How to Handle Consignment Inventory: DSCSA Answers for Dispensers

Like many other operations at dispensing organizations, dispensers are taking a fresh look at consignment inventory now that the DSCSA dispenser law is in effect. With consignment inventory, the physical product moves from the wholesale distributor’s warehouse to a hospital or pharmacy, but the change of ownership does not immediately occur. In the absence of a traditional sale and clear trigger for the exchange of compliance documentation, what additional processes might you need to put in place in order to support DSCSA compliance?

What, exactly, is consignment inventory?

Consignment inventory, a practice seen across many types of supply chains, is commonly employed in hospital settings and sometimes by pharmacies. Consignment inventory allows a business to take ownership of product at a flexible time, independent of when it takes possession. Sometimes taking ownership is tied to a procedure or actual dispensation, but it can also be triggered by inventory management. It generally gives the dispensing organization the flexibility to take ownership based on when they actually need the medication. Until that point - and sometimes even briefly afterwards - a wholesale distributor still owns the product.

How is consignment inventory used?

Consignment inventory is often part of the managed services a wholesale distributor provides. They will ship product to a pharmacy - hospital or independent - and manage inventory, monitoring product levels and restocking as necessary. They retain ownership of the drugs until they are used. Offering this level of service can be a competitive advantage for the wholesaler.

Another common use for consignment inventory is in hospital settings, where drugs are dispensed during procedures and the exact amount of a medication that will be needed cannot be predicted in advance. Wholesale distributor representatives will sometimes attend these procedures to determine how much product was used and finalize the change of ownership.

What are the compliance implications?

If you work with consignment inventory, here are several things to consider as you develop compliance procedures:

• Consignment inventory may be managed by personnel who do not normally participate in DSCSA processes. For instance, an operating room nurse may pull compliance inventory off the shelf for a procedure, triggering the change of ownership. How will you train these staff to recognize that a change of ownership has occurred and follow up? 
• Once you have oriented all personnel to the DSCSA implications, will you give them access to your compliance system, or train them to communicate the change of ownership to your staff that are regularly responsible for DSCSA compliance issues? 
• In situations where consignment product is used in procedures, hospitals should think through how they can minimize the time between when the product is dispensed to a patient and when the change of ownership occurs and the appropriate compliance documentation is received. Theoretically, they may want to receive the T3 documentation and verify it before they dispense the drugs to their patient. Their relationship with their wholesaler and their level of established trust will likely come into play. 
• On the returns side, consignment inventory actually simplifies procedures. A supplier can take back product without a paperwork exchange if the dispenser realizes they will not be using it. 

Just like loaning product, 340B programs, documentation access, and lot number, consignment inventory practices are impacted by the new regulations and need to be reevaluated. Next week, we’ll look at how to handle expired product in a DSCSA world.