Agnes Shanley is senior editor of Pharmaceutical Technology.

Agnes Shanley

The past few years have brought increasingly challenging problems to logistics and distribution. It may come as no surprise that some pharmaceutical manufacturers have job titles in place such as “Director of North America Supply Chain Complexity Management” (1). Some companies, however, may be relying on outmoded technology to handle these problems. Further complicating the picture is a fragmented network of multimodal transportation services that are charged with moving more valuable, often irreplaceable, time- and temperature-sensitive products, says Dan Bell, vice-president, Regulatory Compliance and Technical Affairs for Marken. As he puts it, “We’ve come to expect the unexpected.”

	Over the past few years, Marken says, logistics companies have seen Murphy’s law play out in every possible way, from fuel tanker fires shutting down airport terminals to volcanic ash clouds blocking air traffic for entire continents, to labor disputes and political conflicts disrupting shipping at ports. In addition, recent epidemics such as the Ebola and Zika virus outbreaks have challenged companies’ ability to react quickly to the need for services, while ensuring staff protection and the safe handling of biological samples and vital vaccines.

Supply-chain risk assessment and management are a new focus


	The best defense for any pharmaceutical manufacturer is having a firm understanding of supply chain risk, and better control over suppliers and transportation and logistics partners. Johnson & Johnson (J&J), for example, has strengthened its supplier risk assessment and management program to monitor suppliers and assess multi-tier supplier risk, Chris Calabretta, J&J Global procurement lead, biologics and vaccines, told attendees at a biopharmaceutical forum examining global trends at the Drug, Chemical and Allied Trades Association’s (DCAT) annual meeting on March 16, 2016.

	“We’re focusing on the three Rs: reliability (i.e., on-time reliability and quality), risk (i.e., the type of risk in the product and raw materials supply chains), and readiness, or assessing whether our suppliers are ready,” Calabretta said. The goal is to identify key risk indicators and assess the company’s exposure.  

	The company has set up an enterprise business process and playbook, integrated across functions, that will use market intelligence to mitigate, communicate, and manage risk, Calabretta said. Technology will be a critical part of this strategic approach to supplier and shipper management.

	J&J is using Elementum, a mobile app that allows the company to monitor potential supplier events, in real time. Armed with these data, designated corporate centers of excellence can focus on specific issues and issue real-time reports on specific supply chain risks.


	Elementum, a spinoff of Singapore-based Flextronic International, was launched in 2012 and released its first commercial apps in 2014. The app uses a cloud-based platform that allows manufacturers to manage specialized facets of supply chain, whether logistics, suppliers, or manufacturing. The platform is designed to be deployed quickly and to offer one single view of the issue at hand.

	Flextronic’s annual report (2) describes the platform as leveraging the concept of the “Intelligence of Things,” using smart connected devices to reduce the risk and cost of supply chain management, where every day lost on product delivery can add up to $65 million in lost revenues.

	Another app, commercialized in 2015, is KPMG Spectrum’s Intelligence Engine, designed to detect third-party network vulnerability (3). The platform analyzes and mines global financial and geopolitical risk data for 12 different categories of suppliers to assess potential threats, and KPMG claims that it can allow some risks to be predicted 16 weeks before they can result in any significant market impact.


	Technology is not a silver bullet for trouble-free shipping, but it can make a complex process more feasible. Marken’s chief commercial officer Ariette Van Strien and Dan Bell, vice-president of regulatory compliance and technical affairs, shared perspectives on distribution challenges with 

 We have been hearing how global positioning system (GPS)-enabled technologies are allowing shipments to be tracked anywhere. What other technologies work in synergy with GPS-based platforms, and how are specialist service providers and couriers collaborating to ensure that product is shipped safely and on time?

 Marken Sentry is a GPS-enabled sensor platform that allows location tracking and environmental monitoring. Through exception alerting and geofencing (i.e., placing a virtual fence around an area and monitoring the area so that alerts are received whenever tracked mobile objects enter or leave), we can manage security and real-time sensor alerts and ensure contingency plans can be activated as soon as possible. Armed with real-time data, Marken can work with airlines and ground transportation companies to build dedicated teams that have access to the same information and understand the unique needs of pharmaceutical shipments.

 We are also testing an automated milestone-reporting system that uses both GPS and radiofrequency identification (RFID). This will allow key points along the supply chain to be monitored and confirmed. This approach is especially important for cell, gene, and immunotherapy shipments where critical events must happen in sequence and be logged in real time. Tracking individual vials of medicine down to the vial is possible using RFID.

	Many of the recent advances have been in software. In the United States for example, the Automated Commercial Exchange (ACE) system implemented for the US Customs office will also bring other government agencies, such as FDA, to a single-user portal. This will allow importers of highly regulated products such as pharmaceuticals to be monitored and tracked through the import process more efficiently. Advances are being made in packaging materials, with more efficient insulating materials such as aero gels and phase change products that allow for more efficient and longer validation times for thermo isolating packaging. Temperature controlled shipments can now use passive packing solutions down to -50 °C.


	PharmTech: Can you share an example of how collaboration prevented a lost shipment or recalled pharmaceutical product?

 Most recently, a shipment of pharma products rated for temperatures of +15 to +25 °C controlled room temperature (CRT) shipped from Italy to Boston was booked for temperature-controlled service within passive thermo isolating packaging. Airport personnel mistakenly placed the shipment in a frozen room in a 20 °C freezer while it was in airline custody.

	An alert was issued from the Marken Sentry device, which reported back to the dedicated operational team and warned of a rapid temperature decline, providing opportunity for immediate intervention. A quick notification was made from Marken to the airline, and within an hour, airline staff moved the shipment to the correct storage location, ensuring that there was no deviation to the product and the shipment was not compromised.


	PharmTech: Life-sciences companies have been conducting more clinical trials and setting up manufacturing facilities in remote and less developed parts of the world. How do you approach service in these locations?  

 One region in which we see renewed interest is the Middle East and North Africa region for infectious diseases and more common ones. Marken has invested in a stronger network throughout Africa including West and Central Africa, as well as the Middle East. Local partners must pass the same audit and selection process as all our global partners, and must confirm their willingness to comply with good distribution practices (GDPs) and quality standards.

