This New Year’s Day was a momentous occasion for the US pharmaceutical industry’s manufacturers and partners across the supply chain. As they welcomed in 2015, they also braced themselves for the implementation of a new law, Phase I of the Drug Supply Chain Security Act (DSCSA).

Signed by President Obama in November 2013, this is a multistage endeavour that will affect everyone from retailers and repackagers to the FDA itself. With the second instalment scheduled for November 2017, and the third six years later, its aim is to promote effective track-and-trace solutions for pharmaceuticals all the way from manufacturer to the user.

While the law is complex – the product of over a decade of Congressional bills and hearings – the problem it has been designed to solve is painfully clear. Through promoting better traceability solutions, it aims to thwart the introduction of counterfeit and other illegitimate drugs into the supply chain.

"The basic goal is that by the end of 2023, every drug manufactured will have a track-and-trace system until it reaches the patient," explains Priya Gopal, associate director of strategic plans and projects at Novartis. "If there is anything suspect, you are able to trace the source, so it will be a robust anti-counterfeiting measure."

Deadly serious

Counterfeit medicine is a serious, expensive and potentially deadly issue that poses a particular problem in countries in which legislation is lax. In 2011, a study by the World Health Organization found that 64% of imported antimalarial drugs in Nigeria were fake.

"The goal is that, by the end of 2023, every drug manufactured will have a track-and-trace system until it reaches the patient. If there is anything suspect, you are able to trace the source."

In the US and other developed countries, the prevalence of counterfeit drugs is estimated as less than 1%, but there have been several highly publicised incidents. In 2005, 18 million Lipitor tablets were recalled due to criminal activity, and fake versions of the weight loss drug, Alli, were sold online in 2010.

With accurate track-and-trace systems in place, it will be easier to stop the spread of such drugs, and to work out exactly where they infiltrated the supply chain. Likewise, there will be fewer opportunities for contamination, adulteration or diversion. It should come as no surprise that many traceability laws, similar to the DSCSA, have sprung up around the world.

For the US pharmaceutical industry, compliance efforts are already well under way. As of 1 January, manufacturers, repackagers and wholesale distributors have been required to provide their customer with product tracing information whenever the drug is sold on the US market (FDA has said it will not take enforcement action until 1 May).

"Many of the industry partners weren’t ready for 1 January, so FDA gave them a grace period," says Gopal. "As I heard from my customers and distributors, 70-80% of their manufacturers are now compliant, sending information along with packages. Phase I is nothing complicated, then, but it’s still slow progress."

Those who met the deadline are now gearing up for Phase II, which is more complex in its specifications. As of 27 November 2017, manufacturers will need to pass on all transaction information in electronic form, and their products must be fully serialised. As Gopal explains, this is not likely to be a straightforward process.

"In 2017, the manufacturers will need to imprint a 2D barcode with a serial number onto every product we sell in the US market," she says. "It sounds simple, but it’s not easy to implement. Once you have that, manufacturers need to capture those serial numbers internally in our systems.

"We also need to be 100% electronically connected with our customers, passing on the transaction information, history, and status every time there is a change of ownership. We are currently 10-15% electronically connected with our customers, and the rest is mostly paper-based."

One giant leap

Making the leap to electronic will mean shaking up the current systems. Currently, a platform called EDI is used, which is an old, manual model of B2B connectivity that is insufficient for these purposes. The global standards organisation GS1 is now in working on a new model, EPCIS, which will facilitate electronic exchange between supply chain partners.

One surprising aspect of this next phase is the fact that, while transaction history and so forth will need to be transmitted, there is no equivalent requirement for serial numbers. Gopal believes it is important to look at what this will entail.

"In 2019, the distributors will be required to capture the serial numbers if a return happens on their product," she explains, "but if they don’t know the serial number, how will they make sure it’s what they sold? These are the details that need to be worked out: how will our partners downstream be able to operate and how will we support them? This will be a collaborative effort over the next three years."

Complying with Phase II may prove easier for some pharmaceutical companies than for others. While they will all need to invest significant time and resources – with a heavy cost burden placed on packaging and IT departments – larger manufacturers will be more easily able to absorb this blow than smaller ones.

For a company the size of Novartis, the real concerns lie with integration (how do you ensure that your many customers have the infrastructure to connect with you electronically?), but for smaller companies, the issue is expense.

"It’s not the cost of the product itself, it’s the cost of the implementation and maintenance of that product," says Gopal. "Smaller companies will have more challenges with budget, especially generic companies with low margins. With experience, pharma has reduced our cost of implementation, but it’s still a significant figure."

Reducing these costs may come down to planning. As manufacturers scramble to meet the upcoming requirements – not just in the US, but throughout the world – it is likely that vendors will be stretched thin, and it is important to take advantage of their offerings with time to spare. We may soon be forced into a situation of undersupply and over-demand.

"As the FDA releases further clarifications, the pieces of the puzzle should start to fit, and, ultimately, the rewards should be significant."

It’s important to remember that upheaval isn’t always bad. As they implement new IT systems, manufacturers have an opportunity to streamline their existing processes, and purchase systems that deliver prompt returns on investments. Still, it goes without saying that early adopters (specifically large pharma companies) will have an easier time in the years to come.

Lay down the law

Novartis’s own serialisation programme has been in place for a while. As an international company covering various jurisdictions, it has had no choice but to stay ahead of the curve.

"Many countries have different versions of serialisation requirements, so we have a global programme that sits in Basel, which looks at the requirements on a broader scale," reveals Gopal. "We look at things in a global fashion, and that helps us reduce our cost and redirect our attention to our key priorities."

Turkey, for instance, has had full track-and-trace implementation in place since 2012, and Brazil, China and South Korea are currently in the process of implementing theirs. The EU Falsified Medicines Directive, which will require a unique serialisation number and barcode on every unit of drug product, is due to come into force in 2018.

While each law poses its own challenges, the US version is particularly complicated, and Novartis is working with industry bodies to address the areas of contention that remain.

"The law is law, but when it comes to the detailed implementation there are a lot of questions, and that’s where industry organisations come in," says Gopal. "They are working to get answers to these open questions with FDA so they can move forward. We really need to get ready no matter what, so industry is very active in this space.

"All of these groups are working alone and together to get more clarity on the law and how they can move into the implementation phase quickly, considering its complexity. Each and every supply chain partner has to do their bit for it to work. This is the first time things have come together in this magnitude, from manufacturers to retailers, but the regulation is still not clear and in many areas guidance has still not been released, so that places stress on the programme."

The scale of the task ahead should not be understated. Given that the burden lies not just on the individual manufacturer – but also on the parties they trade with – it is important to consider how each supply chain partner falls into the overall picture.

Still, we can remain optimistic that, as FDA releases further clarifications, the pieces of the puzzle should start to fit, and, ultimately, the rewards should be significant. If all goes according to plan, the pharma supply chain will look markedly different in 2023 to how it does today, with issues such as drug counterfeiting becoming a thing of the past.