Product Serialization and Electronic Pedigree in 2009

Requirements for pharmaceutical product serialization and pedigree have been a moving target for many years. State governments, federal agencies, and the industry itself battle over the most secure and efficient method to reduce counterfeiting and diversion by tracking drug product movement throughout the supply chain.

Today, the challenging roadmap of governing laws requires manufacturers, contract service providers, wholesalers, and distributors to maintain a detailed understanding of all the upcoming or pending requirements. Constant changes in the law, similar to what we witnessed in California, have challenged the industry to figure out how to proceed.

Understanding Today’s Requirements

To understand the complexity of the challenges that manufacturers are facing, the regulatory environment must be reviewed. (Manufacturing encompasses both pharmaceutical company operations as well as those of contract manufacturing and packaging organizations [CMOs and CPOs] that will be charged with serialization and pedigree.)

For the past few years, the industry has been focused on California’s pending requirements. California’s rule will require the product to be serialized at the salable unit (or item) level. It defines the unit level as the “smallest unit of sale.” This means that each packaged item will need to have a unique product identification code (i.e., serialization) that will aggregate to the case and pallet to establish a parent-to-child relationship. The law does not require a specific technology or number schema, but most of the industry has been following the GS1 standard for 2-D codes and the EPCglobal schema for RFID.

California’s recent delay to 2015 has given the industry a false sense of security and delayed their efforts to prepare. Interestingly, the Ridley-Thomas bill that delayed the law in California included federal preemption language that would void the California law should the federal government develop a national e-pedigree and serialization standard.

The federal government has taken serious action in developing a variety of bills and laws to deter and prevent the counterfeiting and diversion activities in today’s pharmaceutical supply chain. In September 2007, President Bush signed into law HR 3580, the FDA Amendments Act of 2007 (FDAAA). Section 913 directs the secretary of the department of Health and Human Services to develop a standard numerical identifier no later than 30 months after the date of the enactment of FDAAA (March 2010). This will create a national numerical standard for product serialization.

While many organizations have been focused specifically on serialization and e-pedigree bills, the passing of the Prioritizing Resources and Organization for Intellectual Property Act of 2007 strengthens the U.S. court’s ability to punish those convicted of counterfeiting. This is a measure that big pharma has been requesting for years. Counterfeiters can now be sentenced to life imprisonment if their crime causes death. The sentence for inflicting serious bodily harm as a result of counterfeit products has also been increased. Conviction for such an offense can result in up to 20 years in jail. Both sentences can carry a fine.

The current bill receiving the most attention is HR 5839, Safeguarding America’s Pharmaceuticals Act of 2008, also known as the Buyer-Matheson bill. This bill details provisions for a national pedigree standard and utilization of the national numerical identifier. It establishes a universal drug identification and tracking system and adopts a uniform set of national standards. Originally requiring product serialization and e-pedigree in late 2011 or early 2012, the bill is being revised to push dates out that align with California’s deadlines. This bill has the support of many industry organizations, including the Health Industry Distributors Association (HIDA). (For more on the Buyer-Matheson bill, please see the Security Packaging Supplement beginning on page 31.)

Global serialization requirements present huge challenges to all companies involved. With as many as 10 to 15 different country requirements, each with a different time line and technology, compliance is becoming very complicated. The biotechnology community in Europe is moving toward serialization; the carrier of choice is the 2-D Data Matrix code. We have seen significant opportunities for variable 2-D Data Matrix codes for numerous brand owners and manufacturers from customers that are shipping product directly into Europe.

The most talked about serialization program is that of Turkey. Turkey is scheduled to require serialization on all prescribed, over-the-counter, and nutritional products starting in January 2009. The 2-D code has been designated as the technology of choice for now, with RFID being considered for the future. Compliance for Turkey will entail printing the 2-D code either directly printed on the package or on a secondary label. The 2-D code must be on the outside of the packaging and be visible for scanning, whether it is on a label or a folding carton. The pharmaceutical manufacturer or importer must place all serialized data on a Web site that will be operated by the Turkish Ministry of Health. All products that are considered in the “distribution chain” will be monitored by the Web site, which will serve as a national database. Reimbursements and chargebacks will also be handled through the system.

So what is the impact of these swirling state and federal laws and bills on the pharmaceutical industry and its partners? Waiting or doing nothing now is not an option. Manufacturers must understand standards and the available item-level serialization options in the market today. They must develop a strategy to comply with multiple types of technologies to support customer requirements. They also need to develop a strategy to deploy and support e-pedigree and establish a trading partner network capable of managing the many customer requirements. Such a strategy needs to include the ability to receive, create, update, and distribute e-pedigree and the supporting data to trading partners by many methods.

Another challenge is how and when to provide serialized product to wholesalers. They will likely be dealing with hundreds of products with a variety of data carriers/reading requirements (such as ultrahigh-frequency [UHF] RFID, UHF near-field [NF] RFID, high-frequency [HF] RFID, and 2-D codes). If everyone waits until the last minute to serialize products, wholesalers will not be able to absorb all requests.

How to Prepare Without OverInvesting?

It’s important to begin preparing now. As stated above, legislation has a way of just happening. Just when you think a bill is forgotten, or lost in subcommittee, it becomes law. The challenge is minimizing investment in these uncertain times when you are already trying to expand your business with great demands on both capital and human resources. Serialization and e-pedigree implementation are not simple achievements. Most companies, once they get into compliance details and requirements, wish they had started earlier. Considerations include trading partner data interoperability, ERP integration, flexibility of varying data-carrier technology and serialization schemas, package design to withstand the rigors of production lines, RFID and 2-D data commissioning, and creating and passing e-pedigrees. If you wait until full clarity is achieved, there will be a tremendous strain on industry expertise and capacity, and you will lose the chance to minimize disruption in your operation.

Every drug maker is faced with the same questions: Do I invest in my own infrastructure or do I outsource serialization and e-pedigree to a partner? The latter becomes clearer if you are using a CMO or CPO. The ability of a contractor to demonstrate readiness to pilot and put into production both serialization and e-pedigree solutions will drive significant new business now and for the foreseeable future.

Here is a glimpse into some of the best practices from leading companies, be it a pharma manufacturer or contractor. It’s clear that a firm must implement a risk-based approach that allows it to gain the
following:

• Experience on end-to-end serialized and e-pedigree processes.
• The ability to market and gain new customers.
• The ability to manage scale-up by investing in a pilot packaging line, e-pedigree software, and a distribution strategy.
• The ability to engage customers and distributors to ensure a planned scale-up for ‘on-ramping’ serialized product.