Even While Regulatory Mandates Slip Into the Future, Brand Protection Needs Remain

Pharmaceutical CommercePharmaceutical Commerce - March 2009

Drugmakers recalibrate anti-counterfeiting and serialization efforts

Given economic uncertainties, regulatory delays, and the resulting lack of clarity in how to pursue long-term product security objectives, many drugmakers have reset their sights on short-term objectives. Anti-counterfeiting product and service vendors, recognizing the challenges drugmakers are facing, are stepping up with products and services geared to the short-term need at the same time they continue to toil on the intractable problem of counterfeits.

“It is impossible to obtain a precise estimate of the production of counterfeit medical products on national markets,” according to the summary of the World Health Organization executive board meeting held in Geneva in January. “However, the number of incidents detected in 2007 increased to more than 1500, roughly a 20% increase over that for 2006 and a 10-fold increase over 2000.”

It amounts to a good-news/bad-news scenario for the product security industry: The good news is the economy: “Three million people out of work, and three million more expected this year…they are all looking for cheaper ways to get medications. It’s a counterfeiter’s and illegal diverter’s dream,” says Dean Hart, SVP at NanoGuardian (Skokie, IL).


But the economy, combined with e-pedigree initiative delays, is also the bad news: “There were certain customers who had significant e-pedigree budgets pulled from them. Some asked for the money to be put back toward traditional anticounterfeiting. That’s how some funds got freed up,” says Gregg Metcalf, industry market manager at packaging supplier Nosco (Gurnee, IL). He cites an increase among drugmakers who are looking at a traditional anticounterfeiting features plus 2D barcode serialization technology. “Since the delay, we’ve gotten five new customers interested in color-shifting inks with high-end security taggants.”

What they can do in the short term is combine traditional anticounterfeiting with serialization, but sans pedigree. “This lets them start to look from a long-term standpoint: what needs to be done internally? And externally, how will it flow through the supply chain?” Metcalf says that Nosco now has some clients who are starting pilot projects.

Effort too broad and complex

In the US, pedigree efforts like California’s—pushed out to 2015—and the FDA’s—pushed out to 2010 (just to set a standard, not necessarily to implement it)—have slipped because their concepts were “too broad, too much change across too many stakeholders—manufacturers, distributors, retailers—and all new technology,” says Jim Rittenburg, VP at brand-protection company Authentix. (Addison, TX) “It’s too complex to bite off at once. A more stepwise approach is needed.”

Drugmakers know, however, that they can’t take their eyes off the brand-protection ball entirely, no matter how bad the economy or how slow the regulators. (See Pharmaceutical Commerce’s 2008 Product Security Supplement, September 2008, for background.) “They figure they’ve got to do something now,” says Metcalf at Nosco.

In fact, as counterfeiters become more sophisticated, brand owners increasingly seek multiple layers of product protection: “One feature for the general public, one for forensics, and one for law enforcement,” says Adam Scheer, marketing director for authentication solutions JDSU in Milpitas, CA. “The layering of the technologies has become important.”


In fact, some brand owners are even using layers of the same technology. Constantia Hueck Foils (Wall, NJ), maker of CPI security foil, has some customers who apply the foil in layers. “We see various versions of that to make a more robust solution,” says Fred Lutz, sales and marketing director. “Complexity comes with the profile of the drug. The higher the profile, the more complex the anti-counterfeiting solution.” What’s key is layering that is “simple, not complicated, and dynamic, meaning it can be changed,” he says, to accommodate manufacturers who require regularly scheduled security adjustments. “And the solution has to be plug and play, with reasonable economics.”

Technology vendors continue to develop new offerings, if recent exhibitions are an indicator. At the Interphex show (New York; March 17-19), Pharmorx Security (Southborough, MA), showed a combined authentication systems (e.g., high-resolution surface imaging, security inks, serialized barcode) with a software service, AuthentiTrack, to collect and verify identification data throughout the supply chain. Meanwhile, at the HDMA Distribution Conference (Baltimore; March 15-17), On+qor (Bridgeville, PA), a provider of rigid packaging for parenterals, announced that it will implement Verify Brand’s (Minneapolis) Digital Authentication, Track & Trace (DATT) system at packaging lines, as well as set up the data center to integrate Verify Brand’s serialization processes with a warehouse management system or enterprise software system.


Also at Interphex, Alpvision (Vevey, Switzerland) announced that it has developed a method to use the unique patterns left on the surfaces of punch dies after machining (and which are transferred to tablets from that die) as a ready-made authentication system. A tablet can be analyzed in a device as simple as an office document scanner, and when the scan is compared to the stored image from the original die, the tablet can be authenticated. Finally, Oystar Manesty (the Fairfield, NJ, arm of Germany’s Oystar Group) showed a tablet press featuring an external lubrication system called Accuspray that can also apply a taggant on a specific location in the die, such that the taggant is positioned on the surface of tablet for easy in-field verification.

