Agnes Shanley is senior editor of Pharmaceutical Technology.

Agnes Shanley

As FDA has stepped up inspection of API and finished drug manufacturing facilities outside the United States, its inspectors are uncovering more reasons for drug company sponsors to do what they should be doing anyway:  assessing and monitoring their suppliers’ and business partners operations, quality systems, employee training, and overall business practices. Caution is required with all business partners, but can be much more complicated when these partners are thousands of miles away and do business in another language and culture.

	Failure to be proactive can have far-reaching impacts. Drug shortages can result when FDA inspectors find problems at a sole offshore supplier’s API manufacturing plant and place that supplier on Import Alert. In other cases, contract manufacturer or supplier noncompliance can stop the development of a promising new drug, when a pre-approval inspection reveals a poor understanding of cGMPs, and FDA stops new or abbreviated new drug (NDA or ANDA) application review with a Complete Response Letter (CRL).  As Lachman Consultants’ Vice-President Arlene Ocampo recently warned (1), “Be ready, be smart, and be prepared.” That means making sure that your business partners are too, wherever they are based.

	These were some of the issues explored in a June 22, 2016 webcast jointly sponsored by the law firms Dechert, LLP and Hyman, Phelps and McNamara, P.C. Ominously entitled “The International Pharma Supply Chain: Imperiled Like Never Before,” the program (2) touched on problems that are converging to keep pharmaceutical executives up at night: data integrity problems, an immature compliance culture at many facilities in developing regions, and the emergence of corruption and bribery, already seen on the physician marketing side, as a potential supply chain safety issue.

	We’ve been hearing about serious manufacturing and quality issues at offshore facilities for some time. In an interview with attorneys at both firms preceding the webcast, Hyman Phelps Principal Douglas Farquhar said that the term “more imperiled” is anything but hype.

	In the 12 months ending June 1, 2016, he notes, FDA issued 25 warning letters to pharmaceutical manufacturers, and, excluding compounding and marketing-related actions, 23 were issued to foreign facilities. “We’ve reached the point where 90% of warning letters are being issued to foreign facilities, many of which are in India and China,” Farquhar says. Considering that approximately 80% of the pharmaceuticals sold in the US are either made overseas or use APIs that are made offshore, he adds, “that’s a huge percentage of distribution.”

	His colleague, Hyman, Phelps and McNamara lawyer and FDA alumnus Mark Schwartz, notes that data integrity is most often cited in warning letters to offshore suppliers, accounting for 43% of FDA’s Center for Drug Evaluation and Research’s (CDER’s) warning letters in 2011, but 78% of warning letters in 2015. Chinese and Indian manufacturers were cited in 31% of warning letters in 2011, he says, but four years later, that number had risen to 70%.

	“Data integrity has become a huge problem, and CDER is now in a Catch-22 situation--either allow products into the country that could potentially violate requirements of the Federal Food,Drug,and Cosmetic Act and threaten to create a public health crisis, or put the manufacturers involved on import alert and potentially usher in drug shortages,” Schwartz says. Most common signs of poor data integrity include:

		Hiding time and date settings on test results

		Re-integrating analyses to achieve passing test results

	It’s likely that data integrity has surfaced as a problem because regulators are inspecting more--and more offshore--facilities. In 2015, FDA conducted approximately 180 inspections of facilities in India and China. As Farquhar noted on the webcast, the agency has 13 staffers in China and wants to triple that number, and to double the 9–10 it has in India.

	In addition, regulators in China, India and elsewhere are increasing their inspections, and including inspections of more foreign facilities, focusing currently on European suppliers (

	In the June webcast, Schwartz pointed out better inspection practices, singling out Peter Baker, FDA India’s assistant country director, for particular respect. Several years ago, Baker (3) began applying sophisticated methods to examine facility computers to find hidden data (such as additional “unofficial” test results) in computer hard drive directories.

	But fundamental issues are also at play, notes consultant John Avellanet, principal of Cerulean Associates, LLC.  “Nobody really teaches you not to backdate a lab notebook in college,” he says. “It’s a question of ethics, and then training by your company.”

	Poor data integrity practices are everywhere, but Avellanet says that it is about 10% easier for inspectors to find problems at facilities outside of Western Europe and North America than within them. European and North American companies are used to being inspected regularly, not only by regulatory agencies but also by third parties such as International Organization for Standardization (ISO) auditors.  “There’s a level of expectation that [outsiders] will come and look at our work, when we signed and dated documents, our training records, and so on,” says Avellanet. “People at facilities in the US and Europe are more prepared for the obvious red flags,” he adds.

	Even in developed regions, seasoned professionals may have difficulty translating good documentation into good electronic data practices. As a result, the people who evaluate offshore partners’ facilities are often from quality or purchasing departments. They may not really understand what good data integrity practices look like in day-to-day work, or know what to look for to find problems, he says. At the same time, Avellanet says, “Many pharma IT departments focus more on the ‘T’ than the ‘I,’ in IT, which makes it hard to translate IT-speak into quality or management language.”

	Senior managers, meanwhile, may be so focused on the bigger picture that these issues get short shrift. “There is no line item in budgets for data integrity,” says Avellanet. “Those most affected by it must distill data integrity down to three talking points, and try to get funding.  It’s a tough row to hoe, since management tends to think of quality as overhead to begin with,” he says--until the company receives a warning letter or has a new drug development program put on hold.

	Import alerts, which block APIs and finished pharmaceuticals from being sold in the US, may have given some companies a false sense of security, notes Farquhar.  More should take warning from current cases, and be sure to diversify their API suppliers. “For pharma companies that depend on, say, a single API supplier, it can take more than a year to recover once the supplier is listed,” he says.