	We have developed our own network in countries such as South Korea, China, or India, to provide reverse logistics from these countries into Europe and North America. In 2012, Marken opened regional depots in Frankfurt, Germany, Long Island, New York, and Singapore. The Singapore site was built expressly for this purpose, because we saw the trend of manufacturing moving to various regions.

	Our regional depots are an integrated part of this new solution. Investigational medicinal product that is manufactured in other regions can be stored at regional depots and distributed just in time to investigator sites throughout Asia, Europe, and the US. We anticipate some manufacturing moving to Central and Latin America, and our five-depot network throughout this region is ready.

Director of Supply Chain Solutions job description

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Articles

Risk assessment may be the best defense when outmoded technology, complex transportation systems, and Murphy’s Law disrupt pharmaceutical supply chains.

Technology Drives Shipping Risk Management

	Pharmaceutical serialization deadlines are almost here, but many companies are not all that far along in their implementations (or even, in some cases, their strategy development). 

asked a number of experts to share what they are seeing out there regarding serialization readiness.

	In the first interview in this series, Brian Daleiden, vice president of marketing for TraceLink, shares detailed observations on pharma's readiness for serialization and track and trace in general. 

 From your observations, how well are pharma companies progressing in their serialization and track and trace efforts?  

 Progress in the implementation of track and trace requirements has been highly variable across the industry. There seems to be a growing realization among companies that implementation of serialization and track and trace is much more complicated and time-consuming than many people in the industry initially believed.  The process can entail massive complexity at the systems, data and operational levels.

	In general, we see the following types of approaches among pharma companies:

Proactive, aggressive rollout of global track and trace programs.

 Companies taking this type of approach want to build an agile infrastructure that embraces the global regulatory/data management diversity and builds in flexibility to respond to new regulations or changes in existing regulations. These companies are looking to reduce the cost, risk and time for secure compliance, to ensure market availability for drug products across their diverse global markets, or to potentially gain a competitive advantage over industry rivals in key markets or supply channels.

Incremental deployment in a “just in time,” localized approach.

 Companies that adopt this type of approach are looking to isolate their serialization and track and trace deployments on a country-by-country basis. This type of strategy is often driven by resource constraints or by operating models that focus on strong local decision-making.

Just getting started in understanding the regulatory and business requirements, and compliance planning.

 There is a segment of the market, particularly in the small-to-mid-sized company or the pure virtual space, where companies are really just beginning to define the serialization and compliance infrastructure they need. These companies  are just starting to deeply engage with the contract manufacturing organizations and third-party logistics (CMO/3PL) partners they rely upon and the wholesale distribution customers they serve to discuss regulatory requirements and business expectations. Some of these companies were originally looking to outsource all of their serialization and traceability compliance efforts or to postpone investment for another year. But, as the knowledge of serialization complexity and timelines has started to flow across the industry, they are now realizing the internal requirements they face even in an outsourced model or even now planning to shift some work in-house due to the potential risks and hidden costs of outsourcing.

Haven’t undertaken a formal internal serialization compliance program at all.

 Some companies are currently outsourcing their serialization compliance and completely placing all decision-making in the hands of their partner. Others believe that enforcement of the regulations will be delayed.

How advanced are contract manufacturing and packaging organizations’ efforts? Do you see more operating companies involving them in planning/implementations?

Some contract manufacturing and contract packaging organization (CMO and CPO) programs are quite advanced, with a comprehensive analysis of their customer base and regulatory requirements that have fed a detailed serialization program and serialization management infrastructure. For a large segment of CMOs though, there is a lot to do. Many CMOs have taken a "wait and see" approach whereby they will determine their serialization approach based on incoming customer requirements. This creates several challenges for the CMO. Customer requirements often pile up late as deadlines approach without some guidance from the CMO as to realistic implementation timelines. Customer requirements often conflict with each other as some customers may require things such as aggregation while others don’t. Different enterprise serialization systems in use by customers may also impose diverse integration and data management challenges on the CMO’s internal serialization infrastructure. These CMOs that take a passive approach will face a myriad of business challenges meeting near-term regulatory timelines effectively while setting themselves up for long-term success.

More companies are actively involving CMOs in planning and design


	We have recently seen a significant increase in the number of pharmaceutical companies that are actively involving their CMOs in planning and design processes, rather than just presenting a set of requirements for implementation. As operating companies started to survey their supply partners to gauge serialization readiness, interpretation of regulatory requirements and preferences/capabilities for data exchange ---from serial number generation and commissioning through the shipment of serialized products--- it became evident that there was a very wide disparity of opinions and plans across the supply partner community. In response, many operating companies have started to take a very hands-on approach toward engaging their CMO partners, from one-on-one planning meetings to broad educational webinars across their entire CMO ecosystem, seeking to drive some measure of standardization on operating requirements and data management standards.

Can you please comment on any significant projects you’ve been working on?

We’ve been working on dozens of major projects across multiple geographical serialization / track and trace compliance requirements, including US DSCSA (lot-level and serialized), China, EU, Brazil, South Korea, India and others. These projects span myriad regulatory requirements (serialization, traceability, verification and government compliance reporting), operating ecosystems (internal packaging, CMO/CPO packaging, 3PL distribution, supply chain distribution), and data exchange methods (Healthcare Distribution Management Association Electronic Data Interchange/Advance Ship Notice (HDMA ASN), GS1 EPCIS, XML, CSV). Some of the projects are designed to test and deploy the concept of a global serialization control tower to centrally manage diverse supply networks across diverse country compliance regimes. Others are designed to test out live integrated connections to new compliance systems such as the European Hub operated by the EMVO for implementation of the Falsified Medicines Directive for 2019. Still others are designed to test out new data exchange and operating models such as the EPCIS pilots being undertaken to test out serialized data exchange models for the Drug Supply Chain Security Act (DSCSA) compliance. Every year, we’re seeing one to three significant new country regulations become finalized which kick off a whole new set of implementation projects.

: What are the greatest technical challenges that industry still faces in terms of meeting serialization efforts, but also establishing pre-requisites for tracking and traceability?  

