Associate Director, IT Applications
Hikma

Manish Garg, PMP, PSM

Pharma's 2026 predictions revisited: AI tools have arrived, but organizational readiness, data governance, and regulatory gaps now limit real-world impact.

H1 2026 in Review: AI Adoption, Onshoring, and Data Gaps

Six months after industry experts laid out their predictions for 2026, many of those experts return to see what's tracking, what's shifted, and what it means for drug development and manufacturing professionals in H2.

The throughline across every prediction is the same: the technology moved faster than the organizations meant to use it. Manish Garg, serialization, regulatory compliance, and track and trace expert, who framed AI in drug discovery as a speed play back in December 2025, now sees the real story as strategic. As he puts it, "What's become clearer in the first half of 2026 is that the more meaningful shift is happening at the strategy level, not just the speed level."

That readiness gap shows up in regulatory enforcement, too. Mike Stenberg, LGM Pharma, points to FDA's first warning letter specifically citing improper AI use in manufacturing “with a major oversight related to specifications and procedures."

On the data side, Remco Munnik, Arcana Life Sciences, argues that Europe's database-driven submissions push is exposing a more fundamental problem than technology adoption, adding that "AI only works when the underlying data governance is solid."

Supply chain predictions largely held, with Campbell Bunce, Abzena, confirming that selective US onshoring and a biologics surge, including ADCs and antibody oligo conjugates, are playing out roughly as forecast. Meanwhile, Megha Sinha frames the year's real headline plainly: "the technology has now arrived, and the binding constraint turns out to be the organizational readiness, the employee sentiment, and the data."

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Is Organizational Readiness Pharma's Real AI Barrier in 2026?

Back in December 2025, several industry leaders staked out predictions for what 2026 would bring to drug development and manufacturing. Now, at the midpoint of the year, many of those experts return to see how their predictions held up. They find a pattern showing up across nearly every prediction: the tools arrived quickly, but the organizations meant to run them didn't catch up nearly as fast.

When referring to AI in drug discovery, Manish Garg, industry expert, originally called it a race for speed. Six months in, he's revised that read entirely, telling 

 "What's become clearer in the first half of 2026 is that the more meaningful shift is happening at the strategy level, not just the speed level."

Regulators are catching the same gap from the enforcement side. Mike Stenberg, LGM Pharma, flags a milestone warning letter as proof that the oversight is already here. "Earlier this year, FDA issued its first warning letter that specifically cites improper use of AI in manufacturing with a major oversight related to specifications and procedures," he says.

Underneath both trends sits a harder problem: data. Remco Munnik, Arcana Life Sciences, tracking Europe's shift toward database-driven submissions, put it as "AI only works when the underlying data governance is solid."

Elsewhere, the forecasts are holding steady; US onshoring is advancing selectively, biologics approvals are climbing, and Campbell Bunce, Abzena, says the industry's trajectory matches almost exactly what was predicted six months ago. Megha Sinha sums up where that leaves manufacturers, saying, "the technology has now arrived, and the binding constraint turns out to be the organizational readiness, the employee sentiment, and the data."

The full picture, including what each expert got right, what they missed, and where they're recalibrating for H2, is best heard in their own words.

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As the pharmaceutical industry crosses the midpoint of 2026, the landscape is defined by a complex interplay of rapid technological advancement, shifting geopolitical alliances, and evolving regulatory frameworks. Following a series of interviews conducted in July 2026 with seven pharmaceutical manufacturing and development experts, a clear picture emerges: while the industry has embraced the potential of next-generation modalities and AI, the "last mile" of execution—particularly regarding regulatory compliance, data consistency, and organizational readiness—remains a formidable hurdle (

Continued below the infographic - click to enlarge

Infographic: Pharma Manufacturing 2026 Midyear Reality Check

This report synthesizes these expert perspectives to provide a comprehensive look at the trends defining H1 2026 and the challenges awaiting the industry in the final months of the year.

We also wanted to hear from you. Findings from a poll of our LinkedIn followers reflect the core tensions identified by the seven experts in their midyear 2026 assessments, particularly regarding the gap between technological potential and operational reality (Table).

I. The Rise of Next-Generation Modalities: ADCs, AOCs, and the GLP-1 Surge

The first half of 2026 has seen a significant surge in the development of complex biologics and bioconjugates. 

, notes that his earlier predictions regarding the rise of these molecules have been largely borne out by clinical progress and regulatory approvals.

"We're seeing a lot of excitement, a lot more investment, in these next-generation molecules, and we're seeing that kind of borne out in the clinic and through some of the approval processes as well," Bunce observes.

Bunce specifically highlights the "surge in ADCs" (antibody-drug conjugates), noting that there are now approximately 23 approved ADCs worldwide. Recent milestones include the approval of AbbVie’s Decnupaz, an anti-CD123 conjugate for dendritic cell neoplasia, which utilizes a novel PPD dimer toxin payload. Beyond traditional ADCs, the industry is witnessing intense interest in antibody-oligoconjugates (AOCs), with companies like Avidity and Dyne progressing treatments for muscular dystrophies (Figure 1).