	Supplier noncompliance can also play a major part in curtailing development of a new branded or generic drug via a new drug application or abbreviated new drug application (NDA or ANDA). If the API used to make the drug was made by a company on the Import Alert list, FDA will not approve the drug, says Farquhar.

	Since April 2016, FDA has issued two CRLs to two companies with new drug candidates (2). What was significant in these cases, Ocampo says, is that the CRLs were not based on the usual reasons (e.g., safety or efficacy problems with the drug), but because pre-approval inspections at offshore supplier facilities indicated cGMP compliance problems. “Within the past 12 months, we’ve had at least five clients come to us because their NDAs or ANDAs were not approved for this reason, says Farquhar.


	While the US government has brought numerous cases under the Foreign Corrupt Practices Act (FCPA) since it was enacted in 1979, US enforcement authorities have been particularly aggressive over the past decade, says Dechert partner and co-chair of its International Trade and Government Regulation practice, Jeremy Zucker. He notes that many past enforcement actions have targeted pharmaceutical companies that provided cash, trips, entertainment and other things of value to physicians at state-owned health systems to induce them to prescribe the companies’ products--and that Kara Brockmeyer, the chief of the FCPA unit at the US Securities and Exchange Commission (SEC), recently announced that the SEC again would focus on corrupt practices in the pharmaceutical industry. Zucker notes that supply chain is becoming an area of interest, and regulators are exploring whether local manufacturers and other partners are bribing foreign officials to secure commercial advantages. Local enforcement agencies in India, China, and other countries are increasing their own efforts to prosecute bribery, paying close attention to third parties, such as travel agencies and clubs, that could be involved in such deals.

	“There is great potential for bribery and corruption to affect the supply chain, because money can, in theory, so easily be funneled through third - party agencies,” says Kareena Teh, a Hong Kong-based litigation partner with Dechert who leads the investigation practice in Asia. In addition, she says, “we see a lot of issues around customs and getting things in and out of China, and the potential for ‘inducement’ payments to be attempted.”

	Inspection reports in some FDA warning letters, particularly those calling out basic plumbing issues with sinks and toilets at API manufacturers, beg the question of whether some local government official or inspector “greased the wheels” for manufacturers. “How else could these facilities pass local annual health and safety inspections when such problems existed?” Teh asked on the webcast (1).  She also recalled the case of Chen Wen-Hsiung, an inspector with the Taiwan FDA, who was reportedly paid more than $150,000 over two years, to warn local pharmaceutical companies of “surprise” cGMP inspections and help them pass (3).

	Questionable business practices can take other forms, too. This was seen with the 2008 heparin recall, in which some of the heads of the Chinese suppliers implicated in the recall were related to each other.

	Questions about heparin safety persist today. In March 2016, US representatives noted many inconsistencies that had not been explained or resolved, which reflect basic safety loopholes in the pharma supply chain (4). It’s important to be aware of contract wording, especially where additional payments are linked to milestones that involve other partners. Avellanet recalls a situation with a client who had outsourced a clinical project to an overseas contract research organization (CRO), with milestone payments built into the schedule. The CRO, in turn, provided milestone payments to local investigators, which resulted in fictional patient recruitment and the logic often found in these situations. “I get double the money if I enroll 10 patients instead of six. So who will know if I make up four more people? The sponsor doesn’t speak this language and by the time they get patient data, the trial will be over,” says Avellanet.

	So what is a sponsor to do?  Thorough due-diligence and vetting of suppliers are crucial. “Mock audits are critical….and companies need to look hard at data integrity issues and at electronic recordkeeping, 21 

 Part 11-type issues, including being sure to back up all data and store it remotely from the plant location,” says Farquhar, who believes in scheduling, and repeating, unannounced quality audits.

Reminder: International Pharma Supply Chain Imperiled Like Never Before

,” FDA Law Blog, June 16, 2016. 
	2. A. Ocampo, “

Complete Response Letters Due to Failed PAIs: More to Come?

” Lachman Consultants’ blog, June 2, 2016.
	2. E.K. Sharma, “

,” BusinessToday.com, March 16, 2014.
	3. T. Sandle, “

,”August 16, 2015, DigitalJournal.com.
	4. A. Shanley, “

US Representatives Question the Safety of the Heparin Supply

Articles

Bribery and corruption may be the latest challenge to supply chain integrity.

Supply Chain Partner Scrutiny Moves Beyond GMPs

Pharmaceutical distribution was once considered separately, as a simple handoff. Manufacturers made product, then had it shipped (by a reputable company and its partners) to its destination. This approach ignored the modes and nodes, numerous product transfers, and players involved in the logistics process. It also predated biotech, and a clear understanding of just how sensitive biopharmaceuticals can be to the slightest changes in temperature, pressure, humidity, or other conditions. Today, logistics providers and pharmaceutical manufacturers agree, simple handoffs no longer work.

	Good distribution practices (GDPs), which focus on optimizing conditions for product storage, have set a baseline for maintaining pharmaceutical quality and safety during shipment, transportation, and delivery.

	They may all be somewhat similar and share the same goals, but every country’s GDPs are different. In the United States, the US Pharmacopeial Convention’s (USP’s) guidance is used, but the World Health Organization (WHO) has its GDPs, as does the European Union (EU), which updated its GDPs in 2013 (1).

	For those cold-chain service providers farthest away from the product (i.e., airlines, airports, and freight forward and courier companies), understanding and applying pharma GDPs can be confusing (

). Such understanding is crucial, however, especially for air cargo shipment. Temperature excursions account for $2.5-12.5 billion of pharmaceutical product loss each year, according to the International Air Transport Association (IATA), the Montreal-based trade group that represents airlines (2).

