Putting the Right Process in Place: How to Address Product Returns and Recalls 

Updated on January 31, 2024
Good looking woman pharmacist working in pharmacy with medicine and prescription

Pharmaceutical returns and recalls are complex issues that need to be managed as new and existing drugs flood the marketplace. Doing so efficiently and effectively requires pharmaceutical companies to weigh several variables and overcome obstacles. These challenges include regulatory compliance, track and trace, authentication and verification, inventory and quality dispositioning, black-marketing, counterfeiting, and the lack of an industry-wide standardized policy. Such factors underscore the importance of creating a process to address these challenges and offer opportunities to improve the pharmaceutical supply chain and operational efficiency to provide customers with safe and effective medications. 

A failure to create such a process can be costly. For instance, after a recall, a leading pharmaceutical manufacturer closed a distribution site, which cost the company roughly $600 million in sales. The toll is not just financial. The New England Compounding Center recalled injectable corticosteroids contaminated with fungal strains, which ultimately led to more than 750 reported cases of fungal meningitis and more than 60 fatalities. 

Consider the challenges

Also known as reverse distribution, the drug return process entails triaging the receipt of returned drugs and then ascertaining whether to issue a replacement product or a credit based on the drug manufacturer’s return policies. There are numerous risks and challenges that can arise throughout this process. For example, stringent and complex regulations govern pharmaceutical returns to ensure safety, quality, and accountability. That said, compliance requires substantial resources and expertise. Non-compliance can lead to penalties, loss of licenses, and damage to a company’s reputation. 

An additional challenge is traceability, which is key when handling returns and recalls. A comprehensive and well-implemented chainwide serialization and track-and-trace system could make it nearly impossible to inject counterfeit drugs into the pharma supply chain. 

An absence of infrastructure, emerging technologies, and comprehensive policies can also create issues. For example, adequate warehouses, transportation lead times, end-to-end digitalized processes, and end-to-end track software integrations crucial for receiving, sorting, and managing returns are still lacking. A dearth of clearly defined return policies, documentation, and performance indicators adds complexity to the return/reverse distribution management process. 

Further complicating the process, each company in the pharmaceutical industry follows its own unique practices and policies related to returns and recalls. This makes it challenging to measure performance or implement industry-wide solutions. Improved coordination is required to streamline returns for all stakeholders. 

More stringent regulations governing quality have led to more frequent recalls. One recent report determined that pharmaceutical recall events increased by more than 30 percent in 2022 and impacted units more than doubled. Such statistics highlight the need for effective pharmaceutical returns and recalls. It is critical to implement systems that enable the swift location of recalled products in the supply chain and at customer sites to ensure public safety. Companies should analyze why returns occur to ultimately reduce revenue leakage and waste. 

Assessing the impact of technology

Digitization and artificial intelligence (AI) are crucial in enhancing the pharmaceutical industry’s returns management processes. These technologies can improve the way returns work in several ways. 

Generative AI tools using large language models (LLM) can analyze large datasets associated with returns and identify patterns and trends that might be challenging for traditional systems to detect. Pharmaceutical companies can use this information to take proactive steps to reduce the likelihood of returns. 

The Internet of Things (IoT) enables systems and devices to connect and exchange data. These devices permit pharmaceutical companies to monitor products’ condition in real time throughout the transportation process and while in storage. AI’s potential for automating tasks that humans typically perform is tremendous. AI-driven automation can handle routine tasks such as verification and documentation, for instance, which decreases the need for human intervention and the potential for human error. AI is useful for interactions with customers as well. AI-powered chatbots and virtual assistants can communicate with customers and handle commonly asked questions regarding returns. 

AI can also assist in determining why returns occur in the first place. For example, it can recognize return patterns, whether a specific product line, manufacturing process, or distribution channel and pinpoint areas in need of improvement. 

Blockchain technology is designed to record information, track assets, and reduce the risk of the system being compromised. It shows promise in enhancing traceability, which offers increased transparency in the supply chain. As such, documentation for returns improves, and returns can be traced back to their origins. 

Forecasting the future

AI and other technologies will play a prominent role in improving pharmaceutical returns. For example, AI can use personalized treatments to assist with returns by adapting to individual patient needs and adjusting inventory accordingly. AI algorithms can also detect anomalies in returns data and improve the identification of potential fraudulent returns or counterfeit products.

The pharmaceutical industry is shifting toward more precision medicine, which includes customized dosages. A patient’s response to a change in treatment or medication can increase the likelihood of the return of unused or partially unused medications. The growing use of specialty drugs, which requires complex manufacturing, increases the probability of returns related to drug quality. Using smart AI tools to identify potential gaps in manufacturing processes can reduce returns. 

As the marketplace becomes increasingly competitive, the key steps of the return and recall process—compliance, customer relations, and risk management—become more important than ever. It is imperative for pharmaceutical companies to have a solid understanding of the risks and challenges that come with product returns and recalls as well as implement streamlined and effective processes that address these challenges. Doing so will improve sustainability and aid pharmaceutical companies in remaining compliant with industry and regulatory standards. 

Abhishek Sinha
Abhishek Sinha

Abhishek Sinha is a business and integration architecture manager at Accenture LLP. He is a subject matter expert in the areas of pharma pricing and advance returns management S/4 HANAfunctionality and reverse logistics business processes. Abhishek holds a bachelor of science and engineering degree, a post-graduate diploma in business management, and received his master’s degree in marketing management at Pune University, India. He can be reached at: [email protected]