F ramework for Reverse Logistics Practices in Pharmaceutical … · 2018. 7. 15. · Johnson &...

Framework for Reverse Logistics Practices in Pharmaceutical Supply

Chains

Dr. Haidar Abbas1 and Prof. Jamal A Farooquie

2

[email protected],

[email protected]

Abstract

Maximization of the total value generated is

the prime objective of every supply chain. All

sales and deliveries are not always final.

Customer may come to return the same

product or offering for a number of reasons.

Unsold products are returned at the end of a

selling season from retailers to manufacturers

due to overstocking of inventory. Therefore,

there must be a provision of another similar

flow or chain which could carry these returned

products backwards. Here one comes to the

concept of reverse logistics. This research

paper is an attempt towards proposing a

framework of reverse logistics that largely

deals with the medicines in the context of

pharmaceutical supply chains operating in

India.

Keywords: Reverse Supply Chains, Reverse

Logistics, Pharma Chains, Drug recall.

Note: Related figures are drawn on a separate

document which is attached with the mail.

1. Introduction & review of

previous studies

"The process of planning, implementing,

and controlling the efficient, cost-

effective flow of raw materials, in-

process inventory, finished goods, and

related information from the point of

consumption to the point of origin for

the purpose of recapturing value or

proper disposal (Rogers & Tibben-

Lembke, 1999)”.

Reverse logistics gives an opportunity to

the companies to distinguish and

differentiate themselves, helps in building

consumer confidence in the company

brand, and also positively influences

customer satisfaction. Reverse logistics is

practiced in many industries like steel,

commercial aircraft, computers,

automobiles, chemicals and

pharmaceuticals etc. Some of the

companies that have practiced reverse

logistics include BMW, Del phi, DuPont,

General Motors, Hewlett Packard,

Johnson & Johnson, Ranbaxy labs, Storage

Tek, Walmart, IBM and TRW.

Product recalls is an important area where

reverse logistics is becoming increasingly

important. In the context of the industry

under study, recall is even more important

where the health of the patient may be

put at risk if the drugs are not withdrawn

expeditiously. For example, in 1997, the

world's best-selling weight-loss drugs,

Redux and Pondimin, had to be

withdrawn when evidence emerged that

International Journal of Pure and Applied MathematicsVolume 119 No. 16 2018, 2343-2358ISSN: 1314-3395 (on-line version)url: http://www.acadpubl.eu/hub/Special Issue http://www.acadpubl.eu/hub/

2343

their use might lead to heart disease.

Being most high- tech, regulated and

capital- intensive, the pharmaceutical

supply chains not only emphasize

regulatory compliance and safety of

products, but also aim at leveraging

information to be more responsive to the

needs of consumers (White Paper, Verisign,

2006). Erol et al. (2010) examined the

various reverse supply chain practices

which included collection/sorting/testing,

transportation and distribution,

warehousing, repair, reuse,

remanufacturing, reuse, disposal, spare

parts management, redistribution/resale

and the information management. Resale,

redistribution, repair, reuse, recycling,

upgrade, remanufacture, refurbish,

retrieval, incineration, hazardous waste

management are some of the key recovery

processes (Dissanayake & Singh, 2008).

Ritchie et al. (2000) discussed the reverse

logistics operations of hospitals. They

mentioned three kinds of reverse logistics

activities namely "Reuse", "Recycle" and

"Disposal" which should be applied on the

basis of the integrity of medicines. Sartori

(2011) reported that Healthcare

Distribution Management Association

(HDMA) estimated 3-4% of products

going out from pharmaceutical

warehouses ultimately coming back.

Jesson et al. (2005) outlined the reasons

for the occurrence of returnable stock of

medicines at customers' end which

included death, overstocking at home,

changed prescription, expired medicines,

medication stopped by patient, adverse

effect from drugs, error of prescription

and order or supply. For retailers, the

much obvious reasons include "customer

returns", "supply error" (supply of

undesired medicines, expired medicines,

defective medicines etc.) (Khan &

Subzwari, 2009) and others

(documentation error, launch of better

substitutes, withdrawal, overstocking etc.)

and the driver of return is same i.e.

adjustment/settlement of such no-more

required stocks. For manufacturers, these

reasons included "defectives", "customer

returns" and "others" (documentation

error, launch of better substitutes,

withdrawal, overstocking etc.). The

drivers for manufacturers for accepting

these returns may include "customer

satisfaction", "regulatory compliance",

"intensive competition" and "social

responsibility measures".

