White Paper: Four Ways to Stop Counterfeited Pharmaceuticals We know that large amounts of counterfeit drugs have entered the US drug distribution system. According to the World Health Organization (WHO), 10% of the global drug supply is counterfeit. In some countries, this percentage exceeds 50%, states the Food and Drug Administration (FDA). Reported counterfeit incidents in 2007 involved 112 countries and 639 branded, generic, and over-the-counter (OTC) drugs, according to the Pharmaceutical Security Institute -- and most instances go unreported because “you don’t know what you don’t know.” To put this industry-wide pain point into perspective, Piribo estimates that the global pharmaceutical market generated revenues of $712 billion in 2007 and is forecast to grow to $929 billion in 2012, a compound annual growth rate (CAGR) of 5.5% over the 2007-2012 period. And these projections are conservative relative to others that have been published. The Center for Medicine in the Public Interest projects that worldwide counterfeit drug sales are growing by at least 13% annually over the 2007-2010 time frame. This is more than double the estimate for overall pharmaceutical revenue growth – and implies that conservatively, counterfeits will be at least 14% of the global drug supply by 2012. Organized crime involvement driven by the high profitability achieved by counterfeiters bolsters these figures even higher. Figure 1. Global Legitimate and Counterfeit Drug Market Projections, 2007-2012E (Dollars in Billions) $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 2007
Global Pharma Revenues
Counterfeit Pharma Revenues
Sources: The World Health Organization, Piribo, and New Momentum.
When we as consumers think about counterfeit drugs, we typically think about proactively seeking out lower-cost alternatives to popular drugs through the Internet. How much spam advertising Viagra and birth control, ironically, do you receive each week? The frightening truth is that you may have counterfeit pharmaceuticals in your medicine cabinet today because of breakdowns in the legitimate supply chain. One prominent pharmaceutical industry analyst was asked to choose the genuine drug when presented with two tablets by a major pharma company executive. He chose the counterfeit product. What few people consider is the following scenario. You are in London on business, and you forgot your heart medication. You call your doctor in the US and ask for your prescription to be called into the chemist the hotel concierge has recommended. You presume that you are picking up a genuine pharmaceutical… but can you be sure…in the same way that 5 pills of your 50-pill prescription you picked up anywhere are not counterfeit? We doubt it. Be mindful in this specific scenario that the European Union (EU) has 27 member states. The EU employs a "parallel trade" ordinance, which means that the independent wholesalers who are part of the supply chain can repackage or relabel drug shipments before sending them to their next destination. In the UK alone, parallel-traded medicines accounted for almost 20% of all prescription drugs sold in 2007. European manufacturers supply a lot of Canadian-based online pharmacies, so their pills can be at risk, too. This problem has not gone unnoticed. The European Federation of Pharmaceutical Industries Association (EFPIA) supports a ban on the repackaging of medicines. It said the main focus of forthcoming legislative reform should be to ensure that the integrity of the original package is "absolutely guaranteed" throughout the entire supply chain, from manufacturer to patient. To this end, the EFPIA will pilot a barcode system
using 2D matrix coding to enable pharmacists to verify each package of medicine through a unique identifying code before giving it to the patient. The pilot is slated to begin this year in Germany. Figure 2. Infiltration of the US Drug Supply
Source: PTE Magazine.