	Air cargo transportation is often the riskiest portion of the product’s journey, as sensitive materials may be left waiting between flights or in various parts of airports, pending customs inspections or regulatory assessments.

	“Traditionally, shippers have tried to mitigate the impact of airport delays by incorporating special features into packaging, but now we are at a point where airlines need to shore up that part of the supply chain,” says Dan Bell, Marken’s vice-president, Regulatory Compliance and Technical Affairs.

	Long customs and regulatory inspection delays are still typical

	One of Bell’s Big Pharma clients recently noted that Brazil’s average airport inspection time had gone down, from 70 to 60 days. But still, Bell says, “No packaging in the world can maintain product for that length of time. Airlines may need to plug in an active container or move product into cold storage or an air-conditioned room. There’s a more active part for airports to play in such scenarios,” Bell says.

	There is also a strong business reason for airports to become more directly involved. Between 2000 and 2013, pharmaceuticals dropped from 17% of all air cargo shipment business to 11%, according to data developed by 

 (2), with some pharma manufacturing centers opting for sea transport instead. 
	Recognizing the need for standards relevant to air shipping, IATA, which had helped develop several important airline and airport safety standards, launched the Center of Excellence for Independent Validators (CEIV) Pharma Logistics program in 2014. Its goal is to develop global standards for air transportation of pharmaceuticals, but also to certify compliant companies, and train airport, airline, product handling, and freight forward personnel in the basics of current good manufacturing practices (cGMPs) that are required to ensure pharmaceutical safety and efficacy during shipping.

	IATA has been active in this area for some time, explains CEIV Pharma Logistics project lead Ronald Schaefer, with a time and temperature task force made of pharma shippers, freight forward companies, ground handlers, airlines, and airports that focuses on cold chain issues and meets twice a year. IATA’s efforts started in 2007 with the publication of its “Perishable Cargo Regulations (PCR)”(3), followed by Chapter 17, which updated guidelines for handling temperature-sensitive pharmaceuticals (4). Its next effort was to place special labels on temperature-sensitive pharmaceuticals, the use of which has been mandatory since 2012.

	IATA has been engaging pharma shippers for their suggestions, given complex, varying global regulations and the number of stakeholders involved. Those in the industry agree that having standards will be crucial in the future.

	In drafting a standard, IATA’s first step was studying, and adapting, the global GDPs. It focused on WHO’s and the EU GDPs as well as the EU Annex 5, but also took the best of each regional GDP and its own PCR to create one robust standard for pharma transport. The standard is designed to apply to anyone, whether they are a trucking company, ground handler, or freight forward company, says Schaefer (5).
	IATA also developed two training programs, one on the operational side on how to handle pharmaceuticals, and the other on audit quality training management, a five-day classroom course. In order to receive CEIV-Pharma certification, a company must first be assessed by an independent validator who identifies areas of compliance and noncompliance and generates a gap analysis report. The company is given a chance to close the gaps, and, when it is ready, a formal audit is done, with particular emphasis on the gaps that had previously been noted. It generally takes each company about six months to become ready for certification, Schaefer says.

	In addition to the audit, companies need to complete the training requirement, by sending two people from each of its locations to the course. Certification is valid for three years, after which recertification is needed, Schaefer says.

	Companies can be certified individually or collectively via a “community” approach, in which a number of different companies undergo certification together at one airport. This approach, which was first used at Brussels Airport, can be more economical, and allows different stakeholders (e.g., airlines versus shippers) to better understand each other’s challenges and needs. Since the program was launched, 34 companies have been certified, Schaefer says, and he is aiming for 80 by end of year.

	Daniel says the initiative has strong precedents. After all, he asks, didn’t cGMPs result from industry-wide stakeholder agreement? “CEIV-Pharma ... is an important part of the pharmaceutical industry’s development, in establishing widespread and well-known standards for GDP, especially for entities in the distribution chain that have not developed quality systems that address GMP concerns,” he says. There will also be financial incentives for getting certification, notes Bell, because airlines, airports, and freight companies will be able to charge a premium if they can offer documentation showing improved training and quality performance.

Guidance of November 5, 2013 on Good Distribution Practices of Medicinal Products for Human Use

Practical and Value-Generating Approaches to IATA Chapter 17

,” Seventh Edition of Perishable Cargo Regulations, 

	When referring to this article, please cite as A. Shanley, "Manufacturing and Distribution Boundaries Blur," 

Airlines, airports, freight forwarders, and other cold-chain partners are taking a crash course in pharma cGMPs.

Manufacturing and Distribution Boundaries Blur

	Recent revisions to the European Union’s (EU) good distribution practices (GDPs), which were updated in 2013, reflect increased regulatory focus on the supply chain and how drugs get to the patient and point of dispensing, notes Dan Bell, Marken’s vice-president, Regulatory Compliance and Technical Affairs.

	The revisions have also emphasized the importance of current good manufacturing practices (cGMPs), something that is clearly seen in Annex 15, Chapter 6 of the EU GDPs, which includes a section on risk assessment and planning, Bell says.  As a result, suppliers have been investing more in equipment and in training. “Uncontrolled ambient product temperatures have become more important,” notes Bell. “We always knew that an item at 2 to 8 had to be kept there. Now we have 15 to 25, -20, -25, and -150 to consider. In addition, most guidelines are not very prescriptive. People have been left to figure things out for themselves.”

	“Bits of GMP are creeping into the GDP world. If you were a drug manufacturer, you’ve already been doing this for 40 years, but it is a new experience for airlines and trucking companies to map out cold rooms where they are going to condition phase-change and other materials to be kept at fixed temperature,” he says.

