PhM: How do you see pharmaceutical companies reacting to e-pedigree requirements this time around?
TA: Although it’s not the first time the industry has discussed e-pedigrees, it is, in some ways, and we’re still dealing with those same issues. At the federal level, the PDMA law has been in effect now for almost 20 years, and, still, has yet to be enforced. There’s a legal injunction, and so it has never been put into effect. But the concepts are still being discussed and considered, and companies are keeping an eye on what that would mean for them.
So in the absence of the federal level action, the states have jumped in over the past several years – states like Florida and California primarily, but there are thirty-some states with active pedigree kinds of laws, either in place now or working their way through the legislative track. And so with California, which was the most stringent and one of the earliest to come on the scene, the industry has gone back and forth. The industry has taken it seriously in many cases, and a lot of manufacturers have at least started down the track of figuring out what it would take to be compliant. But the California law keeps on getting delayed itself, and so it has yet to be fully enacted and enforced.
Meanwhile, around the world, there are other similar laws taking shape, and across Europe and Asia, some of them similar to California, some of them more similar to a federal PDMA, and with different timelines for implementation as well.
PhM: Is there a lot of uncertainty out there?
TA: This environment has created a whole lot of uncertainty in the industry about what the requirements will ultimately be, what timeframe and when companies will need to act. To a large degree, companies are taking the requirement seriously, but they’re taking a measured approach to compliance, developing strategies, putting plans in place, and, in some cases, taking steps forward and running pilots . . . but there’s a general hesitation to go full-out to compliance at this point because the requirements seem to be changing all the time. A few companies, the exceptions, are moving forward in a more deliberate way. Some others are simply playing wait and see at this point, until the fog clears.
PhM: Some companies had already prepared for the Florida requirements. Are they more or less sufficient to meeting California standards? Where are the two most different?
TA: Well, the Florida requirements were the first real pedigree laws to hit on a state basis here in the United States. And what Florida did was focus on the track and trace – the ability to track drugs through the supply chain in a paper form – in a paper pedigree, really – and they focused on what they called “normal channels of distribution,” which means that as long as a drug goes through normal channels of distribution, it wouldn’t need a pedigree. However, anything traveling outside of the normal channels of distribution would need a pedigree. And also, the pedigree is required to be generated at the wholesaler stage of the supply chain, so it’s tracking a drug’s chain of custody from the wholesale distribution level down to the pharmacy or the doctor.
California is much more stringent, so just meeting Florida requirements is absolutely not acceptable for meeting California’s. California has said, first and foremost, that it is looking for an electronic pedigree. Then beyond that, it is looking for the pedigree to be initiated with the manufacturer, not the wholesaler. Also, they're looking for pedigrees for all drugs, whether they’re being distributed through normal authorized distribution channels or not.
By far the most significant aspect of California’s legislation is that they're requiring unique identification at the smallest saleable unit. What this means is mass serialization at the unit level for all drugs entering the state that are sold in the state.
PhM: What is the biggest technical challenge in meeting California requirements? Is it serialization, is it establishing the e-Pedigree, or is it the integration of the two?
TA: Well, there are certainly challenges in both of those areas. The pedigree, and particularly electronic pedigree, area is new and it’s evolving. I think the more significant issues, particularly on the technology side, lie in the serialization because serialization affects not only the information transfer that needs to happen between trading partners along the chain, but it also impacts, inherently, the packaging and the packaging process and, in some cases, the label of a drug, creating questions about how and where and what technology to use on the labels and what changes to make on a packaging line or in a warehouse.
PhM: How will this change supply chain partnerships?
TA: The greatest challenges to overcome have to do with the nature of the trading partner relationships up and down the supply chain. So, while the pedigree and serialization questions are inherently technology questions about IT, packaging and scanning, this issue is forcing new conversations and new models of relationships between the trading partners in terms of generating information, sharing information, and providing access to information up and down the supply chain.