Counterfeit medicine enters the legitimate supply chain through parallel importers all over the world. Documented cases have appeared in the UK, the Netherlands, Italy, France, and Portugal. In one case, the counterfeit ingredients came from Mexico, Thailand, and Brazil. Spanish police raided six laboratories in Catalonia, which were producing counterfeit anabolic steroids and hormone-boosting substances, such as cancer drugs. The operation was capable of producing more than 20,000 doses per hour. The police estimate that they seized about 30 million doses (about 10 tons of tablets). 70 individuals were arrested in 56 raids in 13 Spanish provinces. The products seized were destined for distribution in various EU countries â€“ and were confirmed to have been exported to Italy, France, and Portugal. The US is by far from immune. According to James Christian, vice president and head of global security at Novartis, in 2004 when Rudolph Giuliani was running his consulting business, his group went out to JFK airport and out to DFW airport with Customs and the FDA. They found that both airports were getting about 40,000 packages a day that contained some kind of medical product. They opened 1,500 in both locations and found that 86% of them were illegal in the US. Figure 3. Counterfeit Medicine Enters the Legitimate Supply Chain Jess â€“ Would you make sure that the arrows go to northeastern Spain? And can we get the arrow going out to Italy, France, and Portugal (http://www.safemedicines.org/resources/europe.pdf)? Sources: The Partnership for Safe Medicines and New Momentum. THE PRIVATE SECTOR MUST BE AT THE FOREFRONT OF THE SOLUTION
According to the Center for Medicine in the Public Interest, counterfeit drug sales are expected to reach $75 billion globally by 2010 – skyrocketing by 90% from the 2005 level. (Some estimates put this number at $100 billion.) And the economic uncertainty worldwide exacerbates the problem. Interesting, The Daily Triumph, a Nigerian paper, has stated that “the private sector has to be at the forefront of the solutions.” We concur. Patient wellness and safety is the number-one priority of all pharmaceutical companies. Thus, shutting down counterfeit and gray market activity is paramount to these companies’ mission. And in order to develop new drugs to save more lives, pharmaceutical companies have to generate profits, which counterfeit and gray market activity significantly diminish. Attacking Counterfeits is a Multi-Faceted Strategy The FDA’s extensive experience with counterfeit and diversion drug cases has revealed that the secondary wholesale market is where much of the illegal activity occurs. In 2004, the FDA Counterfeit Task Force issued a report outlining a framework for public and private sector actions that could further protect Americans from counterfeit drugs, including the implementation of new track and trace technologies to meet and surpass goals of the Prescription Drug Marketing Act (PDMA). This framework called for a multi-layer approach to address the problem and included the following measures:
• Secure the product and packaging • Secure the movement of drugs through the supply chain • Secure business transactions • Ensure appropriate regulatory oversight and enforcement • Increase penalties • Heighten vigilance and awareness • International cooperation Dr. Alan Goldhammer, Associate Vice President of Scientific and Regulatory Affairs, at Pharmaceutical Researcher and Manufacturers of America (PhRMA), has stated that, “ We need a systems approach” to pharmaceutical supply chain safety and security. “There is no single magic bullet.” We need “innovative packaging technologies,” improved business processes,” and “active enforcement against counterfeiters.” A major US pharma company recommended the following when commenting on its technological strategy to fight counterfeiters: Track, trace, and authenticate; product differentiation/packaging; and surveillance. Technology is a powerful tool in the fight to ensure patient safety and protect manufacturers’ brands. With that in mind, we will discuss four concrete ways that pharmaceutical companies can ameliorate this global problem: counterfeit protection on packaging, RFID systems to track product through the supply chain, on-dosage security, and sophisticated search engines/advanced web-mining technology. Taken singly or combined, these strategies can significantly bolster customer safety and loyalty – as well as your brand and revenues. Figure 4. Pharmaceutical Industry -- Relative Gain to Each Constituent Group Regulatory Mandate Supply Chain Synergies Anti-Counterfeiting Brand Protection Patient Safety
Manufacturer Medium High Medium High High
Distributor Medium Very Low Low Low High
Retailer Medium Medium Medium High High
Sources: HDMA Research and Education Foundation and New Momentum.
STRONG GROWTH FORECAST FOR COUNTERFEIT PROTECTION ON PACKAGING
Why does packaging matter so much? Consider that Lipitor costs $2-3 in the US, but the Indian version sells for Rs 5.50. With the exchange rate being Rs49.68/US$, counterfeit opportunity potential abounds. Industry sources state that only 10-15% of today’s pharmaceutical packaging incorporates security features, even though the perunit cost of these features is a fraction of a penny. Donald Dobert, president of ATL Security Label Systems, cited one of the largest counterfeiting attacks known. It involved more than 18 million doses of counterfeit Lipitor (a statin, a cholesterol-lowering drug). Counterfeiters manufactured the tablets (they contained some of the active ingredients). Bulk containers of the fakes were imported into the United States, emptied, filled with a different product, and then exported. At the same time, the counterfeit Lipitor was repackaged by an "assumed" legitimate company and then sold into the regular wholesale distribution chain. This is called "salting." The counterfeiter mixes real and fake product. This makes detection of the fakes more difficult. Thus, the repackaging of drugs creates many opportunities for criminals to conceal their fakes and introduce them into the legitimate supply channels. Strong growth is forecast for value-added types of packaging, especially parenteral vials and flip-top closures, plastic dispensing bottles and closures, prefillable inhalers and syringes, parenteral stoppers, track and trace and authentication labels, and unit dose pouches. Simple stimuli (such as breath or water) activate new “smart holograms” to reveal a hidden image or color change to verify authenticity. The smart holograms can be easily integrated into a supply chain. The technological sophistication that is employed in these solutions deters counterfeiters from trying to replicate them. Another solution is marked foil, which is almost impossible for counterfeiters to replicate. High-precision laser technology permanently marks foil with fine-line graphics, text, logos, or other microimages during the rolling process. Below we highlight three particularly innovative packaging vendors:
• ATL Security Label Systems. Nanomolecular particles that are incorporated into paper,
adhesive, ink, or other packaging material offer counterfeit protection at a cost of fractions of a cent. The tiny particles function as a synthetic DNA and can be detected and read by a proprietary scanner to authenticate products instantly ("Nano-molecular Forensic Marking System).
