When products fall through the cracks of established supply chains, they often land in gray markets where they’re diverted to distribution channels not authorized by the manufacturer. This pervasive phenomenon crosses industry lines and impacts a slew of different products, from automotive and consumer goods to electronics and pharmaceuticals. When it comes to healthcare, the ramifications can be dire—it only takes one improperly stored medication or tampered-with test kit to cause potentially life-threatening patient complications.
For this global medical device manufacturer, patient safety is priority No. 1. Despite its standing as a major player with a nearly 40% share of the large market segment it occupies, the company struggled to gain insight into mission-critical data—specifically, distribution data, which they needed in order to understand how and where end customers were purchasing their products. This led to several patient safety concerns, as well as a significant financial one: Due to poor and lagging data quality and process gaps in validating that data, the organization suspected it was losing up to 10% of its annual U.S.-based revenue as a result of rebate overpayment.
The company’s leadership team—especially its CFO—was laser-focused on fixing this leaky tap to protect not only patient safety and product integrity but also the manufacturer’s bottom line. The first step? Engaging the team at Navigate, who promptly rolled up their sleeves, dug into the data to validate the nature and severity of the issue, and moved swiftly to shed light on the way forward.
Rooting Out the Rebate Issue
The challenge ahead was multifaceted, complex, and in large part, unknown. In collaboration with the company’s brand protection lead and legal, audit, and contracting teams, the Navigate team began to unearth the root causes of the rebate issue so they could 1.) clearly gauge the problem and 2.) attack it at the source.
Rigorous research and market analysis revealed exactly what the medical device manufacturer was up against: a distribution network that wasn’t incentivized to reduce rebate fraud or eager to adopt contract changes that would. Distributor delays in providing data—and ensuing data migration challenges—compounded the issue. This critical information languished for six months to a year before reaching the manufacturer, at which point the fraudulent rebates had already been paid and recouping the funds became exceedingly difficult, if not impossible.
Digging deeper still, the team set out to validate exactly how much revenue the company lost annually as a result of rebate overpayment. After an initial third-party audit, the company had caught a glimpse of the problem, but lacked the full picture—without validation, the executive team wasn’t able to fully grasp the size, scale, and severity of the damage and what was required to repair it.
Quantifying, Qualifying, and Pushing Forward
As the research, information-gathering, and data-mining work hummed along, the team sought to align internal stakeholders by establishing routine, collaborative, and cross-functional touchpoints within the organization—which was a welcome first for the team members tasked with resolving the rebate issue. This opened the door for communication around which existing tools and processes worked and which didn’t, allowing the team to identify and, if necessary, build the plan for a data analytics solution.
With the problem-scoping process complete—and finally, clarity around the root causes—Navigate investigated and identified six comprehensive solutions, each of which addressed the ineligible rebate issue from a different angle. The common thread among all six? They paved the way for the company’s teams to align internally and work, think, and act in new ways.
From track-and-trace technology to package and labeling protocol recommendations, the medical device manufacturer now had answers and a roadmap to guide execution. With everyone on the same page, internal teams were empowered to take decisive and effective action—together—to close critical data gaps and identify fraudulent rebates before the medical device manufacturer paid them.
Short-term wins were sure to follow, as well as long-term impact; not just for the company, but for the market segment at large. By shining a light on gray market activity and the harm it can cause, the manufacturer sought to make a positive change, confront something complex and important, and commit to pursuing creative solutions to an all-too-common problem. For a global company among even bigger global competitors, this took courage and the willingness to see their efforts through.
In the end, the medical device manufacturer was positioned perfectly for success. By capitalizing on the insights revealed during the engagement to improve processes and profitability, the company is poised to accomplish the most important mission of all: enhance the health and safety of every patient who relies on its products.
With the problem-scoping process complete—and finally, clarity around the root causes—Navigate investigated and identified six comprehensive solutions, each of which addressed the ineligible rebate issue from a different angle. The common thread among all six? They paved the way for the company’s teams to align internally and work, think, and act in new ways.
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