	Another important change with the EU GDP update was assigning responsibility to all parties in the cold chain, notes Paul Daniel, senior regulatory compliance expert and validation program manager at Vaisala. “Links in the distribution chain farther from the manufacturer are now under regulatory scrutiny. As a result, all distribution entities must now adopt standard GMP practices for temperature-controlled distribution,” he says.

	When referring to this article, please cite as A. Shanley, "GMPs Creep into GDPs," sidebar to, "Manufacturing and Distribution Boundaries Blur," 

Recent revisions to the European Union’s good distribution practices, which were updated in 2013, reflect increased regulatory focus on the supply chain.

GMPs Creep into GDPs

Virtual companies have become a major presence in the pharmaceutical industry, developing more of the new drugs in the pipeline. Their needs are quite different from those of traditional large and even mid-sized pharma companies, and contract manufacturing and contract development and manufacturing organizations (CMOs and CDMOs) have been adjusting their service approaches to better meet their requirements.

	Although some virtual companies may aspire to become full-fledged manufacturing companies one day, many do not, but focus on milestones and licensing deals. Vertex Pharma is an example of a virtual pharma company that thrives in its virtualness. Since the company was set up in 1989, it has launched three new drugs, and in 2015, FDA approved its drug Orkambi, manufactured via a continuous process (1). Over the years, the company has worked with partners on new applications of process analytical technology and quality by design.

	Vertex is collaborating with one of its strategic contract partners, Hovione, on a continuous manufacturing process at Hovione’s East Windsor, NJ facility, which will include continuous blending, wet or dry granulation, fluid bed drying, tableting, and coating operations. Hovione invested $24 million in the facility, which is expected online in 2017, and Filipe Gaspar, vice-president of R&D, said that the new approach will allow manufacturing and process development to run in parallel with clinical studies to speed commercialization.  When the facility was announced in 2015, Hovione managers said that it would offer use of spare capacity to third parties interested in manufacturing medicines continuously (1).

	As this example suggests, service providers have had to approach virtual companies differently than they do their traditional Big Pharma clients. The CDMO Patheon, which launched an initial public offering (IPO) in July 2016, articulated some of the approaches being taken with virtual pharma in its Flexible Manufacturing services platform, which was formally introduced in March 2016, at the Drug, Chemical and Allied Trades (DCAT) conference in New York City.  The company is working on flexible manufacturing with Amgen, but also includes a number of virtual pharmaceutical companies with innovative technologies among its clients. Joe Principe, vice-president of global alliance accounts for Patheon, discussed the platform, and the thinking behind it, recently with 

 When did you first see virtual pharma companies becoming a factor in pharma outsourcing?

 Virtual pharma companies have always been an important part of the CMO base, and they are a growing part of our revenue and client base. Virtual companies are developing about half of all the pharmaceuticals in the development pipeline now, but their needs are very different from those of more fully integrated pharma companies, which have well-defined procurement organizations to support the spend around outsourcing. Virtual pharmaceutical companies are more susceptible to fluctuations in the capital market than most mid- to large-sized pharma companies.

 Are contracts structured differently for virtual pharma companies?

 Generally, we are not restructuring contracts, but we have been developing new offerings around flexible manufacturing. These are not specifically targeted to virtual pharma, but many virtual companies find them more attractive because they offer a more complex approach to sourcing than the traditional transaction-based approach based on predefined capacity.

	Our approaches stem from more strategic conversations that we’ve been having with the market, broadly. It is very clear that clients, especially virtual companies, would want suppliers to share in that risk because of the significant capital associated with preclinical, pre-commercial, pre-launch, and Phase III clinical manufacturing phases. Flexible manufacturing approaches offer a way around the ‘take-or-pay’ rigidity of legacy contracts, so that contracts can bend and stretch a little based on real-world demands. There are instances, for example, in which a virtual company may have a unique manufacturing process that doesn’t suit using a CDMO’s standard assets. Their only option is to build out.

	We’ve developed a condo model--actually, the concept was in place long before we gave it a name--that allows a smaller company to come in and take advantage of our infrastructure, engineering, and facility design expertise, so that they can build within our infrastructure something that would be a dedicated plant for their very specific opportunity.  This approach is typically attractive to companies that don’t have products on the market. It can be riskier for the CDMO partner because they don’t yet have a clear understanding of the products’ chances of success. We tend to work with companies that have generated stable revenues.Currently, we have four active condos in place.

 What other types of services are you offering with umbrella terms such as the condo model?

 All of these models have come out of more strategic dialogue over the past few years. We asked clients how we could solve their supply-chain needs, instead of focusing on the old requests for proposals (RFP)-driven approach.  
	Their responses eventually became product offerings within our Flexible Manufacturing platform. They include:

		Dedicated facilities, built specifically for the client to use for their own purpose. The client can change the product mix from one day to the next. This is a more capital intensive offering than the condo model, because it involves construction of a facility specifically for that client. We have a number of requests for this type of arrangement, especially from Big Pharma.

		Fractional ownership, or facilities that are built for a finite group of clients that are working in the same technology area, providing visibility over multiple clients and products. Currently, we have three strategic clients that are asking for this type of approach, which is especially attractive to small to midsized clients. We manage complexity around demand forecasting. This approach provides dedicated assets that are less expensive than a custom facility.

		Global network assets, in which clients’ requirements are satisfied by multiple sites in our network. We guarantee access to a certain amount of capacity within the network. Clients can qualify multiple sites. They give us their schedules, and we work out planning around those schedules, and build an offering that gives them access to capacity over certain time periods. It’s a low-risk approach that allows us to use existing assets.

