High Cost of Counterfeiting Underscores the Importance of Visibility into the Supply Chain

It is often thought that counterfeit medicines are largely a problem in developing countries, and that the strict regulatory framework in the United States, Europe and other major markets make counterfeiting incidents fairly uncommon.

By Rick Ruiz, Partner, Life Sciences, CSC

But as a report from the European Observatory on Infringements of Intellectual Property Rights shows, fake medicines have a huge impact on the EU pharmaceutical sector. The report estimates that counterfeiting costs the sector around €10.2 billion per year directly, and the knock-on effects result in about €17 billion of lost sales to the EU economy.

But it’s not just a financial blow. Counterfeiting results in job losses: 38,000 directly and 91,000 indirectly. Counterfeiting is also increasing in the United States, for example through Internet sites or as a result of a complex and disorganized supply chain. The practice of farming out portions of the manufacturer’s supply chain creates “black holes” of accountability and visibility when using traditional scan-only tracking techniques. Counterfeiting occurrences also have a significant negative impact on the brand because once the brand has been damaged it is costly and near impossible to regain the public’s confidence.

The risks counterfeit medicines pose to patients are severe with unexpected side effects and reactions, and potentially a deterioration in their condition. In fact, some counterfeits may contain hazardous ingredients.

Improving Visibility

Therefore, tackling counterfeiting must be a priority for all stakeholders. At an industry-wide level, some initiatives have been put in place to tackle counterfeiting, for example the European Medicines Verification Organisation (EMVO), which is designed to enable end-to-end verification of pharmaceutical packs.

In the United States, the Drug Supply Chain Security Act (DSCSA) of 2013 requires companies to identify and trace certain drugs, and by the end of 2018, global track and trace regulations incorporating the serialization, traceability and verification of pharmaceuticals will require greater oversight of the supply chain.

Pharmaceutical companies have largely struggled with tracking the supply chain because of error-prone manual activities. As a result, companies need to put in place technologies and processes to enable better traceability and visibility in order to prevent counterfeits, diversions and theft.

To better control the supply chain – including distribution channels, multiple geographies and a wide-network of partners – pharmaceutical companies must gain real-time visibility, such as modelling that can compare actual to expected delivery, dashboards to identify products that aren’t moving according to plan and the ability to divert shipments in emergencies. Companies need to invest in and leverage more of the emerging Internet of Things and Industry 4.0 functionality and features. Real-time machine-2-machine data exchange is available to provide immediate and intelligent information on the status and exact location of every product.

Learn more about the next generation supply chain and the importance of visibility by downloading our white paper “5 Ways the Digital Supply Chain Drives Success for Life Sciences.”

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