Optimize Medication Returns in the Pharmacy
Expiring drug products are a problem in every pharmacy. But out-of-date pharmaceuticals don’t have to be an unmanageable business expense. The right business partner can turn expired medications into cash.
Medication returns vendors, more formally known as reverse distribution or reverse logistics providers, manage between 3.5% and 4% of all pharmaceutical sales, according to a 2018 estimate from the Healthcare Distribution Alliance (HDA) Research Foundation. That’s more than 120 million units annually, worth more than $13 billion, based on 2016 pharmaceutical product sales of $450 billion.
“Return Solutions comes to the pharmacy quarterly and goes through our entire stock to pull everything that is expired or set to expire in the next few months,” said Lisa Stahlman, RPh, pharmacy manager at the WellSpan Pharmacy in Dallastown, Pennsylvania. “A few weeks later, we get a check. I’m sure there are plenty of pharmacies that don’t use a returns company, but it’s so much more time-efficient and cost-efficient than trying to keep up with return policies and requirements for every manufacturer on your own.”
Dealing with expired products is a relatively recent problem. Prescription (Rx) products didn’t carry expiration dates until federal law was changed with the addition of 21 CFR 211.137 in 1978. With a few exceptions, any Rx product packaged after September 29, 1979, that does not carry an expiration date is in violation of good manufacturing practice for finished pharmaceuticals. Similar requirements for use-by dating have since been extended to over-the-counter medications and many other items in pharmacy inventory.
There are several reasons pharmacies can end up with expired or soon-to-expire Rx medications on the shelf. It’s easy to blame poor inventory management, but growing use of perpetual inventory systems has improved inventory management and increased the number of inventory turns in many pharmacies.
But even the most advanced perpetual inventory and ordering systems miss product expirations. Most systems know how much of a given product is on the shelf at any given moment, but few systems routinely capture the lot number and expiration of individual product units. And when it comes to minimizing expired inventory, those two elements—lot number and expiration date—are the two most important factors, Mike Gordon, RPh, owner of Gordon’s Drugs in Knoxville, Tennessee said. That’s why he regularly checks medication stocks manually.
“I’d love to have an inventory system that tells us when something is going to expire in six months,” Gordon said. “I don’t know of any system that can do that. That’s why I check my shelves myself. If we have two or more bottles of a product, I always open the oldest one first. And if I find an unopened bottle that expires within six months, I return it.”
Wholesalers are generally more efficient in forecasting and managing inventory than individual dispensers, the HDA noted. Wholesalers operate a limited number of facilities with enormous volume, which creates efficiencies, economies of scale, and process standardization that individual pharmacies cannot match.
Dispensers are spread across about 200,000 locations in different market channels. Inventory varies by location, customer demand, prescriber preferences, pharmacy benefit manager and payer formulary requirements, and other variables. Inventory management systems, product demand forecasting, ordering, stock rotation, and other operational factors range from fully manual to fully automated. Another common problem is stock containers that have already been opened.
“You always have medications on the shelf that have been opened, and you can’t return a container to the wholesaler once it has been opened,” Stahlman said. “Once something is opened, you’re stuck with it as far as the wholesaler is concerned.”
Despite pharmacists’ best efforts to manage Rx inventory, some portion of inventory will never sell. In retail channels, this unsold excess inventory may be as high as 20% to 25% of total Rx inventory, according to the HDA.
Retailers have four choices for dealing with their excess inventory:
- transfer slow-moving product to another outlet with higher demand,
- return unused, unopened product through the wholesaler’s in-house return process,
- ignore unused meds until someone gets around to doing something or the meds expire, or
- use a third-party medication return vendor to manage returns.
Transferring product between outlets works only if there is more than one pharmacy in the system. That generally means a chain operation, a health system with multiple pharmacies, or an independent pharmacy with at least two locations that have different Rx sales patterns.
Returning through your wholesaler seems logical but remember that wholesalers are in business to distribute products, not take them back. Return fees can hit 20% and higher, depending on the wholesaler. And most wholesalers offer only mail-in service. It’s up to the pharmacy to identify expired/expiring products in their inventory, package items for shipment precisely as required by the wholesaler, and track returns. Ignoring unsold inventory typically means doing returns only when or if someone has time and gets around to it.
