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We know that large amounts of counterfeit drugs have entered the US drug distribution system. According
to the World Health Organization (WHO), 10% of the global drug supply is counterfeit. In some countries,
this percentage exceeds 50%, states the Food and Drug Administration (FDA). Reported counterfeit
incidents in 2007 involved 112 countries and 639 branded, generic, and over-the-counter (OTC) drugs,
according to the Pharmaceutical Security Institute -- and most instances go unreported because “you
don’t know what you don’t know.”
To put this industry-wide pain point into perspective, Piribo estimates that the global pharmaceutical
market generated revenues of $712 billion in 2007 and is forecast to grow to $929 billion in 2012, a
compound annual growth rate (CAGR) of 5.5% over the 2007-2012 period. And these projections are
conservative relative to others that have been published. The Center for Medicine in the Public Interest
projects that worldwide counterfeit drug sales are growing by at least 13% annually over the 2007-2010
time frame. This is more than double the estimate for overall pharmaceutical revenue growth – and
implies that conservatively, counterfeits will be at least 14% of the global drug supply by 2012. Organized
crime involvement driven by the high profitability achieved by counterfeiters bolsters these figures even
higher.
Figure 1. Global Legitimate and Counterfeit Drug Market Projections, 2007-2012E (Dollars in
Billions)
$1,000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
2007 2008E 2009E 2010E 2011E 2012E
Be mindful in this specific scenario that the European Union (EU) has 27 member states. The EU
employs a "parallel trade" ordinance, which means that the independent wholesalers who are part of the
supply chain can repackage or relabel drug shipments before sending them to their next destination. In
the UK alone, parallel-traded medicines accounted for almost 20% of all prescription drugs sold in 2007.
European manufacturers supply a lot of Canadian-based online pharmacies, so their pills can be at risk,
too.
This problem has not gone unnoticed. The European Federation of Pharmaceutical Industries Association
(EFPIA) supports a ban on the repackaging of medicines. It said the main focus of forthcoming legislative
reform should be to ensure that the integrity of the original package is "absolutely guaranteed" throughout
the entire supply chain, from manufacturer to patient. To this end, the EFPIA will pilot a barcode system
using 2D matrix coding to enable pharmacists to verify each package of medicine through a unique
identifying code before giving it to the patient. The pilot is slated to begin this year in Germany.
• Increase penalties
• International cooperation
Dr. Alan Goldhammer, Associate Vice President of Scientific and Regulatory Affairs, at Pharmaceutical
Researcher and Manufacturers of America (PhRMA), has stated that, “ We need a systems approach” to
pharmaceutical supply chain safety and security. “There is no single magic bullet.” We need “innovative
packaging technologies,” improved business processes,” and “active enforcement against counterfeiters.”
A major US pharma company recommended the following when commenting on its technological strategy
to fight counterfeiters: Track, trace, and authenticate; product differentiation/packaging; and surveillance.
Technology is a powerful tool in the fight to ensure patient safety and protect manufacturers’ brands. With
that in mind, we will discuss four concrete ways that pharmaceutical companies can ameliorate this global
problem: counterfeit protection on packaging, RFID systems to track product through the supply chain,
on-dosage security, and sophisticated search engines/advanced web-mining technology. Taken singly or
combined, these strategies can significantly bolster customer safety and loyalty – as well as your brand
and revenues.
Figure 4. Pharmaceutical Industry -- Relative Gain to Each Constituent Group
Manufacturer Distributor Retailer
Regulatory Mandate Medium Medium Medium
Supply Chain Synergies High Very Low Medium
Anti-Counterfeiting Medium Low Medium
Brand Protection High Low High
Patient Safety High High High
Sources: HDMA Research and Education Foundation and New Momentum.
STRONG GROWTH FORECAST FOR COUNTERFEIT PROTECTION ON PACKAGING
Why does packaging matter so much? Consider that Lipitor costs $2-3 in the US, but the Indian version sells for
Rs 5.50. With the exchange rate being Rs49.68/US$, counterfeit opportunity potential abounds. Industry sources
state that only 10-15% of today’s pharmaceutical packaging incorporates security features, even though the per-
unit cost of these features is a fraction of a penny.
Donald Dobert, president of ATL Security Label Systems, cited one of the largest counterfeiting attacks known. It
involved more than 18 million doses of counterfeit Lipitor (a statin, a cholesterol-lowering drug). Counterfeiters
manufactured the tablets (they contained some of the active ingredients). Bulk containers of the fakes were
imported into the United States, emptied, filled with a different product, and then exported. At the same time,
the counterfeit Lipitor was repackaged by an "assumed" legitimate company and then sold into the regular
wholesale distribution chain. This is called "salting." The counterfeiter mixes real and fake product. This makes
detection of the fakes more difficult. Thus, the repackaging of drugs creates many opportunities for criminals to
conceal their fakes and introduce them into the legitimate supply channels.
Strong growth is forecast for value-added types of packaging, especially parenteral vials and flip-top closures,
plastic dispensing bottles and closures, prefillable inhalers and syringes, parenteral stoppers, track and trace and
authentication labels, and unit dose pouches. Simple stimuli (such as breath or water) activate new “smart
holograms” to reveal a hidden image or color change to verify authenticity. The smart holograms can be easily
integrated into a supply chain. The technological sophistication that is employed in these solutions deters
counterfeiters from trying to replicate them. Another solution is marked foil, which is almost impossible for
counterfeiters to replicate. High-precision laser technology permanently marks foil with fine-line graphics, text,
logos, or other microimages during the rolling process.
• Privacy concerns;
• Concerns over the accuracy and speed of electronic devices and systems; and
• A lack of definitive data to determine how RFID will affect sensitive products (e.g., liquids, biologics).