As I see it, the pharmaceutical industry really faces four key challenges in meeting serialization regulations while appropriately managing the cost, risk and time for track and trace programs. These challenges include:

. A pharmaceutical company preparing for the US Drug Supply Chain Security Act (DSCSA) or other serialization deadlines needs to establish complicated bi-directional data exchange connections with a diverse set of supply and trade partners. Serialization is not simply putting a number on a bottle. From internal packaging sites and CMO packaging facilities to 3PLs and downstream trading partners, the pharmaceutical company’s serialization and compliance infrastructure must share extensive master data (product, partner and company) and transactional event information that is coupled to operational triggers. This may involve orchestrating connections between dozens to thousands of systems across a company’s supply and trade network, connections which have to be made with companies that simultaneously making their own decisions on many of the same issues.

. The transition from lot-level tracking to unit-level serialization and traceability creates an explosion of compliance data, which must be generated and managed along with a massive increase in transaction events, which must be managed at operational speeds.

	Traditional enterprise infrastructures and relational databases simply aren’t designed to deal with these information flows. The serialization data generated, and the master data and transactional information related to a uniquely serialized product that is captured and shared as a product is packaged, shipped and verified across the supply chain is an order of magnitude larger than the related information associated with a product under lot-level production and distribution. The serialization events which need to be tracked and managed are much more diverse than lot-level events, and much more intimately connected to the real-time operational processes from packaging site through internal distribution and out into the supply chain.  

. Change and evolution are constant with respect to track and trace regulations, mandating that the serialization and compliance infrastructure be designed to support this new reality. Governments continuously launch new regulations or evolve new rules on existing regulations. We see this in the United States, where the overall regulation evolves from lot-level traceability and verification to interoperable, electronic item-level traceability over the course of several years. Other regulatory bodies from the EU to Brazil continue to publish updated rules and regulations. Trade partners impose new business requirements related to track and trace regulations. Under the US Drug Supply Chain Security Act (DSCSA), for example, wholesale distributors and other supply chain members have now started to publish their expectations for the aggregation of serialized drug product identifiers between unit-level and case-level product.

	Technology standards for data exchange that companies need to support and collaborate on with network partners continue to evolve, including HDMA ASN and GS1 EPCIS. Finally, the ability to connect to and interoperate with diverse enterprise infrastructures is also a big challenge. Mergers and acquisitions create technical challenges when companies or operating facilities are acquired which use different ERP, WMS or line management systems from those currently in use. These create significant master data management issues for the crucial product, partner and company master data that needs to be provided to the serialization and track and trace systems for compliance. A heterogeneous internal and supply ecosystem also creates a diverse set of existing operating processes and triggers which need to be harmonized for integration with the compliance system.

. The emergence of serialization and related compliance regulations now means that there is a new layer of systems that are part of the critical production and distribution process. Now, the ability of a pharma company to supply medicines to its customers depends on the ability of the serialization and compliance system to be operational 24x7x365.

	Pharmaceutical companies and other supply chain stakeholders need to prepare, check and provide a variety of compliance data as drug products are shipped, received or analyzed by operating facilities, creating great technical challenges for the compliance system,  which needs not only to manage massive data but also needs to be ready to respond (at operational speeds) to queries on this data from a diverse set of business systems. Serialized product returns verification under FDA's Drug Supply Chain Security Act (DSCSA) is one example of an emerging challenge where operational processes from one industry stakeholder (the wholesale distributors) can be tightly coupled with the compliance system of another stakeholder (pharmaceutical company).

	In addition, master data is becoming an unexpectedly difficult to master for global compliance. A diverse set of over 30 distinct product, partner and company master data fields must be captured, cleansed and incorporated into track and trace compliance activities, from serial number generation and commissioning to government compliance reporting. These master data fields include not only expected data elements (e.g., product code or unique company identifier) but also highly country-specific fields such as scheduled drug and product image in India and the current supply price in South Korea.

: Please comment on the unique challenges posed by upcoming deadlines in European regulations under the Supply Chain Directive and their impact on strategy and technology solutions.  In addition, have there been changes to other national regulations and enforcement deadlines in other parts of the world that are having any impact?

 EU False Medicines Directive (FMD) regulations create several data, operational and network challenges for pharmaceutical companies, marketing authorization holders (MAH), CMOs, and others across the supply chain. I think that as companies have started to analyze the Delegated Acts for Safety Features, unexpected issues have started to bubble up which is making EU FMD compliance much more complicated than was first expected.

	FMD creates an umbrella regulation covering the member states of the European Union, plus several other countries aligning to FMD requirements. So first off, companies need to treat the EU FMD, not as a single harmonized track and trace law to meet, but instead as a standardized serialization, reporting and verification regulation that is adjusted depending on the products involved and the target markets supplied within the EU. The EU FMD acknowledges the uniqueness of each member state by providing some flexibility in how the regulations apply for drug products targeted for dispensation within a given country.

	For example, the law requires the MAH to capture and report in the product master data notification to the EU Hub the target market(s) for a drug product. A drug product may be regulated as a prescription medicine in one member state but not another, thereby creating serialization requirements for some drug packages and not for others depending on the target market.

	Certain prescription drug products may be white-listed, or exempted, from the safety feature requirements while certain OTC medicines may be included in FMD regulations due to their risk profiles. One member state may prefer to use the standard GS1 GTIN to identify the drug product, while another country may require a unique national product code. Member states may also require additional data, such as a national reimbursement number, to be captured and stored in the barcode and reported upon with each drug product. Although serialization at the transport container or case level isn’t required by law, and neither is aggregation, as internal distribution sites and 3PLs, wholesale distributors and others in the supply chain look at how they will meet the regulations, it is becoming increasingly apparent that case serialization and aggregation may become necessary business requirements for many pharmaceutical companies serving the EU.

	These are some of the complexities facing a pharmaceutical company preparing their internal packaging sites and external CMO network, and the CMO looking to serve a diverse pharma client base for the EU. It imposes the need to have a flexible serialization infrastructure that can support diverse data sets for products targeted across the EU member states, the three EEA countries and Switzerland, which are following EU FMD regulations. Network management is a particular challenge for EU FMD compliance when a pharmaceutical company looks at their sizeable internal packaging network and external CMO packaging network which needs to be on-boarded and serialization-enabled.

