. No one is prepared to keep large quantities of controlled substances around. The key in the healthcare supply chain is to have a strong willingness for collaboration and be ready to take advantage of new innovations. "They clearly see that the advantage of CSOS is that it translates into savings."
The system also has mitigated theft, according to Gagnon, which in the economic downturn of the past couple of years has been on the rise.
Walker notes that Endo was involved in discussions with the DEA when the idea of an electronic ordering system was first conceived in 2004. Once Endo itself decided to install such a system, she says, implementation took just under a year. Part of that had to do with ensuring secure communications were able to penetrate firewalls and that data sets were clean. Now that things are up and running, new customers can be integrated into the process in four to six weeks. Customers easily see the advantage in eliminating the tedious and time-consuming manual reporting to the DEA.
There is simply not as much electronic ordering as one might think, Gagnon says. But in his opinion, the advantages are too many and too great for that situation to last much longer.
UPS Healthcare Logistics, www.ups-scs.com/solutions/healthcare.html
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