Starting pilot projects

Cortegra Group Inc. (Parsippany, NJ), which provides a range of anticounterfeiting solutions including one that uses the microstructures of the substrate of a drug package to create a unique digital signature, views its solutions in the context of meeting eventual pedigree goals while solving near-term authentication needs. “We’re making it more seamless for companies as they invest in pilots,” says Narendra Svrivatsa, business development manager at the packaging services provider. “This is the time when you look at strategic investment. Return on investment (ROI) becomes much more significant now.”

Many pharmaceutical manufacturers continue to view the ROI from such e-pedigree technologies as RFID as mandate-driven, he says. “Right now it’s built into the cost of goods sold. Companies haven’t stepped away from that view yet,” says Svrivatsa. “But as they strive to reduce costs, and see what they can achieve through more efficient supply chains, this is where the ROI payoff is going to be huge.”

The difficult economy that is driving strategic thinking among drugmakers is likewise driving strategic thinking among product security providers. But in their efforts to keep brand owners a step ahead of the counterfeiters, security experts are going beyond the physical package and the pill to proactive services that involve statistical sampling from retail locations in an attempt to find fakes weeks or months before they might otherwise be detected.

Brand protectors get proactive

One such service, NanoGuardian’s Closed Loop Protection Program, amounts to a proactive early warning system to pharmaceutical manufacturers. “Instead of realizing months later the reasons why they’re getting poor results or adverse events, hopefully this puts them ahead of the game,” says Hart of NanoGuardian.

The program works as follows: Tablets or capsules are produced, coded using the company’s nanoencryption technology, and distributed by manufacturers into the supply chain. Pharmacies throughout the US have been identified and that information is housed in a database. Using an algorithm-based process (created with pharmaceutical development consultancy Torbeck and Associates of Evanston, IL, and detailed in the January 2009 white paper, The Statistics of Counterfeit and Diversion Detection in Pharmaceutical Supply Chains), specific pharmacies are randomly selected to provide each month’s sample.

Sample prescriptions are obtained via a national physician panel established by NanoGuardian and are filled at the randomly selected pharmacies. The acquired samples are sent to a NanoGuardian facility, where the product is authenticated and the forensic-level nanocodes are decrypted. Sampling information is reported to the manufacturer, including the date and location of each sample taken and the authentication results. Suspect counterfeits—those lacking nanoencryption—are reported to the manufacturer.

In addition to authentication of the product, NanoGuardian provides the nanocode within the authentic product to the manufacturer. A secure Web-based application validates the nanocode against associated information provided by the manufacturer separately, including product information (strength, expiration date), manufacturing information (location, date, batch and lot number), distribution information (country, distributor, wholesaler, chain), and e-pedigree technologies (RFID, 2D barcodes). Information for each sample that contradicts any of these validations yields manufacturer notification.

Difficult to detect

Triggering events might be the disbursement of product in, say, a Chicago pharmacy that was packaged for distribution in Latin America, or the appearance of expired product that is being dispensed through a retail pharmacy, as the paper explains. Such situations are among the more difficult instances of counterfeiting to detect, the paper says.

Hart says that most of the companies NanoGuardian is working with are focusing on the US marketplace. “When they find a problem, they can work with their supply chain partners to find out where it’s coming from,” he says.

NanoGuardian utilizes a “razor/razor-blade” cost model. Drugmakers that work with NanoGuardian pay a one-time cost of about $1.5 million for a custom nanoencrypter machine. Upon doing so, “you’ve bought the razor,” says Hart. The “blades” that do the nanoencryption represent an ongoing cost of “fractions of a penny per dose, and nanoencryption contracts typically are done on a yearly basis.” The Closed Loop Protection Program is available on an annual basis, too.

Physical security layers

In a manner similar to NanoGuardian’s, JDSU has evolved its offerings from physical security to product security services. The company now boasts three product security elements, says Scheer: technology, applications, and program management. Its authentication solutions division is the culmination of an effort it began in early 2008 with the acquisition of American Banknote Holographics (ABNH), the security pioneer that introduced holograms onto the globes of Mastercard credit cards. It began its security work based on the perceived threat to paper currency of the color copiers introduced in the 1980s.


The company today boasts expertise in such pigment-based technologies as color-shift inks as well as such covert technologies as its Charms document authentication solution, which uses printable microstructured taggants that can be added to coatings or inks on top of a substrate, and personalized with letters, numbers, symbols, logos, colors, shapes, and textures. Charms can also be used in the company’s overt SecureShift color-shifting ink and standalone in varnish, the company says. Charms can be incorporated using conventional printing processes, such as flexography, gravure, pad, and silk screen.