		Enterprise model, in which we help our clients look at their internal networks and get the best value from their own footprint (e.g., manage their facility, close and move facility). In some cases, we acquire bits and pieces of, or all of, their networks along the way. Since we’ve launched this model, we have had two or three conversations with different manufacturers around it. We are enjoying continued strategic dialogue with clients around all of these offerings.

		Keeping an eye on innovative technologies

 As a CDMO, how are you facilitating innovative processing?
	

 We keep an eye on technologies that are in play and where the industry is heading. Our acquisition of Agere a few years ago, for example, was targeted at helping us solve solubility issues, a major industry challenge. We are investing in continuous manufacturing technology and discussion potential applications with clients, either for new products or for existing processes.

Hovione and Vertex Partner on Continuous Manufacturing

Pharmaceutical Technology Outsourcing Resources Supplement

	When referring to this article, please cite it as A. Shanley “New Business Models Attract Virtual Pharma," 

Pharmaceutical Technology Outsourcing Resources Supplement 

New approaches add flexibility and reduce risk for contract development and manufacturing organizations (CDMOs) and their clients.

New Business Models Attract Virtual Pharma

Vendor-sponsored events in 2016 are bringing pharmaceutical manufacturers, contract packagers, and contract development and manufacturing companies (CDMOs) together to discuss their mutual needs, global regulatory issues (particularly requirements for the Drug Supply Chain Security Act [DSCSA]), and supply chain partner demands.

	Optel, Systech, and TraceLink have all begun to present conferences designed to bring operating companies and contract partners together to discuss serialization challenges. TraceLink’s Summer 2016 conferences took place on both the East and West coasts of the United States. Their goal is to have different supply-chain partners share insights into visibility and traceability and technical challenges, and gain perspective on customer needs, says Brian Daleiden, Tracelink’s vice-president of industry marketing.

	Despite 2017 deadlines for DSCSA, a small fraction of small pharma companies are still taking a “wait-and-see” approach, Daleiden says, but most have become much more proactive. Big Pharma is pushing its contract partners to plan investments, and virtual companies are no longer waiting for their partners to initiate action. “We’re seeing much more of a dialogue [between pharma sponsors and contract companies] now,” Daleiden says.

	Standards advanced by Global Supply Chain Standard 1 (GS-1) and its Electronic Product Code Information Service (EPCIS) are helping the effort, experts agree. Another encouraging trend, says Brandon Beltz, director of global serialization for Pfizer, is that contract manufacturing organizations (CMOs) are taking part in these programs. “Smaller CMOs are starting to realize that serialization is a ‘today’ problem, and no longer two years away,” Beltz says, noting the need for shared perspectives and information. “There is still a lot of work that the industry must do between now and 2017, and a variety of bumps may come up along the way that are difficult to anticipate before an organization is fully engaged in serialization readiness activities.”

	Leading pharma distributors are becoming more open about their business and traceability requirements, Daleiden says, and aligning those requirements. For instance, they are requiring that manufacturers create and provide them with aggregated information for the serialized products they make, so there is a need for initial data on the relationship between serialized and aggregated product. “They need to ensure that product is in sealed cases, since they cannot break up cases to scan it.”

	Another issue is saleable returns. Once they receive products, distributors will need to verify the Standard Network Interface (SNI) before they can resell them.  Currently, distributors estimate that they receive more than 58 million saleable units per year. For 2019, says Daleiden, they will need to be able to verify product, at operational speeds, before commingling, to know whether they can accept it.

	The industry is now testing scenarios for meeting DSCSA requirements and querying manufacturers, he says. “You don’t just need serial numbers, but an understanding of the relationship between units and boxes and cases, and data will have to be shared downstream with third-party logistics companies and wholesaler distributors,” he says.

	“EPCIS is moving toward Version 1.2 of a data-exchange standard that will help with aggregation return, queries, and verification,”Daleiden says. Meanwhile, pilot projects are testing operating principles and best practices, and connecting nodes along the supply chain. “Most critical is managing exceptions,” says Daleiden, “since there are so many more types of exceptions in a serialized environment.”

	Experts from a large contract packager (Sharp Services), a large pharma CDMO (Patheon), a mid-sized CDMO (Recipharm), a small CMO (Saneca Pharma), as well as technology vendors (see Sidebar) shared their insights with 

 for this article, which examines progress they are making in serialization efforts and beyond.

Gaurav Banerjee, Director of Technical Services, Sharp Packaging Solutions

 When did you start thinking about going beyond serialization and working toward broader traceability and track-and-trace goals?

 We started our serialization work in 2008, and we have been engaged in the ‘broader traceability’ effort for a number of years now. We’ve exchanged data with downstream trading partners, and provided data to an EPCIS that enables authentication at point of dispense.

	Of course, serialization needs to be adopted by all pharmaceutical manufacturers and distributors/wholesalers in order to enable true supply chain visibility as intended by the DSCSA by 2023.

 What percentage of your clients demand serialization and track-and-trace services? Are any using their own systems?

 Currently only about 25-30% of our customers are requiring serialization, as early adopters, but we’ll need to serialize the products of nearly 100% of our customers in order to meet regulatory compliance requirements by November 2017.
	Manufacturers generally choose to invest in their own serialization capabilities for bread and butter products, but outsource serialization for lower volume products or more-complex serialization work (e.g., for autoinjector pens). Virtual pharma outsources all this work.

 Do customers understand the investment required, or do they take this for granted?