	In addition, scalability is an extreme challenge in preparing for EU compliance. Product packs are manufactured in a unit-of-use presentation in the EU as opposed to the larger bulk containers that many medicines are produced in for the US market. So the unit count for serialization to be implemented across the medicine supply for the EU Falsified Medicines Directive (FMD) is massive, with many estimates topping 10 billion units annually for the industry.

	Beyond the EU, there are several other changes, new regulations and modifications of existing enforcement deadlines that are creating significant impact on pharmaceutical companies and their supply network partners. These include:

		South Korea regulations, which set deadlines for phased implementation between Jan. 2016 and July 2017. The nation has established complex government compliance reporting requirements with the Korea Pharmaceutical Information Service (KPIS) system for serialized product shipments, returns, destruction and error corrections for prescription pharmaceuticals coupled with monthly reporting of OTC medicines.

		India. Phased implementation between April 2016 and April 2017 of extensive Drug Authentication and Verification Application (DAVA) compliance reporting for both large pharmaceutical companies and smaller SSI manufacturers including reporting of company, product and distribution partner master data, batch / pre-production notifications, batch withdrawal notifications, production/serialization notifications and shipment notifications.

		Brazil. Modification of the existing 11.903 law and RDC 54 regulation into a new proposed track and trace law whereby information of serialized product products, movements of such drug products across the supply chain and other related transaction events must be captured and reported to a central repository by each industry stakeholder (manufacturer/importer, wholesaler, and pharmacy dispenser). This is a change from the existing regulation where the pharmaceutical marketing authorization holder was responsible for the capture of all product movements and transaction events across the supply chain.

		Saudi Arabia. Phasing in of the serialization requirements for drug products starting in Mar. 2017 and the beginnings of discussions with respect to a central compliance database for reporting purposes. The approach that Saudi Arabia takes for serialization and compliance reporting is setting a baseline which is being closely watched by other countries in the Middle East.

	In addition, other events (e.g., publication of the draft Russia track and trace regulation with unique serialization and reporting requirements, and China’s SFDA’s announcement that it intends to suspend the existing traceability system and modify the traceability regulations) highlight the continually evolving nature of regulations.

  Have companies you work with, for the most part, been taking a long-term approach and building in foundations for traceability into their serialization efforts, or are most just focusing on serialization and meeting requirements

 Most of the companies that we have been working with have been trying to incorporate a long-term traceability and business value vision into their serialization efforts. At minimum, even where there is a purely a serialization regulation, it has become clear to most companies that serialization doesn’t mean merely putting numbers on bottles and that the information generated and the network connections developed have great potential value to the business.

	To comply with serialization regulations that a pharmaceutical company must meet as well as serialized product management and verification requirements which might be imposed from a business perspective, there are a myriad of network connections to develop and product/transactional data which needs to be exchanged for serialization, shipment, returns, exception management and other operations across the supply chain. So this realization has led to a baseline level of traceability analysis and planning for most companies.

	Beyond that, many of the companies that start early in the preparation process find several opportunities for business value and can use this to inform serialization and traceability design to simplify or speed realization of these benefits after the wave of compliance has been met.  There are a myriad of opportunities where a highly connected supply network and rich integrated serialization and traceability data can be leveraged to improve the business. These benefits range from the near-term pragmatic, such as improved inventory management or returns reconciliation, to the transformative, such as direct patient engagement and optimized product launch planning. Even if the detailed infrastructure and operational planning isn’t tackled at this stage, at least more companies are bringing in other stakeholders from across the organization to educate them on the serialization and traceability program, thereby stimulating thinking about the future.

Ideally, how should companies go about laying the groundwork during serialization to simplify implementation of traceability

	Fundamentally, a company must take an “outside-in” approach to serialization programs to not only simplify traceability implementation but also ensure that packaging lines and serialization-enabled sites will meet the diverse regulation and business requirements which are coming into force. This approach is the only way that all external influences can be identified, analysed and prepared for which will impact the serialization system and the packaging line configuration.

	The outside-in approach involves doing a detailed network analysis of:

		The markets that a company current serves or is planning to enter in the next three to four years.

		The regulations in force or in the development stage for those countries to determine not only the unique serialization data requirements, but also identify the business events and operational triggers which must be planned for, and the required data exchanges that these events cause across the internal production, internal distribution and supply chain distribution.

		The supply network that the company uses, including internal packaging resources and external CMOs. This helps determine which business and operational systems these resources use, their integration and data exchange requirements, and the implementation and integration preferences of the partners.

		The trade partner network that a company uses. Wholesale distributors and other supply chain partners may make assumptions about how serialization data is captured and configured when they use this information for receiving, product verification and other activities. If a pharmaceutical company doesn’t engage with at least their key downstream trade partners to vet assumptions, data mismatches can occur. We saw this happen during the California ePedigree serialization pilots where pharmaceutical manufacturers and wholesale distributors had different assumptions on issues (e.g., whether a serial number field should be padded with leading zeros or not), which caused receiving errors during distribution when the data from the barcode didn’t match the serialization data sent by the manufacturer for verification.

	Using the outside-in approach, a company can get a holistic view of the market-partner-system requirements to identify up-front any data or connectivity conflicts, resolving them during the planning stages when deadlines are distant rather than during commercial go-live stages where retrofit is costly and time is running short.

: What progress has been made in standardizing requirements?

There has been only moderate progress globally in standardizing regulatory requirements. Some of the greatest progress in standardization has been made in on-package information and data exchange areas. Increasingly, global regulations are generally aligning to GS1 standards for on-package and product identification, particularly the use of GS1 barcoding standards (2D DataMatrix, etc.) and the use of GTINs.

	Data exchange standards are starting to solidify, or at least coalesce around some common themes. In the US for lot-level product traceability, there is strong alignment in the use of HDMA ASN as the baseline data exchange format, although implementation has seen considerable customization from company to company within the use of optional data fields or business extensions to the standard. In the US for DSCSA serialization and serialized product data exchange, there is general consensus in the desire to leverage GS1 EPCIS as the foundational standard. To this end, the GS1 US Healthcare organization and a diverse set of industry stakeholders have been working diligently to create an updated implementation guideline which will serve as the basis for DSCSA serialization data exchange and inquiries. EPCIS is also gaining traction as a common data exchange approach at the packaging line to enterprise serialization system level.

