Get a Grip on the Supply Chain - Pharmaceutical Executive

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Get a Grip on the Supply Chain
Sarbanes-Oxley revenue-recognition compliance is reducing perfectly competent execs to complete blubber. Here's help in figuring out when a sale is really a sale.


Pharmaceutical Executive


SOX COMPLIANCE AND BEYOND

The good news is that change is on the way. As a whole, the industry recognizes the value of improving the flow of information across the supply chain. In the offing are a handful of innovative (and sometimes competing) inventory-and sales-focused data-tracking initiatives. Though it is difficult to forecast winners or losers—or when any will be fully up and running—the best options include the following: e-pedigree tracking, drug unit-level serialization, and 867 reporting (see "Tracking, Tracing, Transponding").

While these initiatives are currently in pilot form, none is expected to be widely deployed any time soon. Meantime, with SOX compliance cops breathing down pharma's neck, companies are scrambling for accurate and timely methods of inventory tracking.

Early discussions between IMS and its drug-manufacturer client made it apparent that IMS's access to industry data could be leveraged as a tool for constructing a clearer picture of sales-related activity and, ultimately, better revenue recognition. Essentially, IMS's relationships with wholesalers, retail pharmacies, hospitals, clinicians, and other participants enable the company to capture transaction dynamics across many points in the shipment/supply chain. In practice, it accesses about 94 percent of pharmaceutical product sales through all channels in the United States.

Following a number of adjustments, the information from the IMS database can be combined with relevant supplementary sources (retail takeaway information and projected data to account for the 6 percent not covered), put through a series of calculations, and validated (see "Chain Surgery").

Increased visibility into the supply chain can be used for far more than SOX compliance. For example, IMS's client is currently studying how greater knowledge of inventory in near–real time might be used not only to refine its rebate strategies—say, by determining the overall effectiveness—but also to make real-time decisions, such as when to offer which level of rebate to which channel.

For the industry as a whole, greater insight into ongoing cyclical, regional, and other sales and distribution trends enables better management of product flow. This leads to fewer lost sales (through the avoidance of stockouts), greater anticipation of distribution bottlenecks, and generally lower costs through optimized inventory levels. Other potential advantages include optimized manufacturing runs, improved marketing insight, more dynamic pricing and rebates, better sales-force management, and clearer linkages to performance.

As real time moves from business mantra to business reality, supply-chain information can help firms respond both dynamically and strategically. Companies investing in state-of-the-art inventory assessment for SOX compliance will likely find that they also have reaped a crop of critical intelligence on product demand and performance. Ultimately, this allows firms to adjust quickly and competitively to an ever-changing marketplace.

Lisa Papworth is a principal for product and portfolio development for IMS Management Consulting and can be reached at
Tim Kelly is IMS practice leader for promotion management and can be reached at
Stuart Kamin, an IMS consultant, also contributed to this article. He can be reached at


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