Jackson & North (2006) examined four

disposal practices for customers namely

trash (throwing in the garbage), flush,

donate, household waste collection event.

Al-Naggar and Alareefi (2010) studied the

patients' disposal practices regarding their

International Journal of Pure and Applied Mathematics Special Issue

2344

unused medications and found that

majority of the respondents were throwing

their unused medications into trash. Rest of

their respondents were found equally

preferring the burning of such medications

and storing them in refrigerators. The

researchers also found that the patients

were not informed about the proper way

of disposing of unused medications either

by the physicians/pharmacists. Their

findings suggest that the best way to

educate the Malaysian patients about the

disposal of unused medication is through

school, university and public campaign.

2. Objectives and

Methodology

The only objective of this study is to

conceptualize the reverse logistics process

for pharmaceutical supply chains operating

in Indian premises. The present research

considers three components of the reverse

pharmaceutical chains- end users (patients

or their attendants), retailers

(pharmacists/medical stores/ dispensary of

hospitals &/or nursing homes), and

pharmaceutical companies as

manufacturers. Each component is

assumed to have medicines, at times,

which need to be returned back or disposed

off. The nature of the objectives suggests

an exploratory type of research design for

the present research (Malhotra & Dash,

2007).

3. Observations and Discussions

This objective is achieved through

extensive literature review, inputs from

executives in pharmaceutical companies,

personal interviews with end users and

retailers, and the researcher's own

experience during the study and through this

process, some observations are made; a)

medicines may enter a reverse chain for

various reasons and the reverse process

may be initiated by the end user, retailer, or

even the manufacturer, b) any medicine

shall be referred to as unused medicine if

the medicine is either unfit for use or not

presently required c) there are three

possible phases of a reverse logistics

process (RLP) in pharmaceutical chains-

end user phase, retailer phase, and

manufacturer phase.

There are a variety of reasons for which a

stock of unused medicines may exist at

users' end. The reasons might include

"medicine didn't match prescription",

"medicine didn't suit the patient", "medicine

was already expired", "prescription

changed during treatment", "packing was

unreliable", and "medicine was no more

required". For reducing these six important

reasons into a manageable number, the

researcher has clubbed them into two


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groups. Group 1 of such reasons, called

supply error, includes "medicine didn't match

prescription", "medicine was already expired"

and "packing was unreliable". Group 2,

named overstock includes rest of the three

reasons. End users have four options to deal

with any unused medicines under either of

the two groups. The options are return (to

the medical store or dispensary), retain for

future use, donate to some needy people,

or dispose it off.

It appears to be logical that medicines

found unfit for use due to some supply

error are the ones which will be returned to

the source. So it is quite unwise for an end

user not to return such medicines for

refund/exchange unless its value is

insignificant or it is not convenient for him

to return. For medicines which become

unfit for use at the user's end or are no

more required due to any of the reasons

listed in group 2, the end user has to look

at it carefully about whether it is expired

or not. If it is expired, he has no option

other than to dispose. If it is a non-expired

medicine, he may retain it for future use,

donate it to someone, return it to the

source, or even dispose it off. For a

successful return to the source,

particularly to medical stores, certain

conditions might apply in order to get

refund or some other medicine in

exchange. Such conditions may include

intact packing, certain minimum monetary

worth, availability of the cash memo, time

elapsed between purchase and return, and

of course it should have not expired during

the time between its purchase and return.

The customer (end user) is supposed to

examine such medicines in the light of

these conditions before he/she approaches

to the medical store for return. Thereafter

he/she is expected to decide about what to

do from among the alternatives mentioned

above (retain, donate, return, and dispose).

In case, the end user decides to dispose the

unused medicines, there are generally four

disposal methods available- throw in the

garbage, flush, bury or burn. Another

major issue related with these disposal

methods is that how the end user perceives

these methods in the context of

environment. Figure-1 illustrates this entire

process.

Figure-2 explains the second phase of the

RLP taking place at the retailer's end. If the

retailer accepts unused medicines from the

end user, the medicines are added to the

stock of unused medicines that already

exists at the store. This existing stock

could have piled up due to some supply

error (e.g. supply of undesired medicines,

defective medicines, expired medicines

etc.) or overstocking (due to some

documentation error, launch of better

substitutes, or withdrawal by the


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manufacturer, or inaccurate sales forecast).

