Q1: Counterfeit drugs are becoming increasingly prevalent in the pharmaceutical supply chain. Why do you think the problem has grown so rapidly during the last decade?
The main drivers are related to financial incentives, lack of strong penalties, available openings to this activity through repackaging and parallel trade activity plus the rise of globalization. It should be no surprise that counterfeiting is growing when the production and sale of counterfeit pharmaceutical products can be more profitable than the sale of illegal street drugs. The legal penalties for counterfeiting are also usually significantly lower than similar penalties for street drug trafficking.

The diversion of pharmaceutical products plays an important role in the overall product security threat. Parallel trade is used to open market competitiveness and pricing. However, given the inherent arbitrage opportunities when markets have widely divergent price levels, coupled with the ability to hide product identification and transaction history with repackaging and redistribution of products, illicit traders have quickly identified areas to counterfeit and/or divert products. In fact, analyses have shown a strong correlation between counterfeiting and diversion given that the primary way to make profits from counterfeiting is to divert such products into the legitimate supply chain.

The growth of globalization has also helped stimulate the counterfeiting threat. As the industry seeks to lower costs, increase production flexibility and open new markets, the complexity of the pharmaceutical supply chain has exploded. The increase in the number of supply chain participants, the rise in the number of stops a product takes from manufacture to consumer and diversity of the product traceability regimes across the globe have all contributed to increased opportunities to counterfeit product in one area and sell it profitably elsewhere.

Q2: Are there any inherent problems in global supply chains?
The distribution chain has become very complex and is only as strong as its weakest link. Each time a product changes hands, there is an opportunity to introduce counterfeit medicines and, with the techniques employed by counterfeiters, it can be difficult to identify a fake from an authentic product.

A complex distribution chain without the ability to identify, authenticate and trace products throughout the supply chain can lead to the entry of counterfeits. Additionally, not all actors in the distribution chain are subject to governmental regulations, those actors that are may not be required to follow the same legislative mandates, and requirements to comply with certain standards such as Good Distribution Practices (GDP) and Good Manufacturing Practices (GMP) also vary widely by region.

Even today in the EU, there are only guidelines, not binding provisions, regarding GMP for the manufacture of APIs. Compliance with GMP by the manufacturer of the API, both in the EU and abroad, is controlled via the manufacturer/importer of the medicinal product. Therefore, better legislation and enforcement is required to ensure that the imported API is manufactured to the same, or better, level of GMP as the country of importation.

Additionally, much of the raw material for finished dose products comes from regions outside the location of the final product manufacturing facility. This puts a significant burden on companies when trying to assure the safety of their supplies, and on authorities who have a limited set of resources to monitor and inspect this foreign activity to the necessary level.

Q3: How do the problems vary across the globe? Are some issues more prevalent in certain regions?
The problems are driven by the divergence of regulatory environments, core competencies and market dynamics across regions and specific countries. For example, China and India have become primary areas of API/excipient and contracted finished dose manufacture because of low costs, growing expertise and technical readiness. However, the current level of monitoring and control is limited in these countries while the general prices of finished dose product is significantly less than prices in the EU or US. Counterfeiters located in these countries seek higher profit markets, and most seizures conducted in overseas ports or free trade zones in the EU and US link the origin of the counterfeits back to these in China and India.

In South America, the counterfeiting market is slightly different as demand is mainly driven by the market dynamics. For example, one of the South American governments endorses and gives incentives to doctors that prescribe generics drugs because it lowers healthcare costs. Therefore, there is no patent protection for the branded manufacturers because their products can easily be represented by generics. This creates a huge opportunity for counterfeiters to capture those markets and disguise themselves as another generic manufacturer with low-cost products.

In South Asia and Africa, the counterfeiting of vaccines for HIV/AIDS, malaria and other afflictions is a huge concern because of the demand for these products, coupled with the paucity of manufacturing and traceability controls.

Overall, the net result is that counterfeiting and diversion have become a global issue because the counterfeiting supply chain increasingly mirrors the legitimate supply chain.

Q4: What steps are companies taking to prevent their products from being counterfeited?
Companies are taking several approaches to making their products and their business performance more immune to the risk of counterfeiting. One key step many leading firms are taking is to invoke a systemic product security approach to their traceability investments by analysing the risk factors involved, the goals of the security programme and the specific security benefits of the tools available.

