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Pharmaceutical manufacturers that launch ePedigree and serialization initiatives today will improve their competitive positions in the short and long terms.
Implementation of the California ePedigree legislation, now scheduled for 2015, has been postponed many times, and some pharmaceutical manufacturers have delayed preparations for compliance. This strategy, however, may be shortsighted. Large challenges, including dwindling pipelines and an increasing focus on reimbursements, require pharmaceutical manufacturers to improve operational efficiency and reduce risk. Serialization solutions may help companies achieve both goals.
The California ePedigree initiative, designed to ensure that only authentic pharmaceutical products are distributed through the supply chain, requires manufacturers, distributors, wholesalers, and retailers to track, trace, and authenticate the entire chain of drug custody. It also requires manufacturers to track their products at the serialized salable-unit level—a significant change in an industry that has never tracked beyond the lot level.
What are the benefits?
Pharmaceutical manufacturers that launch ePedigree and serialization initiatives today will improve their competitive positions in the short and long terms. First, ePedigree and serialization initiatives yield greater inventory visibility and traceability that can support business operations at several levels. These capabilities can help improve patient safety and protect brand integrity by reducing fraud and identifying counterfeit drugs before they reach the public. In addition, pharmaceutical manufacturers that undertake ePedigree and serialization initiatives can avoid much of the financial loss associated with diversion, counterfeiting, and recalls, which, according to some analysts, cost the industry more than $30 billion annually.
Furthermore, the increased level of transaction detail captured through ePedigree and serialization initiatives helps reduce chargebacks and improve their reconciliation, thus strengthening a pharmaceutical manufacturer’s financial position. Several manufacturers have discussed novel approaches that could enable access to better inventory information. The approaches, which would rely on improved access to downstream supply-chain data and the adoption of serialization, would help prevent overproduction, eliminate waste, and improve on-hand inventory levels.
Achieving these benefits, however, will require fundamental changes in the relationship between manufacturers and wholesalers. In the United States today, pharmaceutical wholesalers are the manufacturers’ biggest customers, and they control sales to pharmacies and other outlets. Wholesalers possess the lion’s share of market data, which they guard closely because selling the data to the manufacturers brings them significant profits. It remains to be seen whether ePedigree requirements will put an end to this data-sharing impasse.
Also, ePedigree and serialization enable efficient and accurate returns management. Industry sources estimate that returns cost the pharmaceutical industry approximately $2 billion annually. Lot-level product tracking does not enable manufacturers to verify which returns are legitimate. It is most cost effective to write off returns without additional verification, even though some returns could be counterfeit, returned at a higher price than the invoice price, purchased from another manufacturer or distributor, or even expired. Serialization initiatives provide a link between the return receipt and the original shipment and invoice. Supported with the right technology solutions, ePedigree and serialization can provide returns-repudiation functionality that will enable manufacturers to verify that the returned products are the same as those that were shipped. This verification can improve accuracy and increase cost savings.
How do we get there?
Information technology is at the core of ePedigree and serialization initiatives. Although regulations do not require specific technologies, the realities of unit-level serialization, item-level tagging, and the resulting capture and management of massive amounts of transactional data make technologies such as radio-frequency identification (RFID) and two-dimensional (2D) barcodes practical requirements.
Many core technologies are available to companies embarking on ePedigree and mass-serialization initiatives, but few business-applications solutions can support them. Some manufacturers have launched Electronic Product Code Information Service pilot projects only to find that this technology requires the company to build an additional business application to use the data.
To gain the flexibility and agility necessary for a successful ePedigree initiative, pharmaceutical manufacturers require business applications that are built on an open, standards-based, service-oriented architecture (SOA). The applications must generate, transmit, and authenticate drug-product serial data and electronic pedigrees when pharmaceutical products move within the enterprise and across the supply chain. An SOA-based mass-serialization and pedigree-management application provides a scalable and flexible infrastructure for efficient forward and reverse logistics by integrating with existing back-end transactional systems.
Existing business applications can become overburdened quickly because they were not designed to manage the additional data generated by mass serialization. SOA enables the legacy business applications and the serialization application to coexist. The serialization application generates, stores, and analyzes the massive quantity of serialized data with minimal or no effect on the existing transactional systems. Because SOA enables a loosely coupled approach to enterprise-application integration, it allows one system to experience disruptions without halting the whole business process. SOA enables business processes to operate across a multinode network, which makes the process more fault-tolerant and protects existing investments against potential business and technological disruptions.
SOA also facilitates the integration of ePedigree solutions with existing manufacturing, shipping, and receiving transactional systems by relying on standards-based web services and reusable business objects, thus extending a pharmaceutical company’s investment in information technology. In addition, a standards-based architecture offers more flexibility at less risk than a tightly coupled approach, thus facilitating interactions within the enterprise and throughout the supply chain. SOA also facilitates the adoption of new technologies more than tightly coupled architectures do. Thus, SOA protects against obsolescence caused by disruptive techniques and technologies.
Little more than five years ago, the pharmaceutical industry had hardly considered serialization. Similarly, the disruptive trend of personalized medicine has fostered the emergence of companies such as Genzyme (Cambridge, MA) and Myriad Genetics (Salt Lake City) that can change the way they manage information. These and other companies have excelled at accessing and using many disparate patient-related data sources, including genomic, proteomic, clinical, and molecular artifacts, to focus the drug-development process on an individual’s predisposition to a particular disease or condition. Companies that can adapt quickly and embrace serialization will be the first to reap its business benefits. Companies that are less nimble will struggle to comply with evolving regulations in time for enforcement deadlines.
Pharmaceutical manufacturers that meet ePedigree and serialization requirements without delay will be better prepared for the new regulatory environment. These companies will be able to improve their operational efficiency and will reduce their risk now and in the future.
John Danese is director of life-sciences product strategy, and Arvindh Balakrishnan is vice-president for the life-sciences industry, both at Oracle, 500 Oracle Pkwy., Redwood Shores, CA 94065, tel. 800.ORACLE1, [email protected].