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The supply chain for genuine pharmaceuticals has grown longer, and every step in the chain offers an opportunity for counterfeiters.

The problem of counterfeit drugs and drug adulteration has been a worldwide issue for decades. Fueled by Internet sales, unsecured physical and cyber global supply chains and minimal punishments, counterfeit prescription drugs have become an exploding industry, with an estimated market worth $75 billion a year worldwide¹. An estimated 80 percent of counterfeit drugs come from overseas with most of them manufactured in India and China.

In this era of globalization, the supply chain for genuine pharmaceuticals has grown longer, and every step in the chain offers another opportunity for counterfeiters. The challenges facing drug manufacturers are numerous in addressing the issue of supply chain security and can be summarized into four major areas, shown in Figure 1.

Figure 1

Pharmaceutical companies and governments worldwide believe that counterfeiting can be reduced significantly by implementing product serialization. Serialization requires a comprehensive system to track and trace the passage of prescription drugs through the entire supply chain. Serialization could potentially identify every product by a unique serial number in addition to the origin, shelf life and batch number for that product. This could potentially allow the product’s lifecycle to be traced from production, through distribution, and finally to the patient.

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Serialization addresses several challenges facing supply chain security in today’s global marketplace:

  • Controlling and monitoring a highly complex distribution network from manufacturer to consumer in which products change hands as many as 10 times.
  • Authentication of the product at various levels in the supply chain becomes very difficult without data sharing across the supply chain.
  • Current business processes are very labor-intensive and, as a result, the price paid by the consumer for pharmaceutical products is high.
  • The high price of prescription drugs and the relative ease of duplication and diversion make them a prime target for counterfeiters.

Serialization is not just about generating unique serial numbers, but also requires maintaining those identifications to provide visibility and full traceability within the supply chain. It requires collaborative action from partners throughout the supply chain for accurate recording, tracking and managing of data as the product moves from manufacturer, to distributor, to the dispensing point.

As part of a long-term strategy, the United States has been trying to move to implementing technology and systems that would discourage the introduction and distribution of counterfeit drugs. In November 2013, the President signed into law the Drug Quality and Security Act (DQSA) (H.R. 3204). The DQSA is the result of a multi-year effort to produce balanced legislation taking into consideration stakeholder priorities. Factors include California delegation concerns with pre-emption, the FDA’s desire to preserve “pedigree” and get to a more robust, more transparent track-and-trace, while preserving Constitutional 10th Amendment rights. Implicit within the DQSA is the Drug Supply Chain Security Act (DSCSA) which outlines critical steps to build an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the U.S.

While there has been general agreement amongst all states within the U.S. regarding the need to address drug security, there have been differing opinions regarding how best to address the issue. The result has been 50 separate states’ specific legislations all trying to address the same basic supply chain. The passage of DQSA supersedes each individual state’s specific legislation, creating a single unified federal framework to address supply chain security. The timeline for implementation of DQSA is shown in Figure 2.

This new federal legislation results in an immediate preemption of all state laws, regulations and requirements for tracing products through the supply chain, including any recordkeeping and pedigree requirements. It also states that the current federal pedigree requirements as defined under the Prescription Drug and Marketing Act (1987) must continue in force until Jan. 1, 2015, as a bridge to the new national framework.

Figure 2

As shown in Figure 2, the implementation of the act is phased. Specific to the question of pedigree compliance, the act has specified product traceability requirements for Phase 1 as follows:

  • Manufacturers, wholesale distributors, dispensers and repackagers must pass, capture and maintain certain information with respect to each transaction.
  • Emphasis should be on lot‐level info (vs. SNI or unit)
  • Now “pedigree” or “product tracing” requirements are triggered by changes in ownership (or transactions) between trading partners.

Expanding upon the concept of transactions or changes in ownership, the law defines the following elements:
1. Transaction information (TI)‐includes the name of the product, strength and dosage form, NDC, container size, number of containers, lot number, transaction date, shipment date and the name and address of the businesses previous and subsequent owner.

  1. Transaction history (TH)‐paper or electronic statement that includes the transaction information for each prior transaction back to the manufacturer.
  2. Transaction statement (TS)‐paper or electronic attestation by the entity transferring ownership of the product that it:
  • Is authorized under the Act
  • Received the product from an authorized party
  • Received TI and TS from the previous seller
  • Did not knowingly ship suspect or illegitimate product
  • Systems and processes to perform verification
  • Did not knowingly provide false transaction information and did not alter the transaction history.

Each business is required to provide the TI, TH and TS to the subsequent owner for each transaction, and capture and maintain for six years the TI, TH and TS for each transaction, whether as the buyer or as the seller.

This obligation begins on Jan. 1, 2015 for manufacturers, wholesaler distributors and repackagers; and on July 1, 2015, for dispensers. The law goes further to state that all drug product manufacturers are required to pass this information in electronic format beginning no later than four years after enactment of the Act. This means that by 2017 manufacturers must, upon request of other sectors, verify the SNI of suspect products. Manufacturers, repackagers and wholesale distributors must verify the SNI of saleable returns beginning four, five and six years after enactment, respectively.

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While this legislation is a major step forward for the U.S., market harmonization issues remain. Broadly speaking, two serialization models are emerging. Under the U.S. “pedigree” model, products are serialized, aggregated and authenticated when a change of custody occurs. Data is shared between trading partners along the supply chain. The problem with this model is that authentication only occurs at a change in custody. A product may bounce around multiple distribution centers before changing custody with each location and provides an opportunity for counterfeit product to enter the supply chain. In Europe, the “authentication model” relies on item-level serialization, registration of product in a national or regional database, and then authentication at the point of dispensation. While serialization under the authentication model makes it harder for counterfeiters to operate, a counterfeit product may still make it to point of sale before a genuine one. Under both models a covert means of anti-counterfeit technology is still required.

There can be no doubt that there is global convergence toward serialization as a key weapon in addressing counterfeit, product mix-up and gray market challenges. The enactment of the DQSA and DSCQA is a major step in providing clear requirements and guidance to the industry as to how to move toward a unified, consistent and effective security solution. Whether the U.S. transaction model or Europe’s authentication model prove to be more effective remains to be seen, however, regardless of the model adopted, serialization technology will be a component of establishing a compliant and effective solution to ensuring the quality of product manufactured in today’s global marketplace.