Despite the cited concerns, the group delivered several recommendations:
• We recommend that stakeholders continue moving forward in implementing RFID across
the drug supply chain.
• We recommend that FDA work quickly to complete its RFID Impact Study examining drugs
and biologics, and publicly share the results.
• We recommend that stakeholders explore the use of RFID for tracking medical
countermeasures.
The FDA continues to encourage the rapid adoption of RFID in the pharmaceutical supply chain. The FDA
believes that a reliable pedigree from the point of manufacture to the point of dispensing is essential to
ensuring a safe drug supply. In its view, RFID is a means of providing an electronic pedigree. To that end,
the FDA has identified RFID as the cornerstone in the fight against counterfeit drugs. Track and trace
technologies offer tangible benefits: pharmaceutical product verification, improved supply chain
management, and public health emergency response. One of the most important advantages of RFID
over 2D bar codes is its ability to perform non line-of-sight readings at production speed.
RFID Naysayers Abound…and Software and Hardware Expenses Top the Complaint List
But RFID is not just about applying a tag – and naysayers abound. Some view it as simply an expensive
inventory management tool, given the hardware and software needed to employ it. While downstream
partners have the potential to benefit the most from RFID, the manufacturer bears most of the costs.
Some of the challenges are uniform adoption among distribution partners, business processes that are
not integrated, tags that are discarded during repackaging, and cost. RFID strategies sometimes begin
with tagging only high-risk products and then moving to tagging all products.
Case Study: A Major US Pharmaceutical Company’s RFID Pilot
One major US pharmaceutical company began a pilot program focused on shipping RFID/EPC (electronic
product code) tagged XYZ drug and creating an authentication capability. The company chose this drug
because it is its most frequently counterfeited product. Today, all XYZ drug produced for sale in the US
now contains an RFID/EPC tag.
A mass serialization capacity allows the generation and assignment of a unique number to each bottle,
case, and pallet of XYZ drug. This capacity writes information to high- or ultra-high-frequency RFID tags.
The EPC reading and writing capabilities allow high-speed application on existing packaging lines. It also
allows two-dimensional bar code alignment to capture and track tag and write/read performance. It can
capture EPC information upon shipment from the company’s logistics centers. In addition, it provides
authentication capability down the supply chain to wholesalers and pharmacies.
Some key decisions made during the pilot involved the following: read and write to tags online versus
prewritten; no national drug code (NDC) number in the numbering scheme; that privacy must come first;
that the two-dimensional bar code was redundant; and to disclose the use of RFID on the label.
There are many RFID vendors. Below we present RFID innovators:
• TAGSYS. TAGSYS marks pharmaceuticals with a unique RFID-enabled product identification tag,
which can capture information at the individual item-level. Together with its reader and antenna
designs, the RFID system delivers Six Sigma levels of performance in terms of tag readability and
product quality. As a result, manufacturers and their supply chain partners can automate labor-
intensive processes, authenticate and safeguard goods and enable real-time inventory.
• Combined strategy: Impinj and Alien Technologies. Alien Technology uses its patented manufacturing
process, Fluidic Self Assembly (FSA®), to fabricate RFID inlays and straps in unprecedented volumes at very
low cost. Utilizing Impinj's Monza chips, Alien produces high-performance inlays and straps targeting
global customers in pharmaceuticals, among other industries. The goal is to leverage both companies’
strengths to produce high-performance chips at competitive costs.
ON-DOSAGE SECURITY ECONOMICAL…AND PROVES VERACITY AT THE PILL LEVEL
The most obvious benefit of on-dosage security is that once a pill is separated from its package, no matter how
secure, the packaging is a moot security point. Advances in “on-dosage” technologies have made them feasible
complements to tamper-resistant packaging, barcoding and other traditional security features. In addition, this is
an economical solution, given that pharmaceutical companies can apply the tags during the manufacturing process
without extra steps or additional equipment. One innovative feature is covert encrypted micro-tags applied to the
actual pill. End users can monitor the tags with a simple, hand-held detection system. Each tag is unique to the
drug, and counterfeiters cannot reverse-engineer them. Each tag contains multiple layers of security. In the future,
these identifiers could be linked to the packaging protection to authenticate the packaging security.
• Color. Duplicating color is a real challenge to counterfeiters. Particularly difficult are the glossy and
pearlescent color-shifting coatings. Counterfeiters have to know many manufacturing and material input
to be able to duplicate the color shift.
• Bar Codes and Images. Bar codes and images such as logos on the actual pill can protect patients from the
plant to ingestion. Manufacturers can describe these for patients in the packaging. While it may be like a
no-brainer that counterfeiters could learn from the very literature provided to protect patients, on-
dosage high-definition images are very difficult to duplicate.
• Sensory Identification. Taste and smell also can help patients authenticate a drug.
The Results
New Momentum’s solution enabled the pharmaceutical manufacturers to monitor billions of site
registrations and emails in real time, analyze and prioritize the most likely suspects, and investigate using
reverse WhoIs and IP ownership. It was able to document all activities associated with each case. At eight
weeks, based on test buys done based on the data driven by the fully automated system, the success
story results were as follows:
• 530 suspect companies
• 1,750 new suspect URLs
• Six large-scale, potential “syndicate” rings in the first six weeks
• 33% success rate vs. 16%
• Easy-to-use classification tools made it easy to track progress and results of buys.
At 16 weeks, the success rate was 50% and growing.
Scorecard
Sites Provided Buys Done Tests Pending Counterfeit Success %
12 6 0 3 50%
10 7 0 3 42%
7 0 0 0 N/A
9 1 TBD 1 100%
38 14 0 7 50%