Keep it real – anti-counterfeiting legislation14 April 2014
Last year, two key pieces of regulation in the battle against counterfeits came into force in Europe and the US. Mark Davison, founder of Blue Sphere Health, explains how these could effect significant change to the way in which the pharmaceutical industry does business.
For most of us in the West, our primary exposure to counterfeit medicines probably comes from those Viagra scam/spam emails that arrive in our inboxes from time to time. But counterfeit medicines are a huge issue for the pharmaceutical industry.
According to the World Health Organization, counterfeit malaria medicines alone cause as many as 200,000 avoidable deaths each year. In more than 50% of cases, medicines purchased over the internet from illegal sites that conceal their physical addresses have been found to be counterfeit, it adds.
Indeed, the US FDA estimated a few years back that counterfeits made up more than 10% of the global medicines market, with annual earnings from the sales of counterfeit and substandard medicines accounting for a $32-billion industry globally.
These figures are, of course, shocking and worrying. But, as Mark Davison, founder of pharmaceutical security and anti-counterfeiting consultancy Blue Sphere Health, points out, it is important in any debate over counterfeits to recognise the global developing/developed nation split that exists in this area.
"There is a danger in getting too wrapped up in statistics," he says. "If you look around the world, the average incidence is worrying. But there is a big gap between the relatively secure supply chains of, say, the US, Europe and countries like Australia, where the incidence could be 1% or lower against the as-high-as-50:50 prevalence you get in some developing nations.
"To that extent, the global averages can be misleading. If you go to some African countries and use the channels that locals would use to get their drugs, the incidence can be quite shocking.
"It is not just counterfeit drugs that are the issue, but adulterated drugs too. You can get drugs that are toxic in themselves, in that the adulterated ingredient in the medicine causes illness or a reaction. For example, some of the knock-offs of Viagra have contaminants in them that could be fatal for someone with a heart condition.
"The second way that counterfeit or adulterated drugs can harm people is when they just won't do what they are supposed to do. So you can have an antibiotic that doesn't have enough, or even any, active ingredient in it. In these cases, the problem is obvious. In the case of something like anti-malarials, lack of efficacy can have tragic consequences."
The battle against counterfeits is, of course, being fought on many fronts, physical, virtual and cyber: direct customs and excise and security enforcement, packaging, supply chain transparency, patient education and so on.
But one core area is regulation. In Europe and the US, two key pieces of regulation are the US Drug Quality and Security Act (also known as HR 3204) and the EU's Falsified Medicines Directive.
HR 3204 was signed into law by President Obama in November 2013. Among other measures, it gives the FDA much more authority to regulate and monitor the pharmaceutical supply chain, and will eventually impose traceability requirements on all stakeholders from manufacturers to pharmacists. The EU's Falsified Medicines Directive came into force from the start of 2013 and introduces new harmonised, pan-European measures to ensure medicines are safe and the trade in medicines is rigorously controlled. Both of these legislative moves have the potential to effect significant change in the way in which the pharmaceutical industry does business, argues Davison.
"The response from the industry and regulators has been a long time coming, but we are beginning now to see a consensus emerging that traceability of drugs through the supply chain is critical," he says. "Both of these new regulations will help significantly to tighten up the supply chain and, in turn, offer greater protection to citizens."
The example being set by the US and Europe in this area is also encouraging other countries to follow their lead.
"Developing countries, too, are now starting to get the message, although often there are constraints around funding and regulatory capacity," says Davison. "For example, we now see many of the BRIC countries are looking to bring in similar legislation to that of the US and Europe.
"China, for example, has implemented a traceability system, although its system is an outlier in global standards terms. The government is at the centre of the process and issues the drug companies with numbers to put on their packs, rather than the drug companies doing it themselves and reporting to government, which is how it is done in most of the rest of the world. China also still relies on the old linear barcodes, much like you get in supermarkets, rather than the data matrix codes now preferred in the West, and uses non-standard numbering. Most of the other national schemes, although they may differ in detail, use GS1 global numbering standards.