Bunce predicts this trend will only strengthen as biotechs face immense pressure to reach "value inflection points" by securing patient safety and efficacy data quickly. To meet this demand, CDMOs are shifting toward high-throughput "front-end design" processes and integrated manufacturing platforms that truncate timelines by combining protein production and conjugation activities.

Simultaneously, the "GLP-1 boom" continues to reshape manufacturing priorities and patient access models. 

Mike Stenberg, vice president of Business Development at LGM Pharma

, points to the rapid normalization of direct-to-consumer (DTC) and telehealth channels as a major development in how patients access these drugs.

"The biggest story for me is what's spilling over into how people access these drugs. Direct-to-consumer platforms have gone from a novelty to nearly universal in under two years,” Stenberg states. “Meanwhile, we continue to see new routes of dosage administration being explored."

While transdermal and subdermal delivery systems are still in early development, the approval of the first oral solid dose GLP-1s represents a milestone in administration routes. 

Saharsh Davuluri, CEO and managing director of Neuland Laboratories

, adds that while small molecules remain a core modality, the need to invest in new modalities like peptides and oligos is creating a challenge in capital allocation. He notes that Neuland is currently commissioning new peptide manufacturing facilities to meet increasing demand, particularly for large-scale production.

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Pharma manufacturing and development experts reassess their 2026 predictions for the industry and look ahead to the second half of the year.

Midyear 2026 Industry Report: Taking Stock of Pharma Manufacturing, AI, and Regulatory Trends

II. Geopolitics and Global Supply Chain Reshaping

The "China+1" strategy has evolved into a more aggressive push for multi-region redundancy and onshoring. Experts agree that geopolitical tensions and new tariffs have transformed supply chain resilience from a strategic choice into an operational necessity.

serialization, regulatory compliance, and track and trace expert, observes that the framing he used at the end of 2025 was already too conservative by early 2026. "I'm seeing companies building genuine multi-region redundancy, not just adding one backup supplier and calling it done,” Garg explains. “The supply chain resilience conversation is no longer primarily about geography. It's increasingly about data visibility."

Garg argues that geographic diversification alone is insufficient; companies must combine it with real-time traceability and serialization data infrastructure to respond to disruptions quickly. Davuluri echoes this sentiment, highlighting India’s sustained role as a critical manufacturing hub, particularly for APIs and peptides. However, he notes a surprising lack of new CDMO investment commitments on US soil compared with the "flurry of announcements last year."

A significant challenge identified by Davuluri is the increasing volume of out-licensing deals coming from Chinese innovators to “big pharma.” This creates a complex manufacturing dilemma for non-Chinese CDMOs, he notes. "When you have big pharma in-licensing some of these new drugs from Chinese innovators, who determines the manufacturing plans? Is it the Chinese company that is licensing out, or is it the big pharma company?" Davuluri asks.

Despite this complexity, Stenberg sees a clear trend toward onshoring drug product manufacturing closer to the end market. He notes that while APIs and raw materials often remain globally sourced, finished dose is where domestic investment makes the most sense for gaining operational, regulatory, and economic control over the "last mile."

III. The AI Evolution: From Productivity to Operational Participation

Artificial Intelligence has moved past the "hype" phase into practical application, though its deployment remains uneven due to validation and auditability requirements. 

Megha Sinha, founder and CEO of Kolter AI

, reports that "agentic systems" are now actively participating in plant floor operations.

"Inside the plant, agentic systems are already detecting out-of-spec results, pulling batch records, drafting root cause analyses, and cutting investigation time by 50% or more in validated GxP environments,” Sinha notes (Figure 2). “That is a shift from AI as a productivity layer to AI as an operational participant."

However, she argues that these systems stop short of solving the industry's costliest problem: translating manufacturing changes into regulatory consequences across dozens of markets. Current digital twins model shipments and capacity but cannot compute the specific filing requirements or grace periods triggered by a process change.

Henrik Johanning, senior vice president of quality & strategy at Epista Life Science

, notes that AI governance has matured rapidly. "The conversation has matured from 'What can AI do?' to 'Can the regulated process defend what AI helped create?' That is a significant shift," he observes.

Regulatory expectations now require AI tools to sit within the pharmaceutical quality system, necessitating defined intended use, risk assessments, and human oversight. Stenberg warns that the pace of AI adoption will continue to look slow because the industry proceeds carefully given the regulatory scrutiny. He points to the 

first FDA warning letter citing improper use of AI in pharma manufacturing

IV. Data Quality: The "New Moat" and the NDC-12 Identity Transformation

The experts we spoke with all agree that technology is no longer the primary bottleneck in pharma manufacturing; rather, it is the quality and governance of the underlying data. Garg emphasizes that data quality has become the central competitive differentiator for AI in manufacturing, stating, "The companies that are realizing real AI value in early 2026 are almost uniformly the ones that invested in their [enterprise resource planning (ERP)], serialization, and master data infrastructure in 2023 and 2024. Data quality isn't just a barrier; it's the new moat."

