Todd Applebaum
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Pharmaceutical companies and their trading partners face significant challenges in securing the supply chain against counterfeiting,
diversion, and product adulteration. The high price of prescription drugs and the relative ease of duplication and diversion
make them a prime target for counterfeiters. In response to a rising number of drug counterfeiting incidents, several state
and federal governments have drafted legislation to track the distribution of pharmaceuticals.
The most stringent of these laws was passed by the state of California, requiring a pedigree in electronic form for all drug
shipments into California. The pedigree is a statement of distribution history that lists each change of ownership starting
with the manufacturer. At the time of writing this article, the California pedigree law is currently scheduled for enforcement
on January 1, 2011. However, it is likely that enforcement will be delayed based on pending legislation (S.B. 1307) awaiting
signature from the governor. If signed into law, this new bill would push requirements for drug serialization to January 1,
2015, and only for 50% of a company's products (with the balance required a year later). Meanwhile, at the federal level,
the Safeguarding America's Pharmaceuticals Act (H.R. 5839) was introduced in the House earlier this year and proposes a graduated
implementation schedule beginning in September 2011. If enacted in its current form, the federal bill would override all current
and pending state legislation, including California's.
Despite the uncertainties in the regulatory environment, most pharmaceutical and biotechnology companies have begun planning,
and in some cases preparing, for compliance with serialization and pedigree requirements. They quickly find that a compliant
solution involves complex interactions extending broadly across their organization, spanning business processes and operations
across packaging, warehousing and distribution, and information technology. For many manufacturers of pharmaceuticals, where
some or all of these functions are commonly outsourced, the challenges are compounded. For these companies, a compliant solution
must span the operations of their contract manufacturers (CMOs), third party logistics providers (3PLs), marketing and distribution
partners, and any internal operations.
Although each situation is unique in aspects of product and packaging, supply model and network, and IT infrastructure, there
are several common challenges faced by these virtual manufacturers, and lessons to be learned.
CHALLENGES
Product Packaging
The most significant operational implications arise at the packaging operations. Because a core requirement of most current
pedigree laws involves applying a unique serial number at the salable item level, achieving mass serialization can require
a significant investment in equipment capable of printing and applying serial numbers to each level in the packaging hierarchy.
Beyond the purchase and installation of new equipment, validation of the redesigned packaging line also will be required.
Then, in addition to the physical application of the serial number, the necessary IT infrastructure must be in place to accurately
generate serial numbers, ensure their uniqueness, and electronically transmit them to trading partners in the form of an RxASN
or pedigree.
Although these requirements exist for all companies affected by the laws, the complexities of implementing a pedigree solution
are compounded when packaging operations are outsourced. This is caused by the limited influence manufacturers have over their
CMO's serialization strategy. Although each manufacturer will have a unique set of requirements specific to their products,
they often will share outsourced packaging lines with other companies' products, and for the CMO, it is in their best interest
to standardize and implement a universal solution to avoid supporting multiple serialization options in one packaging line.
However, most manufacturers cannot just pick up and leave their CMO because of the potential disruption to supply and the
additional cost and resource commitment necessary to transfer operations to a new CMO.
Furthermore, manufacturers with multiple CMOs face added challenges coordinating the generation and storage of serial numbers.
If more than one CMO is deployed for a product, serial numbers across multiple packaging sites or multiple CMOs must remain
unique. Duplication of serial numbers will not only result in non-compliance with pedigree laws but will also hold up the
release and sale of product to trading partners. In addition, aggregating serial number data from multiple CMOs may require
additional IT solutions. And as the number of packaging sites increases, so does the level of complexity.
