Serialization and Supply Chain Security

Regulatory compliance should be the byproduct, not the goal.

By John DiPalo, Chief Technology Officer, Acsis, Inc.

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A year after adulterated heparin caused deaths in the United States and Europe, inspectors in California were still finding contaminated product in hospitals throughout the state, even though the manufacturer had sent out multiple recall notices, and the issue with the product was well known. As the pharmaceutical industry responds to regulatory mandates to address such weakness in the supply chain, it’s important to ask, “Could this same thing happen in a ‘serialized’ world?” The answer depends on how companies choose to architect their serialization solutions and to what level companies integrate serialization into their business systems. Manufacturers and packagers who let compliance drive their serialization implementation strategies may be missing the opportunity to drive significant business benefits by implementing an enterprise resource planning (ERP) driven solution.

Siloed Serialization Is a Limited Solution
Without a way to pinpoint the locations that received tainted product, manufacturers must recall all items shipped within a particular timeframe. Serialization can help with that.  However, organizations that focus their serialization efforts on recall management will experience some benefits, but they will lack the granular end details that can support more effective solutions, more precise recalls, tighter inventory control and better identification of fraudulent activity. Regulatory compliance should be the byproduct, not the goal, of serialization.
Ideally, organizations should look for enterprise-wide solutions that will ultimately support sharing serialization information across the internal supply chain as well as among trading partners. This requires integrating serialization data with the ERP system and adding context or business data, ultimately tying it all to the serial number.

This end-to-end approach not only enables timely track-and-trace capabilities, but it also expands advantages throughout the entire supply chain as it enables synergistic benefits from the business data in the ERP system. This connection between the serialization system and the ERP system makes it possible gain visibility of product from the point of manufacturer to the patient.

End-to-end is the End Goal
It is the ability to use the business information stored with each serial number that makes product serialization valuable. A serialization strategy that ties into ERP systems and provides real-time visibility throughout the entire supply chain offers significant benefits for the entire organization:

  • Brand Protection—During the first six months of 2011, the federal Food and Drug Administration issued more than 40 Class-1 recalls. Automated tracking throughout the supply chain is critical for efficient response to such events, and an end-to-end serialization solution supports more effective recalls. Companies that can promise recall integrity increase patient safety. This may help differentiate their product, boost their brand image in the eyes of customers and end users, and help protect the reputation from negative consequences.
  • Supply Chain Efficiency—Inefficiency costs money. According to the Healthcare Distribution Management Association, the pharmaceutical industry loses some $2 billion annually on returns and lost product and spends the same amount processing returns, expirations and recalls. An enterprise-wide serialization strategy could provide the necessary level of visibility to allow companies to control these costs by ensuring that returned product is credited at the cost at which it was sold. An enterprise-wide serialization solution could also integrate the information in warehousing, order fulfillment, etc., providing a level of granularity that increases shipping accuracy and reduces the likelihood of taking back ineligible returns. Extending information capture to trading partners enhances the benefits. Drawing a real-time picture of where product is at any point in the supply chain enables tighter inventory control, especially in short-supply situations, and drives better understanding of the impact of disruptions or process changes, ultimately supporting better decision making. 
  • Greater Control— An end-to-end system can capture key information and metrics as the product moves through production, associate it with the serial number and make appropriate information available to trading partners. This information could include anything from quality assurance data to special handling requirements to business data. For example, manufacturers could share information to help ensure that specifications—such as required storage temperature—are met as the product moves through the supply chain. This benefit becomes increasingly important as the industry increasingly moves toward specialty drugs, many of which have high degrees of control requirements. By 2020, most of the top 10 most prescribed drugs are expected to be specialty medications. 
  • Reduced Risk— Each year an estimated $45 billion in counterfeit drugs enters the supply chain. In April the FDA reported a new batch of counterfeit Avastin in the United States, packaged as Altuzan, the brand name for Avastin in Turkey. The fake product did not contain a key ingredient in Avastin, an injectable cancer drug. The agency had reported a previous counterfeit batch in February. A serialization strategy that provides the infrastructure to allow transparency across trading partners enables the timely track-and-trace capabilities that can help reduce this type of counterfeit risk, fraud and diversion. 
  • Pricing Accuracy—A serialization strategy that extends to trading partners also addresses issues with special pricing, controlling who gets the price and how those chargebacks are executed and also preventing the problem of duplicate chargebacks. Manufacturers save the costs associated with manually investigating discrepancies in chargeback requests and resolve disputes more quickly.

Three Stages to Success

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