As a part of the return policy of

companies, returns are only acceptable

from the retailers when they are found in a

wholesale quantity. However, it has been

noticed that retailers accept returns from

their customers in retail also in order to

build and maintain their goodwill in the

market. From time to time, retailers

categorize their stock of unused medicines

accumulated due to any of the above

mentioned three reasons into two groups;

usable medicines (fit for use sale/resale or

donation) and non-usable medicines (unfit

for use sale/resale or donation). Retailers

have four options to deal with their stocks-

retain (for sale/resale), return (to the

manufacturer), donate to some needy

people or dispose it off.

Usable medicines can be retained (to be

sold/resold), returned or donated while

non- usable medicines can either be

returned or disposed of. Based on whether

the non- usable medicines are in

wholesale or retail quantity, these are

either returned or disposed of. In order to

return such stocks successfully, retailers

might have to fulfill some return policy

conditions (e.g. availability of purchase

bill, certain minimum worth, and time

elapsed between purchase and return)

other than the retail or wholesale quantity

of medicines. The non-usable medicines

include both the expired as well as

defective medicines. In case of the

acceptance of such returns, the retailers

get settlement (exchange/refund) for their

returns. Following any of the four disposal

methods; throw in the garbage, landfill

after treatment, sewer and burn, retailers

dispose of the medicines which are either

found in retail quantity or are failed

returns. However, the reasons behind the

practice of any specific disposal method

and the perception of retailers about these

disposal methods in relation to the

environment are again the matters of

investigation.

It has been observed that pharmaceutical

companies sell or receive the returnable

medicines from retailers through a

middleman (dealers/distributors/CFAs).

Therefore, retailers return their stocks of

non-usable medicines to the manufacturers

through these middlemen. Based on the

fulfillment or non-fulfillment of the return

conditions, these agents may reject or

accept such stocks. Accepted stocks enter

the manufacturers' stocks which may

already be having some other stocks of

medicines due to production defects,

supply error, and other reasons

(documentation error, launch of better

substitute, withdrawal, overstocking etc.).

Based on their preliminary examination,

these are categorized into usable (fit for use


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sale/resale/donation) or non-usable (fit for

use sale/resale/donation) medicines.

The non-usability of medicines may be

due to any major/minor defect. Major

defects (poor functionality, non-

functionality, or negative functionality of

a particular formulation, the packaging

error, packing error, labeling error etc),

which occur during production phase,

might negatively affect either the

effectiveness of the formulation itself or

the goodwill of the company. On the

contrary, minor defects occur during the

transit phase and include disappearance of

a particular label, price, expiry date,

instructions etc. As soon as a

manufacturing company is informed about

any major defect, it immediately

identifies the specific lot(s)/batch(es),

locates and then recalls (withdraws).

Medicines with minor defects which occur

during transit come back through their

original route of supply.

Based on the state, worth and costs

associated in dealing with such kind of

stocks, a decision is taken regarding

whether these medicines should go for

refurbishing, recycling or disposal. The

medicines with minor defects are subject

to refurbishing. Being equally effective

formulation-wise, such medicines are

meant for redistribution after required

refurbishing. The medicines which return

for some major defect(s) but contain some

recoverable value are meant for recycling.

Recycling such medicines result into

resource recovery on one hand and

generation of waste on other. Resources

once recovered are utilized in suitable

avenues. The waste generated in this

process is disposed of with non-usable

medicines which are neither meant for

refurbishing nor recycling. At large,

manufacturers practice either of the three

disposal methods; engineered landfill,

sewer down after proper treatment, or

controlled incineration (Figure-3). The

reasons behind the practice of any

specific disposal method and their

perception about it in relation to

environment are again the issues of

enquiry.

Having developed these three separate

models for the three different reverse

supply chain stakeholders, researcher

adopted the reverse logistics system

elements model proposed by Lambert et al.

(2011) who proposed a Reverse Logistics

system with four main steps: gatekeeping

(entry), collection, sorting, and disposal.

