Securing the Supply Chain

An international crime wave has hit the pharmaceutical industry. Counterfeiting rings are producing and selling prescription-drug knockoffs that can make people sick. Criminals uninterested in copycat drugs are stealing genuine medicines from trucks and warehouses, raising the risk that consumers may receive out-of-date or adulterated products. Some $75 million in prescription drugs was stolen from an Eli Lilly distribution center in Enfield, Connecticut, in March; the company also lost $37 million of insulin last year from a hijacking incident. Hijackers hit sanofi-aventis in Puerto Rico in January. And the US Food and Drug Administration found counterfeit tamiflu (oseltamiflu) sold widely on the Internet during the H1N1 swine-flu outbreak.

Jill Wechsler

FDA officials and industry leaders are calling for more concerted efforts to address these decades-old problems, aggravated by increased globalization in drug production and sourcing, added pressure on industry to cut costs, and more intense public scrutiny of drug quality and safety. The deteriorating situation threatens to erode manufacturer revenues, as well as public confidence in the pharmaceutical industry and in FDA's ability to protect patients.

Manufacturers are stepping up efforts to secure supply chains, tighten security protocols, and prosecute criminals. Pfizer (New York) has been working with federal enforcement agencies to stem widespread counterfeiting of Viagra (sildenafil), while GlaxoSmithKline (London) seeks to halt e-Bay auctions of counterfeit versions of the weight-loss drug Alli (orlistat).

A recent Pfizer research report, "Cracking Counterfeit Europe," describes a $14-billion black market for counterfeit medicines in Europe and estimates that 50-90% of drugs purchased online by Europeans are fake and often contain too little active ingredient. The problem is much more serious in developing nations; the United Nations calculates that more than $500 billion in counterfeit drugs is traded each year throughout the world, leading to approximately 700,000 deaths annually from malaria and tuberculosis.

Targeted oversight

One response is to expand FDA's oversight of imports and to strengthen drug pedigree requirements. The US received approximately 20 million shipments of food, devices, drugs, and cosmetics in 2009, up from about 6 million a decade ago. Some 40% of the drugs taken by Americans are imported, and about 80% of active pharmaceutical ingredients come from overseas. "Globalization has fundamentally altered our market landscape," stated FDA Commissioner Margaret Hamburg at the Center for Strategic and International Studies in February. Addressing global supply-chain safety "is one of my highest priorities for FDA," she asserted.

However, Hamburg and others acknowledge that FDA has the capacity to inspect only a tiny fraction of imports and less than 8% of foreign drug-manufacturing establishments each year. The agency has established offices in China, India, and other regions to increase its presence around the world. These outposts are building regulatory capacity in other countries and supporting collaboration on regulatory issues, but are not equipped to do much on-the-ground oversight.

Thus, FDA has launched the Predictive Risk-based Evaluation for Dynamic Import Compliance Targeting (PREDICT) information system to target its oversight of imports on the riskiest food and drug products. PREDICT ranks import shipments based on the nature of the product and past compliance experience of a producer or shipper, among other factors. Products with high risk scores will be targeted for inspection, while low-risk items will move though customs more rapidly. FDA is implementing PREDICT first for foods and examining what changes may be needed for it to work for drugs.

The agency also proposed a Secure Supply Chain Pilot project to provide "green lane" processing for drug imports from shippers and manufacturers with secure supply chains. Although announced a year and a half ago, the pilot has not yet begun because of details that need to be worked out with the US Customs and Border Protection (CBP) agency. One issue is whether drugs and medical products can use CBP's Customs-Trade Partnership Against Terrorism (C-TPAT) program, which offers reduced border inspections and priority processing for products from companies with validated security practices and fully controlled global supply chains.

In addition, FDA officials would like Congress to enhance its authority to detain and destroy illegally imported food and drug products. The House of Representatives approved food-import safety legislation last November, but the bill has been stuck in the Senate for several months, largely because of legislators' focus on healthcare reform. The food-safety measure was pulled out of the broader FDA Globalization Act sponsored by Rep. John Dingell (D-MI), which also increases FDA authority to deal with an increasingly global drug supply. Once the food safety measure is enacted, Congressional leaders say they will take up the drug-import provisions. But recent efforts to add to the legislation a ban on bisphenol-A in food containers has drawn strong opposition from the food industry and raised uncertainty about the bill's future.

