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An Introduction to ERP Software for Pharmaceutical Distributors

In a recent discussion with a small start-up pharmaceutical distributor, I was asked if Arionerp had a “Lite” or “Start-up” version of our Pharmaceutical Wholesale Distribution ERP Software for companies that did not need all the “advanced functionality”.

Before I responded, I thought for a few seconds to consider what functionality could be removed to make a “Lite version” of Pharmaceutical ERP. I realized that any functionality that was removed would either prevent the pharma distributor from complying with their regulatory requirements or make their daily operations inefficient and prone to errors/mistakes.

I’m sure not everyone will agree with my opinion on what is required, so I thought I would identify the functionality I feel any “Pharmaceutical Wholesale Distributor” needs in their ERP software and leave it up to our readers to make your own conclusions. To be clear, this post does not address the specific functionality needed or required by Pharmaceutical Manufacturers, 3PLs, or Dispensers.

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Basic ERP Software Functionality

Before we discuss pharmaceutical functionality, standard wholesale distribution functionality is the backbone of any ERP system. I feel the most basic functionality for any solution to be categorized as ERP software is the ability to manage your inventory, create Purchase Orders, enter Sales Orders, manage customers and suppliers, ship and receive products, and perform all accounting functions such as Accounts Receivable, Accounts Payable, Bank Management and General Ledger activities. The ability to access data to generate and print reports is also a backbone function of any true ERP software. If these functions were removed the software would not be able to provide a small, start-up pharmaceutical distributor the functionality they need to manage their business.

Pharma Wholesale Distributor Software Functionality

Basic pharmaceutical functionality starts with those requirements set out by regulatory agencies such as the FDA, DEA, and state authorities for all pharmaceutical wholesale distributors including start-ups. What is important next is the functionality mentioned above to help the user ensure they can manage their pharmaceutical business efficiently. When conducting a software search, it’s important to look for:

  • The ability to comply with Regulatory Requirements
  • Classification and Storage of Pharmaceutical Information of Products
  • Quarantine of Products
  • Suspicious Order Monitoring “SOM”
  • Interoperability Capabilities

Regulatory requirements

In the Pharma industry, the phrase DSCSA is an everyday acronym that does not segregate between small start-up independent pharmaceutical distributors and large primary distributors. Every wholesale distributor no matter the size is required to comply with these requirements if they want to be a trading partner in the US Pharmaceutical supply chain.

  • Management of Customer and Vendor Licenses: A wholesale distributor is required to ensure that the trading partners they are doing business with are “legitimate” (have an active license). Every transaction is written (SO’s and/or POs) requires a review to ensure the trading partner has a legitimate license. Information stored in Pharma ERP software to manage license number, license expiration date, and classifications of products that can be sold and/or purchased from the trading partner need to be reviewed to verify legitimacy during any sales or purchasing transaction. Without the ability to have an ERP system help with this process, efficiency would be very poor and therefore, I feel required as basic functionality for Pharma Distribution ERP Software.
  • As part of the DSCSA, the requirement to store a copy of a trading partner’s license is required although it is not required to be done electronically. Efficiency dictates that a file copy stored in the Pharma ERP system is the best approach as the file can be searched for quickly and stored for years on end. Therefore, I feel electronic storage of documents is required as basic functionality for Pharma Distribution ERP Software.

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Classification and Storage of Pharmaceutical Information of Products

  • Information required to be stored for each product/SKU is different than non-pharma distribution. The ability to store the product “Transaction Information” (TI) and “Transaction History” (TH) for each product lot (for seven years) and to provide a Transaction Report (T3) to downstream trading partners when the product is shipped to them is required to help Pharmaceutical Distributors comply with the DSCSA. Many distributors using non-pharmaceutical ERP software opted to use 3rd party applications or felt they could perform this task manually. It became evident very quickly that it was not possible to manage this requirement manually and the ERP system would have to manage this data or needs to be seamlessly integrated with a 3rd party application.
  • The classification of a product (OTC, Prescription, and various Schedules) by the DEA and each state are required to ensure a product can only be sold to a customer that has proper credentials (license) to purchase the product in question. Reviewing a customer license to ensure they can acquire a specific product can be very time-consuming and non-efficient.

As the requirement to provide a “T3” with each order is not possible to maintain as a manual process, and the need to ensure a customer has the correct credentials to purchase a given product cannot efficiently be managed manually, I feel both the above mentioned are required as basic functionality for Pharma Distribution ERP Software.

Quarantine of Products

Quarantine of product(s) is a requirement by the DSCSA separated into two sections:

  • As part of the Transaction Reporting (T3) requirement discussed above, any trading partner receiving products from an upstream trading partner must not allocate/ship the product(s) until a completed Transaction Report (T3) is received from the upstream trading partner. Oftentimes, products are received into inventory without an associated T3 and therefore, should not have a status that will allow them to be allocated/shipped. A process in the Pharma ERP must be provided to prevent the inadvertent allocation and shipping of these products.
  • A second scenario for quarantine is if a product that is received or in your inventory management is identified as “Suspicious”. This product(s) must be quarantined immediately to prevent it from being allocated/shipped. Pharma ERP software must have the ability to move the product to a quarantine location and prevent the products from being allocated until they are cleared.

As these functions are both DSCSA requirements and could potentially be a danger if consumed, I feel that they are definitely required as basic functionality for Pharmaceutical Distribution ERP Software.

Suspicious Order Monitoring “SOM”

Suspicious Order Monitoring is a requirement for trading partners to “pay attention” and report “Suspicious orders” including orders of unusual size, orders deviating substantially from a normal pattern, and orders of unusual frequency. Pharmaceutical ERP software such as Arionerp includes this functionality in our standard Pharma software. As this is required functionality, I consider this required as basic functionality for Pharmaceutical Distribution ERP Software.

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Interoperability Capabilities

Developers have been working on the required functionality to electronically pass shipping information from one trading partner to another that contains applicable information to track an individual saleable unit. This ability will move the industry to a place that will make it even more difficult for illegitimate products to enter the supply chain. The ability to understand the information being received and the ability to provide the information so it can be used by the downstream trading partner as well as the ability to search for specific serial numbers of products is required functionality for the November 2023 deadline. Therefore, I also consider this required as based functionality for Pharmaceutical Distribution ERP Software.