• Cortegra Group. Cortegra's brand authentication technologies employ state-of-the-art anti-diversion, anti-counterfeiting and anti-fraud printing methods. As part of its single-source printing solutions for pharmaceutical manufacturers, it provides brand protection with materials such as integrated microprinting, holography, color-shifting inks, varnishes, taggants, threads, frangible papers, and digital watermarks.
• Eastman Kodak. The KODAK TRACELESS System is a forensically invisible authentication
technology that protects against fraud and counterfeiting. It is easy to implement and integrates into a wide range of materials with no disruption to product design or production processes. The KODAK TRACELESS Proprietary KODAK Markers can be integrated into a wide range of host materials with no impact on material characteristics. They are only detectable with TRACELESS Readers. They are invisible to standard optical, forensic, or chemical analysis. The system has built-in safeguards to make reverse engineering virtually impossible. RFID SYSTEMS TO TRACK PRODUCT THROUGH THE SUPPLY CHAIN In its 2006 update, the FDA issued its third report since 2004 to address the combined efforts of the agency and the private sector in its fight against counterfeit drugs entering the US drug supply. The initial 2004 report recommended that widespread adoption and use of electronic track and trace technology would be feasible by 2007. It advocated for the track and trace mechanisms and highlighted RFID as “the most promising technology to meet this need.” These technologies would help secure the integrity of the supply chain by providing an accurate drug "e-pedigree." The e-pedigree would extend the tracking from the manufacturer through the pharmacy. We must point out, however, that RFID tags leave the actual pill or capsule vulnerable, supporting our recommendation for a multi-prong approach for combating counterfeiters.
When the 2004 report was delivered, many participants in the pharmaceutical supply chain concurred that 2007 would be a realistic deadline. Some pharma industries early proponents include Pfizer, GlaxoSmithKline, and PurduePharma. In the 2006 report discussions, however, stakeholders felt that the 2007 deadline was not achievable – and believed that setting a new deadline was not realistic. The group felt that the voluntary approach was not providing enough incentives for adoption. Many states, most notably California, advocated for e-pedigrees, and the FDA encouraged manufacturers to pilot tag their highest-risk or highest-volume products. In 2008, however, Governor Schwartzenegger signed SB1307, the California bill that postponed the implementation deadline for California’s serialized e-pedigree law from the already lengthened deadline of 2011 to the following: 50% by January 1, 2015, and 100% by January 1, 2016; January 1, 2016 for wholesaler/distributors; and January 1, 2017 for pharmacies. Some of the trepidation surrounding the adoption of RFID technologies included the following:
• A lack of standards (for e-pedigree fields and format, data systems, international transmission standards, and hardware specifications);
• Privacy concerns; • Concerns about the ownership of confidential business transaction data; • Challenges in serializing all products; • Concerns over the accuracy and speed of electronic devices and systems; and • A lack of definitive data to determine how RFID will affect sensitive products (e.g., liquids, biologics). Despite the cited concerns, the group delivered several recommendations:
• We recommend that stakeholders continue moving forward in implementing RFID across the drug supply chain.
• We recommend that stakeholders consider a phased-in approach, placing RFID tags on products most vulnerable to counterfeiting and diversion as a first step.
• We recommend that FDA remain committed to facilitating RFID implementation and working with stakeholders, standards organizations, and others.
• We recommend that FDA work quickly to complete its RFID Impact Study examining drugs and biologics, and publicly share the results.
• We recommend that stakeholders explore the use of RFID for tracking medical
countermeasures. The FDA continues to encourage the rapid adoption of RFID in the pharmaceutical supply chain. The FDA believes that a reliable pedigree from the point of manufacture to the point of dispensing is essential to ensuring a safe drug supply. In its view, RFID is a means of providing an electronic pedigree. To that end, the FDA has identified RFID as the cornerstone in the fight against counterfeit drugs. Track and trace technologies offer tangible benefits: pharmaceutical product verification, improved supply chain management, and public health emergency response. One of the most important advantages of RFID over 2D bar codes is its ability to perform non line-of-sight readings at production speed. RFID Naysayers Abound…and Software and Hardware Expenses Top the Complaint List But RFID is not just about applying a tag – and naysayers abound. Some view it as simply an expensive inventory management tool, given the hardware and software needed to employ it. While downstream partners have the potential to benefit the most from RFID, the manufacturer bears most of the costs.