PhM: How can one have serialization without creating manufacturing bottlenecks?
TA: It’s important to remember that serialization is not just a packaging or filling line issue. Aspects have to do with being able to label at the speed of production, and then being able to read and validate the information as it’s being packaged, but then also being able to process the information and get the information where it needs to go for the next trading partner, whether it be a warehouse or a distributor, to be able to receive the information . . . correctly, and then for a wholesaler distributor to be able to break down, say, cases and pallets and repackage and scan and read the information accurately.
So all along the chain, these kinds of questions pop up about: can we keep pace or is this going to become a bottleneck in the process? In the vendor universe, there is no one that deals with that entire footprint.
Now, there are specific technology providers at each point along that chain, and some of them are addressing the situation and look like they're in a position to provide a solution. But I would caution any readers against going out and looking for a single solution that covers all the aspects of the supply chain. We just haven’t seen that yet. We know that there are very capable solution providers on the packaging technology side and the information management and information execution around the packaging lines, even on the scanning and authenticating of serial numbers.
We know there are also very capable solution providers on the warehousing side as well, and they're focused on addressing these issues about serialization and the transaction volumes.
PhM: Of the pharmaceutical company pilot implementations, which do you consider benchmarks to companies just setting out to develop an e-pedigree and serialization solution?
TA: Personally, I like the example that Purdue Pharma has set with OxyContin. However, one needs to understand that, while it’s a good example of how this is actually possible in the industry, the technology that they’ve chosen is not necessarily the right answer for other companies in the industry. But at least what they’ve done is they’ve set an example here that can show not only the industry, but regulators, how this can effectively be addressed, at least on the serialization and track and trace side.
[Editor’s note: Click here to read more about the Purdue Pharma pilot.]
PhM: Three years ago, we heard endless buzz about RFID, but when we look at pilot programs now, it seems that most companies, while they're working with RFID in the background, are implementing the 2-D barcodes. Is this the route that you think most companies are going to take, and what role do you see RFID playing in the future?
TA: If you go back five years – even longer than that – there was a lot of buzz about RFID being the answer. FDA even advocated RFID, informally, then backed away. To some degree, I think that did the industry a bit of a disservice because RFID, particularly just a couple of years ago, with the first generation of chips and technologies, still posed a lot of questions about reliability, read rates and so forth.
By putting the focus on that particular technology, a lot of hesitant players in the industry then felt they could say, “Look, the technology’s just not ready, so we’re not going to do anything.” And it also took the focus off of some other capable technologies, like 2-D barcodes, that are capable of providing this kind of a solution, and that are much more mature from a technology standpoint.
So I believe, and I think most of the industry believes, RFID is the right long-term solution. It’s pretty clear that in the past, even as recently as a couple of years ago, the technology wasn’t there. Today, with second-generation chips and technology, it looks like they’ve worked out most of the bugs, but implementing RFID requires a fair amount of infrastructure, which is a barrier to many companies moving forward.
And so in the near term, I do see 2-D barcode as being the solution that most companies are moving forward with, and then keeping their eye on the evolution of RFID. Many of the companies we work with want to be the fast followers, not the ones who are ground-breaking and testing out the new technologies.
PhM: You mentioned new e-pedigree regulations taking shape in Europe and Asia. Are there philosophical differences in the way regulators are approaching the e-pedigree concept, and how does that impact the types of business relationships or supply chain relationships or strategies that pharma companies take in each region?
TA: There is a bit of a philosophical difference that you can see pretty readily. If you look at the approach of the Europeans, for instance, they're taking a much more centralized approach. Granted, very little of this is put into law right now, with the exception of specific EU states enacting their own laws, but at a European level, they're already working on much more centralized guidelines that are also broader. They're not as focused on a particular technology or a pedigree or a serial number, but they're taking a much broader approach in terms of the regulatory aspects, safety features, prohibitions against repackaging, import-export laws, and so forth that would be required to really address the problem of securing the drug supply chain.