By gate-keeping they meant deciding

which products should be allowed to enter

the system which is essential to manage the

system and controlling costs. Collection

permits the retrieval of products from


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internal or external customers. Sorting

decides the fate of each returned item;

what to do with the product while disposal

decides the destination of the product. In

this research, the researcher has modified

this model (Lambert et al., 2011) where

"retention" means retaining the medicines

for the purpose of return/future use/donate

for end users, sale/resale/return/donate for

retailers, and sale/resale/donate/refurbish

and recycle for manufacturers. For this

study, the key reverse logistics process

steps are reduced from four to three as the

sorting and retention/disposal steps are

integrated into a single step (Figure-4).

After developing three reverse logistics

models and modifying the reverse

logistics system elements model (Lambert

et al., 2011) as per the suitability of this

study, the researcher develops a reverse

logistics framework for pharmaceutical

supply chains operating in India by

synthesizing these three different models

which portrays the reverse logistics steps

of the modified model (Figure-5).

Drawing a line of distinction among the

different activities and steps of these end

users, retailers and manufacturers was no

less than a herculean task- like end users do

gate-keeping and collection at the same

time. Even then, this comprehensive

framework (Figure-5) portrays as much

clear view of the various steps and

processes of reverse logistics program as

possible.

4. Conclusions and

Recommendations

Quality of a research is reflected in the

relevant conclusions it draws and

meaningful recommendations it makes in

relation to the objective(s). Pursuing the

objective of this study regarding the

conceptualization of reverse logistics in

pharmaceutical supply chains, researcher

began the discussion from the End User

(patient/attendant) followed by the

Retailers (Medical Stores/Hospitals

&Nursing Homes) and Manufacturers.

Based on own observation, formal and

informal interviews and expert opinion,

researcher drew three different conceptual

models which were later utilized in

developing a framework which depicted

the entire reverse logistics process for the


India and reflected reverse logistics

system elements model proposed by

Lambert et al. (2011). The framework

drawn for the end users' reverse logistics

practices mainly exhibits the reasons for

having unused medicines reverse logistics

practices of end users, return conditions,

disposal methods, the framework for

retailers' reverse logistics practices

exhibits the types of stocks, reverse


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logistics practices and disposal methods

and the framework for the manufacturers’

reverse logistics practices exhibits the

types of stocks, decision variables, reverse

logistics practices and the disposal method.

Based on this definition (Rogers & Tibben-

Lembke, 1999) and in the context of Indian

pharmaceutical supply chains, there are

three key stakeholders involved in the

reverse logistics practices. Ignoring

anyone of these three might have distorted

the results and thus, undermined the

purpose of this study. Therefore, researcher

has studied the reverse logistics practices

of the end users, retailers and the

manufacturers.

The researcher drew three different

Reverse Logistics Models which were

synthesized to construct a framework of

reverse logistics process for the


India which illustrates the reverse logistics

practices and disposal methods for

different end users, retailers and

manufacturers.

End users, besides other reasons, also

return medicines due to some supply error

(particularly the mismatch of medicines

with the prescription). This may be either

due to the retailers' inability to read out the

prescription correctly or the unavailability

of the prescribed medicines. However, in

either case, the end user loses trust and

satisfaction. Therefore, it is recommended

to the retailers to mitigate all kinds of

supply errors to win the end users'

satisfaction. Since this research was carried

out focusing the practices of a particular

region largely for end users and retailers,

the future researchers may examine its

generalizability through empirical

investigation.

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logistics on warehousing. IL: Oak Brook, WERC.

Unused Medicines (End Users)

Supply Error Over Stocking

Non-Expired Expired

Retain State

Worth Receipt Time

Donate lapsed

Return Dispose

Throw Flush Bury Burn

[Figure-1: Reverse Logistics Process Model I]


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Unused Medicines (Retailers)

Usable Medicine Non-Usable Medicines

Sale/Resale Donate Retail Wholesale

Dispose Return

Throw Landfill Sewer Burn

[Figure-2: Reverse Logistics Process Model II]


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Unused Medicines (Manufacturers)

Usable Medicine Non-Usable Medicines

State Worth Cost

Sale/Resale

Donate

Refurbish

Resource

Recovery

Recycle

Waste

Engineered

Landfill

Dispose

Sewer

Down

Controlled

Incineration

[Figure-3: Reverse Logistics Process Model III]


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Unused Medicines/ Returning Stocks

Gate-keeping

Collection

Sorting and Retention &/Disposal

[Figure-4: Reverse Logistics Steps Model IV derived from Lambert et al., (2011)]


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[Figure-5: Reverse Logistics Framework in Indian Pharmaceutical Supply Chains Model V]


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