Product security is a vital consideration for any pharmaceutical company due to the life-critical nature of drug products. There is much attention in the news media about the problem of fake medicine with alarming statistics about the estimated size of the counterfeit drug trade. However, the cost to pharmaceutical drugmakers of unauthorized and illegal drug diversion in both financial and human terms is potentially an even larger problem.
After the issuance of the U.S. Food and Drug Administration’s PCID Guidance for “in-dose or on-dose” markers or tracers for use as authentication measures, the door has been opened for the industry to implement “on-board” physical or chemical identifiers that can help address the challenges of drug product counterfeiting and diversion. More specifically, brand owners can now use inert microtags or markers at the drug dosage level during the manufacturing process. These solutions can sometimes provide both security and business intelligence to allow drug companies to protect lives, enhance their bottom line, and maintain a “final audit” marker in the product, separate from packaging or labels.
HOW DOES PRODUCT DIVERSION OCCUR?
There are many ways that drug product is diverted illegally or without authorization. Product diversion is also commonly known as “pricing arbitrage,” where operators will acquire legitimate product in a lower priced channel and resell it into a higher priced one, sometimes repackaged, sometimes not. The cost to brand owners of unauthorized diversion is massive, particularly since revenue lost to resellers drops right out of the bottom line. The manufacturer — in most cases, the innovator company that developed the drug — has already incurred the full cost of goods sold but does not bank the highest possible price for the product when the product has been arbitraged. There are two major types of pricing arbitrage diversion:
a) Channel diversion, where product is improperly taken from a lower price-point channel and sold into a higher-priced channel, with these diverters arbitraging the difference.
b) Country diversion occurs when a product is diverted from a lower price-point territory or country for re-sale in a higher price-point territory or country.
Both kinds of this pricing arbitrage diversion adversely impact the bottom line of pharma companies. But to go further, pricing arbitrage practices may even create other liabilities and patient risks if the diverted product is relabeled incorrectly, possibly misrepresenting instructions for use, or is subjected to improper handling and storage conditions.
This may occur when an intermediary sub-distributor simply acquires the product intended for sale (and often subject to strict contract terms that limit such sales) in the lower priced or discounted channel, then resells it for a higher price in a non-discounted channel. High-priced, patented drugs are often sold in countries with less developed health care systems at significantly lower prices. While the reasons for these pricing differences are complex and depend in part on global differences in intellectual property protections, healthcare reimbursement systems, political considerations and liability laws, huge opportunities exist to arbitrage this pricing gap. In Europe, repackaging and parallel importing is a legal practice, and allows for companies to take financial advantage of the pricing difference found between a market like Turkey versus the United Kingdom. However, this pricing arbitrage is not only a financial risk, it can compromise patient safety as well. “Even authentic drugs that have been improperly diverted due to price arbitrage can create health concerns if the diverted product is not properly stored or handled, or if the packaging is not in the correct language, which can lead to over-dosing,” said Ron Guido, formerly the vice president of Global Brand Protection and Supply Chain Integrity for Johnson & Johnson.
Another form of product diversion is the unauthorized, out-of-scope and sometimes fraudulent return of product during the euphemistically named “reverse distribution” or product returns stage. This activity is a major source of what is known as “revenue leakage” and has a substantial financial impact on pharma companies. Most drug manufacturers have quite liberal returns practices, but they lack the tools necessary to confirm whether returned material is actually authorized and within scope of the returns policy.
Product received by a drugmaker’s returns processing company is often in damaged or obliterated packaging, or even not in original packaging at all. This makes it extremely difficult for the returns processor to determine whether such product is out of scope and therefore not eligible for refunds. It is certainly possible to issue credit for product that is fake, stolen, diverted or improperly relabeled. Now a brand protection consultant to health care companies, Guido has seen these challenges arise across the industry.
“We saw situations where authentic pill bottles with genuine labeling were filled with fake material and then re-sealed and returned for credit,” said Guido. Currently, returns monitoring practices often do not involve the checking of the contents of containers but instead simply authenticate by weight and a cursory check of outer markings.