In the meantime, staff pull expired stock when they notice it and usually collect it in a back room or an empty tote. That can allow items to go too far out of date to receive credit and take up valuable space in the store. Stocks of expired medications can also raise compliance issues with state pharmacy board and Drug Enforcement Administration (DEA) inspectors.
“You are always going to have meds that are expiring that you can’t do anything about,” Stahlman said. “Perpetual inventory and the right policies and procedures help, but it’s going to happen. Using a third-party medication returns solution is an awesome way to turn an inventory problem into revenue.”
For most pharmacists and pharmacies, third-party vendors can be the more effective option. Independent medication returns companies generally focus exclusively on the return of expired and expiring products. They can usually offer better rates than wholesaler return programs and the best vendors can even customize their service to meet the pharmacy’s specific needs.
The DEA currently registers more than 50 reverse distributors that are authorized to handle returns of scheduled pharmaceutical products as well as other drugs. With that many potential vendors, customer service satisfaction is key when it comes to selecting your medication returns partner.
Return Solutions has been collecting and returning expired and short dated medications for nearly 30 years. Based in Knoxville, Tennessee, the privately-held company focuses on helping pharmacies navigate the challenges of returning drugs for credit and getting the most out of expired products. Return Solutions offers two types of service options: a comprehensive on-site service and a simplified online mail-in process. Pharmacies’ return items will be processed on the day of the on-site service and within 24-48 hours of mail-in receipt.
“They check my shelves every six months and pull everything that is expired or set to expire in the next six months,” said Gordon. “Ninety days later, I get a check. It comes to [approximately] $8,000 to $10,000 every six months, [approximately] $1,000 to $1,500 a month. For a pharmacy that averages 140 or 150 scripts a day, six days a week, that’s a lot of money.”
Return Solutions said its average pharmacy client returns expired and expiring medications three times per year with an average product value of $6,500 per return. That’s $19,500 annually in revenue.
“I can’t sing the praises of Return Solutions enough,” said Stahlman. “We used Return Solutions when I started here 20-plus years ago, changed vendors a couple of times as we merged and grew, and now we’re back with them. Return Solutions is awesome to work with.”
When it comes to using a third-party vendor, different companies have different approaches to issuing credit. While some may pay promptly, others may wait until the manufacturer actually issues a credit, which can take up to a year, sometimes longer. Return Solutions offers a highly simplified reimbursement process through its OneCheck Select program, issuing credit through one consolidated check with no hidden fees. Even more, pharmacies have a choice of receiving credit within 10-, 30-, 60-, or 90 days.
“Our rep checks expiration of every container on the shelf and pulls everything that needs to go, gives us an inventory of expired and expiring products, sends them off, and we get a check,” Stahlman said. “Dealing with our expired medications doesn’t get much easier.”
The busier the pharmacy and the more varied the Rx stock, the more it makes sense to use a returns vendor, Gordon said. It is possible to track returns internally and work through wholesalers, but every wholesaler and every manufacturer has different requirements for returns. And with Return Solutions’ simple and cost-effective process, pharmacists will have more time to dedicate to their patients without having to worry about tracking return credits.
“There are plenty of companies that can take back our expired or expiring products,” said Gordon. “Return Solutions comes to the store twice a year and I get a check in the mail. They make returns easy for me and for my staff so we can spend more time with our patients.”
If you are interested in learning more about how Return Solutions can help your pharmacy quickly recoup funds for your expired inventory, please visit drugreturns.com/home/AAP or call 1-800-579-4804.
- HDA Research The Role of Reverse Distribution. August 2018. Accessed January 31, 2021. www.hda.org/resources/the-role-of-reverse-distribution
- HDA Research Factbook: The Facts, Figures and Trends in Healthcare (2017-2018). 88th ed. 2017. Accessed January 31, 2021.
Return Solutions offers the fastest credit reimbursement in the industry – receive a single check for your credit in as few as 10 days, or choose the 30-, 60-, or 90-day option. AAP Members receive the 30-for-90 promotion on their first return – credit is issued in just 30 days at the lower 90-day rate. Visit drugreturns.com/home/aap or call 1-800-579-4804 to learn more.