Some of the challenges are uniform adoption among distribution partners, business processes that are not integrated, tags that are discarded during repackaging, and cost. RFID strategies sometimes begin with tagging only high-risk products and then moving to tagging all products. Case Study: A Major US Pharmaceutical Company’s RFID Pilot One major US pharmaceutical company began a pilot program focused on shipping RFID/EPC (electronic product code) tagged XYZ drug and creating an authentication capability. The company chose this drug because it is its most frequently counterfeited product. Today, all XYZ drug produced for sale in the US now contains an RFID/EPC tag. A mass serialization capacity allows the generation and assignment of a unique number to each bottle, case, and pallet of XYZ drug. This capacity writes information to high- or ultra-high-frequency RFID tags. The EPC reading and writing capabilities allow high-speed application on existing packaging lines. It also allows two-dimensional bar code alignment to capture and track tag and write/read performance. It can capture EPC information upon shipment from the company’s logistics centers. In addition, it provides authentication capability down the supply chain to wholesalers and pharmacies. Some key decisions made during the pilot involved the following: read and write to tags online versus prewritten; no national drug code (NDC) number in the numbering scheme; that privacy must come first; that the two-dimensional bar code was redundant; and to disclose the use of RFID on the label. There are many RFID vendors. Below we present RFID innovators: • TAGSYS. TAGSYS marks pharmaceuticals with a unique RFID-enabled product identification tag, which can capture information at the individual item-level. Together with its reader and antenna designs, the RFID system delivers Six Sigma levels of performance in terms of tag readability and product quality. As a result, manufacturers and their supply chain partners can automate laborintensive processes, authenticate and safeguard goods and enable real-time inventory.
• Combined strategy: Impinj and Alien Technologies. Alien Technology uses its patented manufacturing
process, Fluidic Self Assembly (FSA®), to fabricate RFID inlays and straps in unprecedented volumes at very low cost. Utilizing Impinj's Monza chips, Alien produces high-performance inlays and straps targeting global customers in pharmaceuticals, among other industries. The goal is to leverage both companies’ strengths to produce high-performance chips at competitive costs. ON-DOSAGE SECURITY ECONOMICAL…AND PROVES VERACITY AT THE PILL LEVEL The most obvious benefit of on-dosage security is that once a pill is separated from its package, no matter how secure, the packaging is a moot security point. Advances in “on-dosage” technologies have made them feasible complements to tamper-resistant packaging, barcoding and other traditional security features. In addition, this is an economical solution, given that pharmaceutical companies can apply the tags during the manufacturing process without extra steps or additional equipment. One innovative feature is covert encrypted micro-tags applied to the actual pill. End users can monitor the tags with a simple, hand-held detection system. Each tag is unique to the drug, and counterfeiters cannot reverse-engineer them. Each tag contains multiple layers of security. In the future, these identifiers could be linked to the packaging protection to authenticate the packaging security. Some on-dosage identifiers include the following:
• Color. Duplicating color is a real challenge to counterfeiters. Particularly difficult are the glossy and
pearlescent color-shifting coatings. Counterfeiters have to know many manufacturing and material input to be able to duplicate the color shift.
• Bar Codes and Images. Bar codes and images such as logos on the actual pill can protect patients from the
plant to ingestion. Manufacturers can describe these for patients in the packaging. While it may be like a no-brainer that counterfeiters could learn from the very literature provided to protect patients, ondosage high-definition images are very difficult to duplicate. Sensory Identification. Taste and smell also can help patients authenticate a drug.
We highlight some innovative vendors below.
• NanoGuardian. NanoGuardian™, a division of NanoInk®, focuses exclusively on delivering
brand protection solutions to fight illegal diversion and counterfeiting. With the NanoGuardian system, a proprietary method is used to create multi-layered (overt, covert, and forensic) features on the dosage surface. These multi-layered security features provide both field-level authentication and tracing capability on every single dose. The cost is said to be less than a penny a pill.
