IT Trends From the Trading Partner perspective

November 14, 2011
Nicholas Basta

Pharmaceutical Commerce, Pharmaceutical Commerce - November/December 2011,

New HDMA 2011-2012 HDMA Factbook finds gradual growth in IT-based collaborations

The 2011-2012 HDMA Factbook, a compilation and survey of distributor, manufacturer and healthcare data, has been published by the Center for Healthcare Supply Chain Research, HDMA’s research arm. The annual publication, now in its 83rd year, presents a wealth of data on HDMA member business activity, distribution volumes and the like; the Center also solicits on information transfers between manufacturers (who are associate members of HDMA) and HDMA members. These IT-related activities focus primarily on electronic data interchange (EDI) relating to order processing, financial transactions, returns and chargebacks.

On one level, these data are simply the nuts and bolts of e-commerce among major manufacturers and their trading partners. But on another, they give a picture of how truly extensive information-sharing and collaboration are among these trading partners. Supply-chain and IT advisors have a constant refrain: that better collaboration will lead to better decision-making, forecasting and visibility into the marketplace.

More advanced business analysts at manufacturers overlay business analytics tools on these data, thereby gaining insights into business activity on a pace that can sometimes be faster than the scrip data from information vendors like IMS Health (www.imshealth.com; although, to be sure, IMS Health can and does access the same data when working with some of its clients). Companies like Axway (www.axway.com), Integrichain (www.integrichain.com) , Model N (www.modeln.com), Valuecentric (www.valuecentric.com), SAP and its business partner Vistex (www.vistex.com) provide data cleansing and analytics based on these data sets; and some manufacturers get by with home-grown solutions, extensive spreadsheeting, or analytics tools like those from SAS Institute (www.sas.com).

The 2010 picture (Table 1) shows that most manufacturers use EDI for basic transactions—invoices, purchase orders and chargebacks—with distributors, and return authorizations with reverse-logistics providers. The more granular data on sales activity—advanced shipping notice (EDI 856), product transfer (867) and product activity data (852)—are used by 50-60% of manufacturers, and only 8-10% of manufacturers plan to use these tools in the next 12 months. Although the Center has been tracking these data for several year, trends are hard to evaluate because the survey format for this information has changed since last year. Generally speaking, though, it seems that about participation in these collaborations has increased by about 10 percentage points in many of the key categories since 2009.

With the exception of returns notifications (EDI 180), which would obviously be transmitted between manufacturers and reverse-logistics providers, manufacturers don’t seem to be very interested in exchanging data with other service providers, such as market research companies, or those involved with aligning marketing activities (discount programs—see p. 1; sample distribution; or multichannel marketing campaigns), or even healthcare-provider-related data such as medication adherence programs. In coming years, the availability of anonymized e-prescribing records, or data pulled from electronic health records (EHRs) have the promise of even clearer visibility into the marketplace. It’s going to keep IT consultants busy for years to come.

CSOS, barcodes and serialization

Other data from the Factbook shed light on other types of collaboration, including those mandated by DEA, such as the Controlled Substances Ordering System (CSOS). According to the Center, distributor use of CSOS (which is not mandatory; paper-based systems can still be used) has jumped from 33% in 2008 to 83% in 2010. DEA requires notifications of who are ordering, and then receiving shipments of, Schedule II and III substances, but has had a slow uptake since instituted in 2007.

DEA also figures in another data set that the Center has collected: the use of customer location identifiers. In a truly modern and automated tracking and information system, a customer code will provide an easy way to match customers with locations and with business activity. By default (because the great majority of healthcare-provider locations are required to have them) trading partners have been using these DEA codes to identify customers. According to the center, the DEA number is in use by 100% of manufacturers and distributors. Manufacturers, under the gun to comply with “sunrise” information-sharing programs with GPOs and their member hospitals are now using the recommended Global Location Number (GLN) of the GS1 standards organization (Pharmaceutical Commerce, Sept/Oct Product Security supplement, p. 20); this is now in place for 29% of manufacturers when dealing with chain or independent pharmacies, but only 13-14% of hospitals or other customers. Much more common is the Health Industry Number (HIN), in use with 60-80% of customers. Lesser numbers of manufacturers are using the Data Universal Numbering System (DUNS) or proprietary numbering schemes.

FIG. 2. BARRIERS TO ELECTRONIC COMMERCE IN LIFE SCIENCES source: HDMA

GLN, in turn, leads to preparations for serialization and e-pedigree programs. The Center’s survey (Table 2) finds that serialization pilots or programs are slowly increasing, while the number of manufacturers who have no current serialization plans has declined from 63% to 36% in 2010. Both 2D barcode and RFID tags are still in contention for item serialization; but the number of barcode projects are on the increase, while 70% of manufacturers have no plans for developing RFID capability over the next year.

When asked what the barriers to use of electronic commerce are (Table 3), the leading reason was the willingness of trading partners to participate. That speaks to the resistance, up and down the supply chain, for trading partners to share data, a situation that one hopes will be improving soon.

The 2011-2012 Factbook is available from HDMA by visiting the HDMA Center for Healthcare Supply Chain research site, www.hc supplychainresearch.org. PC