A risk-based analysis of a company’s business and product portfolio is the starting point. Dimensions that play into rank-ordering products and processes include the potential patient harm caused by ingesting a counterfeit product, the individual product value per dose, the business operational and geographic strategy, and the corporate and brand equity risk in the event of an adverse event. Given this background, the goals of the security programme are analysed. Does the company want fast detection of a counterfeit or diverted product either in the supply chain or in the consumer’s hands? Is it crucial to facilitate quick investigation and closure of any detected security events? How important is it to erect a preventative barrier that deters potential criminals from even trying to counterfeit our products?

The answers to these questions are important because different anticounterfeiting and antidiversion tools can be judged to be more or less effective based on the security goal in mind. As no silver bullet exists among the current technologies, which include on-package overt and covert markings, serialization of product, serialized product identity verification, electronic pedigree and others, the best way forward to deter counterfeiting is to apply a mix of technologies on a product line or regional basis.

As the protection of product security technologies only extend as far as they are adopted across the supply chain, companies are becoming increasingly involved in organizations, such as GS1, or working with EFPIA to harmonize codification and serialization efforts to a more universal set of standards.

Companies are also realizing that they cannot tackle the security question alone, but must enlist the support of their supply and trading partners. Most of the leading security technologies require active participation from multiple places in the supply chain for them to truly be effective; for example, applying a serial number to a package only provides security protection if someone downstream in the supply chain can scan the package to retrieve the number and has access to a serial number verification system. This requires investment by multiple parties, thus stimulating many recent discussions on supply chain collaboration initiatives, whereby the benefits of product traceability can be shared along with the costs.

Finally, many of the global pharmaceutical companies are not waiting for a 'one size fits all' technology solution. Instead, they are defining strategic serialization plans that fit their own unique needs, finding out which specific serialization technologies to include in their product packaging and distribution processes, and augmenting traceability solutions with more creative and stringent technologies to provide product security to their specific packaging.

Q5: Have any new, innovative anti-counterfeiting tools recently come onto the market?
In addition to commonly applied package-level technologies such as holograms, colour-shifting, inks and the emerging serialization and serialized product verification systems, there are several new technologies that the industry has been testing recently.

For instance, a technology called Structure Recognition is driving a lot of interest in the industry. Structure Recognition technology generates a unique fingerprint for each folding box by scanning the paper surface and then records its structure in a highly-secured database. At the dispensing point, the pharmacist can scan and capture the unique structure of the folding box and verify it against the database. In addition, some companies are even experimenting with the development of technologies for encoding a unique identity onto each pill in a bottle or blister pack. These new technologies are still in the very early stages of testing and adoption.

There are important criteria that one must consider when evaluating different tools. Certainly, high-implementation cost is one, especially for the new, innovative technologies. Another is scalability with the trading partners, such as dispensers. Technology requiring mass deployment of highly proprietary solutions is likely to limit the range of participants in the supply chain, as well as impose greater barriers in scaling the solution across the network. That said, innovations such as these may add important new layers to the security blanket in the future.

Given these criteria, the emerging serialization solutions, coupled with product identity verification systems using a unique identification number on the individual units, is drawing more and more attention as an anticounterfeiting tool. There has been a noticeable effort in the industry on defining a common standard for the unique identifier, a key foundational piece for this effort. Continued progress on this front will make serialization and network-based authentication systems a true mechanism to track and trace finished dose drugs, APIs and other products across the supply network.

Q6: In your opinion, what is the most promising anti-counterfeiting technology?
Selecting the right anticounterfeiting technology begins by understanding what type of counterfeiting problem needs to be solved. Different products face different types of counterfeiting, ranging from completely fake to up-labeled to substitution of the content. There is no single solution that is known to solve all different types of counterfeiting problems and the right combination of different solutions needs to be considered.

For this reason, product traceability solutions using serialization have been considered a promising candidate because of the relatively large range of counterfeit types and scenarios it can address. A number of different characteristics of the electronic track and trace infrastructure underpinning these solutions make this possible. First of all, it is dynamic in nature; as the unique identification number varies for each and every unit of product, counterfeiters will find it much harder to replicate the original pack issued by the manufacturer. Problems encountered with many traditional technologies are often related to the static nature of the feature, which means that counterfeiters quickly find a solution. By making the counterfeiters continuously guess what the unique identification number is, the serialization solution imposes additional barriers.

Another interesting feature for serialization-based product traceability solutions is that they have the potential for industry wide adoption. Many different regulatory bodies in the EU, the US and elsewhere are looking closely at product serialization as a key part of their traceability regulations. These serialization-based systems also benefit from the use of open and commonly available technologies. With support by the industry standards efforts, this paves the way for scalability of the solution across the supply network.

