Financial Performance

Products worth hundreds of billions of dollars (US) travel throughout the pharmaceutical supply chain each year. These product movements spawn numerous financial flows between trading partners at all points in the supply chain from manufacturing to dispensation. Among the diverse financial flows tied to product movement are initial order payments, fee-for-service and incentive program reimbursements, and returned product credits.

The impact of incorrect measurements or inefficient execution in business processes designed to handle these financial flows can be significant. Chargeback claims between a manufacturer and its wholesale distributors may range up to 5% of gross sales. Pharmaceutical returns, while varying widely in volume depending on product type and returns policy, average between 2-4% of originally distributed product. In fact, IDC estimates that between 3-5% of pharmaceutical revenue is lost due to various reconciliation inefficiencies.

Measuring business activity related to financial performance requires the ability to clearly answer many questions such as:

• Did the identified product sale or product movement actually occur?
• Are the products and transactions on the financial claim correctly represented?
• Are the terms of sale correct, including trading partners, locations, transaction dates, and product quantities?
• Are interrelated transactions, such as negative chargebacks spawned by product returns, captured correctly?

As a result, maximizing financial reimbursement performance depends upon your visibility and access to precise product data and supply chain transaction information. Without it, managing your financials can become no better than a guessing game.

Financial Insight Through Supply Chain Data and Visibility

Companies have the opportunity to directly impact their financial performance by taking advantage of insight and measurability provided by serialization information and pedigree data made available on a collaborative trade network.

"Demand-Driven Supply Network leaders have 15% lower inventory, 17% better order fulfillment, and 35% shorter cash-to-cash cycle times than the average... it's about visibility and control."Roddy Martin, VP and General Manager - Life Sciences, AMR Research [2007]

Serialization and Serialized Product Pedigree Data

Serialization of pharmaceutical products, particularly when combined with the transaction histories available in electronic pedigrees, opens new avenues to financial performance measurement. Individual product serial numbers (EPC or other) provide unique, item-level linkage to rich product data such as NDC, lot number, expiration date, and physical location. Pedigree data augments this information with a complete transaction trail through the supply chain, including trading partner identification, supply chain transaction dates/locations, and ties to related financial documents such as invoices and POs.

Collaborative Trade Networks

New advances in building collaborative supply chain partners helps connect trading partners together in new and rich ways across multiple business processes. Advances in connectivity generated by new technologies such as EPCIS help lower the bar in technical integration across the supply chain. Collaboration and discovery models originally taken from social networking concepts help increase speed and reduce errors in connecting and managing trading partners across shared business processes.  

Opportunity to Improve Financial Performance

Being able to leverage rich serialized product and supply chain transaction information gained from integrating to a collaborative trading partner network offers the potential for substantial business benefit in improving financial performance including:

• Reduced revenue leakage  Stop reimbursing on counterfeited, diverted, or unsold products. Identify and fix claim credit inaccuracies caused by wrong pricing inputs or incorrect product volumes. Track duplicated or otherwise inappropriately resubmitted reimbursement claims.
• Reimbursement efficiency  Reduce processing work, eliminate rework, and shorten the claim-to-cash cycle.
• Trade agreement measurement  Improve ability to monitor and measure adherence to trade agreement and fee-for-service provisions. Create more effective and profitable agreements.
• Financial measurement security  Improve confidence in current financial results and enhance predictability of future financial performance. 

SupplyScape Solutions for Financial Performance

Companies seeking to improve their financial performance can leverage SupplyScape solutions such as:

• Strategy Consulting business analysis and planning services
• Professional Services implementation and program management services
• Operational Support managed operational services and on-going support
• Nexus supply chain collaboration foundation
• Product Security serialization and pedigree information suite