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The pandemic has accelerated the adoption of enterprise resource planning in pharma supply chain management, as the recent US rise of one “technology enabler” attests
With a 20-year vantage point managing international teams in the IT sector, Christopher Catterfeld has watched the evolution of supply-chain practices up close and personal. One particular area at the fore has been the growing use of enterprise resource planning (ERP) systems, and, most notably, their application in the world of pharmaceuticals—an especially fertile territory today for new strategies and changing priorities in ERP.
Catterfeld is currently chief marketing and product officer, and managing partner for Iptor Supply Chain Systems, a global ERP and supply chain management, planning and logistics software company that supports distribution-focused organizations. One of its customer bases is pharma. In February, Iptor, headquartered in Sweden, acquired its longtime partner The Mesa Group, a Dallas, TX-based tech solutions provider, to grow the company’s US footprint. Working out of Munich, the German-borne Catterfeld refers to Iptor as a “technology enabler,” building its name on a skill base in cloud-based systems and tools that help distributors handle the full range of customer orders and fulfillment requirements—with the goal of end-to-end supply chain traceability. Its main operations are in the Nordics, followed by the US, Central Europe and Australia.
With a career track record in various C-level roles (GM, strategy, marketing portfolio and corporate development), Catterfeld previously spent 10 years with another software specialist, Sage, at its Germany and UK offices, before being named chief marketing officer for International Business Systems (IBS) in September 2016; IBS was then rebranded as Iptor. Three years later, Catterfeld (who is also an Angel investor and advisor) and a colleague initiated a management buyout of Iptor. The deal was completed in January 2020, making Catterfeld part owner.
Pharmaceutical Commerce recently spoke with Catterfeld about his company’s ramped-up business strategy in pharma/healthcare; his thoughts on technology adoption among pharma distributors and how it’s accelerated during the Covid-19 pandemic; and the ongoing quest of drug manufacturers and their supply partners to comply with changing and new regulatory mandates, such as those in the US’s Drug Supply Chain Security Act (DSCSA).
The following are excerpts from our discussion, edited lightly for clarity.
What factors have driven Iptor’s increased focus on pharma-sector support?
The business has developed a significant footprint in the pharma industry—a wide range [of clients] from smaller companies to more corporate-type, well-known brands. For example, in Europe, we have Admenta [Italia Group], the Italian arm of McKesson, as one of our larger clients. We have presence in the Middle East. So quite good coverage globally. But probably our largest footprint is in the US. We work with two larger units from AmerisourceBergen, ICS and MWI Animal Health, but then also with typical mid-market and upper mid-market businesses such as Top Rx, and smaller ones as well.
What we have done since the second half of last year is, because of the need especially for smaller businesses to adapt to DSCSA (the Drug Supply Chain Security Act) and other legal requirements, launch what I call an entry package—a multi-tenant offering preconfigured. Where we are aiming at is the more startup type of pharma businesses, so those that are just starting to operate but still have the same challenge as established companies to comply with all the regulations.
Is that a concerted business strategy—focusing more particularly on the needs of pharma startups?
It is an important segment in terms of distribution. And it can involve consulting services that are not necessarily product- or technology-related. It’s more a strategy to introduce different aspects and best practices that we are seeing from larger customers.
What we have seen over the past two years is you have this imbalance of people from the AmerisourceBergens that know exactly or have predictions of when certain elements of legislation are going to apply, and how and when their manufacturer partners are going to be ready with serialization [compliance]. And then you have the smaller businesses sitting around a table wondering why they are in the same industry but have no idea what the larger businesses are talking about. I think this is where we as a technology enabler can really play a role to say, “there are best practices and there is more that we can share”; we are not the ones who interpret or give legal advice, but certainly we can share what's happening with some of our peers that are larger and who maybe are around the table when certain things are discussed about new pieces of legislation.
So, in practical application, the compliance strategies you learn from the bigger companies and from other segments you include as advice to your startup clients?