Q7: SupplyScape is a leading force in driving the creation and development of industry standards such as the EPCglobal Drug Pedigree Messaging Standard. Can you tell us more about this and its benefits?
As the industry seeks to enhance product security and regulatory compliance, it is important to ensure interoperability between systems across the supply network on a global basis. At the heart of managing counterfeiting and diversion threats, efficiently executing product recalls and driving supply chain visibility, is the need for an exchange of information within the company, its suppliers, outsourced contract partners and downstream trade partners. Open standards driven by industry groups such as GS1 Healthcare and GS1 EPCglobal are necessary to ensure efficient and harmonized operations between companies by providing alignment on intercompany processes and the data those processes consume.

In the US, the Drug Pedigree Messaging Standard (DPMS) was an important foundation in helping companies within the pharmaceutical supply chain, from manufacturer to pharmacy, comply with state and federal regulatory requirements for exchange of pedigree data that captures product movement and transaction flows as products move through the supply chain. The DPMS standard documented an interoperable data format, defined data fields and outlined specific operational use cases, which significantly helped reduce the costs for companies integrating and deploying their pedigree-based supply chain traceability solutions.

More broadly, on an international basis in the US, EU and elsewhere, additional standards work has focused on item-level serialization, product serial number verification and drug traceability from any point in the supply chain. Key facets of this work include standardized serial number formats, such as Electronic Product Code (EPC) and Global Trade Item Number for assigning product identity, serial number carrier formats for barcode and Radio Frequency Identification, and serialized event information exchange and serial number look up services such as EPC information services.

All of this work is targeted at a common set of benefits:

• reduced risk of deploying technology solutions within the enterprise
• reduced implementation and integration costs of connecting to partners
• reduced life cycle system maintenance costs
• reduced risk of business noncompliance given a failure to meet project deadlines
• enhanced access to product and transaction information across the entire trading network, which can be leveraged to drive new business value.

Q8: What action do you think global agencies should take to help protect the supply chain?
Governmental agencies and non-governmental industry organizations are starting to collaborate on a global scale, a new and promising trend. In particular, agencies such as the FDA, European Commission, World Health Organization and Chinese SFDA have recently been at the forefront in proposing new product traceability and supply chain visibility initiatives.

There are several actions that these agencies could take that would continue to raise the supply chain security bar.

First, the agencies should continue to push for the harmonization of rules and recommended technologies within their own respective regions/countries, as well as across international boundaries. Currently, the diversity of traceability and reporting requirements makes it difficult to create a single supply chain security model with ease of adoption, and also leaves holes in the supply network that counterfeiters and diverters can exploit. The harmonization of traceability technologies, serialization numbering systems, product label markings and business process interoperability standards would stimulate broad adoption across the supply chain, deter security threats.

Second, the agencies should continue to take a broad interpretation at what it means to protect the supply chain. Recent incidents of product adulteration have highlighted the need for visibility beyond the finished dose supply chain, including the ability to track the API, excipients and other intermediates that contribute to the finished drug. There are some efforts in these areas, but they are disjointed and not particularly focused on harmonizing traceability in the ingredient supply chain with that of the finished dose supply chain.

In addition, global agencies should certainly continue their focus on establishing a common inspection regimen for manufacturing facilities, streamlining the analysis of imported products, and pursuing stronger penalties and enforcement actions for identified illegal activities.

Q9: As well as helping to protect supply chains and products, what other services does SupplyScape offer to life sciences companies?
Besides protecting patient safety, it is no surprise that recent industry trends such as the expiration of drug patents, the increase in strategic outsourcing and the growth of regulatory compliance mandates are also on our customers’ minds. A major focus of SupplyScape’s software development and consulting services teams has been to create solutions that help companies drive profitable growth, gain operational flexibility and secure compliance during these uncertain times.

On the regulatory compliance front, companies are facing several issues because of the multitude of new product traceability and reporting requirements that are either in force or in the planning stages in the EU and across other markets such as China, Brazil and US. Failure to sufficiently plan for these mandates can result in being locked out of markets, significant fines or unnecessary business costs by deploying 'one-off' solutions. So, we work with companies to help them analyse this regulatory landscape, build flexible compliance plans that align with their internal business goals and deploy software tools to support serialized product identification, supply chain traceability and regulatory reporting requirements.

Beyond mitigating compliance risk, most of the companies we work with also want to drive return on investment from their product security and compliance investments. Our analysis and planning services help business leaders identify areas where these investments can be leveraged to optimize reimbursement programmes, improve brand competitiveness for both established and newly launched products, and enhance the visibility and control of outsourced manufacturing, packaging and distribution operations. When opportunities have been identified, the software tools we offer on the SupplyScape Nexus collaboration environment were designed specifically to help companies realize new business value in these areas.

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