At a PDA/FDA Pharmaceutical Supply Chain Workshop in Bethesda, Maryland, in April, Deborah Autor, director of the Office of Compliance in FDA's Center for Drug Evaluation and Research (CDER), emphasized the need to update FDA authority over imports. Under current law, FDA has to demonstrate that a product is adulterated or counterfeit to block its entry. "That's backwards," Autor said, explaining that importers should have to demonstrate that a drug is safe to bring it into the country.

Ironically, efforts to reduce the import of counterfeit and adulterated medical products could be undermined by federal and state policies that permit reimportation of low-cost drugs from other countries. Sen. Byron Dorgan (D-SD) and Montana Governor Brian Schweitzer have requested federal permission to import drugs from Canada for these two northwestern states, but FDA maintains that such a program could facilitate drug diversion and counterfeiting. At a Senate budget hearing in March, Commissioner Hamburg told Sen. Dorgan that drugs imported outside the regulated supply chain raise "genuine safety concerns," particularly for products ordered over the Internet. FDA officials note that drugs supposedly imported from Canada frequently come from other parts of the world, and that many medicines ordered through pharmacy websites are counterfeit or substandard. But many politicians and consumers regard theses claims as mere ploys by the pharmaceutical industry to keep out cheaper competition.

Industry vigilance

FDA also is urging manufacturers to assume greater responsibility for ensuring the quality and safety of their products at all points on the supply chain. At the PDA workshop, CDER Director Janet Woodcock called on industry to "up the ante on vigilance" and to devise real solutions to supply-chain problems. Modern track-and-trace technology can help manage far-flung supply chains, but should be linked to programs for qualifying suppliers and for monitoring global conditions. Also important are robust security measures able to deal with overt criminal activity and networks for communicating within industry and with FDA about these issues.

Although increased outsourcing by manufacturers may appear to reduce production costs, Woodcock noted that such approaches actually may generate hidden expenditures. Suppliers with less of a track record may require more extensive due diligence and monitoring. And doing business in countries with weaker regulatory systems may open the door to counterfeiting. It's the manufacturer's responsibility to ensure the reliability of suppliers, she emphasized, especially in times of ingredient shortages or political upheavals that can disrupt imports and product distribution.

A company's supply-chain security should be regarded as part of a manufacturer's broader quality system for managing known and emerging risks, Woodcock added. A quality risk-management system should include strategies to prevent quality problems and to better detect risks, including those related to incoming raw materials. This approach parallels quality by design in manufacturing, which involves controlling the physical attributes of raw materials such as particle size or state of hydration, to ensure quality throughout the production process. Pharmaceutical companies should establish quality agreements with suppliers to clarify where ingredients come from and to stipulate the importance of rapid notification about supply disruptions.

Conversely, continued industry difficulties in managing supply-chain issues may lead to stricter oversight and regulation by FDA, possibly including mandatory supplier audits. The agency is contemplating revisions in good manufacturing practices (GMPs) for starting materials, for example, and Congress may legislate added tracking requirements and other safeguards.

Identification and tracking

Efforts to identify illegal imports and stolen products stand to gain from the development of standards and validated technologies that can better secure the nation's supply chain against counterfeit, substandard, adulterated, or expired drugs, as required by one provision in the FDA Amendments Act of 2007. FDA took an important step toward fulfilling this mandate by issuing guidance in March that establishes a standardized numerical identifier (SNI) for prescription drug packages. The standard is based on a serialized National Drug Code, combined with a unique serial number of 8 to 20 characters that can identify individual drug packages. Despite pressure for additional information on the identifier, FDA does not require expiration date or lot and batch numbers for fear of making the SNI too long and complex. The aim is to be compatible with international identifier standards and to set the stage for additional numerical identifiers for cases and pallets.

FDA also launched a campaign to heighten public awareness about the dangers of drug theft and diversion and to spur manufacturers to improve warehouse and supply-chain security. The agency has established a Cargo Theft mini website on www.fda.gov that now cites some 20 theft incidents in the past year involving insulin, inhalers, infant formula, and contact lenses in addition to prescription drugs.