Finally, “street” diversion is a dangerous form of drug diversion when prescription medication — usually controlled substances like powerful pain killers — get diverted to users and buyers without appropriate controls, instructions or prescriptions. The demand for this kind of diversion is due to the highly addictive nature of the drugs and has resulted in an epidemic of abuse and overdosing with often fatal consequences.
ADDRESSING PRODUCT DIVERSION
The current focus on drug product supply chain security in the United States can be found in the Drug Supply Chain Security Act, or DSCSA. The DSCSA is part of the Drug Quality Safety Act signed into law on Nov. 27, 2013, and is intended to produce end-to-end product traceability throughout the entire distribution supply chain. The intent behind the DSCSA is that by coordinating transaction records with pharmaceutical distributors and retailers, authorized supply chain workers can theoretically follow a drug’s chain of custody to help flag the source of fake or sub-standard drugs entering the chain. The DSCSA is an important step forward in strengthening the total drug supply chain. However, a major shortcoming of this legislation is that all of the traceability and security measures are focused at the packaging level.
“We have seen many examples of serialized bar codes being re-imaged from genuine packages and applied to fake packages,” said Guido. “In some instances, ‘fake’ authenticating features such as rogue phone numbers, websites and holograms are added to packages to fool inspectors, traders and even patients.”
And even if a package is authentic, without verifying the actual drug product directly, no one can determine absolutely whether the medicine inside is real or fake. And even if real, whether it has been improperly diverted, or if is it truly the right product in the right place at the right time?
COMPLEMENTING PACKAGING SECURITY EFFORTS
It is clear that to supplement all of the investment across the pharmaceutical industry in packaging security and traceability and fight the challenge of product diversion, on-dose authentication measures are needed for a complete product security program.
There are a number of technologies that can be applied at the dosage level to help demonstrate that a drug product is the real thing, including the following:
- Pearlescent coatings that are difficult to mimic so that counterfeiters cannot replicate the real product easily.
- Chemical or molecular markers where special ingredients are added to the drug formulation. Then, a quick chemical test that destroys the sample can confirm whether that special ingredient can be found.
- Chemical analysis, such as Raman or Near-Infra Red spectroscopy, to spectrally analyze the chemical make-up of the sample and compares the resulting chemical fingerprint against a library of fingerprints of the authentic formulation. A match would confirm that the sample’s formulation mimics the target product.
MICROTAGS AND ON-DOSE FEATURES
An advanced, on-dose solution is the microtag. A microtag is a microscopic particle that can be safely mixed into a drug product, and when its presence is detected in the sample, it confirms authenticity. The most useful microtags are those that can carry information or provide a wide variety of differentiated identification that will allow it to distinguish between different codes so variations of business intelligence can reside on multiple drug products. This ability to have a multiplicity of identification numbers or fingerprints is what allows it to address the product diversion problem.
Diversion is a more complex and challenging problem than counterfeiting. There are numerous packaging security features to assist a trained user in distinguishing between a real and a fake product, sometimes even without packaging. But for diversion, the sample product in question is the real thing, but may be in the wrong place at the wrong time. A pill sold in India for one dollar may be identical in look and substance to the pill sold in the United States for several hundred dollars, and it is that equivalence that makes diversion so appealing to both diverters and consumers. If a microtag could act like a bar code and provide a link to the product intelligence that confirms where that product was made, when it was made, when it expires and what territory it was sold into, a drugmaker could more easily determine if that product had been improperly diverted from the channel or location it was intended.
TruTag Technologies, for example, offers an advanced microtag consisting of silica micro particles that can be safely added to most oral solid dosage form drugs without modifying the manufacturing process already in place. Once included in the medicine itself, the taggant will last indefinitely through the product’s lifecycle and can be scanned using one of TruTag’s portable detectors.
In order to address the enormous challenge of product diversion, pharmaceutical companies should be incorporating on-dose authentication as part of a complete product and supply chain security program. Microtags can offer the security and business intelligence to fully complement packaging security and traceability systems.