	But there is considerable diversity in several of the overall regulatory requirements facing pharmaceutical companies and the rest of the supply chain. Countries continue to implement a diverse mix of overall track and trace regulations designed to meet their unique governmental goals, which span from anti-counterfeiting and healthcare reimbursement to drug supply monitoring and taxation control. The regulatory regime adopted by a country generally includes some mix of the following:

		Serialization. Unique identification of product across one or more packaging levels generally starting at the saleable unit or secondary level. Aggregation is required in some countries and not in others while varied data elements beyond the standard four of product code, lot number, expiry date and serial number may be mandated.

		Traceability. Tracking and tracing products and their transactions across diverse events such as changes of ownership or product movements. These regulations often require direct data exchange and management of traceability information between supply chain partners.

		Verification. Verification of product identity at one or more points in the supply chain, such as at dispensation. Some regulations may mandate verification of transaction data as well during situations such as suspect product investigations.

		Government Reporting. Reporting of a mix of master data, packaging  and serialization information, supply chain transaction events, exception information and other data across the birth to death of a serial number or a product from manufacture to dispenser.

	Within each one of these regulatory areas, countries are adopting a variety of master data and operational information requirements, data management rules, data exchange requirements and overall governance policies, which creates a complex patchwork of requirements for global compliance.  No two serialization regulations are ever completely alike. Today, the predominant approach we see globally is the application of serialization and government compliance reporting regulations.

Progress is being made, but work remains to be done. Brian Daleiden, vice president of marketing at TraceLink, discusses the state of the industry, as companies attempt to meet complex, and changing, global requirements.

Tracking Pharma’s Serialization Efforts

Pharmaceutical track-and-trace regulations have been taking shape for several years now, with countries setting compliance deadlines. By 2017, US regulations demand that manufacturers be able to serialize product  (i.e., identify every package, using 2-D barcodes and a unique identifier that includes product ID, serial number, expiration date, and lot number). By 2023, regulations require that they be able to track each bottle or package back to the original manufacturer.

	That vision of end-to-end data exchange remains a long way off, says Joe Whyte, director of serialization and connected enterprise solutions at Rockwell Automation. “Companies are exchanging files but not tracking anything,” Whyte says. “Information exchange today relies mainly on electronic data interchange (EDI) Advance Ship Notice/Manifest (ASN), an electronic shipment notification document.There is no data to mine, analyze or use, and it doesn’t solve any counterfeit, diversion, manufacturing or supply chain problems. Without aggregation and GS-1’s EPCIS standards, you cannot capture any supply chain product event information, so there is no benefit to consumers and no ROI for manufacturers, wholesalers or distributors.”

	At this point, even achieving serialization, the first part of this journey to transparency, still challenges many manufacturers. With one year to go to meet US regulations and three years to meet European requirements, progress among small- to mid-sized pharma companies has been spotty, according to consultants and experts in serialization and traceability.

	Big Pharma companies, for the most part, began working on serialization strategy five or six years ago. “Large manufacturers are moving forward, while mid- to small-size manufacturers still struggle,” says Evren Ozkaya, founder and CEO of Supply Chain Wizard, a consulting firm that specializes in track-and-trace implementations.

	Differences in approach really have little to do with size or company type, however, and more with mindset, says John McKeon, technical director with Portalis, Ltd., based in Kerry, Ireland. At proactive companies, he explains, senior managers are aware of the challenges and benefits of serialization.  “They have approved a strategy for full product serialization with aggregation.  The solution is agreed upon among all stakeholders within the company, and ownership of the rollout is shared.  These companies are often technology leaders and committed to robust planning and risk mitigation,” he says.

	In reactive companies, there is no clear ownership of the strategy, which, he says, can prevent projects from being completed. Often, if a serialization solution design results, it is overly simplified and does not meet product or market requirements.  

	“Within our current customer base, the average level of completion for serialization is 25%,” says Jean-Pierre Allard, director of technology at Optel Vision.

	Currently, more than half of pharmaceutical contract manufacturing organizations (CMOs) lack the resources and capital required for compliance, says Ozkaya, while some smaller outsourced service companies may not yet be fully aware of what is needed. Generic-drug  companies are behind branded firms in serialization efforts, but larger generic drug manufacturers have been proactively reaching out to their CMOs. Many manufacturers are focusing on strategic CMOs only, and assessing risk.

	There are technical hurdles to clear in developing serialization and track-and- trace programs, but, experts say, it’s the human ones that are proving most difficult to surmount. Some deadlines and requirements that were set in the past wound up being postponed, and many manufacturers reacted by postponing serialization efforts and taking a “wait-and-see” approach, which, Whyte says, gave some companies a false sense of security.

	“Looking at legislation, the volume of work required and the time available, the industry is in for a bit of a wakeup,” says McKeon. It can be easy to underestimate the time required for serialization, he says.  There’s the 140 days or more between the time product leaves the warehouse until it reaches the pharmacy shelf.

	But before that, there is the eight to 12 weeks spent writing the user requirement specifications (URS) document, one to six months for bidding and selecting vendors, three months or more for technical discussions and drawing up a contract, four weeks for document preparation, two weeks for document approval, one week per line for installing equipment,  six to 12 weeks for line validation, 12 to 20 weeks lead time for machines, and time required for other steps. It adds up to a considerable amount.


	The fact that pharma is outsourcing more manufacturing and related functions has made serialization efforts more complex. In some cases, CMOs have been waiting for guidance from pharma clients, but haven’t received it, says McKeon. Most CMOs expect new contract terms to assist them with serialization solution design, capital expenses for the project, and a longer contract period within which to recoup investment, but issues of increased costs often hold up contracts.

	In addition, many large pharma companies are also CMOs to each other, under arrangements in which they package and distribute each other’s products in specific regions, based on company-to-company agreements, says McKeon. These agreements are less likely to result in the impasse that can occur between a large pharma company and its smaller CMOs, he says, especially when project scope changes and costs go up.

	“At least 25% of pharma CMOs have not started a project internally,” notes Allard.  However, he sees the situation changing rapidly, as customers push them, or even give them ultimatums (e.g., “eighteen months or else”) to get started with implementations. Brian Deleiden, vice-president of industry marketing for TraceLink, also sees the situation improving, with more operating companies taking a very “hands-on” approach to engaging CMO partners.

