RxElite Holdings
Case Study: RxElite Holdings
Solution: Ross ERP
Industry: Pharmaceuticals
Country: U.S.A.
About the company
Idaho based RxElite Holdings, Inc. is a highgrowth, specialty pharmaceutical company that develops, manufactures and markets generic prescription drug products in specialty generic markets. RxElite’s products include anesthesia drugs, sterile liquid dose drugs (including respiratory inhalation drugs, ophthalmics and injectable drugs) and transdermal patches. RxElite has established distribution agreements with more than 90 percent of the U.S. generic drug market, including customers such as Wal-Mart, Walgreens, McKesson and Cardinal Health. In June of 2007, the company launched Sevoflurane, its primary anesthesia product. Sevoflurane is part of a product category that represents a $400 million U.S. market, has only two competing products and high barriers to entry.
Challenges
Chargeback and contracts management is a critical issue for the pharmaceutical industry, as it directly affects the financial bottom line of both pharmaceutical manufacturers and distributors. Chargebacks represent the difference between the sales price, which is usually the product’s weighted average cost and the contracted price for which the wholesaler sells the product. The process of managing chargebacks involves the validating, tracking and processing of chargeback submissions from wholesale distributors. Unfortunately, time pressures, transaction volume and data accuracy combine to make this process a significant challenge for many life sciences manufacturers. In fact, studies indicate that for most manufacturers, nearly 20 percent of chargeback lines are handled manually. Yet chargeback claims between wholesale distributors and a manufacturer may range up to 5 percent of gross sales, underscoring the need for systems that not only automate processes but also ensure data quality, confirm the validity of the chargeback against the pharmacy/retail customer or the member of a GPO, decrease overpayments and provide the audit trails mandated by regulatory requirements.
Due to its exponential growth, RxElite needed a way to make its chargeback management process more efficient, automated and streamlined while minimizing revenue leakage and overpayments. “We were processing chargebacks with nonintegrated systems that included our accounting system, spreadsheets and a series of paper reports from our partners,” explained Earl E. Sullivan, Chief Operating Officer for RxElite. “The process was highly error prone because of the volume of transactions we had to review manually. Also, the labor costs associated with managing chargebacks were becoming prohibitively high and impeding our ability to grow.” At the same time, RxElite was facing increased pressure from both large and mid tier wholesalers to accept and process chargeback submissions electronically. “Customers naturally expect us to make doing business as easy as possible,” said Sullivan. “And we recognized that our inability to accept and process chargebacks according to their directives was negatively impacting sales.”
RxElite also recognized that it had long ago outgrown its QuickBooks accounting system. The company’s plans to go public further heightened its need to implement an operational system of record designed specifically for the pharmaceutical industry. Also one that would enable the company to grow profitably. But after months of research, RxElite struggled to find a software vendor that could offer an integrated ERP and chargeback solution. Finding a single integrated system was essential from both a timing and a cost perspective. Facing an aggressive product launch, and growth schedule as well as going public, RxElite couldn’t afford to go through a lengthy implementation process involving two major disparate systems. “There were also cost considerations,” said Sullivan. “The total costs of two separate systems would have topped $1 million, and integrating the two applications would have required tremendous effort and an additional investment of at least $100,000.”
Solution
RxElite selected Ross Enterprise’s Ross ERP system, the only fully integrated ERP and chargeback/contract management solution in the market specifically tailored for manufacturers in the life sciences industry. Ross ERP leverages its backend capabilities around pricing, promotions, chargebacks, rebates and discounts in its ERP system as well as its sales order, inventory and EDI capabilities and married them with a proven, cost effective chargeback and contracts management application, all in one single system.
The chargebacks functionality in Ross ERP supports:
• Contract maintenance for direct (retail chains) and
indirect (GPOs)
• Electronic processing of chargeback submissions,
chargeback disputes, and price changes
• Real-time calculation of administrative fees and rebates
• Real-time accrual of chargeback values to the
General Ledger
• Calculations for average manufacturer price (AMP)
and wholesale acquisition cost (WAC) to meet the
Deficit Reduction Act (DRA) Final Ruling guidelines
In addition to Ross Chargebacks and Pricing Management System RxElite also deployed CDC Software’s Ross ERP, Pivotal CRM solution for its sales force, as well as Ross’ EPM (enterprise performance management) Because timing was of the essence, the combined Ross solution and Pivotal CRM had to be deployed rapidly. “Ross really came through for us,” said Sullivan. “Through careful planning and preparation we were able to implement the full suite of solutions in under 90 days. That’s impressive, considering the amount of preparation needed to make this a reality.”
Results
According to Sullivan, not only was Ross the most costeffective solution, it also enabled RxElite to drastically shorten time to results. “By going with this fully integrated Ross solution, we have saved hundreds of thousands of dollars and 9 months of implementation time,” said Sullivan. “The cost savings have come from not just direct labor costs, but also from our ability to prevent erroneous deductions.”
By fully automating the contract maintenance and chargeback process, the integrated Ross solution has enabled RxElite to reduce the time and costs spent reviewing, validating and processing chargeback submissions from several hours, even days, to only a few minutes. Accuracy on contract pricing and transaction dating has also improved, further reducing chargeback processing times.
The company’s ability to accept chargeback requests via EDI also means that it can more efficiently manage errors in chargeback submissions from customers. When errors are identified, Ross’ EDI-driven dispute mechanism is automatically triggered, generating the necessary supporting documentation for reasons of rejection, and further reducing the need for costly manual intervention reporting. Through the Ross EPM Sales reporting tool, RxElite can now easily calculate administrative fees associated with chargebacks and provide accurate reports of those fees directly to customers. “The standardized, EDI-based nature of these reports gives our customers a much greater sense of security and accuracy than our previous spreadsheet-based approach,” commented Sullivan. EPM Sales also generates real-time running totals of chargeback quantities to support chargeback dollars being requested. This helps RxElite minimize the risk of overpayment on submissions. “Being able to run these reports in a timely fashion is not only critical to ensuring that we’re meeting and fulfilling the obligations of the contract, it has also allowed us to further improve our relationships with our customers,” said Sullivan. “Customers appreciate the new level of accuracy, our efficiency in processing requests and the fact that we now have official documentation that can be easily tracked, not just spreadsheets or handwritten records.”
Moreover, by being able to accept and process large volume chargeback submissions via EDI, RxElite has been able to cut costs and pursue new business opportunities. “In the past, going after new prospective customers or pursuing additional business with existing customers would have entailed hiring more internal resources to handle what was then a very laborintensive chargeback and contract management process,” commented Sullivan. “The Ross platform has enabled us to position ourselves for growth.”