 Generally, there is much more to serialization than people realize. We provide this as a service and charge a usage fee (analogous to a hotel charging customers only for the nights customers stay there). It is a different story if customers want a long-term arrangement, in which case customers help pay for capital outlay.  If they’re just running it on 10,000 bottles, they pay for the time required. For us, it is a cost of doing business, but customers are learning, as the automotive industry had to learn when companies had to invest in safety requirements such as air bags and seat belts. It has been alarming to think about the number of pharma companies that have not yet developed firm serialization plans.

 How have you balanced the need to be flexible and adapt to very different client needs, and yet be able to meet global deadlines for serialization?

 As a contract packaging organization that has to onboard over 100 customers for serialization within deadlines, we have had to focus on flexibility, which led us to standardize on a few key line and package configurations and select technology partners who could provide support at all locations.

	We have established a Sharp standard offering for serialization that our customers may choose to adopt for rapid enablement or we can customize the service provided to the extent our customers desire, as we have solid technical expertise to work through a number of different options. We work with a number of vendors including Systech, Covectra, and TraceLink.

 Can you give some examples of ‘success stories,’ or projects that achieved success with serialization and track and trace, what they taught you, and why they worked?

 In one case, we had a project that involved four levels of aggregation, from pouches to cartons to cases to pallets on a high-speed line, running approximately 330 pouches per minute.

	As Sharp’s foray into commercial serialization for a high- volume product, this set of three identical lines, implemented between 2009 and 2012, taught us valuable lessons in terms of the correlation between the physical packaging of products and the data/electronic trail that needs to be maintained with serialization.

	Another project entailed five levels of aggregation, from individual blister cavity to blister card to carton to case to pallet. This high-speed application presented unprecedented challenges in aggregating data at 900 Serial Numbers per minute. Sharp overcame the technical challenge with the help of a few key technology partners, and now produces a product that is the first of its kind in the industry, having serialization down to the individual dose with aggregation all the way through the pallet level. The main lesson learned from this project was how things are affected when serializing at high speed, when you have to maintain data integrity at rates that put high demands on computer systems.

	Another example involved bottle serialization, with bottle to case-to-pallet aggregation. When you print numbers on a carton, and inspect that box as it travels on a conveyor, camera positioning is a relatively straightforward exercise.  Having to scan a bottle label on a round bottle, however, presents orientation challenges from the bottle to the vision system.

	Again, working with key technology partners and having a skilled engineering staff helped Sharp overcome this challenge and turn it into a ‘standard’ solution that can now be deployed on multiple lines as we scale up to support serialization demand.

 Have you been able to quantify and demonstrate return on investment (ROI) through these projects?

 There’s more of an opportunity cost rather than ROI consideration for a contract packaging organization (CPO) with serialization, in the strict financial sense, i.e., if we can’t provide it, and our competitors can, where does that leave us in 15 months when it’s required by law?

	Serialization is becoming the cost of doing business in the pharmaceutical packaging industry, not only for packagers, but also potentially for the customers we serve, depending on how the costs are shared and absorbed contractually. However, it does provide the economic advantage to product manufacturers of allowing them to be able to trace movement of product in their supply chains to a more granular level, and, hence, prevent costly waste of drug product.

 Are there aspects of serialization and the scope of work required that clients still do not understand?

 Yes, absolutely. Many think serialization is simply printing numbers on packaging. What goes into generating, storing, capturing, and conveying those numbers is not well understood. As the industry becomes better versed in the computerized systems and the IT-related aspects of serialized packaging, there will no doubt be a better grasp of the effects of serialization on pharmaceutical packaging.

 What have you found to be the most difficult challenges involved with serialization?

 The most difficult technical challenge at this time has to do with the exchange of serial number data, and associated master/meta-data for packaged product lots.  Since there is no universally accepted standard for the interoperability of computer systems used for track and trace, the ‘data mapping’ effort often requires a good bit of attention and effort. Perhaps the most challenging non-technical issue is the availability of sufficiently qualified resources to deploy serialization on packaging lines.

 Which national set of regulations is proving the most challenging to meet and why?

 Brazil’s (now temporarily redacted) ANVISA regulation is significantly challenging, because it has required randomization across global trade item numbers (GTINs), which distinguish one item from the next in the supply chain/market.  
	Having to track which serial numbers are acceptable to use with a particular GTIN, rather than being able to select numbers from a pool or repository, regardless of the GTIN with which they are to be associated, requires careful data management, especially when the same product is manufactured at more than one company and location.

 What role will standards play in overall traceability assurance?

 Harmonization on globally accepted interoperability standards will be key to the full traceability of pharmaceutical products in the future.

 How can pharma clients help ensure the success of serialization programs?

 Start early, listen to those with experience, and collaborate with them. Choose technology vendors based on future needs, considering the possibility of expanded use of serialized data. A GS-1 company prefix, product GTINs, SN format, and artwork/space are some of the main elements that need to be communicated to service providers.

	2017 deadlines looming: will capacity meet demand?

 Given that so many pharma companies delayed starting serialization projects, do you expect an industry shortage of resources and capacity to handle requirements?

 We definitely see a tidal wave coming our way, but we like to believe that we are equipped for it since we got started with serialization early on. If we can convert our existing customer base within the next year, we can accept additional requests as the deadline approaches. We are working to equip ourselves to handle demand. This is another reason why we have established solid relationships with vendor partners.

	We’ve been able to improve project delivery timelines.  Five years ago, eight months was the norm, now it’s threemonths. Standardized systems and processes have made this possible.

Chris Howell, senior director, global engineering and technology, and global serialization program manager, Patheon

 How long has Patheon been working on serialization, and track and trace initiatives?

 Patheon started serialization efforts in early 2015 as a response to early market requirements such as China and South Korea. Our efforts initially began with select packaging sites in our network and have since expanded to all sites having the capability to perform applicable finished good packaging.