This focus on data is critical as the industry faces 

. Garg describes the FDA's 12-digit National Drug Code rule as an "enterprise identity transformation" that will affect virtually every system in the supply chain, from ERP and serialization to labeling and reimbursement platforms. "The parallel I keep using is DSCSA... History is about to repeat itself for organizations that make the same mistake with NDC-12 [by treating it as check-the-box compliance]," Garg warns.

Remco Munnik, founder of Arcana Life Sciences

, notes that while management has a "strong appetite to 'solve everything with AI,'" the reality is that AI only works when foundational data governance, such as identification of medicinal products, or IDMP, is solid. He identifies "digitalization with consistency" as the primary challenge for the remainder of the year, ensuring that data are interoperable across regulatory, quality, and manufacturing systems.

V. The Regulatory Landscape: Annex 1, Reform, and Convergence

In Europe, the implementation of EU GMP Annex 1 continues to drive facility investments. Johanning reports a strong focus on HVAC, water systems, and barrier technologies as companies move from theoretical risk management to real capital decisions. "The real maturity test is whether [quality risk management] changes decisions, not whether the risk assessment exists," he remarks (Figure 3).

While global regulatory convergence has helped align terminology around data integrity and quality systems, Johanning notes that "operational friction" persists due to regionalization and local release models. Munnik adds that the 

 is making significant progress toward a future in which lifecycle changes are handled via structured database updates rather than document-based submissions, with tangible success targeted for 2027 (Figure 4).

On the inspection front, Stenberg analyzed recent FDA data and found that while inspections increased in 2025/2026, the growth was almost entirely domestic. "Inspections did increase, but growth was almost entirely domestic, with foreign inspections in countries like China and India seeing far more modest growth despite the number of registered facilities there continuing to increase," Stenberg notes. Critically, the core GMP deficiencies found during these inspections, such as issues with written procedures and investigations of failures, remain unchanged from previous years, according to Stenberg.

VI. The Human Factor: Skills Gaps and Change Management

The transition to digital-first manufacturing has exposed a significant skills gap and the need for rigorous change management. Johanning notes that while companies are upskilling, quality, engineering, and IT still too often operate in separate, deep lanes. He argues the constraint is the ability to make "good GMP risk decisions" across these disciplines.

Munnik observes that economic pressures often cause companies to postpone the rotational programs and skill-building needed to bridge this gap (Figure 5). "When budgets tighten, rotations and skill-building are often the first to be postponed, even though they are exactly what is needed to close the gap," he says.

Sinha adds that the "orchestrator" roles often touted by companies are frequently "title-deep rather than skill-deep." She frames the shift as a fundamental change in the job itself, moving from 

 them. Davuluri emphasizes that a major part of this transition is ensuring that scientific talent feels secure and views AI as a tool to aid their effectiveness rather than a replacement.

VII. The Road to H2 2026: Challenges and Strategic Outlook

Looking ahead to the remainder of 2026, several critical challenges remain (Figure 6):

 Stenberg warns that early-stage biotech financing is on pace for its "worst year this decade," which could lead to a thin manufacturing pipeline in the future.

 Garg predicts that as the stabilization period ends, organizations should expect greater operational scrutiny from trading partners regarding data accuracy and interoperability.

 Johanning argues the biggest challenge is "turning risk-based intent into executable control strategies" without falling into the trap of over-control.

 Davuluri emphasizes the need for CDMOs to be more agile and responsive, utilizing flexible manufacturing lines to meet crunched development timelines.

 Sinha predicts that the "connective tissue" between functions must be built now to survive the pace that AI-native discovery is about to create.

: Munnik identifies the core challenge as "digitalization with consistency," warning that digitalization only works when "underlying data are stable, governed, and consistent across regulatory, quality, and manufacturing systems."

: Bunce highlights the pressure to offer "innovative ways of rapidly developing molecules" through "high-throughput sort of design" to help biotechs reach critical patient data as quickly as possible.

The first half of 2026 has demonstrated that the pharmaceutical industry is no longer limited by its technology, but by its organizational readiness and data integrity. As Sinha aptly summarizes, "Strategy moves at the speed of boardroom. Execution has moved at the speed of a spreadsheet.” The choice, she says, is whether to wire operations into one auditable backbone now or remain fragmented.

The winners in the second half of 2026 will be those who treat digitalization as a data consistency challenge rather than a technology project, ensuring that their manufacturing, regulatory, and quality systems are truly aligned. As the industry moves toward 2030, the shift from "point solutions" to integrated, data-driven operational backbones has become a requirement for survival in a rapidly evolving global market.

Geopolitical tension and tariffs are accelerating multi-region redundancy and onshoring, making real-time traceability and serialization central to resilience across global networks. Agentic AI is already reducing investigation cycle times in validated GxP operations, yet adoption is constrained by auditability and quality-system governance. Data governance now differentiates winners, especially as NDC-12 forces enterprise-wide identity remapping akin to DSCSA. Annex 1 capital upgrades, uneven FDA inspection growth, and persistent GMP findings add pressure. Skills gaps and cross-functional integration will define H2 2026 execution.

Six months in, pharma manufacturing and development experts reassess their 2026 outlooks and predict what comes next.

