Serialization & Traceability: Where are you?

Pharmaceutical Industry Survey : Executive Summary May 2011

By

Michael Stewart PharmTech, Inc.

Survey Sponsored by:

www.PharmTechInc.com

2011 PharmTech, Inc. All Rights Reserved

Introduction In today s pharmaceutical regulatory environment, executives and management within the industry are facing tough decisions when it comes to their supply chain and increasing regulations. Several states in the U.S. have released guidelines requiring various forms of pedigree (paper or electronic) while others have pushed for mass serialization all the way down to the saleable item level. Several years have gone by with the terms serialization, traceability and Track and Trace being bantered about and concerns over when their implementation would be mandated. The regulatory bodies have once again set their site on this topic and appear to be moving forward with the discussion and clarifying to some degree the direction they want to proceed. In February 2011, the FDA held a public workshop Developing a System for Track and Trace and Authentication for Prescription Drugs to gather industry feedback on what their forthcoming guidelines regarding traceability, pedigree and serialization should look like. The 2010 Joint Strategic Plan on Intellectual Property , a report to the President of the United States, recommended mandated use of electronic track and trace for pharmaceuticals and medical products. In addition, the report states the need to implement a track-and-trace system, which allows for authentication of the product and creation of an electronic pedigree Internationally, serialization, pedigree, authentication and traceability in various forms is underway namely through the efforts of Turkey, Brazil and France. India, China and Belgium as well are moving forward on theirs. The topic is back on the front burner and regulatory action is a given. As industry insiders, we cannot deny that there is a renewed governmental interest and more pronounced push towards establishing U.S. and international guidelines as to the acceptable standards, how the events are reported and who has access to this data at each stage of the process from manufacturer to final dispenser. Although the driver by the FDA, states and international health ministries is patient safety, for many pharmaceutical manufacturers in a world of shrinking margins, expiring patents, concerns over counterfeiting, theft, diversion, recalls and the need for cost containment, this push by regulatory bodies is being viewed as an opportunity to build in business value to what was initially deemed a compliance project. Traceability and serialization projects are now a way to manage supply chain data that until recently would have been unavailable. Companies can build business engine rules around the capture, use and dissemination of said information to management that can provide actionable data to improve processes and provide real-time continuous improvement. PharmTech, Inc. conducted a recent survey of pharmaceutical professionals to gauge four specific areas surrounding serialization and traceability; Awareness, Readiness, Business Value and Challenges to Implementation. The results offer an insight into the changing mindset regarding serialization and traceability as a compliance burden towards how to use and leverage this new information to improve the business and create a competitive advantage.

2011 PharmTech, Inc. All Rights Reserved

Participants

The companies in the survey were represented by pharmaceutical manufacturers (64%), Contract Manufacturers (18%), Distribution/Wholesale partners (8%) and Other functions (10%).

Of the respondents, 72% were from North America, 18% from Europe and 10% from Asia.
Company Location

N. America Europe Asia

2011 PharmTech, Inc. All Rights Reserved

Awareness
Awareness of Guidelines
90 80 70 60 50 40 30 20 10 0 CA SB1307 France CIT13 FDA SNI Guidance Turkey I.T.S. Unaware of any

In general, most companies were aware of the California e-Pedigree and serialization bill and the guidance by the FDA on standardized numerical identifiers. Acknowledgement of international legislation was mixed. While less than 10% of respondents were unaware of any of the guidelines.

How Long Do You Expect a Full Implementation of a Traceability Solution to take ?

60 40 20 0 6m 1 Yr 2 Yr 3+ Yrs

When we asked participants the implementation time from Let s do this to Flip the switch we were surprised at the responses and underestimation of how large of a task implementing a serialization and traceability solution is. Although nearly 60% of respondents expected the timeline to be one year or less, the actual timeline for many large manufacturers can average 35 years depending on the number of lines and products involved. The view that there is a plug and play software/hardware solution that can be plugged in was prominent and increasingly optimistic. Concerns over interoperability of IT systems, inventory build-up due to a line being shut down for modifications, design of business rules engines, trading partner integration, data access, data repositories and handling of queries etc were not even considered.

2011 PharmTech, Inc. All Rights Reserved

Readiness To gauge readiness and proactive efforts, we asked a series of questions relating to what they have done from a planning perspective followed by where they are in the implementation or piloting stages.