 When did you start thinking about going beyond serialization and working toward broader traceability/track-and-trace goals?

 From early on in our efforts, we’ve been pursuing additional goals to provide full aggregation to aid in downstream traceability efforts. Our sites that are currently serializing also include aggregation. This will be a core element of new lines as additional sites come on-line through the remainder of the year.

 What percentage of your clients demand serialization and track-and-trace services?

 Most of our clients require serialization for various markets, and we have positioned ourselves to be able to meet all global requirements. A handful of clients have discussed bringing some production back in-house to utilize the internal investments they’ve made.

 How have you balanced the need to be flexible, and yet be able to meet global deadlines for serialization?

 Whether they are a large, mid-sized or virtual pharmaceutical company, each client’s expectations and resources for serialization vary considerably. This variation has spurred Patheon’s goal to provide a standard solution that  meets the majority of client’s requirements.

	Our solution follows GS-1 standards and provides both serialization and aggregation capabilities. Customization requests are critically examined, as they do require a longer timeline and increased resources, so we have to be cognizant of achieving the greater goal of readiness for all clients when providing solutions for such requests.

 Can you give an example of a project that achieved success, what it taught you, and why it worked?

 Our experience to-date has been focused on meeting early market needs, as well as preparing for the much bigger requirements for the DSCSA. Some key lessons learned include: the benefits of standardization, best practice sharing among sites and starting the process early.

	With clients in the triple digits, we’ve learned that standardization is the best use of our resources. Customization is expensive and time-consuming, and can detract from core deliverables.

	Because our nine sites in North America and the European Union are simultaneously implementing lines, we have a valuable pool of resources from which to share learnings. Additionally, the time for engineering, delivery, installation, and qualification can be extensive. Delivery timelines are increasing as the volume of work grows. Starting early has put us in a good position to learn from the early implementation processes and be ahead of the curve.

 Have you been able to quantify and demonstrate ROI for clients through these projects?

 Patheon has partnered with our client base in the capital implementations for serialization. Payback for our investments has been initially modeled during the capital approval process. We will be monitoring project results throughout the network to confirm adherence to these initial models, but it is currently too early to draw conclusions.

 What are the most difficult challenges involved with serialization?

 The greatest technical challenge we face is the variety of organizations with which we work. Our clients have varying expectations, system architectures and support vendors. Patheon has selected vendors such as Tracelink, Advanco, and OCS in Europe, as well as ROC IT and Optel in North America. Beyond this level of variety, the next biggest challenge lies in the qualification and validation of these complex systems.

 No single set of national regulations poses a particular issue at this point. Rather, it’s the potential variety and expectations for change as we move forward which raises concerns.

	As an industry, the more we can drive and lobby for consistency and harmonization in national regulations, the better we’ll be able to achieve our overall societal goals to keep our drug supply chain safe.

 What role will standards play in the future?

 The more we can standardize, the easier it will be for us and our clients to meet our overall goals. The use of GS-1 standard requirements wherever possible will simplify implementation, operation, and maintenance of our solutions.

 We’ve mapped out a standard onboarding process for our existing and new clients to follow in transitioning to serialized product. This process involves sharing information such as product and location master data, discussing IT integration, and agreeing on product qualification expectations.

	We’ve started the discussion and information sharing with the majority of our clients. For those who haven’t started, the key message would be that it’s time to begin.

	In addition, working with your CMO’s standard approach can help to save cost and -- more importantly, time -- during implementation.

 Can you give examples of how serialization and track and trace might provide long-term savings?

 Certainly, there are both one time and continuing costs associated with serialization. Initial qualification of the modified packaging process and end-to-end data transfer is a key one-time cost.

	Artwork modifications and obsolescence costs could be another cost area. Beyond those one-time costs, we expect to see some increase in unit costs as well. The potential for line speed decreases and additional overhead costs to technically support the packaging process could increase the cost of goods sold (COGS). We will be monitoring this closely as we move forward through the learning curve over the next couple years.

	Serialization as a competitive advantage

Asa Wilander, head of customer relations, Recipharm serialization task force

 How long have you been working, formally, on serialization and track-and-trace initiatives?

 Recipharm’s initial project started in May 2013, and afull-scale program was launched in 2014, with the establishment of Recipharm’s serialization task force. A standard solution that will be implemented across our group was defined in 2015, and we are progressing along our journey, which involves investing over $40 million through 2019.

	When we launched our full scale serialization program, we had broader track-and-trace goals in mind. The task of defining a standard that would meet all market requirements has been completed, and we are well on our way to meeting track-and-trace goals.

 We have selected SEA Vision and Marchesini as our software and hardware partners for serialization and the deployment plan has been completed. The complete serialization solution will now need to be implemented in 15 of Recipharm’s European locations across more than 70 production lines.

	We will also need to ensure the solution is connected to customers’ IT systems. A pilot showcase line is now operational and, starting in October 2016, our customers will be able to view and trial Recipharm’s standard solution for serialization and aggregation.

 Are all of your clients demanding serialization and track-and-trace services?

 Around 85% of Recipharm’s customers will require these services. Some clients believe that it is still too early to start the implementation process and don’t understand the full picture of what needs to be done to be ready for serialization. Our view is that these organizations must face this challenge head on, because changes can take time to implement, particularly in a complex supply chain.

	The majority of clients are aware that serialization requires their CMO to make a significant investment and will also take responsibility for their part in the project. That said, we have developed a novel pricing model that aims to reduce the financial burden for our customers.

	Recipharm’s pricing structure will see the removal of any upfront investment costs for pharmaceutical companies looking to access our serialization capabilities. Instead, we will spread the cost of serialization across each customer’s on-going supply agreement.