"One lesson that has become very clear over the past few years is that counterfeit drugs are no longer made just by local bad guys in a back street," continues Davison. "As an industry, it is run by well-funded, capable and highly organised criminal organisations. They will always be looking for ways to get around, if not just copy, security codes and packaging features. Pharmaceutical companies and regulators cannot afford to get complacent; they have to keep moving. But robust and transparent traceability, with global standards, is a big step in the right direction."
HR 3204, for example, is heavily focused on this issue of traceability, in that it will establish a unit-level interoperable drug tracing system, which will be phased in over the course of ten years. This will require companies to provide information about each drug to the next party in the supply chain as well as create licensing standards for wholesale distributors. On top of this, the FDA will be required to keep and make available to the public a database that allows consumers and members of the drug supply chain to identify appropriately licensed wholesalers.
The emphasis on traceability and data management within HR 3204 and the Falsified Medicines Directive could create a new climate in which, it is hoped, it will be that much harder for the counterfeiters to operate, explains Davison.
"It is not about just putting codes on boxes; it is much more fundamental than that. When this new legislation is bedded down, it will mean that manufacturers still have to manage physical inventory but also, just as importantly, a new virtual digital inventory," he says.
"So, as a drug company, if you screw up the data side, your products will simply not be saleable. It is not just about marking and scanning codes; it is about creating a means of storage and usage of data. It requires companies to take a step back and look at this whole issue much more strategically, rather than simply having a tactical response to a problem.
"The regulations require companies to be a lot more careful about data than they historically have been. So it is not just about the new random codes or serialisation; they have to have their master data correct and be sure their fixed data about their product or line is correct as well. Because all that is going to be reportable - which stock keeping unit is associated with which global trade item number or GTIN - so time and resources are going to need to be invested up front to get it right."
Threats and opportunities
Moreover, the potential benefits of this may in time go a lot further than simply the anti-counterfeiting agenda, Davison argues. Clearly, some of the investment that pharmaceutical firms are going to need to put into this will be to ensure relevant boxes are ticked and compliance requirements are met. But pharmaceutical companies need to see it as much more than that, he contends.
"The more enlightened companies are seeing this as an opportunity to get better at doing business in a global market. If you see it as a threat or a curse, you will miss an opportunity; it should not be just about complying, but about improving processes and reaping a return on investment.
"Obviously, pharmaceutical firms do not want to spend more money than they have to, but this is definitely about exploiting the wider opportunity that is out there. It will make the supply chain much more transparent and much easier to track; when all the dots are joined together, it will be quite powerful.
"When you look at digital security, the more transactions you have, the stronger the security gets. Since the US and EU together account for the majority of medicine sales by value, having mandatory digital traceability will be a major step forwards. It becomes quite simple to spot clusters of unauthorised transactions and makes it much harder for counterfeiters to operate at industrial scale.
"There is also an opportunity for developed nations to do more to assist developing nations in terms of tackling this issue," Davison adds. "By helping all countries to build anti-counterfeiting capacity, we can help save lives and improve the conditions for global commerce in pharmaceuticals."
More tangentially, greater transparency and traceability could in time have a knock-on benefit in terms of targeted consumer marketing and promotional activity.
"Another advantage that comes with digital security is the opportunity to offer additional marketing or add-ons," says Davison. "People are now using consumer scanning of products to look at providing additions to their service, for example, offering coupons.
"Once someone has scanned the code on the pharmaceutical box, you can start to deliver other services that customers have voluntarily opted in to. This might be a daily reminder service, sending out a message every evening to remind the patient to take their medication, or a prescription-refill reminder to go back every four weeks, or whenever the renewal point is. Even just receiving more general health tips is a service that is often highly valued by customers. Service provision is something that counterfeiters will not be able to do, or want to do, and so there will be less chance for them to make inroads into legitimate brands.
"So the message for pharmaceutical companies is that this is an issue that is much bigger than compliance with the legislation," continues Davison. "I think many of the big pharmaceutical companies have grasped this and do see it as an opportunity - albeit one requiring significant investment in infrastructure. The challenge is going to be bringing along the smaller and mid-sized companies, and local manufacturers in the developing world, so as to really make a difference to patient safety worldwide."