Have you conducted a serialization or traceability readiness assessment?

Unsure Unsure

Are you currently in a serialization pilot?

No

No

Yes

Yes

10

20

30

40

50

60

10

20

30

40

50

60

70

Approximately half of all participants had conducted some form of readiness assessment to some degree, however over sixty percent have not begun to pilot.
Are you currently serializing at least one product?

No

Yes

10

20

30

40

50

60

70

80

2011 PharmTech, Inc. All Rights Reserved

Business Value

What business functions benefit from traceability and real time supply chain visibility?
100 90 80 70 60 50 40 30 20 10 0

Each contributor had their own perception of what business value(s) having increased supply chain visibility would create for each operational function. Recall management and Brand Protection were the top two value drivers, however improving forecasting & planning, distribution processes and inventory control ranked high as well. The assumption that traceability serves a compliance only function is disproved as real tangible and quantifiable business opportunities present themselves across all organizational and supply chain functions.

2011 PharmTech, Inc. All Rights Reserved

Challenges & Implementation When asked about what the biggest organizational challenges are (were) with implementing a traceability and serialization solution the responses were mixed. The three areas that were considered the largest obstacle, ranking extremely challenging and somewhat challenging, were Regulatory Uncertainty, Equipment Capital Expenditure and that traceability was a Compliance Only Issue.

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Not a Concern Not Very Challenging Challenging Somewhat Challenging Extremely Challenging

The regulatory uncertainty and compliance only issue concerns will take care of themselves as we have more firm regulatory guidance. The key component of the cost concern is what is driving the need for business value built into traceability solutions. Even as a compliance or regulatory concern, the cost of the equipment and processes does not change. Therefore, management and operations are in need of identifying how to make these solutions not only compliant, but work for them and create relevant and actionable data reporting to ensure that there is inherent value built into their customized traceability system.

2011 PharmTech, Inc. All Rights Reserved

Challenges & Implementation Thirty-five percent of the participants indicated they have implemented a traceability system or are running a pilot. A full twenty five percent noted that they have no plans at this time to for a traceability system to be implemented. That leaves forty percent of respondents looking to develop, pilot and implement a traceability solution within the next year. Having seventy five percent of those participating engaged at some level of traceability planning emphasizes the understanding of forthcoming mandated traceability as well as the realization of additional business benefits to moving forward.

When does your company plan to implement a traceability or serialization system?

30

20

10

Currently Running Within 6 6 months 1 Year + No Plans have one a Pilot months to 1 year

2011 PharmTech, Inc. All Rights Reserved

Parting Thoughts In our daily engagements with pharmaceutical manufacturers at various levels of traceability readiness, just starting to evaluate processes to those that are already serializing at least one product, it is abundantly clear that the process from start to finish incorporates so much more than just choosing a solutions provider. PharmTech recommends a Traceability Readiness Analysis (TRA) for all manufacturers that are beginning to assess their organizations preparedness and to indentify in advance exactly what systems, people, processes, modifications, budget and timeline may be necessary as this all comes to pass. The Traceability Readiness Analysis allows manufacturers to understand the framework of what needs to be done and prioritize projects that can be tackled now, regardless of future regulations, and what projects will be rolled out as necessary as the regulatory landscape is more defined. A typical analysis through full implementation can take 3-5 years. For pharmaceutical manufacturers, it s the question of How do you eat an elephant? Rather than being overwhelmed or frozen by the enormous task in front of them, a Traceability Readiness Analysis will provide the road map to a customized traceability solution that provides the much needed business value and return on investment they expect and require while adhering to changing regulatory guidelines.

About PharmTech, Inc. Founded in 1995 as a validation provider, our services have expanded to include Quality Management Systems, Technology Integration and Traceability Systems in consulting for FDA regulated industries. As a leader in pharmaceutical consulting, PharmTech prides itself on not only showing you where the industry is going, but providing you a road map to use those trends to your advantage to increase business value and Return on Investment (ROI). Our staff averages in excess of 10 years of industry, compliance and consulting experience. We work to give you ROI from the projects you are required to undertake, whether compliance related or not, and gain long-term value in an ever changing business climate. As a result, you are able to quantify your business objectives and realize significant return on your investments by leveraging technology and strategic data management.

2011 PharmTech, Inc. All Rights Reserved