Six Months In: A 2026 Progress Check on Pharma Manufacturing, AI, and Regulatory Shifts

what I expected for pharma manufacturing in 2026

, I spoke to the drivers of innovation and how drug manufacturers should prepare their operations for the next phase of competition and growth. Now that 2026 is half over, I reflect back on what predictions I made came to fruition, which didn't, and why, as well as what's in store for the second half of the year.

AI in R&D and the Shift to High-Value Therapies

The AI-driven R&D trend I described in December continued to accelerate in the first half of 2026, but with an important nuance I didn't fully anticipate. In December, I characterized AI's role in drug discovery as primarily about cutting timelines for identifying candidates. What's become clearer in the first half of 2026 is that the more meaningful shift is happening at the strategy level, not just the speed level. Companies are discovering candidates faster and restructuring their pipelines around what AI makes economically viable to pursue. The oncology and rare disease focus has intensified, partly because those are the areas where AI's ability to find signal in complex genetic data has the most commercial leverage.

Generative AI for de novo molecular design, which I flagged as a 2026 driver, is progressing but more slowly than the January headlines suggested. The technology works in controlled research settings. Getting it through regulatory scrutiny is a different challenge, and the interpretability problem I mentioned in December as a “black box” concern is still the central obstacle for anything approaching a regulatory submission. The talent shortage I highlighted has, if anything, gotten worse. People who understand both the biology and the AI are genuinely rare, and everyone is trying to hire the same small pool of people. Real-world evidence in regulatory submissions is moving, but modestly. FDA has been more receptive than expected in some therapeutic areas, less so in others. It's not the clean breakthrough moment I anticipated and this is a negotiation happening on a case-by-case basis.

This is where the industry's trajectory aligned most closely with my earlier outlook. I said in December that the sector was moving away from purely cost-efficient, just-in-time models toward genuine resilience through diversification. What I didn't fully anticipate was how decisively the tariff environment in early 2026 would force that transition from a strategic option to an operational necessity. The “China+1” framing I used was already too conservative by March. I'm seeing companies building genuine multi-region redundancy, not just adding one backup supplier and calling it done.

US manufacturing investment increases, which I flagged as a geopolitical hedge, have become a strategic priority rather than a contingency plan for generic manufacturers. The investment decisions being made now are real and significant. The companies that started this shift two or three years ago are in a materially stronger position today.

One thing I underestimated: the supply chain resilience conversation is no longer primarily about geography. It's increasingly about data visibility. You can diversify your supplier base, but if you can't see what's moving through it in real time, you still can't respond to disruptions quickly enough. The companies that combined geographic diversification with genuine serialization and traceability data infrastructure are responding to disruption faster than those who did only one of the two.

Competitive Advantage as Margin Pressures Intensify

The high-barrier-to-entry product focus I described in December is playing out, but the competitive dynamics have shifted in ways worth noting.

Complex injectables and biosimilars remain the right strategic focus, but the competitive pressure in those categories has intensified faster than most anticipated. Several companies that were counting on complexity as a moat are discovering that complexity alone isn't sufficient and that execution excellence matters as much as product selection. The manufacturers who are winning combined the right product portfolio with supply chain infrastructure that can deliver those products reliably at scale. Complex products with unreliable supply chains don't generate the returns they should.

Strategic M&A remains active, as I predicted, but the integration challenge is where I've seen the most difficulty. Companies are acquiring the right pipelines but not underestimating what it takes to absorb a new product family into an existing serialization and regulatory compliance architecture. That's not a technology problem; it's a governance and process problem that technology alone doesn't solve.

The prediction I was most optimistic about in December—agentic AI would begin entering production manufacturing environments—is having a mixed response, if not running behind. Cash flow-rich and branded organization adoption is at a high rate. In a GxP environment, you cannot deploy something and iterate. Every change to a system that touches product release must be validated, documented, and auditable years later. That's not a technology problem; it is the right constraint for an environment where errors reach patients. But it means the “year of the agent” framing that got a lot of coverage at the start of the year has progressed more slowly than many early-2026 predictions suggested, particularly in regulated pharmaceutical manufacturing.

What did happen and what I think was underreported is that data quality became the central competitive differentiator for AI in manufacturing, even faster than I expected. I said in December that AI barriers included data fragmentation and interpretability. What I didn't say clearly enough is that data quality isn't just a barrier; it's the new moat. The companies that are realizing real AI value in early 2026 are almost uniformly the ones that invested in their ERP, serialization, and master data infrastructure in 2023 and 2024. The ones still in pilot mode tried to layer AI on top of fragmented systems and discovered that the problem was never the algorithm. When AI begins processing thousands of supply chain events and making recommendations, inaccurate data causes errors, and at machine speed. It's a “garbage in, garbage out” scenario, but now it happens before anyone can catch it manually.

On smart factory upgrades specifically, I said in December that manufacturers should plan significant investment in IoT sensors, robotics, advanced automation, and cloud infrastructure to reach Industry 4.0 standards. That investment is happening, but the organizations getting the most from it are those that treated it as an operating model transformation rather than a technology installation. You cannot bolt AI onto a fragmented factory and expect it to work. The digital factory cannot outperform poor enterprise data.

