Slow Serialization Efforts May Delay Business Benefits

Image is Courtesy of Portalis.

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.

Outsourcing complexities
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.

Global regulations and challenges
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.

Business benefits unexplored … yet
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:  

• $90 million from inventory cuts

• $11 million/year from reducing inventory financing and holding

• $4 million/year in waste reduction

• $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.

References
1. Rockwell Automation, Serialization Regulatory Compliance, an on-demand webcast 
2. McKinsey, Strength in Unity: The Promise of Global Standards in Healthcare, Mc Kinsey, pp 48-49

Article Details

Pharmaceutical Technology
Vol. 40, No. 5
Pages: 60–63

Citation:
When referring to this article, please cite it as A. Shanley, "Waking up to Track-and-Trace Benefits," Pharmaceutical Technology 40 (5) 2016.