Will Traceability Services Be Outsourced?

In June 2017, FDA gave some small and medium-sized pharmaceutical companies and their contract manufacturing and packaging companies a reprieve, by extending the enforcement deadline for meeting the US Drug Supply Chain Safety Act’s serialization requirements by one year. TraceLink’s Graham Clark, director of contract supplier relationships and cofounder, and Brian Daleiden, vice-president of industry marketing, shared insights into industry’s serialization readiness as well as recent trends and developments with Pharmaceutical Technology.  Here is some of what they had to say.  

PharmTech: Within the past four months, have you seen any improvement in levels of serialization readiness within the pharma industry, particularly for contract development and manufacturing organizations (CDMOs)? 

Clark: We haven’t seen any significant change, and we’re still forecasting that about 30%, or about 30 US contract manufacturers and packagers, won’t be ready in time for the deadline.  But that doesn’t equate to 30% of the pharma market being unprepared. The bigger contract manufacturing, development and manufacturing, and packaging organizations (CMOs, CDMOs, and CPOs) tend to have approximately 100 customers each, and, for many of their bigger customers, they might package 10 or more products. That 30% is composed of smaller CMOs and packagers, which represent significantly less than 5% of the industry’s sales volume, so, generally, readiness is quite good.

PharmTech: In April 2017, we saw the launch of a number of ‘quick compliance’ programs by vendors and service providers. How did they do?

Clark: The United States was the first major market to move toward serialization. I don’t think any of those programs came out early enough to have a big impact.  

One new service provider is Woodfield Distribution, better known as a third-party logistics provider (3PL), which has invested in some packaging lines and is now offering to take on all managing and distribution services for small companies from a 3PL standpoint, including serialization services. This may not represent a huge number of companies but it is a unique model in the US.

PharmTech: Can we expect to see more companies take over traceability requirements for pharma companies on an outsourced basis?

Clark:  We’ve seen three distinct types of companies looking to offer a fully outsourced service model to pharma companies. Woodfield is a 3PL with some packaging capabilities, and in the future, we can expect some other US 3PLs to offer a similar service. Woodfield hosts TraceLink for each client and manages it for clients, along with other services.

However, handling serialization can be challenging for a 3PL. Where some 3PLS were successful with lot-based Drug Quality and Security Act (DQSA) support, serialization is much more complex and they cannot rely on their pre-existing electronic data interchange (EDI) infrastructure to provide a solution. They would have to upgrade warehouse management systems and other software components within their businesses. 
In Europe, we’re seeing more innovation. An example of the new type of service provider would be Tjoapack, which is spinning off a separate business to offer a fully integrated serialization solution for pharmaceutical companies in the Benelux region. We’ve seen a lot more interest from some pretty large CDMOs in Europe about doing much the same thing, and are currently in discussions with a handful of European CDMOs that have more than 100 clients each, about offering similar services. This type of outsourced approach is needed in Europe, because it has seven or eight times as many pharma CDMOs as the US.  

In another model, consulting and professional services companies are looking to provide fully integrated serialization services. Some will offer the TraceLink solution, and will package all the contract manufacturing and third-party logistics services around their service, offering pharma companies an option for managing all those relationships. Excellis, for instance, is launching solutions around a service bureau in the US, looking at all the complexity and taking on outsourcing.  Smaller companies are also looking to start up services as well. 

PharmTech: Are you seeing more manufacturers and contract partners move beyond compliance to utilize the value in some of the data that serialization efforts are gathering?

Clark: It’s easier to talk about all the potential savings, but there’s a lot of infrastructure and heavy lifting required to make ‘value beyond compliance’ applications a reality.  They will come, but it will take time.

Daleiden: Where the value drivers come is from patient engagement and from improving healthcare and supply chain efficiency, not from the manufacturing and packaging ecosystem.  That’s where the CDMO space hasn’t been as engaged as pharma companies and healthcare systems have in the US and European Union. The value is greater for those types of organizations. 

PharmTech: Are you seeing more movement by pharma companies and contract partners to develop aggregation readiness?

Daleiden: Aggregation is not required in many regions, yet it is becoming a well understood business requirement in many contexts. We see that in the EU, particularly for companies that are using 3PLs or logistics service providers (LSPs) when they want to report product pack data on shipments to the EU hub and not do it at the packaging line. Whether you’re using a 3PL or LSP or even your own internal distribution department, knowing exactly which product identifiers you will have to report on a shipment basis becomes nearly impossible if you haven’t created aggregation relationships and can track them within your own distribution network.  

In one of our recent client polls, we found that 60% of EU companies expect to have to do aggregation for business reasons. In the US, if you tried to mention aggregation in a public forum even two years ago, people dismissed it as irrelevant because it wasn’t required.  Now they recognize the realities of managing serialized product, and the fact that they need to create aggregation relationships and have an open conversation with partners on how to manage the data. 

Something like aggregation and serialized product data management is becoming more ‘business as usual’ in the CDMO space than it was a year and a half ago, when the focus was on achieving the bare minimum level of compliance with serialization. 

PharmTech: We’re hearing more about blockchain and how it might work with serialization and traceability. Do you see it having any potential role in the future?

Daleiden: There may be a place for blockchain as a technology, but at this point, we look upon it as yet another tool in the tool box.

Clark:  Generally, for CDMOs as a group, the adoption of any significant new technology does not come naturally. I would not expect to see any early adoption of this technology.  

Article Details

Pharmaceutical Technology
Supplement: Outsourcing Resources
Vol. 41
August 2017
Pages: s36

Citation

When referring to this article, please cite it as A. Shanley, "Will Traceability Services Be Outsourced?," Pharmaceutical Technology Outsourcing Resources Supplement (August 2017).