• Colorcon. To assist in pharmaceutical product development, Colorcon offers a wide range of
complete film coating systems, modified release technologies, and functional excipients. Its brand enhancement and tablet design services enable pharmaceutical companies to distinguish their tablets through color, shape, high-definition imaging, special coatings, flavors, and product security identifiers. It also provides global regulatory services to assist with filing and compliance. SOPHISTICATED SEARCH ENGINES/ADVANCED WEB-MINING TECHNOLOGY The Internet has provided counterfeit and gray market operators with ready access to consumers and markets. We believe that the Internet also provides manufacturers with a means to shut down counterfeit and gray market activity through sophisticated search engines and advanced web-mining technology. Continuous 24/7 monitoring of the Internet for buy and sell listings gives manufacturers real-time intelligence into the market perpetrators. Some vendors enable pharma companies to easily spot these perpetrators on user-friendly custom SaaS-based solution dashboards through inappropriate discounts, volumes, dates, or geographies. They can also receive real-time alerts on questionable activity. Complete contact information can be captured, which gives the manufacturer the proper legal documentation to shut down an illegitimate supplier. We know that there are many benefits to quickly identifying suspect companies, networks that offer counterfeits on the Internet, large counterfeit syndicates, and consistent trends – and one of the most important attributes about this type of solution is that it finds more than three times the number of violators as semi-automated solutions. The New Momentum Solution: A Case Study A major US pharmaceutical manufacturer knows the increasingly predatory counterfeit environment is threatening patient safety through a lack of active ingredients, the inclusion of harmful components, and improper accompanying packaging. To addition to ensuring patient safety, its ability to stop counterfeiting and gray market activity will affect revenues and operating results. The company is losing billions in global revenues to counterfeiters. It plans to continue to employ innovative approaches to prevent counterfeit pharmaceuticals from entering the supply chain and to achieve greater control over the distribution of its products. The company reported flat revenues in over the 2006-2007 and 2007-2008 periods. Employing the WHO statistics that 10% of all pharmaceuticals sold globally is counterfeit, and the AGMA/KPMG projections that 25% of this is recoverable, this major US pharmaceutical manufacturer conservatively may have been able to recover more than $1.3 billion in revenue lost to counterfeiters annually. To that end, this company, known for being cutting-edge in this fight against counterfeits and gray market activity, engaged New Momentum. It had been using a semi-automated vendor, but was convinced that it could achieve better results against counterfeiters using New Momentum’s fully automated system. During the three-month pilot, New Momentum’s advanced web-mining technology monitored the global open markets on a 24/7 basis for the pharma company’s most counterfeited drug. The company was able to spot perpetrators through using the custom user-friendly dashboard through spotting inappropriate discounts, volumes, dates, and geographies. It received system-generated real-time alerts on questionable activity. Through the system, the pharma company was able to capture complete contact information, which gave it legal documentation to shut down perpetrators. Figure 5. The New Momentum SaaS-Based Solution Dashboard Jess – Can we please use a current Pfizer screen, but cover up the Pfizer name? Source: New Momentum.
New Momentum’s solution enabled the pharmaceutical manufacturers to monitor billions of site registrations and emails in real time, analyze and prioritize the most likely suspects, and investigate using reverse WhoIs and IP ownership. It was able to document all activities associated with each case. At eight weeks, based on test buys done based on the data driven by the fully automated system, the success story results were as follows: • 530 suspect companies • 1,750 new suspect URLs • Six large-scale, potential “syndicate” rings in the first six weeks • 33% success rate vs. 16% • Easy-to-use classification tools made it easy to track progress and results of buys. At 16 weeks, the success rate was 50% and growing.
Figure 6. New Momentum Pilot Pharmaceuticals Scorecard – Success Rate Scorecard Sites Provided
Source: New Momentum.
CONCLUSION Counterfeiters have ready access to the technology needed to produce everything from labels to active pharmaceutical ingredients. Globalization has made distribution channels easy targets for introducing counterfeit products. The accompanying rising profitability of counterfeiting has increasingly attracted organized crime. While they are improving, regulations governing the drug distribution system do not provide a strong enough deterrent in terms of enforcement and penalties to discourage counterfeiters. At New Momentum, we strongly believe that all members of the pharmaceutical ecosystem – manufacturers, wholesalers, distributors, pharmacies, and solutions providers -- must work together to alleviate and eventually eliminate this threat to patient safety and wellness.
New Momentum strongly believes that all members of the pharmaceutical ecosystem – manufacturers, wholesalers, distributors, pharmacies, and...
Published on Jul 26, 2010
New Momentum strongly believes that all members of the pharmaceutical ecosystem – manufacturers, wholesalers, distributors, pharmacies, and...