The NDC-12 Story I Didn't Fully Anticipate in December

I think this will be the supply chain and regulatory story of H2 2026 and into 2027, and most coverage is still treating it as a packaging update. It isn't.

NDC-12 is an enterprise identity transformation. When the FDA's 12-digit National Drug Code rule fully phases in, virtually every small or large enterprise system in the pharmaceutical supply chain that stores, processes, transacts, or reports a drug product identifier will be affected: ERP, serialization, EPCIS data exchange, EDI transaction formats, warehouse management, labeling, chargeback platforms, reimbursement systems, contract manufacturer connections, distributor onboarding, etc. All of it.

Through my participation in the cross-industry NDC-12 Pilot Program and EDI integration workshops, I've heard conversations that make clear that the scope of what needs to change is significantly larger than most organizations currently appreciate. The companies beginning their systems assessment now will be in a very different position from those that wait until 2031 and try to do it reactively.

The parallel I keep using is DSCSA. The companies that treated DSCSA as a genuine operational transformation—building clean serialization architecture, establishing real governance, getting trading partner data quality right—are now in a much stronger position for NDC-12 and for every AI initiative they're running. Those that treated DSCSA as check-the-box compliance are rebuilding from weak foundations. History is about to repeat itself for organizations that make the same mistake with NDC-12.

Perhaps the biggest lesson from the first half of 2026 is that organizations are discovering technology is no longer the limiting factor. Most enterprise platforms already support AI, automation, IoT, serialization, cloud computing, and advanced analytics. The competitive differentiator is increasingly organizational readiness with trusted and high-quality data, governance, cross-functional collaboration, workforce capability, and disciplined execution. Technology has become accessible; transformation has not.

As the DSCSA stabilization period concludes, organizations should expect greater operational scrutiny from trading partners and increased emphasis on serialization data quality, interoperability, and exception management. Serialization data accuracy and trading partner interoperability are enforceable requirements now, not performance aspirations. The first signs of this are already visible in how distributors are responding to manufacturer compliance metrics. Another sign is that regulators have been emphasizing DSCSA compliance and performance while they visit the enterprises for inspections and audits. Right documentation, quick explosibility, and provability is still a hard part for many in the industry.

The deadline is 2033, which feels distant. The systems changes required do not have 2033-length lead times. EDI format migrations, master data architecture changes, EPCIS updates, trading partner re-onboarding, and more all have lead times measured in years. The next few months of 2026 is when I expect the gap between organizations that are in their assessment phase and those that will start to become visible in commercial relationships, not just compliance conversations.

3. AI Finds its Most Defensible Pharmaceutical Use Case

My prediction is that AI applied to serialization data and supply chain exception handling will show the clearest, and one of the earliest, enterprise-scale AI use cases capable of delivering measurable ROI, because the underlying data foundation already exists. Serialization systems generate granular, structured, event-level data on every product unit through the entire supply chain. Applying AI to that data for anomaly detection, exception prioritization, and compliance risk identification doesn't require building a new data foundation. Instead, it requires applying the analytics layer to one that already exists and is already validated. That's a materially shorter path to measurable outcomes than most other AI applications in pharmaceutical operations.

AI acceleration in 1H 2026 shifted from compressing discovery timelines to reshaping pipeline strategy, concentrating investment in oncology and rare diseases where signal extraction from complex biology offers outsized economic leverage. Generative AI molecular design advanced but remains constrained by interpretability and regulatory expectations, while the cross-disciplinary talent gap widened. Operationally, tariff pressures forced rapid movement from just-in-time toward multi-region redundancy, increasingly gated by end-to-end data visibility. In manufacturing, agentic AI adoption lagged under GxP validation realities; data quality emerged as the durable competitive moat. NDC-12 is evolving into a broad enterprise identity transformation, converging with DSCSA enforcement.

Manish Garg takes a midyear look back at his 2026 predictions: AI's shift from speed to strategy, supply chain resilience, and why NDC-12 is the next DSCSA moment.

Midyear 2026 Check-In: AI, Supply Chains, and the NDC-12 Story Nobody's Watching

Pharmaceutical serialization is evolving through the power of operational intelligence

Pharmaceutical serialization has reached a decisive inflection point.¹

³ With full enforcement of the U.S. Drug Supply Chain Security Act (DSCSA) now operational across manufacturers, distributors, and big dispensers and parallel advancements like alert management, digital link, Blockchain etc. accelerating in Europe and other global markets, the industry has largely completed the compliance build phase of traceability, what I refer to as the foundation phase. What remains unresolved is how the unprecedented volume of serialized supply chain data, often reaching billions of EPCIS events annually in large networks, will be operationalized.

This article argues that serialization infrastructure should no longer be viewed primarily as a regulatory reporting mechanism, but as a strategic operational intelligence asset.⁴ Drawing on real-world experience across large pharmaceutical trading networks, it examines persistent failure modes that remain hidden behind nominal compliance, including exception overload, certificate expiry, third‑party logistics (3PL) complexity, network fragility, and untested manual fallback procedures. Grounded in current regulatory expectations and increasing legislative scrutiny, what follows outlines a pragmatic path for transforming serialization from reactive compliance into proactive supply chain stewardship.