	From 2023, we will extend this further, ensuring that serialization is included as standard as part of our product manufacturing costs.

 What are the top challenges with serialization?

 The main technical challenge is related to technical complexity (e.g., the number of lines to equip and the integration of our solution with customers’ IT. ) The non-technical challenges we face include coordinating different customer requirements and ensuring that our customers are on board with our serialization journey. The fact that all market requirements are not yet clearly defined is also a challenge.

 Pharma clients need to place serialization high on their agendas and ensure they work together with us to clearly define their requirements from an early stage. They also need to provide the necessary information, specifications, and approved artwork in sufficient time.

 Which national set of regulations is proving most challenging?

 The regulations in China and Russia are proving the most challenging at present, mainly due to the unclear requirements and changes over time.

Now past the “wait-and-see” standoff, most pharmaceutical companies and their contract partners are considering long-term requirements, including distributors’ needs.

Real-World Serialization

For the past few years, data integrity problems, mainly at facilities outside the United States and Europe, have dominated pharma compliance news. Of the 25 warning letters that FDA issued between May 2015 and May 2016, 78% pointed to data integrity issues, and most of them were found at contract manufacturing facilities in India and China (1). Considering the fact that 40% of the pharmaceuticals sold in the US, and 80% of the APIs, are manufactured offshore (2), any misunderstandings can translate into serious quality problems, placing patients at risk.

	The most flagrant failures to maintain data integrity include the following (3):

		Retesting and reintegrating test samples until they pass quality tests

	FDA inspection notes suggest that operators and technicians at some facilities in developing countries may misunderstand the basic purpose of an inspection, and react with fear and panic to inspector requests. For instance, in March 2015, at Zhejiang Hisun Pharma in China, when an operator removed a memory stick from a computer and the inspector asked for it, he turned and ran away (4). In prior inspections in India, when inspectors approached staffers, they tore up paper documentation or poured samples down the drain (5).

	Pharmaceutical companies have been taking steps to shore up training and to verify quality management at offshore supplier sites.  However, it can be difficult to get senior management’s support or a large budget for the work required. In addition, even seasoned employees may have problems making the leap from understanding good documentation practices to grasping how those practices extend to data integrity, and how both play out in the digital world. Pharma compliance expert John Avellanet, principal of Cerulean Associates, LLC, recently shared best practices in an interview with 

 Why are we seeing so many data integrity issues at facilities abroad?

 The reasons are, in part, cultural. In the US and Western Europe, we are used to being inspected by regulatory agencies as well as independent third parties such as the International Organization for Standardization (ISO). 
	In addition, in some regions there can be a tendency to think in terms of rigid cultural constraints about information, as in ‘Don’t tell the people in management about a problem, not only becuse they could fire you, but because they might be from a different culture, or a different social class, etc.’ I admit that often it’s hard for me to realize what assumptions underlie the Western way of just doing plain old business. You can train someone for 365 days a year on the importance of informing his or her supervisor if a mistake is made or spotted, but if the individual’s entire culture says ‘People from your walk of life shouldn’t make waves or you’ll get in trouble,’ your training is falling on deaf ears.

	However, cultural issues are not the only root cause, which is really two-fold: There’s culture and there is money. Culturally, these contract companies in various places around the globe may not be used to doing business outside of their regions, so they don’t know what to expect, or what the basic norms and minimal requirements are for firms from the US or Western Europe. At the same time, US and European firms are looking to reduce spending, so the second root cause factor is cost.

 Is there a fundamental misunderstanding of what constitutes data integrity in a digital world, even at companies in the US and the European Union?

 The problems really start at the sponsor companies. It is difficult to translate the good documentation practices that we have all grown up with into good electronic data practices. How do you translate ‘Don’t sign, except in blue or black ink,’ in the digital world? You’ll still have quality and purchasing staff at sponsors who don’t really understand best practices, since they are outside of their comfort zone of knowledge and activity. They’ve grown up in a paper and ink world. When they have to go out to monitor contract service partners, they usually aren’t given anything specific associated with data integrity to check against (i.e., beyond just having policies and procedures required for data integrity, and internal audit requirements). This information often isn’t being gathered, or isn’t even known by the sponsor firm, which is why firms in the US and EU are also getting into trouble because of poor supplier oversight.

	There is no point discussing audit trail reviews when people still don’t understand why data integrity is so important for safe or efficacious product. What has helped educate people is the fact that regulators are issuing more warning letters and guidance documentation, and getting the word out that this is serious and foundational.

	Management has not always grasped the importance of data integrity, but now they are starting to realize that data integrity issues can jeopardize time and money (i.e., the bottom line) in both the short and the long term.

	Supplier qualification audits, even for critical suppliers, are still dealing with traditional things (e.g., training and corrective actions and preventive actions [CAPA]), stuff that you would have been asking about 40 years ago. Sponsors have to train their people to ask more specific data integrity questions during audits.

 Is there a fear of micromanaging suppliers?

 There may be, but I always say ‘trust your people, but verify their work.’ If people don’t know what to do, they can make mistakes without realizing it.

	For example, if I receive a shipment from an API supplier, I need to test it for strength and quality. A number of firms will take samples and run tests on the lab systems to ensure that those systems can pick up on any problems, but they’ll do it from the systems suitability angle. FDA has already said that this is a big no no, but unless people learn that this is a bad thing to do, and why, as well as what to do instead, they will continue to do it.

 Do companies take too much for granted where data integrity is concerned?

Training and mock audits are the key to preventing data integrity issues with partners offshore, but the process must start at home. Compliance consultant John Avellanet shares best practices and ways to minimize costs.