	Leadership can go in the other direction, too. In February 2016, the contract development and manufacturing organization (CDMO) Recipharm, disclosed plans to invest $44.4 million to set up serialization and track-and-trace capabilities to offer its pharma clients. The company figured that 85% of its client base needed help with serialization.  “When we understood how many programs and customers needed serialization, we decided to make this investment to support our customers,” says Asa Wilander, head of customer relations within Recipharm’s serialization task force. In 2015, the company established how teams at each of its sites would work on serialization. Recipharm has focused on working with one hardware and two software partners, and is using EPCIS standards.

	The biggest challenge in getting customers up and running is communication, she says. “We are proactively starting discussions with our customers around customer requirements and additional features that need to be adopted, but there is still a need for companies to place the serialization challenge higher up on their agendas,” she says, even after Europe’s Falsified Medicines Directive (FMD) set a compliance deadline.

	Pharma companies tend to be siloed, with different departments often reluctant to share information. Within this type of environment, McKeon says, it can be difficult to implement any change that affects every department directly.  

	This lack of communication is often first evident with the URS document, which establishes the foundation for any company’s track-and-trace efforts. “It’s important to take a holistic view from the beginning, even if you only implement serialization in phases … All stakeholders must participate up front, even if the work does not affect them for three years … the work must be holistic and cross-functional if you want to minimize imlementation costs and challenges and realize an ROI,” says Whyte.

Another challenge is finding the best basic approach for dealing with changing timeframes and expectations in other countries, says David Sheedy, serialization IT deployment manager at Zenith Technologies, which provides implementation support, and recently announced a partnership with technology provider SEA Vision.

	Brazil’s regulations were problematic last year, and, Allard says, the “get go” deadline remains unclear. Most companies that work or ship to Brazil are waiting until the directive is issued (expected in May 2016), before starting their efforts.

	EU requirements are also challenging. “Companies need to treat the EU FMD, not as a single harmonized track-and-trace law to meet, but, instead, as a standardized serialization, reporting and verification regulation that must be applied to product lines, depending on target EU markets,” says Daleiden.

	“European regulations are clear on requirements for print and at the packaging level,” says Allard, “and call for a tamper-evident device to protect the packaging. However, the device requires more space on the packaging lines, so manufacturers will need to buy new equipment in order to comply.”

	In some cases, European regulations also call for aggregation (or allocating a serial number on the shipper case and record of the association of the case serial number with the item serial numbers inside), he says, adding that the directive requires companies to notify the database when serialized products are shipped outside Europe. Without aggregation, recording and communicating the serial number on all the shipped products will quickly become cumbersome for distributors, Allard says. “If there is no serial number on the case, a company shipping products out of the European zone will need to open every shipped case and scan each individual item serial number,” Allard says.  “The “implicit aggregation requirement” consideration will only become real after the implementation deadline, he adds, so manufacturers are wondering whether they should integrate aggregation solutions now or wait for demands from their distributors.”

	Daleiden also points to new requirements taking shape in South Korea and India, and a draft regulation in Russia. One other challenge, says Allard, has been lack of guidance from FDA for the US market. Manufacturers are currently implementing solutions, assuming that FDA will regulate with GS-1 compatible solutions and endorse the guidance published by the Healthcare Distribution Management Association (HDMA).

	The second challenge for the US market is that the data transmission model (i.e., whether to use a centralized database hosted by FDA or to have decentralized passing of data from one stakeholder to the other) has not been defined, Allard says. So it is not really possible for distributors and wholesalers to prepare.

There have not been any formal studies of the return on investment (ROI) of track and trace, but consultant Robert Celeste of RP Partners notes potential benefits in operations and beyond. “It offers a unique opportunity to connect with patients,” he told listeners to a June 15, 2015 webcast sponsored by Rockwell Automation (1).

	A McKinsey report (2) estimates that, for a pharmaceutical manufacturer with 25 packaging lines and $4 billion in annual revenues, economic benefits could include the following:  

		$11 million/year from reducing inventory financing and holding

		$3-12 million/year in reducing cost of recalls

		$25-35 million/year from reducing financial impacts of counterfeiting.

	Darryl Brown, vice-president of global strategic marketing at Systech International, notes that more clients in Europe are starting to realize the potential power and value of the solutions.  “They’re asking how they can deliver intelligence back through the value chain,” he says. The next step, he believes, will be using the data to better understand patient engagement, to optimize supply chain management. “Customers may not be ready for this now, but at least they are thinking about it,” he says.

	In the US, he says, one customer is working toward item-level serialization, even though that approach is not mandated. “We are starting to see a more mature thought process,” says Brown.

	Companies must take an “outside in” approach to serialization programs, says Daleiden, not only to simplify traceability implementation but also ensure that packaging lines and serialization-enabled sites can meet the diverse regulation and business requirements that are coming into force.  A number of consultants suggest doing the work in phases, and tackling serialization and aggregation together, from the earliest stages.

Serialization Regulatory Compliance, an on-demand webcast

Strength in Unity: The Promise of Global Standards in Healthcare


	When referring to this article, please cite it as A. Shanley, "Waking up to Track-and-Trace Benefits," 

With deadlines only a few years away, some companies have not started serialization programs, while others are taking a tactical, short-term approach, losing out on potential business benefits.

Waking up to Track-and-Trace Benefits

In the past decade, there was a movement within the pharmaceutical industry to benchmark drug manufacturers’ performance against that of manufacturers in other industries, to improve such areas as process robustness, speed and consistency, and to reduce waste (1). Proponents of lean manufacturing urged pharmaceutical companies to adopt best practices from other industries.

	Thought leaders began to look more closely at manufacturing, as well as such standard industry benchmarks as changeover times and inventory turns, and asked whether pharmaceutical companies could improve performance and become more agile.  To see how closely the industry has been examining its approach to inventory management and supply chain agility, 

asked Lora Cecere, founder of Supply Chain Insights, for her opinion on progress.

