Importance of the pharma industry and how this sector may benefit from cloud-based EDI
Throughout history, the pharma industry has never been as important as it is right now in 2020. The pharma sector is currently one of the most crucial industries throughout the world since there is now an international aspiration to enhance the pharmaceutical supply chain in order to ensure everyone has access to medicines anywhere they are needed. As a consequence of this approach, the big players on the market and even small companies specializing in this area have to increase their efforts to improve their situation in this time of crisis. Digitizing their current processes and relocating them into the cloud, especially in regards to electronic document interchange, are a significant aspects to consider when rethinking current processes. Due to the realignment of current IT infrastructure and processes within the pharma supply chain, huge potential arises for companies that migrate from their traditional, on premise EDI solution to EDI in cloud.
Companies that implement cloud-based EDI see the following benefits:
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Significantly reduced investments in expensive servers and their maintenance
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Notably fewer administrative staff
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Less training required for employees
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Reliable Data Centers
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Data stored in highly secure Data Centers
Companies within the pharma supply chain that currently do not utilize an EDI solution can benefit from EDI in general:
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Cost reduction
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Less bureaucracy and administrative expenses
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Less staff required
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Time
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Acceleration of processes
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Faster payments
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Significant reduction of failures and errors
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Immediate data transmission
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Reduced office work
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Immediate notification of inconsistencies
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Maintenance of supply chain
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Strengthening of its own position within the supply chain – many big players require the use of EDI
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Increase the reliability of delivered documents
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Knowledge
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Compliance with national regulations worldwide
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Validation against data from other documents e.g. 3-Way-Match
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Validations of a commercial and mathematical nature
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Data enrichment
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How does the document exchange work in the pharma industry and why is cloud-based EDI necessary?
In order to understand how the pharmaceutical industry works, a comprehensive view on the whole supply chain is needed. The main market participants within the pharma industry can be divided into several categories: producers, wholesalers, and buyers. Each of these market participants has a specific function and position within the supply chain. The producers mainly supply the wholesalers, which sell the delivered goods to smaller entities such as pharmacies, hospitals, etc. It is quite common for these smaller entities to be represented by buying groups which combine the orders for the purpose of qualifying for lower price segments due to the purchases being bulk-order quantities. The orders of pharmacies and wholesalers are mostly sent in the PHBEST format which is based on EDIFACT D.96A. EDIFACT serves as the regular format for other document types as well. The interactions between single entities, especially in terms of the interchange of various documents within the supply chain, are ether served via on-premise EDI systems or still often via paper- or email-based solutions which do not compare to the sophisticated document exchange software of today. Considering this as well as the high processing time, low efficiency, high costs, and low security standards in the document exchange, further development in this sector is hindered.
EDI in the pharma industry
EDI in the pharma industry has its roots in the retail sector and benefits from its experience. Nevertheless, specific national and EU legal regulations have a strong impact on the information that needs to be exchanged between the single entities to prevent the intrusion of counterfeit medicines into the legal supply chain. In order to ensure the transfer of drugs is secure, pharma producers are obliged to specify the national cost reimbursement and identification number, batch number, serial number, product code and expiration date of the medicine. All this data has to be provided in addition to the European Article Number on all relevant exchanged EDI documents such as invoices, dispatch advices, receive advices, etc. within the supply chain to guarantee the authenticity of the goods. Therefore, common EDI formats such as EDIFACT, XML, etc. have to be adjusted to cover the mandatory fields.
Based on our experience, particular producers separate different drug groups such as OTC (over the counter) and prescription drugs on different invoices, even though the order (PHBEST) contained products of both groups. Specific mappings ensure the correct separations of the product groups.
In comparison to other industry sectors, the companies within the pharma industry are identified by the BFA and BGA number instead of the GLN and serve as the routing of documents.
The product codes of certain drugs may differ among the pharma producers and it can be challenging for wholesalers to match all the different product codes from each entity on the market. Thus, a specific product code matrix, where the different product codes are mapped, can provide unified information to wholesalers. Such product code matrix can be established by the provision of the respective data via a direct interface (e.g. AS2, WebService, sFTP, etc.) from the ERP system of the producers.
Conclusion
In the near future, many companies within the pharma supply chain will make a step towards EDI in the cloud to increase their productivity, reduce costs, strengthen its own position within the supply chain and achieve many other benefits. As a result, these advantages will contribute to a steady and healthy growth of this industry sector.
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Mateusz Szarek is Business Solutions Consultant responsible for the DACH market, specializing in EDI, e-invoicing and master data management systems. Since graduating from Münster University of Applied Sciences and Cracow University of Economics in Business Administration and International Business, his focus has been on customer satisfaction and needs.