Falsified Medicine Directive (FMD) compliance requires pharmaceutical serialisation
Europe’s pharmaceuticals industry is gearing up for one of the largest regulatory introductions in years. In February 2019, the Falsified Medicines Directive (FMD) will come into effect, as regulators aim at preventing falsified medicines entering the international supply chain. Adherence to the new regulation requires every European pharmaceutical company that distributes prescription medicines to have a rigid process and serialisation solution in place.
The introduction of the new regulation comes on the back of a sustained outcry for more transparency in what is happening to products, of which many require careful placement as they are only prescripted to specific patients, across logistic chains and country borders. “Today, product security and supply chain traceability are more crucial than ever,” said Axel Visser, a Consultant at BearingPoint, an international consulting firm. He highlights that transparency is rapidly becoming an economic necessity for the pharmaceutical industry – the complex distribution networks make product authentication a significant challenge, which may place consumer and supply risks on the brand.
The Falsified Medicines Directive is expected to provide pharmaceuticals with a more stringent governance to battle the growing threat of counterfeit drugs. While the pharmaceutical industry continues to boom, counterfeit drugs globally cost the sector billions in damages every year, while putting patients at risk of using substandard or dangerous medication. Such phony drugs slipping into the supply chain is not new, with product security and supply chain costs positioned in the top 5 concerns of healthcare executives for years, but the illicit practice has become increasingly prevalent due to internet sales and globalising markets, which make it easier for fake produce to find its way into distribution. According to estimates of the World Health Organisation (WHO), the counterfeit market has seen a 90% rise in the past five years, with estimated sales now nearing $200 billion.
Apart from the actual production of counterfeit drugs, the practice of illegally reimporting legitimately manufactured drugs is another key area which must be addressed. This is when drugs are purchased wholesale in a cheaper market and imported illegally to a target market, where they are repacked and brought on the market. This not only leads to lower profit margins for pharmaceutical companies, it can also can have consequences for patients. In countries were more drugs are taken out of for ‘export’ (the cheaper market), there could be supply shortfalls for patients, while due to the fall in profits, suppliers could charge more for their produce, impacting the budgets of healthcare systems such as the NHS in the UK.
For this reason, while companies are seeking to implement serialisation to combat fraud, a number of authorities have now included serialisation requirements as part of their regulations. One such body is the US Food and Drug Administration (FDA), which included the need for serialisation through the Drug Supply Chain Security Act (DSCSA), signed into law in 2013. The Act outlines the critical steps required to build an electronic, interoperable system that is able to identify and trace prescription drugs distributed in the United States. In 2019, the European Union will follow suit with the go-live of Falsified Medicines Directive, has a similar scheme which comes into effect in February that year.
Serialisation
By using serialisation – the assignment of unique, traceable numbers to individual items or saleable units – companies have better visibility of their products. “Having an end-to-end serialisation solution is key to ensuring that regulatory compliance can be achieved without unnecessary pains,” said Visser. Based on Global Standards One (GS1), a not-for-profit organisation that develops and maintains global standards for business communication, standards for barcodes and electronic product codes (EPC), serialisation enables a drug to be tracked and traced electronically as it passes through the supply chain. By these means, at any point, government authorities and pharmaceutical companies can not only identify and stop the distribution of counterfeit drugs, but they can also trace fakes back to their source, while handling product recalls more effectively.
However, the implementation of serialisation in a global context is easier said than done, said Visser, an expert from BearingPoint’s Life Science sector. This is in large part due to the complexity of the process: “Serialisation is, of course, not as easy as just printing a unique identity on a product package. Serialisation entails multiple challenges as redesigning labels and multiple packaging processes, adjusting the IT architecture to generate, store and query millions of serial numbers, and establishing cross-functional collaboration with business partners.”
On top of this, serialisation involves a heavy technology component, as pharmaceutical companies have to deal with legacy systems. “The complexity of implementation projects to apply global serialisation systems is commonly underestimated,” Visser added.
A window of opportunity
For pharmaceuticals, the Falsified Medicines Directive should, in an ideal scenario, encompass much more than just achieving compliance. “Despite that the serialisation has regulation as its key driver, pharmaceuticals should leverage its adoption not just to abide to compliance, but also for capturing additional value,” said Visser.
He added, “See it as an opportunity to create more visibility, accuracy and velocity within supply chains. RegTech solutions can improve all these areas in terms of efficiency and cost-effectiveness, while promoting patient safety. And one step further, data insights captured from serialisation can be used to seize further opportunities to the business.”
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