Absolutely. As a technology vendor, yes, we are only providing a piece of software as a service or whatever you want to call it; but given the complexity that's especially in a regulated sector like pharma, that’s hard to handle for a small business without leveraging technology. If you were just reselling a technical product, it's easier. You buy it. You store it. You get an order, you ticket it, and you ship it. But there's not a lot of things sitting around that.
The area that we are currently highly engaged with our customers in the pharma space that is closely linked to the Drug Supply Chain Security Act is suspicious order monitoring. You can hardly argue that a sales agent who is just trying to sell a product knows how many people are living in a specific zip code. This is where technology kicks in, then the system in the background does a validation, uses a bit of machine learning, and comes back with a status to say, “yes, you can ship that product or, no, you can't. You need to talk to your compliance officer.”
The list of checks like these is pretty long and for startup type of businesses, it’s hard to stay ahead of all these things. Just the complexity with different license requirements from local, state, federal—it's fair to say that pharma is potentially an area where, without proper technology and using the connected services that are out there, it’s hard to operate well. You can operate, but the question is can you operate within the boundaries of the legal legislation?
DSCSA compliance is really complex—and where some distributors are challenged right now in meeting some of the new mandates issued, although deadlines for complying have been extended by FDA to late 2023. What’s your take on some the new requirements, such as saleable returns verification and item-level serialization, and what are some the preparations and key challenges for you and your pharma partners in this whole effort of serialization readiness in the US?
DSCSA has been triggered in the US mainly because of the opioid crisis. The interesting thing is we are seeing the same type of legislation kicking in everywhere in the world from a different perspective. Let’s take Europe, for example. I think the EU in our industry is losing 10 billion a year because of counterfeit medicines. It’s the whole problem around operating in a globalized world—is the drug that's in the box really what's stated on the box? I think the whole aspect of serialization and all the checks with returns is one that's relevant, even if we assume tomorrow there is no aspect related to what’s been driven by the opioids. You're still going to have the same requirement. I think once the opioid health emergency that triggered the Drug Supply Chain Security Act is gone, there's still going to be enough reasons in other parts of the world of why this effort at transparency is pretty relevant.
The question you had around using some of the moving timelines, it's a double-edged sword. What we have seen in the last two to three years is basically we had customers that knew [new DSCSA mandates] were going to come into effect. There might be delays due to readiness of the first part—the manufacturers—and then how that kicks in. The customers who really took it on in the beginning needed to be ready anyways. And then you have probably the same thing that comes from human nature—you just push the problem away until it’s then maybe too late.
What we are seeing is the businesses that are coping best with these kind of changes are the ones acting early in the process, because the complexity is not going to drop, it's only going to grow. If you are, for example, a distributor that has waited until the last day, hoping that the manufacturer maybe is never going to be able to serialize the product, the moment when you then realize now you have a time pressure is probably when the next type of legislation kicks in, as you mentioned with the [saleable] returns.
So in terms of best practice, if you are early in the process, especially with a lot of dynamics around new legislations coming up, you are usually much better equipped to handle it. Yes, you can always use certain exemptions, but at some point, it will catch up to you. There is going to be a point when the pandemic is over and you need to keep track of where you have complied with the serialization requirements. The question becomes, “oh no, I probably need a T3 (debrief) statement that I haven't worried about because I had an exception.” It's a bit of a similar train of thought there around how being early and being ready always helps.
How much has the pandemic disrupted implementation or shifted priorities around compliance with the DSCSA?
The priority of compliance and readiness hasn't really been impacted by the pandemic. There's another aspect that we have seen, however. When the whole Covid scenario started, we thought, okay, the pharma segment for us is probably one of the good ones to grow the business with, because a public health crisis usually leads to a stable health and pharma business. But what we saw, especially in the beginning in the US, was it was really dependent on who you delivered to; is your primary customer the pharmacy, or is your primary customer the doctor—considering the changing [patient] behaviors of not going to a physician’s office as much?
You basically had two camps of customers—one that really struggled and that had significant impacts in terms of their sales and their revenues, like in other industries. And then the other ones who pretty much boomed, which was interesting to see because I don’t think any pharma distributor five years ago was thinking about where that focus should lie—more on the doctor sector or the pharmacy sector?—and that that question would actually matter to a substantial level.