From Regulatory Obligation to Operational Control

The pharmaceutical industry in major countries worldwide has been focusing on getting its serialization and track and trace infrastructure and network build for more than a decade and it would be safe to say that in these ten to fifteen years, the industry has built one of the most granular product traceability infrastructures of any regulated sector. At the package level, prescription medicines are now traceable across manufacturing sites, logistics providers, wholesale distributors, and dispensers. This transformation was driven by a clear and enduring need because threats to the supply chain such as counterfeiting, diversion, theft and imports of falsified, unapproved, or otherwise unsafe drugs, could result in unsafe, ineffective drugs in U.S. distribution.

 And as per WHO, at least 1 in 10 medicines in low-and middle-income countries are substandard or falsified.

 Overall, this leads to believe that counterfeit and diverted medicines are continuing to pose a significant risks to patient safety and global supply chain integrity.

Despite this progress, a critical operational gap remains. In many organizations, serialization systems function adequately under stable conditions but degrade quickly under stress, such as during partner outages, data mismatches, system changes, or peak distribution periods. Transaction data are captured, transmitted, and archived yet rarely leveraged to improve resilience or reduce disruption when conditions deviate from the norm.

This creates a paradox increasingly visible across the industry: organizations are technically compliant, yet operationally fragile.

Investment in supply chain analytics and advanced automation continues to accelerate across industries.

 As policymakers intensify scrutiny of pharmaceutical supply chain transparency, resilience, and foreign dependency, the role of serialization is being redefined.

 The question is no longer whether traceability exists, but whether it performs reliably under real-world conditions.

Persistent Operational Challenges in Serialization Programs

Even in mature implementations, several systemic challenges continue to undermine serialization effectiveness at scale and few critical one are addressed below:-

Exception Overload and Non‑Linear Growth

Modern serialization environments routinely generate thousands and sometimes even tens of thousands of exceptions per month within large trading networks. These events are rarely isolated. Minor defects, such as aggregation mismatches, incomplete EPCIS events, or partner‑specific formatting differences can cascade across multiple downstream partners.

In practice, exception volume often grows disproportionately as networks scale. Resolution requires cross‑referencing ERP transactions and correlating them against the touch points from Manufacturing till the end customer, serialization repositories with tracking and tracing details, partner acknowledgments, and historical communications—activities that are inherently time‑consuming and difficult to standardize.

A minor aggregation discrepancy originating at a contract packaging site could propagate through multiple customers including distributor and dispensers’ nodes, triggering product quarantine across the organizations. When performing investigation, we generally find that the technical defect itself was simple; the effort required to identify ownership, align stakeholders, and coordinate corrective action was not.

Organizations that have successfully reduced exception backlogs follow a consistent pattern: they start not with AI, but with taxonomy. Before any automated triage can be effective, exception types must be formally classified—by root cause category (data quality, system connectivity, partner configuration, aggregation error, Operator/clerical errors or quality related issues), by trading partner tier, and by regulatory risk level. Build patterns and trends and rank them. This structured classification becomes the training foundation for machine learning based detection and prioritization. Specifically, teams should: (1) export six months of historical exceptions from their serialization platform and categorize them by type and resolution path; (2) Apply 80-20 rule where identify the 20% of exception types that drive 80% of resolution effort—these are the highest value targets for ML prioritization; and (3) build a standardized exception intake and possible responses form that enforces consistent data capture, which in turn should improve AI model accuracy over time.

 Once this foundation is in place, ML based triage can be piloted on high-frequency, well defined exception types, allowing analysts to focus human judgment on novel or ambiguous cases where it adds the most value.

Exception handling remains heavily dependent on human intervention. Resolution quality varies based on individual expertise, familiarity with specific partners, and access to historical context. During peak shipping periods or organizational transitions, this variability increases and documentation consistency declines, introducing both audit and continuity risk.

Many organizations discover after go‑live that scaling exception handling linearly with headcount is neither sustainable nor effective. The limiting factor is not capacity, but consistency (i.e., how reliably issues are identified, classified, and resolved regardless of who is on shift) and resource churn increase those limits further.

The most effective near term intervention for human variability is a RACI-anchored exception routing model combined with natural language processing (NLP) tools that translate technical system logs into plain language action summaries. Practically, this means defining which team owns each exception category: quality for product level discrepancies, Distribution for Inventory discrepancy, Claims/customer service for Overages, Damages and mis-pick/mis-ships, for IT for connectivity and system and data failures, operations for trading partner coordination. Once routing is explicit, NLP engines can parse incoming exception logs, classify the likely root cause, and surface the relevant owner with a pre-populated action summary, reducing the cognitive load on any individual analyst regardless of their experience level. Organizations that have implemented this pattern report that on-boarding time for new exception analysts drops significantly, and that shift change handoffs become structured data transfers rather than informal verbal briefings, reducing audit documentation gaps.