	“Pharma is stuck in the mud,” notes Cecere, who writes the Supply Chain Shaman blog (2) and has more than 40 years of experience managing major corporate supply chains, consulting, and analyzing industrial performance.

 report (3) noted, pharma is immature, compared to other industries, in its supply-chain management practices. It still has higher operating margins, but faces more complexity, commoditization, and globalization than it did in the past. Mergers and acquisitions have also had an impact, Cecere says. Today, most pharmaceutical companies still generally take a conservative, functional approach to their supply chains, and focus more on the demand cycle than on channel data, says Cecere, who suggests that more industry executives follow the advice of supply-chain expert Carol Ptak, a partner at the Demand Driven Institute. In a blog post on 

 (4), Ptak suggests that companies focus, first, on return on investment and cash flow, and secondarily on profit and loss, so that they can sense changes in demand and adapt planning and production dynamically.

	Cecere and her collaborators have developed a supply chain index to measure how individual companies and industries are improving their supply chain agility. Considering such big issues as overall growth, profitability and complexity, the index tracks industries’ and companies’ improvement by averaging metrics over different time periods.

	Each industry is analyzed individually, based on its unique characteristics, but then companies are ranked, with those that have made the greatest gains recognized as “Supply Chains to Admire” (5) within those industries, based on improvements in inventory turns, return on capital investment, and operating margins.

	Companies in  industries with lower operating margins tend to manage their supply chains better than those with higher margins, so Cecere was surprised to find that generic pharmaceutical manufacturers were not more agile than Big Pharma. In 2015, no generic or over-the-counter drug companies made the cut, while Biogen-Idec was the sole pharmaceutical company to make the list of 26 Supply Chains to Admire.

Biogen-Idec listed on the 2015 “Supply Chains to Admire” List

Biogen-Idec improved its overall supply chain index ranking from 6 (when considering the period from 2006 to 2014), to 2 (when considering 2009 to 2014), the study found. The company increased return on capital from 13% to 21%, respectively, during these same time intervals, and inventory turns, respectively, from 9.99 to 14.55. 

, shows performance for the seven top-ranking pharmaceutical companies from 2011 through 2014, comparing them with metrics for a manufacturer from a different industry: Apple, Inc.

	If traditional supply chain management is not a top priority, how is the industry becoming more agile, and what metrics best reflect its progress? 

 asked Greg Anthos, senior managing consultant at Tunnell Consulting, for his thoughts. Anthos says that pharmaceutical manufacturers are focusing more of their attention upstream, to improve the research and development process, and, in particular, the way they handle clinical trials.  

	More pharmaceutical manufacturers are moving to adaptive trial designs, he says, and a growing number of them are working to be able to bring life-saving products to market under accelerated approval in Phase II. This is a major feat, considering the Phase III failure rate for new drugs (6).

	At a time when some commodity generics continue to be in short supply, the emphasis is not on reducing inventories but on ensuring adequate supplies, Anthos says. Companies are also addressing the challenges brought by mergers and acquisitions, which can temporarily distract staff, at all levels, from operational and agility goals. McKinsey analysts argue for the need for greater CEO involvement, standardized processes, and greater communication and feedback, the hallmarks of any good lean or operational excellence program, when a merger or acquisition is underway (7).

	The following are some opinions on agile manufacturing that Anthos shared in an interview with 

Fear of stockouts and tendency to play it safe with inventory

 It was one of Tunnell’s analysts who first drew industry’s attention to pharma’s inventory turns, compared to those in other industries, as a measure of its agility.  Why is it that the industry appears to have made so little progress in improving its performance in this area?

  Not a lot has changed if you analyze the industry based on the classic supply-chain measures. Some manufacturers are probably carrying well over a year’s worth of inventory. Today, however, supply chain agility has to mean getting medicines to the patient more reliably and efficiently.

	You’ll see some progress in inventory management, but it has not been the primary focus. Today, the industry’s first goal is ensuring supply to market so that there will not be any stockouts. A growing number of processes, especially in biotech, can be complex and fickle, so there is a tendency to play it safe with inventory. In the end, pharma companies will be measured based on ensuring supply, but also on revenue and profitability and cash flow, so inventory turns are largely issues for manufacturing departments, the CFO, and the guys in the warehouse.  

  So how is agility being defined in pharma today?

 Agility is much more about, in the short term, getting new products to market quickly. It’s about launching adaptive trials for breakthrough medications and having a sufficiently strong foundation to be able to launch a new product based on Phase II data.

	In addition, agility means adapting immediately to changes in the market. These can be changes in demand, for example, when a competitor fails to get approval for a new drug and drops out of the market. But agility also means reacting to changes in internal processes or challenges within the company that must be overcome.

	In the end, agility is getting to market faster and better managing the supply chain, and overcoming, more dynamically, any issues, whether external or internal, that have disrupted the supply chain. It’s all about being more responsive to change.

The downsized challenge: doing more with less

 How can companies be agile when they are dealing with more, and more complex processes, as well as with reductions in staff and resources?

 As I see it, the most progressive companies are focusing on three areas:

Increasing risk assessments, on both the supply chain and the enterprise.

 They are becoming more proactive about determining the risks that are out there, prioritizing them, and ensuring that their resources are focused more effectively to address them.

Thinking through potential future changes as they develop any new product,

 i.e., how the process could be simplified to improve robustness and process understanding.  They are also taking steps to simplify their supply chains.  

Ensuring the potential of their processes to address future changes.

  Recently, I had a conversation with someone at a pharmaceutical company who had been in discussions with FDA regarding process changes. He told me that a number of people within FDA have become frustrated by the fact that they are spending most of their time addressing process changes (e.g., changes that incorporate the use of more up-to-date equipment, or even simple changes in the location of manufacture).

	As a result, less of their time is being spent on their primary mission:  ensuring that safe and efficacious medicines get to the public. For drug developers and manufacturers today, the key question is: How do we develop new products so that, in the future, no or only minimal regulatory changes will be required, except maybe filing for new drug approval in a new geographical market. It’s a great stretch concept, but it takes a fair amount of work to get to a point where you can think about, and address, all the issues involved.

	Certainly some of FDA’s and the industry’s early work with quality by design (QbD) had that goal in mind. The idea was to better understand your product performance ranges and the design space, file for approval in a wider range that would allow you to make adjustments in that range.  

	Today, complexity, both of the products and of the regulatory landscape, has boxed us in. Significant numbers of supplements must now be filed for individual products. That’s a challenge that the industry still has to surmount if it is to develop more robust supply chains and more robust processes.