In an April letter to trade associations for manufacturers, wholesalers, pharmacists, and makers of medical devices and infant formula, FDA advised companies to establish action plans for responding quickly to thefts. Companies need to report thefts quickly to local and federal agencies, including FDA's Office of Criminal Investigations, so that public-health risks can be assessed and communicated. FDA said its overarching goal is to ensure consumer safety, citing the case of diabetes patients becoming ill following treatment with stolen insulin that had lost effectiveness due to poor storage. In investigating such cases, FDA wants manufacturers to provide detailed descriptions of stolen products, including lot and NDC numbers, storage requirements, antitampering protections, and how much of each lot is missing.

The standard identifier for drug packages is expected to facilitate development of a uniform system for tracking and tracing pharmaceuticals through the product life cycle. European drug companies recently conducted a successful pilot test of a drug-scanning system that identified fakes, counterfeits, and expired goods, despite some coding problems. Technology vendors are announcing almost daily new tracking and authentication methods that can verify product movement through the supply chain, monitor transport conditions, test for impurities, and prevent tampering. Manufacturers seeking to distinguish authentic from counterfeit products are producing photo libraries that display pictures of authentic packing, labels, serial numbers, tamper-resistant seals, and paper pedigrees.

Companies also are developing tools and best practices for dealing with suppliers such as scorecards with standardized data and nomenclature, as well as templates for supplier quality agreements. Experts advise more personal meetings and information-sharing with key vendors to address manufacturers' and suppliers' concerns and to emphasize the importance of ensuring product quality.

Parallel to these initiatives is a deliberate effort by companies to clarify policies and terms for disqualifying suppliers who fail to adopt quality practices or to maintain secure supply chains. Manufacturers increasingly recognize that it may be wiser to sever ties with a troublesome supplier than to run the risk of obtaining poor-quality ingredients or packaging that can compromise product safety and efficacy. Such an approach requires clear records on supplier performance and compliance with standards and specific actions that would signal the need to end a supplier relationship. Exit plans for terminating supplier relationships are becoming part of supply-chain management programs. Of note, in April, International Pharmaceutical Excipients Auditing, a subsidiary of the International Pharmaceutical Excipients Council, received ANSI accreditation of its excipient supplier GMP certification qualification program, which was encouraged by FDA.

Unfortunately, FDA policy governing manufacturing changes can make it difficult to switch suppliers. Engaging a new source for active ingredients or components for licensed drugs and biologics requires prior approval by the agency, which can take months. Generic-drug makers, in particular, complain that the agency often takes two years to approve a manufacturing supplement. Under the prescription drug user fee program, FDA is supposed to approve supplements for branded drugs within four months, but the process can take longer if applications are complex or raise questions. In the past, manufacturers often preferred to continue working with problem suppliers, rather than to go through the supplement process, but that appears to be changing with increased focus on product quality and supplier performance. FDA is looking to streamline its manufacturing supplement oversight procedures, but is unlikely to drop the prior-approval requirement for changes in ingredient suppliers.

Sharing information

In addition to identifiers and antitheft action plans, FDA wants industry to communicate more quickly about emerging health risks and supply problems with each other as well as with healthcare providers and regulators. A leading forum in support of sharing information is the Rx–360 consortium, which is moving forward with initiatives to share audit reports and details on supply problems and to develop standards and best practices for supplier audits. The group of some 40 manufacturers and suppliers recently launched a shared-audit pilot program, explained Martin van Trieste, senior vice-president for quality at Amgen, at the PDA workshop. Such collaboration has been limited, though, by US antitrust laws that inhibit how companies may exchange information on business practices and decisions. There's interest among industry and regulators in seeking advice from the Justice Department on how the group may discuss company audit results without violating anticompetition policy.

In Washington this month

Legislation that aligns state, federal, and international policies in the supply-chain management area also would support the campaign against drug counterfeiting, diversion, and theft. State licensing requirements for wholesalers and distributors vary considerably, and most states have no curbs on pharmacies that resell drugs from questionable sources such as hijackers. Uniform state licensing requirements and stiffer penalties for trafficking in stolen goods would be helpful. Such items could be included in legislation before Congress that aims to strengthen FDA's authority over imports, support more plant inspections, and establish a uniform electronic pedigree system that can track drugs and medical products through the supply chain. Unfortunately, it may take another crisis such as that with contaminated heparin, for Congress to act, and for all manufacturers to take stronger measures to ensure quality practices in supply-chain management.

Jill Wechsler is Pharmaceutical Technology's Washington editor, 7715 Rocton Ave., Chevy Chase, MD 20815, tel. 301.656.4634, jwechsler@advanstar.com.