Another key error point noticed which causes DSCSA disruption between trading partners is digital certificate expiry which is fairly a preventable cause. In EPCIS based exchanges, expired certificates can silently block data transmission without generating clear system level alerts. Operationally, this often surfaces downstream as unexplained product quarantines. ²

When a certificate lapse at an intermediary node occurs, it disrupts EPCIS transmissions i.e. Interoperability across multiple trading partners. By the time the issue been investigated and root cause is being identified, product movement had already been impacted, requiring coordinated remediation across several organizations. Even though the certificate renewal could happen quickly; the operational recovery extends to length and across an entire business cycle.

Certificate failures are entirely preventable with a structured lifecycle management program. Organizations should maintain a centralized certificate inventory, whether a simple spreadsheet or an integrated monitoring dashboard tool whichever could capture the certificate name, associated trading partner, expiry date, responsible owner, and renewal lead time for every AS2, SFTP, and HTTPS certificate in their serialization network. Automated monitoring tools available within most middleware platforms (e.g., LsPedia, TraceLink, rfxcel, Antares Vision) can be configured to send 90-day, 60-day, and 30-day expiry alerts and reminders to designated owners, escalating to management if the 30-day threshold passes without renewal confirmation. IT teams should additionally implement automated connection health checks daily or periodically and schedule them outside of business hours. These checks confirm that certificate handshakes succeed and will catch post-renewal mismatches (such as a new certificate not yet trusted by the partner’s system) before they affect live shipments. A written certificate renewal SOP, including escalation contacts and a 24-hour emergency renewal procedure, should be tested at least annually. Industry guidance from GS1 US provides specific technical recommendations for certificate management within DSCSA EPCIS implementations.

System Changes and External partner like 3PL Dependencies

Serialization ecosystems are highly interdependent. Configuration changes, API updates, or platform upgrades at a single wholesaler or 3PL can affect dozens of connected partners simultaneously. When logistics providers act as agents for multiple manufacturers, accountability can become diffused.

A recurring operational challenge is that the point of failure is rarely the point of ownership. This misalignment delays resolution and amplifies downstream disruption, particularly under DSCSA timelines for which responsiveness is critical.

Planning the internal changes and change management communication, periodic touchpoints are essential along with system and data impact assessment. involving the external partners with clarity of scope, independence and language helps avoid day 1 disruptions. The most effective intervention for CMO or 3PL related serialization failures is ensuring that trading partner and 3PL service agreements include a formal Serialization Change Notification requirement for example a minimum 30 days advance notice before any platform configuration change, API update, or certificate modification that could affect EPCIS transmission. Beyond contracts, what helps organization is a shared Serialization Change Calendar across all key partners, updated monthly and distributed to IT, quality, and operations leads, so that risk windows are visible before they become incidents. When failures do occur, resolution speed depends entirely on whether a pre-agreed escalation matrix exists hence a simple document that defines who to contact at the 3PL, the expected response time, and the remediation documentation required for regulatory audit. Organizations that have notification clause, change calendar, and escalation matrix in place could resolve partner caused exceptions faster and with less downstream disruption than those managing the same failures reactively.¹⁴

System outages, whether caused by infrastructure failures, cyber incidents, or third‑party disruptions are inevitable. Regulatory obligations for traceability do not pause during downtime.³

In practice, fallback processes are often improvised rather than rehearsed. Risk arises not because systems fail, but because organizations are unprepared to operate effectively without them.

A resilient serialization program requires a written, tested fallback SOP that operations staff can execute without IT support during a system outage. The SOP should specify, at minimum: (1) the maximum permissible outage window before shipments must be held (typically defined by the organization’s DSCSA trading partner agreement); (2) a manual exception log template that captures all product movements with required DSCSA data fields during downtime; (3) the re-transmission procedure for backlogged EPCIS events once systems are restored, including the sequence in which events must be submitted to preserve chronological integrity; and (4) a partner notification template for informing downstream trading partners of the outage and estimated resolution time. Critically, this SOP must be rehearsed—not merely documented. Quarterly tabletop exercises, in which the operations and IT teams simulate a four hour outage scenario and walk through the manual process step by step, expose gaps and build the operational muscle memory that prevents improvisation under pressure. Manufacturers supported by 3PL, the SOP must also define who within the 3PL has authority to invoke fallback procedures and how that decision is communicated back to the manufacturer’s quality and IT teams in real time.

The regulatory environment surrounding pharmaceutical traceability has shifted from implementation guidance to enforcement and assurance.

In the United States, DSCSA enforcement deadlines now apply across manufacturers, repackagers, wholesalers, and dispensers, with remaining stabilization provisions scheduled to sunset for smaller dispensers in 2026.³ Serialized data exchange at scale is now an operational reality.

In parallel, European regulators are advancing beyond the Falsified Medicines Directive toward broader Digital Product Passport concepts under the Ecodesign for Sustainable Products Regulation.

 GS1 EPCIS 2.0 and Digital Link standards provide the technical foundation for this expanded transparency.