 It requires figuring out design choices. For example, a company might choose to launch a new process using a stable platform that is already fairly well understood and characterized, and that has already been scaled up. It also means doing more of the classic QbD work, such as design of experiments (DoE) to really understand how the product behaves, where it works well, and what the process’ fault lines are. Simplification is key, so you lean out the process to reduce unnecessary complexity.

 But how can companies do that effectively with biologics, and how can they do it when they are also rushing to get product to market faster?

 With biologics, there is inherent complexity, so the key is designing in better controls or at least monitoring each process so that you better understand its behavior. It’s not easy. The industry is trying to move forward with greater process understanding while trying to get new products to market faster. These are competing forces.

 How can all of this be done when international mergers are going on and day-to-day conditions are in such constant shift?

 Mergers distract staff. It’s not only a question of pondering who will get to keep his or her job, but such questions as which processes to follow, whether in manufacturing or development.  You want to create the best lean practices that are most effective, but you’re often in a rush to meet some cost reduction synergy or regulatory target that a large consulting firm has told you to meet.

	As a result, many companies reduce staff before they’ve figured out how to simplify and improve their processes.

	Knowledge management is another major issue, because mergers and acquisitions drive a significant amount of employee turnover, both planned and unplanned. Knowledge often resides in individuals, rather than within the organization, and that jeopardizes business continuity. The way to avoid that is by understanding that you want to harmonize processes first, and engaging the folks who are already in the process of doing that to come up with the best work practices.

 Pharmaceutical Research Manufacturing Project, Final Benchmarking Report, 2006

, site accessed February 20, 2016.
	2. L. Cecere, 

Supply Chain Metrics That Matter: A Focus on the Pharmaceutical Industry

,” Dec. 3, 2012, Supply Chain Insights,  (site registration required).
	4. C. Ptak, 


	5. L. Cecere and R. Denman, Supply Chains to Admire, 2015, 

, excerpted with permission, Sept. 8, 2015, Accessible via www.beetfusion.com (site registration and free membership required).
	6. A. Shanley, 

, 40 (13)(February, 2016), pp 24-27.
	7. A. Agrawal et al, 

Pharma M&A: Agile Shouldn’t Mean Ad Hoc

, McKinsey and Co., site accessed February 19, 2016. 

Pharma’s traditionally conservative approach to supply-chain management may be hindering its ability to adapt to changes in demand.

Fundamentals for Pharma Agility and ROI

For decades, APIs, the foundation of the pharmaceutical industry, have been a staid, solid, if somewhat invisible market. Some drug product manufacturers make APIs inhouse, while others outsource their manufacturing to contract development and manufacturing partners.

	Recently, however, as drug approvals have approached levels last seen in the early 2000s, APIs have become a dynamic focal point for mergers and acquisitions, investments in innovation, lab and plant expansions, outsourcing growth, and the development of new chemistry platforms.

	The past few months have seen significant merger and acquisition activity.  In July 2015, The Siegfried Group bought BASF’s API facilities in France, Germany, and Switzerland for $300 million (1).  In October 2015, Merck KGaA bought Sigma-Aldrich Corp., a supplier of APIs and fine and laboratory chemicals, for $17 billion (2). The acquisition solidifies its biopharmaceuticals business and emphasizes chemical manufacturing in its product portfolio.

	At around the same time, Johnson Matthey bought Pharmorphix, a specialist in solid dosage form chemistry, from Sigma-Aldrich (3). The company brings expertise in understanding polymorphism and cocrystallization, and helps to bridge the gap between toxicity testing through Phase I.

	Drug product innovation challenges are driving new developments in APIs. “Our customers must find new ways to bring new therapies to market,” says Nick Johnson, strategic marketing director at Johnson Matthey. The company, once synonymous with chemical catalysis, has rebranded its fine chemicals business to focus on custom API development, manufacturing, and life cycle management; chiral chemistry and catalysts; and controlled substance manufacturing. “From a contract manufacturing perspective, [our customers’ innovation challenge] affects how we structure our business and services. Our goal must be speed to market, and we must structure on areas of R&D and around technologies,” Johnson says.

	Currently, market estimates peg the global API market at $121 billion, and expect it to reach nearly $199 billion by 2022 (4). Generic pharma firms such as Teva and Mylan produce many of their own APIs inhouse, but also sell to other companies, a practice that is becoming more common.  

	More than 10% of the business is made up of specialty APIs outsourced by pharma innovator companies for clinical research (5). Contract companies that focus on API development and manufacturing include Cambrex, Hovione, Siegfried, Johnson-Matthey, and Lonza, are seeing business growth.

	Roughly 99% of API volumes (when measured in kilograms) are based on small molecules and 1% from biologics, says Matthew Moorcroft, global marketing director for Cambrex, a contract development and manufacturing organization (CDMO) that specializes in small-molecule APIs.  

	However, prices for small-molecule, and even some generic drugs, have been increasing, he notes. Market value share, historically reported between 80-85% small molecules and 25-20% biologics, might tip temporarily even further in favor of small-molecule APIs, Moorcroft adds.

	Quality has displaced cost as the top requirement, even in commodity businesses.  As a result, the API business is “no longer a race to the bottom,” according to Peter Werth, CEO of the generic API supplier, Chemworth, in an interview with CPhI for CPhI’s 2016 US Pharmaceutical Industry Outlook, which was released at the Informex show in February, 2016 (6).

	“Four years ago, the main consideration that finished formulation companies would take when sourcing an API was cost. These past four years have seen a rapid rise in quality concerns, which are now at the forefront of everyone’s minds,” he said.

“Worldwide, large innovator companies are increasing outsourcing requirements,” says Moorcroft. “Coupled with the increasing use of generics, and additional opportunities for increased penetration in developing markets, the industry will continue to experience strong growth,” he adds.

	Currently, API manufacturing is the largest business for pharmaceutical CDMOs, the operation most frequently outsourced by small-molecule manufacturers, and the fifth most frequently outsourced operation for biopharmaceutical manufacturers, according to Kate Hammeke, research director with Industry Standard Research (ISR), who shared recent market research findings with 

Manufacturers and contract development and manufacturing organizations are developing processes and facilities to meet growing specialty API demand.