How can embracing new technology help alleviate some of the challenges and efforts involved in DSCSA and other regulatory compliance implementation—and allow a business owner to focus on growing their company?
The pharma industry is a sector where without [new] technology, it's almost impossible, in my point of view, to stay in business. It's probably beyond their core business, historically, to make warehouse operations and the picking process more efficient. Or to give a sales agent a fast way to react to a customer. This is usually the domain expertise of those who provides business software.
But it also relates to a couple of examples that our customers, especially the smaller ones, are using. The beauty of what we call the connected world and connected services, is there is so much value you can get that you wouldn't be able to achieve totally with your own staff, because no one can perform all the things that, in an ideal world, technology does in the background. One example: Historically, a pharma business or a pharma distributor paid a lot if there was something not right on the shipment label. You send something overnight and every shipment company—the FedEx’s, the special delivery companies—they’re going to charge you if just one digit in the label is wrong. For instance, the street name is right but the house number is the wrong one. Today, this is not an issue anymore, because if a manufacturer or supplier uses the US Post Office or another service provider, the [vendor partner] system will tell you the moment when someone types the sales order in and uses a wrong address.
Another example are things like a credit check. It’s not just about your previous transaction history with the customer; if you're a distributor and a customer is ordering a product, you usually assess the combination of what the credit limit is, but then it’s also what others say the credit limit should be. So a system that raises a red flag to say you should think twice if you send that product out because you might never get the money for it is obviously important.
I mentioned suspicious order monitoring as well. We have an active partnership in this area with one of the experts, a company called Five Rivers RX, based in Philadelphia. Basically, what they are offering is the moment when someone is getting a sales order into the system, the information about the zip codes, the type of product, the history of the product gets sent over to a cloud service, and then, within seconds, you get a green, orange, or red-colored warning back. Depending on what you decide you're going to do with the warning, it can then go to your compliance officer or to someone else in the business—or the sales rep cannot execute or confirm the sales order.
In the area of saleable returns verification and VRS (verification router service), we are currently working with a partner on a master data system; so you get more automation there in terms of the standard things that you need to maintain in your system; they’re available as a service. You don't have to have a big staff of people maintaining your master data.
These are all functions that are hard to even imagine how you do them without technology.
I think the beauty of this is adjustment is going become easier. With the set of regulations that have been introduced over the last couple of years, including the requirements to automate, the requirement to comply with these regulations is going to mandate that you get to a decent level of technology support. So every further change is going to be simpler. Because if you have entire transparency over the supply chain, it's easier to comply with certain regulations.
What are your thoughts on the rate or acceptance of technology adoption among pharma distributors? Fairly recent research by the Healthcare Distribution Alliance (HDA) showed 100% of specialty distributors say a primary motivation in adopting new technologies is to ensure regulatory compliance—yet only 25%, at that point, according to its findings, were using a customized software tool to exchange information with trading partners to support compliance with regulations like DSCSA. Why do you believe that was the case?
I think this is where, if HDA does the same research after the pandemic, things will have changed significantly. A year-and-a-half ago, people were aware that the most efficient way to reduce risk is to use standard cloud services—and just using cloud as a deployment or a delivery option. I think everyone was aware, but it was still this perceived risk of not having your infrastructure in-house.
I remember about two years ago at a customer conference in Florida, we had people challenging us, asking what happens if the internet is down? How can we then pick, pack and ship? We had quite an emotional debate with the customers about just the cloud and not buying your own server. I think today or in two years from now, I'm pretty sure if you tell someone that your service is delivered as a cloud service, they're going to look at you and say, “of course.” Because, well, what's the alternative?
If HDA does the same survey in the near future, I think the willingness to adopt these technologies will be significantly higher. And I'm pretty sure it's not only the willingness; I think a lot of them are going to have started projects already. For us, it was pretty amazing that even during a pandemic where people don't usually make big investment decisions, we generated five new pharma customers in the US. The main driver for them was just to say, “I want to be independent, I want to consume it, and I want to be compliant.” I think perception in terms of cloud technologies has completely changed during the pandemic.