JDSU also supplies the MetaSwitch label, which adds a non-shifting color to SecureShift technology, and Phantom, a shadow effect that moves through the SecureShift label. SecureShift can be used on labels, closures, shrink-wraps, blister packs, and holograms or in the plastic of a bottle.

“We’re a full-service vertically integrated shop,” says Scheer. “We can do prototyping, and manage security inventory for our customers. Also, we have design professionals experienced in security and brand packaging.”

Concerning physical security, Scheer says that he is “seeing the importance of layering technologies growing more and more, and of integrating technologies to achieve multiple purposes. “The brand owner is no longer satisfied with just one technology,” he says, with some requesting “seven, eight, or nine features in one.”

Serialization action

FDA’s Congressional mandate is to recommend a serialization system within a year, setting the stage for (potentially) a national track-and-trace system that would encompass state-level pedigree laws as well as securing bidrectional flow of product data up and down the supply chain. In January, the agency released draft guidance for public comment on a “serialized National Drug Code” (sNDC) structure wherein the existing NDC codes would be combined with additional digits to provide an item-level identification—a first step to a track-and-trace system. Without explicitly saying so, FDA is looking to align the sNDC system with the evolving standards of the GS1 organization (Pharmaceutical Commerce, Jan/Feb, p. 23). After the public comment period, FDA will be in a position to propose a final standard.

At the same time, the new Congress does not appear to be diminishing its interest in pharmaceutical security. A bill was introduced (H.R. 1450) to raise penalties for manufacturing or distributing counterfeit product, and a bill that was introduced in the last Congress, H.R. 5839, providing for a national pedigree and serialization system, is expected to be introduced.

Serialization projects are not at a standstill: AstraZeneca, for one, is continuing its global serialization effort. Two key vendors are Systech International (Cranbury, NJ), a maker of packaging execution systems for the pharmaceutical industry, and Scottsdale, AZ-based Axway, a provider of multi-enterprise solutions and infrastructure.

(Axway is also the winner of this year’s iBusiness Solution Award from the Healthcare Distribution Management Assn., which recognized Axway’s Trade Activity Manager solution for innovative supply-chain management; Axway’s serialization system is one of the modules of the Trade Activity Manager.)

Systech manages serialization in packaging while Axway manages the process—aligning serialized packaging data with business and supply chain data for end-to-end visibility and traceability, according to a March announcement. “Axway and Systech are deploying solutions for mutual customers,” says Bruce Harder, Systech director of business development and marketing, in the announcement.

Systech provides the foundation of item-level serialization and aggregation of serial numbers to packaging units. Systech’s software manages the writing, reading, and printing of serial numbers at the line level and controls the provisioning of serial numbers within the packaging environment.

Axway Track & Trace collects and manages serialized product data throughout the supply chain and links it to master data to enable viewing of product lifecycle details. The solution includes product authentication, counterfeit and diversion detection, global regulatory compliance, recall management, and data integrity assurance capabilities. PC


Real-time web mining technology gathers data for use by legal and federal entities

Web-mining software that trolls for counterfeit high-tech products—tailored to the drug industry last fall—has found twice as many counterfeiters in the first eight weeks on the job for a large drugmaker than the drugmaker’s existing anticounterfeiting tool, according to enterprise risk management (ERM) software maker New Momentum LLC. The Enterprise Brand Intelligence software also enabled the drugmaker to identify potential counterfeit networks.

“You have to be real time,” says Chris Jensen, VP for marketing at New Momentum (Santa Clara, CA). The global drugmaker, which was “losing billions” on a particular drug, was using a semi-automated anticounterfeiting product that provided reports only weekly, in contrast to the 24/7 monitoring of the Enterprise Brand Intelligence SaaS offering. “The big syndicates are slick in how they come on and off the Internet,” she says, so the increased visibility into global Internet activity is required.

Jensen believes that almost all counterfeit and gray market drug activity is on the Internet now. Various international estimates put the volume of drug counterfeiting at 10% of worldwide volume, equivalent to about $60 billion/yr. In the U.S., drug counterfeiting (estimated at 1% of volume) is a lesser concern, but drug diversion from one sales channel to another is a higher one. New Momentum sees “a lot of activity coming from Asia,” she says. A drug offering that appears to be coming from Canada may actually be from Korea. “We can identify that.”

Software as a service (SaaS) allows clients to make use of a software program without the need to install it on the clients’ IT systems. For New Momentum’s offering, users configure a dashboard and specify potential counterfeit activity details that will trigger email alerts. Customers can do a test buy of the counterfeit product, and the software captures data regarding details of the offer, including images. The data can be used as evidence in legal channels or turned over to federal agencies for their use. “Federal agencies such as Customs and Border Protection are getting much more involved,” Jensen says.

New Momentum is now talking to major drugmakers and going into pilots, she adds, and expects three or four more pharmaceutical company clients in the coming months.

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