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Loss Prevention and the Pharmacy: Holding the Keys to the Medicine Cabinet

Most practitioners would agree that there is more to loss prevention than simply ‘minding the store’. With the meteoric growth of online and mobile payments, LP professionals are increasingly stretched beyond the traditional bricks and mortar.

But what about loss prevention issues surrounding the pestle and mortar—the ancient method of preparing healing compounds?

This is more specifically an area of concern for Luke Hudman, head of profit protection for Celesio U.K., the leading international wholesale and retail company that also provides supply chain services to the healthcare and pharmaceutical sector. He is an outspoken advocate of a more holistic approach to curing loss; and argues that there is more to the science and management of loss prevention than the mainline retail space which, he argues, is focused upon to the exclusion of almost everything else when people talk about asset protection.

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A Different Forum

“If you watch television or read articles on loss prevention, it is always focused upon retail and shoplifting because that is the popular perception of what the problem is,” said Hudman, who holds the keys to the multi-billion euro drugs cabinet for brands, including AAH Wholesale Pharmaceutical, Lloyds Pharmacy, BetterLife, Evolution Healthcare, Wilkinson’s Healthcare, DrThom and John Bell & Croyden.

“You listen to organisations such as the British Retail Consortium and the issues are all retail-orientated, so it feels that the pharmaceutical sector is almost a poor relation. Yet the role we undertake is more far-reaching, complex, and challenging,” said Hudman, who has recently joined the ORIS Health, Beauty and Pharmacy LP Forum to lobby for greater sector recognition.

“The heads of pharmaceutical loss prevention should have a place to come together and share best practice, information, and intelligence, and lobby on matters of national importance because our business touches everyone’s lives.”

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For Hudman, who looks after 1,647 over-the-counter (OTC) retail outlets located in doctor’s surgeries, health centres, and the High Street, and nineteen wholesale branches, the job is more than simply keeping the balance sheet healthy for the board, although that is a major consideration. His role and that of his seven-member team calls upon the “second opinion” of powerful external forces in what is the most regulated market in the world – from the third party manufacturers to the dispensing pharmacists.

The supply chain has to be, by its very nature, robust because of the constant threat and inherent dangers caused by the unaccountable loss of prescription stock. Questions are not only asked by the business, but by the Home Office, which regulates the wholesale supply chain, and the GPhC (General Pharmaceutical Council); both of whom have powers to audit a company’s policies and procedures. And this can take place at any time, not just when stock goes missing.

“It is a bit like an OFSTED (Office for Standards in Education) inspection report. They come, they audit us, and they leave a detailed report of their findings. This is the daily reality of the licensing and distribution of the stock we manage,” said Hudman.

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Managing the System

Working with medicines presents specific challenges, but it keeps the role interesting.

“There is never a dull moment in our role because of the diversity of challenges that we, as a team, face daily. We could be looking at some data-mining anomalies in a small community retail unit, or a stock management inaccuracy in one of our larger dispensaries, or a wholesale branch.”

The task is made even more challenging with the relationship with the National Health Service (NHS) and the complex invoicing and charge-back procedures, all of which have to balance against individual pharmacies and the stock files.

In addition, the pharmacies are not run by retailers, but pharmacists—the highly-trained and regulated individuals who have fantastic product knowledge and customer care skills, but their stock control management may be in need of some support and guidance from the profit protection team.

Again, this is a training requirement for Hudman and the team, who are there as a support function to the business to help pharmacists and wholesale branch managers better manage everything from their outlets to their out-of-date drugs. This is because it is more than an issue of profit and loss (P&L). It is about having important medicines available for patients at the right time, and managing brand reputation.

“We also monitor stock movement in relation to drug trends and the markets for them in the public domain. For example we can trigger alerts if we notice unusual movements in those ‘drugs of choice’ and act accordingly,” he said.

“If certain types of medicines become the currency of choice, we work with the Police, DAT (Drug Action Team), and other agencies to move one step ahead of the game. This could be that we need to identify unusual stock movement, which could be an anomaly in the system or the potential to be a dishonest colleague that we need to investigate.

“There are desirable products, so we keep an eye on stock movement to make sure the supply and demand remains legal. Here, one of our jobs is to sort the malicious from the non-malicious losses.”

To many people the issue of needle-exchange schemes where recovering addicts visit health centres and pharmacies to swap hypodermics would seem to pose serious crime issues. For Celesio, however, this is one of the more straightforward parts of the role; in part due to the risk profile of the job and offering full protection for their colleagues working in these pharmacies.

“The process is now so slick that it is like every other prescription. We obviously monitor the situation and can deploy additional resources to protect our colleagues, but it is not a major issue for me or the team compared to some of the other challenges in the business,” said Hudman.

Stringent Documentation

All of Celesio’s loss prevention strategies are intelligence-led and rely on comprehensive reporting with either its own home developed spreadsheets or those developed in conjunction with third-party suppliers, including IntelliQ, the data-mining software employed throughout its EPOS estate.

“We have created our own reporting system that highlights stock movement of products that we know are desirable,” said Hudman.

Holding the keys to the drugs cabinet is clearly a major undertaking that goes beyond managing traditional P&L and shrink and into broader areas of risk, brand protection, and legal compliance. It is not about designer clothes and hand bags, but often expensive designer drugs that have an even higher street value and could create major health risks if they found their way into the wrong hands. Pharmaceutical loss prevention is therefore not just about retail shrink, but in fact, the last line of defence between the legal and the black markets.

This article was first published in LP Magazine EU in the Summer edition 2014 and updated in May 2016.

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