Track and trace technologies are a part of their guidelines, but they're taking a much more centralized approach to putting together what would be a centrally accessible database for this track and trace information. And that’s a very different approach than what we see here in the United States at this point.
PhM: So in the United States, every company has to create its own individual database?
TA: That’s right. That’s right, and many players within the industry would be very opposed to a centralized database, for security and for privacy reasons.
PhM: How do you envision supply chain partner contracts working for e-pedigrees? Since you mentioned that the technologies are coming from various different sources, are there groups that are going to integrate and then offer a kind of a platform or will companies have to contract individually with each vendor? And then how would this cost be shared? Can there be some degree of collaboration in the United States between the manufacturer and the distributor or do they just have to undertake this separately?
TA: Well, to a great degree, it’s happening separately, and that may change in the future, and we may see some of these models – these collaborative models – evolving. But to a great degree today, it’s taking place separately, and that’s mainly a result of the industry players moving forward at different speeds. The ones who are motivated either for marketing reasons or real product security reasons to adequately protect a product, they're moving forward unilaterally, but they are already devising some very creative ways to work with their upstream and downstream trading partners.
PhM: Can you give some examples?
TA: Sure, sure. This can be in the form of funding some of the equipment and changes that need to be made at their trading partners and even further downstream, providing the equipment for scanning barcodes or reading RFID tags and those sorts of things. There are also, as you would expect, some new service provider models that are starting up. Frankly, with the degree of uncertainty in the regulatory environment, many companies are just reluctant to commit because of the risk of the requirements changing.
So service providers, such as the software vendors and such as third-party logistics providers and contract manufacturers, are also looking at providing this as a service as well. And I think that’s probably a more typical collaborative model that we’re likely to see where they will track and accommodate the changing regulatory environment so that each pharmaceutical company doesn’t need to do that individually.
Of course, they do that at a price, and so the true nature of the collaboration is a fee for a service kind of arrangement.
PhM: Okay. So this is led by the IT side, and they're partnering with the different hardware and software suppliers? Are there going to be integrators that will offer commercial solutions to pharma manufacturers and distributors or are companies going to have to, for the most part, contract with different vendors for different portions of the technology and integrate it themselves?
TA: At this point, the solution is so fragmented in terms of the different technologies and the players involved that a lot of it is going to need to be contracted individually. Some of the players, I would expect – the big three – the large contract manufacturers, and even some of the larger pharmaceutical companies – will have an opportunity to bring in a partner to handle their ecosystem of trading partners.
But for the most part, it’ll be driven organization by organization. Some of what we may see are a general contractor role that may be played that spans from the manufacturing through the warehousing, and then through portions of distribution. But it’s an awfully big footprint for a single organization within the industry to get their arms around, and so I do expect third-party service providers are going to play a big role in the integration.
PhM: Without naming specific solutions providers, where is the real innovation going on today in e-pedigree?
TA: I think the real innovation right now is going on in two areas. One is real anti-counterfeiting features – anti-counterfeiting and anti-diversion features on products – that have to do with packaging features and the technologies around printing and labeling.
The other innovative area is around these trading partner relationships, and whether these evolve into fee-for-service or shared-cost relationships or information collaboration kinds of relationships.
PhM: And in terms of the trading partner relationships – well, you'd mentioned fee-for-service. You’ve mentioned cases where a manufacturer will help provide a supplier/ partner with technology. Are there other examples of types of relationships that have been set up?
TA: In some cases, the manufacturers might support some of the equipment and capital needs that are required downstream at a wholesaler or a distributor in return for access to the information about what serialized units have been shipped where. And that’s not only at the level of the wholesaler, but can be done further down the chain to the more specialized distributors and pharmaceutical chains and hospitals and so forth.
PhM: I’d heard that that data was not generally shared, so do you see the distributors becoming more open about sharing it?
