Healthcare enters time of profound change

Attention packagers in the healthcare business: Healthcare has entered a time of profound change. That's according to TRAX: Pharmaceutical Supply Chain Integrity, a conference held May 3-4 in Baltimore and produced by the Institute for International Research. The conference brought the following ideas to its audience:

Ron Krawzcyk, Blue Fin Group Consultancy
• Who is responsible for product security in the pharmaceutical supply chain? It has to be a collaborative effort (see illustration). The sheer number of players involved is among the things that make pharmaceutical product security so difficult to achieve. Organizational design and the nature of the relationships among the trading partners are crucial.

Conference Chair Ken Thomas, president of The Taith Group
• Healthcare has entered a time of change as profound as any it has ever undergone. Three driving forces:
- Developments in medicines: For example, medicines can now be developed that are specific to one's gene type.
- Globalization: In a global marketplace where India makes more drugs than any other country, it becomes difficult to even talk about a "U.S. pharmaceutical industry." Everything is interconnected.
- Economics: India, China, and Brazil are all developing a middle class, and they are beginning to view medicines as a right, not a privilege.

• Doing business as usual in the pharmaceutical industry is a path to disaster. Waste will not be tolerated, and failing to stem the tide of counterfeits is wasteful.

• Participants in the pharmaceutical industry have not been good at collaboration. That may need to change. For example, if state or federal legislation requires that an agreed-upon system of mass serialization be developed by a certain date, yet drug manufacturers, wholesalers, and retailers can't agree on what that system should look like and how it should work, it does not bode well.

• The pharmaceutical supply chain system must be more focused on the customer experience: Think Wal-Mart, Procter & Gamble, Target.

Adam Fein, Pembroke Consulting
• Hillary Clinton, Barack Obama, and a host of other politicians are almost certain to lower the barriers to drug importation from other countries. When that happens, counterfeiting will be an even greater problem than it is now. Yet the pharmaceutical industry seems ill equipped to deal with that grim reality.

• Four solutions from the supply side that could make a huge difference:
- Close off diversion entry points by minimizing excess inventory at the wholesaler and by requiring wholesalers to source directly from drug manufacturers.
- Deter criminals through aggressive enforcement and visible prosecution.
- Raise the cost of cheating by implementing new packaging security technologies and by stiffening licensing and record-keeping requirements.
- Monitor everything in the supply chain through the use of pedigrees, track-and-trace technologies, and a better grip on all channel data.

• Even if all four supply-side solutions above were realized, this "dirty little secret" of pharmaceutical counterfeiting would still wreak havoc with the pharmaceutical supply chain: As long as pharmacy buyers and consumers purchase drugs outside any theoretically secure system that is eventually set up, counterfeiting will prevail. The demand side creates a marketplace where counterfeits are desired. Simply put: Sellers of counterfeits require buyers of counterfeits.

• If the following three rules were observed, we'd have a truly secure drug supply chain; but the rules are unrealistic for the reasons stated:

- All pharmacists must authenticate drug pedigree documents, whether paper or electronic.
1. The average pharmacist is not prepared to take on the burden of supply chain security.
2. This might encourage unsafe sourcing from vendors that are "easy to do business with."

-Pharmacy buyers must only purchase from wholesalers that are willing and able to supply pedigree documents
1. This ignores the financial incentives of pharmacy buyers.
2. Most pharmacists haven't studied supply chain management.

- Consumers must refuse to do business with any pharmacy that doesn't adhere to rules 1 and 2 above.
1. Surveys show repeatedly that consumers care primarily about price and care very little about anything else. In fact, consumers are fundamentally oblivious to the very existence of a thing called counterfeit drugs.

Panel Discussion: PDMA in a Post-Injunction World
• The PDMA (Prescription Drug Marketing Act) became law in 1988. The section of the law dealing with pedigrees is a joke. It was designed to create a system of meaningful, enforceable, logical drug pedigrees, but it has yet to be implemented. In the meantime, individual states are concocting a hodgepodge of their own drug pedigree laws. Some states call for "direct purchase pedigrees," some for "full pedigrees," some for "drop shipment pedigrees," and some are calling for no pedigree at all in certain situations. It is leading to chaos.

• Not only are U.S. consumers essentially clueless about the very existence of counterfeit drugs, so are health professionals in hospitals and other institutions.

• RFID has been little more than a distraction. It was identified prematurely as a potential solution. One day it will prove its value. But right now the technology is not ready, and the pharmaceutical supply chain is better served--for now at least--by relying on such things as 2D bar codes. Yes, it requires line-of-site reading, and there are some questions about the cost of 2D bar-code scanners. But right here right now, it beats the pants off RFID.

Jim Thompson, The Centre for Mental Health
• There are 45 members in PhRMA; in India, there is a similar organization, except that it has 30,000 members.

• Online drug purveyors are by and large charlatans and they should be defeated not so much by legislative efforts but rather by consumer education and effort.

• People like Illinois Governor Rod Blagojevich are deluding people by making them imagine that "affordable" drugs they buy through are from an identifiable and secure source. Those drugs could be from just about anywhere in the world, and there's no way of knowing how authentic they are.

Hussain Mooraj, AMR Research
• Pharmaceutical wholesalers and manufacturers jointly are beginning to realize that their approach to the supply chain must come to resemble that of the most nimble CPG companies operating today. Inventory levels are too high, asset utilization at the plant level is not good, and stockouts are still common even though pharmaceutical manufacturers are notorious for having high inventory levels.

• Anheuser-Busch has a business model similar to that of the pharmaceutical industry: 12 breweries, 750 wholesalers, 500,000 retailers. Now that they've gained real-time visibility into their supply chain, if you have a Bud Lite at Jo Schmoe's Pub, A-B knows about it within 12 hours. That is the kind of visibility that drug makers should aim for in their supply chain. It must be demand-driven, so demand visibility is the first step. And it will require cooperation among manufacturers, wholesalers, and retailers. Together, they must engage in joint value creation.

• Efforts at building a truly secure drug supply chain are continually stymied by the simple fact that drug makers, drug wholesalers, and drug retailers have such different interests and points of view. Who should absorb what it costs to build a secure drug supply chain? Should it be drug makers? They don't send counterfeits into the marketplace. What about wholesalers? They don't make counterfeits, either. Retailers? They say it's the patient who gains the most from a secure drug supply chain, so why not pass it along to consumers? But the government isn't about to let that happen. Ultimately, it's going to have to be the drug makers. It's an unfortunate cost of doing business.

--By Pat Reynolds, Editor, Packaging World
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