Governance expectations for advanced analytics and artificial intelligence are also maturing. The FDA has published draft guidance on AI credibility for regulatory decision‑making, along with clarification on predetermined change control plans for adaptive systems.

 The European Medicines Agency has articulated similar principles emphasizing risk based governance and human oversight.

 These expectations align closely with the NIST Artificial Intelligence Risk Management Framework, which is increasingly referenced by regulators on both sides of the Atlantic.

Layered onto regulatory oversight is growing Congressional attention. Multiple hearings and committee reports between 2025 and 2026 have explicitly linked supply chain transparency to patient safety, national security, and drug affordability.⁸ These inquiries make clear that traceability data will increasingly be used not only by regulators, but by policymakers evaluating foreign dependence, pricing practices, and system integrity.

https://www.fda.gov/drugs/drug-supply-chain-security-act-dscsa/title-ii-drug-quality-and-security-act

EPCIS & CBV: GS1 Standards for Event‑Based Visibility.

DSCSA Compliance: Milestones, More Deadlines—and the Road Ahead.

https://www.pharmaceuticalcommerce.com/view/dscsa-compliance-milestones-more-deadlines-and-the-road-ahead

Prescription Drug Supply Chain Transparency and Resilience Hearings.

https://www.aging.senate.gov/hearings/prescription-for-trouble-drug-safety-supply-chains-and-the-risk-to-aging-americans

Research C for DEA. Drug Supply Chain Integrity. U.S. Food And Drug Administration. March 9, 2026. 

https://www.fda.gov/drugs/drug-safety-and-availability/drug-supply-chain-integrity

World Health Organization: WHO. Substandard and falsified medical products. December 3, 2024. 

https://www.who.int/news-room/fact-sheets/detail/substandard-and-falsified-medical-products

Mackey TK, Liang BA, York P, Kubic T. Counterfeit drug penetration into global legitimate medicine supply chains: a global assessment. 

https://pmc.ncbi.nlm.nih.gov/articles/PMC4455087/

 Intelligence in Supply Chain Market Size, Share & Trends Analysis Report 2024–2030.

https://www.grandviewresearch.com/industry-analysis/artificial-intelligence-supply-chain-market-report

AI in Pharma & Biotech Market to Reach US$13.1 Bn by 2034.

https://www.pharmiweb.com/press-release/2025-02-27/ai-in-pharma-and-biotech-market-outlook-to-reach-us-131-bn-by-2034-driven-by-speedy-drug-development-and-gene-editing-advancements-latest-report-b

Foreign Dependence and Pharmaceutical Supply Chain Risk Reports.

https://www.aging.senate.gov/imo/media/doc/senate_aging_american_drugs_report.pdf

Understanding EPCIS: Benefits, Event Types, and Serialization.

https://kezzler.com/blog/understanding-epcis-benefits-event-types-and-serialization/

https://ispe.org/publications/guidance-documents/gamp-guide-artificial-intelligence

https://www.gs1us.org/industries-and-insights/by-industry/healthcare/standards-in-use/pharmaceutical/dscsa-implementation-guidelines

Stanton, D., Supply Chain Management for Dummies, Wiley & Sons. December 15, 2020. 

https://www.dummies.com/book/business-careers-money/business/operations/supply-chain-management-for-dummies-281875/

Ecodesign for Sustainable Products Regulation (ESPR).

https://green-forum.ec.europa.eu/implementing-ecodesign-sustainable-products-regulation_en

https://www.gs1.org/standards/gs1-digital-link

Considerations for the Use of Artificial Intelligence to Support Regulatory Decision‑Making.

https://www.fda.gov/regulatory-information/search-fda-guidance-documents/considerations-use-artificial-intelligence-support-regulatory-decision-making-drug-and-biological

Predetermined Change Control Plans for AI‑Enabled Systems.

https://www.fda.gov/regulatory-information/search-fda-guidance-documents/marketing-submission-recommendations-predetermined-change-control-plan-artificial-intelligence

Reflection Paper on the Use of Artificial Intelligence in the Medicinal Product Lifecycle.

https://www.ema.europa.eu/en/use-artificial-intelligence-ai-medicinal-product-lifecycle-scientific-guideline

National Institute of Standards and Technology. 

Artificial Intelligence Risk Management Framework (AI RMF 1.0).

https://www.nist.gov/itl/ai-risk-management-framework

https://www.nist.gov/publications/artificial-intelligence-risk-management-framework-generative-artificial-intelligence

Pharmaceutical serialization has moved from build-and-comply to full-scale operational execution under DSCSA, with parallel global momentum via EPCIS 2.0, Digital Link, and emerging Digital Product Passport concepts. Despite technical compliance, many networks remain operationally brittle when stressed by outages, partner changes, data mismatches, and exception surges. High-volume EPCIS data should be treated as an operational intelligence layer to improve resilience, reduce quarantine events, and strengthen stewardship. Pragmatic controls include exception taxonomy, RACI-based routing, certificate lifecycle monitoring, change governance, and rehearsed manual fallback procedures.

Pharmaceutical serialization must evolve from regulatory compliance into operational intelligence, addressing hidden failures like exception overload, certificate expiry, and 3PL complexity.