TA: You're correct: it’s not generally shared, and, frankly, I don’t see distributors becoming more open about it except to say that they're becoming more open to it at a price. And so the question is will this become simply a service to be provided for a fee, or will there be more collaborative arrangements about sharing the costs for the equipment or facilities or other infrastructure that’s required for the wholesaler or the owner of that information so that they can defray some of their costs?
PhM: I know there are no typical installations and the question’s probably unanswerable, but would you have any rough ideas of e-pedigree implementation costs for a manufacturer versus costs for a distributor?
TA: You know, for a manufacturer, the key cost elements are going to be number one, the changes on the packaging line, and in some cases, it’s their packaging line, and in some cases, it’s another company’s packaging line. And that may be shared with other companies as well. So those costs might be borne by one manufacturer or shared amongst several.
Then there’s the cost of the information backbone to manage serialized data and that could be an internal solution that a company purchases the software for and licenses and implements themselves, or it could be outsourced or hosted by a technology service provider. So again, the cost question gets a little tricky because, in many cases, companies are looking to outsource it and purchase it as a service.
Then there’s the pedigree software component, and you’ve got the same question there whether a company licenses the software internally to generate pedigrees themselves or relies on a service provider, either a third-party logistics provider or someone similar, to generate pedigrees for them upon shipment to a customer. So really, the cost is really hard to pin down in terms of a typical model.
PhM: What role are contract manufacturers going to play in this, and would they just be carrying out the demands of the contracting pharma company as they're outsourcing more of their manufacturing and packaging, or will they be developing e-pedigree solutions in their own right for the companies that they're working with?
TA: The contract manufacturers absolutely play a central role in this question, as long as we’re talking about primarily contract packagers, for the most part. It’s been interesting to watch how this issue has evolved in the industry because initially, as I talked about, the initial focus of pedigree laws was on the wholesaler – from the wholesaler on down.
And so the first portion of the industry to pay attention to any of this was the wholesalers, and the wholesalers started setting their requirements. And for them to be compliant, they had to set requirements on the manufacturers for the information that they needed in order to generate pedigrees. So because of that, and California entering with their laws, it became a manufacturer’s issue. And the pharmaceutical companies, themselves, started paying attention to pedigree and serialization issues.
But once California included serialization as part of their law, it became a packaging issue, and it really hadn’t been, except for the last 18 months to two years.
Lots of our clients – I’d say most of our clients – at this point, outsource, if not all, at least a significant portion of their packaging needs. So for many companies in the industry, dealing with contract packagers is essential because that’s where serialization and unit level unique identifiers are initiated and where it’s applied. And that’s where most of the physical changes also need to take place, whereas the rest of it, once the information is generated, it becomes more of an information management issue.
The physical changes in packaging and packaging processes need to happen back there at the contract packagers. So yes, they play a key role. Unfortunately, most of the contract packagers were caught pretty flat-footed in dealing with these requirements.
So they have been very reactive in dealing with the requirements submitted to them by individual manufacturers. But there’s an opportunity for them, and a couple of them have started becoming much more proactive in looking at this as an opportunity to say, “We can differentiate ourselves in the market by providing serialization and this kind of serialized information management as a core service to our customers.”
And I think those that become more proactive about that and bundle that in as a set of services that they can provide on a regular basis to their customers in a way that their customers don’t need to define unique requirements to them, I think they will have an advantage in the marketplace. I think they’ll be more attractive partners to work with, particularly for the companies that are more on the virtual side.
PhM: As more consumers turn to generic medications, it seems like e-pedigree will be very important for generic manufacturers as well, but they already face a number of huge cost pressures. How do you see that sector reacting to e-pedigree requirements?
TA: Given the nature of the generics business, they’re going to be more conservative in how they approach it. However, generics companies have an opportunity. With the requirements coming and, in some cases, even these generics manufacturers facing product security and counterfeiting issues of their own, there’s an opportunity for them to differentiate their brand based on a commitment to patient safety and including these kinds of technologies in their products.
