Risk Management and Product Protection

The incidence of injury or death from fake, expired, adulterated, mis-labelled or otherwise unauthorized medicinal products is rising. The pharmaceutical industry itself is also at major risk.  Today, it loses sales revenue to counterfeiters and diverters.  If the criminal activity gets out of control and major tragedies happen, the resulting product recalls, brand damage and stock price falls will cause major financial impact at a time when drug company profits are already under pressure.  So what do we do about it?

Some in the industry still view product security as a “nice-to-have”, a useful but non-essential addition to their packaging and an extra manufacturing expense. In today’s cost-control environment it is tempting to avoid it on some product lines or economize on the quality of the features and systems.

Forward-thinking companies take a broader view.   They know that there are several important reasons to invest now, in an integrated way and across their whole product range. 

The healthcare industry enjoys a very high level of consumer trust.  People believe that medication will improve their lives.  SICPA’s corporate motto “Creating a Climate of Trust in a World of Uncertainty” comes from our heritage in protecting currency, another area where the consumer places implicit trust, but applies equally to our approach in healthcare.

Those drug companies that take patient trust lightly, not taking strong measures to prevent unauthorized versions of their medicines, risk a backlash in the event of any tragedy associated with fake products.  Conversely, those who are brave enough to take a stand and publicly communicate their investment in patient safety, by increasing their product security, have the opportunity to create a commercial advantage as well as claiming the moral high ground

The return-on-investment for product security is hard to measure.  Medicine is generally an imprecise science, with few cure-alls and many grey areas.  If you have high cholesterol and take fake statin pills, your subsequent heart attack will almost certainly not lead to an enquiry into whether your medication was genuine.  Our role in the pharmaceutical industry should be to ensure that counterfeit medicine is not the direct or indirect cause of death, whether or not this is the reason written on the death certificate.

Country managers and product managers are at the frontline of the war on counterfeiting. However, managers may know they have a problem with fake product but find it difficult to quantify accurately and to report.  Sales reporting structures at head office may not allow counterfeiting information to be collated across markets to enable a clear picture of overall revenue erosion. So any financial benefit of authentication technologies is enjoyed by the sales organization, which suffers less revenue loss due to “competition” from fake versions of their brand, but this benefit may be hard to measure. 

The cost of product security is felt on the manufacturing side in increased cost-of-goods-sold (COGS).  Purchasing teams are always pressured to reduce costs, but not always encouraged to maximize value.  They may not have access to data (if it exists) on the effectiveness of their purchasing decisions in reducing revenue erosion due to counterfeiting.

Even if the raw data do exist, the conversion of information to knowledge and then to action is always a challenge in any large corporation. But unless companies take an integrated view of their security costs and revenue flows, the link between investment in product security and financial gain can be lost.

Vendors can help too.  At SICPA we work with customers on a proactive basis and at corporate level. This means we can help them to plan their security features ahead of time, across their whole product portfolio. We can pass on economies of scale in terms of lower unit pricing, and we can make sure that security systems are efficient, globally consistent and upgradeable.  This is far cheaper, both in invoiced costs and in hidden costs such as management time, than addressing individual problems reactively as they occur.

In the current unclear legislative climate, those companies who firmly take the initiative are likely to have a big influence on government and regulatory standards.  As legal approaches gather pace in Europe and the USA, the emphasis in fighting counterfeit drugs will shift from the drug companies to the consumer.  Those companies who prepare for this will likely reap financial rewards. The tools to control this problem are already with us – 2D codes, RFID, overt, covert and forensic technologies.  By starting with a basic universal standard and building from there we can at least begin to control drug counterfeiting.

It is interesting to see the effect of the upcoming California law which (unless delayed) will require pedigree information for drugs sold in California from January 2009 (see www.pharmacy.ca.gov).  Many customers are asking how they can comply with this statute in such a way that their initial investment is controlled but the resulting system is scalable for the USA and the rest of the world.  By seeing California as an opportunity, many companies are piloting technologies which they will probably need for the rest of the world anyway.

We are working closely with governments and with drug and healthcare companies to implement a range of security measures which are tailored to the specific circumstances (geography, product, threat etc).  We always advocate a layered approach, where multiple security features are combined to give a strong measure of protection.  The approaches we use include various overt technologies as well as covert features and forensic taggants.  We also use our experience gained in other industries, such as banknotes and value documents, to bring insight into the pharmaceutical security field.  Pharmaceutical packaging should be seen almost as a value document such as a passport, validating the drug contents of the pack, and not just as commodity board and foil to be sourced as cheaply as possible.

SICPA provides a range of technologies and services, including multi-layered material-based and information-based security.  Our rigorous control of all aspects of the supply chain ensures that security features really are secure. It is important that authentication and/or secure track and trace should take place all along the supply chain.  The chain is only as strong as its weakest link

Using only information-based security in track-and-trace technology, whether RFID or 2D printed codes, is not advisable.  Unprotected RFID tags and 2D codes can be copied, altered, or removed.  SICPA uses a combination of material-based and information-based technologies to ensure that pharmaceutical products are secured against the risks that the industry faces today.

There are no magic bullets against counterfeiters in any industry, but by applying a risk management approach, together with appropriate technology, the impact of this crime on patients and revenues can be minimized.