Search our site
  • Phone
  • Contact us
  • Locations
  • Search
  • Menu

share

  • Add this article to your LinkedIn page
  • Add this article to your Twitter feed
  • Add this article to your Facebook page
View or print a PDF of this page
.

"For pharmaceutical companies, combating counterfeiting is a complex issue, and the coexistence of different approaches by  governments and private companies can compound that complexity."  

DR STEVEN CARDEN, TECHNOLOGY CONSULTING, PA CONSULTING GROUP

What pharma can learn from the tobacco industry

Dr Steven Carden

CHE Manager

1 February 2012

 

Billion-Dollar Industry

The illicit trade in counterfeit pharmaceuticals is worth an estimated $200 billion a year and has obvious implications for public health. A range of anti-counterfeiting measures are currently underway or under consideration. These measures include, at country level, reimbursement initiatives, e-pedigree and covert authentication, and, at EU level, co-operation agreements and the directive on Falsified Medicines.

For pharmaceutical companies, combating counterfeiting is a complex issue, and the coexistence of different approaches by  governments and private companies can compound that complexity. As countries and regions move at different speeds with different solutions, manufacturers have to adapt supply chains to cope, losing operational efficiency and agility.

In addition, some of the approaches have unanticipated side effects – for example, if governments mandate particular technology solutions, they may create a defacto monopoly for the technology providers.

Why Consider Tobacco?

To resolve the complexities facing the pharmaceutical industry in dealing with counterfeiting, it can be helpful to compare the experience of other industries that face comparable issues. These include the logging and beverage industries, but in this article we’ll focus on the tobacco industry, where we estimate that anti-counterfeiting is up to five years ahead of pharma.

Though counterfeiting takes a slightly different form in the tobacco industry (with smuggling being an important factor), it faces many of the same complexities as pharma. For example, there are once again conflicting pressures in tackling illicit trade: the Framework Convention on Tobacco Control, EU agreements and individual countries’ legislation all make different and sometimes contradictory demands.

10 Lessons the Pharma Industry Can Learn from Tobacco

Given the similarity of the challenge, there are salutary and highly relevant lessons to be learned from the tobacco industry’s experience. Here are 10 of the most important:

  1. Focus on the problem, not the technology. Too many proposed solutions are “technology push,” not “problem pull.” Invariably, these miss the mark and require additional complexity and cost that do not add value.

  2. Formulate a strategy early on.Decide whether your organization should be a leader, a fastfollower or a late adopter. What resources are you going to apply? Is there competitive advantage to be had?

  3. Find industry-wide solutions for industry-wide problems. Initiatives from industry bodies and joined-up responses from the industry are much more powerful than anything that an individual company can do.

  4. Balance policy, enforcement and technology. The most successful solutions put in place so far have come from enhanced policy and increased enforcement supplemented by technology. For example, California’s tax stamp implementation increased tax revenues by around $150 million. This achievement is attributable to increased enforcement and duty levels in addition to technology which enabled the enforcers to detect illicit trade and provided evidence for prosecution.

  5. Make sure the industry gets involved. In tobacco, the industry is perceived as part of the problem, but manufacturers have the best visibility of the legitimate supply chain and therefore the best intelligence as to what is going on. They have to be part of the solution.

  6. Realize that denial is not an option. Tobacco companies denied that there was a problem for years and as a result had the World Health Organization’s Framework Convention on Tobacco Control (FCTC) forced on them. Denial effectively lost them a place at the table.

  7. Standardize, standardize, standardize. When you have to deal with multiple countries, multiple sectors and multiple companies, it becomes vital to standardize interfaces, systems, coding technologies, and so on in order to manage complexity and cost. Consider a factory that sources product for 10 different countries. If each country legislates differently, that factory has 10 times the complexity of manufacture, unless standards for printing, line systems and so on are put in place.

  8. Create a portfolio of solutions. Each country has a different mix of issues and therefore some solutions are more suited for some countries than others. For example, increased enforcement and border control might work best in Africa, whereas in Western Europe high-tech track and trace systems can be preferable. Companies need to create not just one set of solutions but a portfolio from which they can select the most appropriate combination for each situation.

  9. Know what success looks like. Particularly in negotiations with governments, it is vital to be able to demonstrate return on investment. For anti-illicit trade measures, however, it is typically extremely difficult to prove that a given change has had the intended effect. There is no agreed metric or methodology for counting counterfeits.

  10. Collaborate with the public sector. The public sector can supply regulation and enforcement muscle provided the right commitment is there (which it should be, given the harm illicit trade does to the global economy and population). The private sector will bear the brunt of any implementation, however, and so it must involve itself actively in the debate about what should be implemented.


Cross-industry Influences Are Already Affecting the Pharmaceutical Sector

Activities in the tobacco world are starting to spill over into other sectors. For example:

  • Turkey has a system for tracking and tracing cigarettes, spirits and beer; it has now launched a similar system for pharmaceutical products

  • Albania launched a tender for a track and trace system, not only for cigarettes and spirits but also for pharmaceutical products

  • Morocco has implemented a security marking system for all beer, soft drinks, mineral water, alcohol and tobacco products.

A couple of years after implementing security product marking for tobacco, Brazil introduced a requirement for medical products, too, to be marked with a unique serial number to allow track and trace.


These Cross-industry Currents May Strengthen

Given the FDA’s ownership of both tobacco and pharmaceutical regulation, we can expect to see accelerating crossover between the two industries driven from the U.S. In the EU, there is a clearer separation between, for example, the tobacco and pharma  regulation. Even so, health officials are part of the European negotiating team for the FCTC, and it is inevitable that the thinking and
rationale from one sector will slip into another in Europe. The pharma industry could in future face some onerous conditions copied from tobacco regulation, such as global track and trace, which could require manufacturers to uniquely identify packs of drugs and mandate scanning at each point of transfer in the supply chain. Other possibilities include licensing of manufacturing equipment, prohibition of internet sales of products and equipment, and “know your customer” provisions. Governments may pass the cost of implementing measures like these on to the industry.

The tobacco industry experience repays study, then, and not only to help formulate anti-counterfeiting strategy: given the cross-over trends, pharma companies may soon find themselves subject to some of the same anti-counterfeiting policies as tobacco companies.

If pharma adopts a “wait-andsee” approach, as the tobacco industry did, governments are likely to impose technology solutions that companies do not want, and will find punitively expensive. The pharma industry, and individual pharma companies, need to formulate a coherent global strategy, and then seize the initiative. 

Dr Steve Carden is a technology expert at PA Consulting Group.


For more information on PA's work with the pharma industry, click here or contact us now for more information.  

NEWS UPDATES

Sign-up to receive company updates and press releases by email or newsfeed:

SIGN-UP

 

   
Corporate headquarters
123 Buckingham Palace Road
London SW1W 9SR London SW1W 9SR
United Kingdom
Tel: +44 20 7333 5865 Tel: +44 20 7333 5865
contact us now