January 2008 | Case Studies | Casebook

Message On a Bottle

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Thanks to new pedigree technology, pharmaceutical manufacturers and sellers no longer find establishing chain of custody a bitter pill to swallow.

The increasing volume of counterfeit drugs entering the pharmaceutical supply chain has created a challenge for the industry and for government regulators.

Until recently, traceability stopped at the manufacturing process. Now, regulations require drug pedigrees to improve supply chain security and prevent counterfeiting.

A pedigree, or certified chain of custody, details each leg of a drug's distribution—from the manufacturer, through acquisition and sale by any wholesaler or repackager, until final sale to a pharmacy or person administering or dispensing the drug.

In addition to preventing the distribution of counterfeit drugs, pedigrees provide full visibility during recalls and security problems. They can also help prevent Medicare fraud and other chargeback scams.

Under federal legislation known as the FDA Prescription Drug Marketing Act (PDMA), all drugs distributed by wholesalers, distributors, or repackagers require pedigrees, unless the manufacturer designates the seller as an Authorized Distributor of Record (ADR) for that drug. Manufacturers are also exempt from the law.

In addition to the PDMA, the majority of states—approximately 35—have pharma supply chain pedigree legislation either in effect or in progress.

"State pedigree laws began in the early 1990s," explains Diane L. Darvey, Pharm.D., JD, director of pharmacy regulatory affairs for the National Association of Chain Drug Stores (NACDS), Alexandria, Va. "Some are more stringent than the PDMA; others less so."

Stating the Rules

State regulations related to authentication and certification requirements, lot number, expiration date, returns, and reporting requirements vary.

In Florida, for example, all drug wholesale distributors must include pedigrees to show chain of custody. The pedigree can be faxed on paper, sent via EDI, or transmitted online using electronic pedigree (ePedigree) software.

"In Florida, pedigree information must be supplied down to the lot number," notes Steve Perlowski, vice president industry affairs for the NACDS. "If a case contains 48 bottles, for example, each bottle must have its own pedigree."

California's pedigree legislation, which goes into effect Jan. 1, 2009, will have the strictest requirements to date. All drugs manufactured in or entering California must have ePedigrees - paper pedigrees will not be considered acceptable. The law will require pharmaceutical manufacturers to create unique identifiers for products, track each product's pedigree, and maintain electronic supply chain records.

"California is the first state to require that pedigrees be electronic," says Jeff Durand, vice president of professional services for SupplyScape, a Woburn, Mass., vendor of ePedigree technology.

One problem with paper pedigrees, which are currently allowed in all states, is that they're fairly easy to counterfeit. With the volume of drugs wending their way through the supply chain every day, it's difficult for trading partners to ensure pedigree compliance requirements using paper documentation.

Electronic pedigrees secure the pharma supply chain by authenticating the drugs every time they change hands. And because secure third-party Web sites—usually the ePedigree vendor's site—host the certificates, they're safe from counterfeiting.

Independently hosted ePedigree software registers the drug, usually at the case or pallet level, either through bar-coding, serialization, or RFID. The technology allows users to verify, through the chain of custody, who else has held the drug.

Speaking the Same Language

It takes cooperation among pharma manufacturers, distributors, and retailers to make ePedigree technology work. EPCglobal, an organization specializing in the development of industry-driven standards to support the use of RFID, stepped up to the challenge by creating a standard that enables and facilitates collaboration among pharma supply chain partners.

In January 2007, EPCglobal's board of directors ratified the organization's Drug Pedigree Standard, which defines a common format that supply chain partners can use to collect electronic pedigree information. The standard includes instructions for creating electronic pedigrees, adding information to them, and collecting legally binding signatures digitally.

It also describes how companies can send and receive data. Six ePedigree technology vendors helped write and test the standard, and they all base their current ePedigree offerings on it.

EPCglobal's standard ensures industry interoperability. The certified software of one ePedigree vendor can exchange information with the certified software of another ePedigree vendor, allowing supply chain partners to use certified software from different vendors.

EPCglobal then began transforming the new conformance requirements into a certification program that enables ePedigree solution vendors to submit their products for compliance testing.

In mid-2007, EPCglobal certified three software solutions—Axway's Synchrony ePedigree, rfXcel's Active ePedigree Management, and SupplyScape's E-Pedigree data management solution. To date, these are still the only three vendors certified by EPCglobal.

EPCglobal also plans to develop a track-and-trace platform standard for the pharmaceutical industry that would use EPC RFID tags to monitor the movement of drugs through the supply chain.

Chain of Custody

As a drug moves from the manufacturer through the supply chain, each company adds to the pedigree. The seller identifies the drugs and the full chain of custody, then certifies the pedigrees and transmits them in advance.

The trading partner receiving the drugs authenticates the pedigrees. When the shipment arrives, the pedigrees are matched to the products and signed, verifying their accuracy. The pedigree software maintains the product-to-pedigree match while the products are in inventory.

"As an example, suppose there are 100 cases on a pallet," says Durand. "A manufacturer can create a pedigree for the entire pallet, or at the case level, or even at the unit level."

The distributor can then send individual units to pharmacy customers, with each unit having an individual pedigree.

Benefits Abound

All the stakeholders in the pharma supply chain derive benefits from ePedigrees. Manufacturers establish a secure product before it enters the supply chain, wholesalers enjoy efficient operational support, and retailers receive products with automatic pedigree authentication.

The role 3PLs and carriers play in pharma supply chain pedigree requirements vary. "Most companies use FedEx, UPS, DHL, and other expedited providers," Darvey explains. "These carriers are exempt from pedigree requirements because they don't store or warehouse the products."

The involvement of 3PLs, however, depends on state law and whether they are considered an agent of the manufacturer. "Under federal law, manufacturers and their authorized distributors of record do not have to pass pedigrees," she says. "Most manufacturers designate their 3PLs as ADRs."

As such, these 3PLs are exempt from PDMA requirements. More stringent state laws, however, may require their involvement to some extent.

3PLs Jump In

Some drug manufacturers and 3PLs utilize ePedigree technology to facilitate supply chain performance, even if it isn't legally required. "Many manufacturers utilize 3PLs as their distribution centers," Durand says.

"In fact, some 3PL customers use our electronic pedigree technology. Our manufacturer customers send their products and provide the pedigree information to those 3PLs, who update it when possession and location change."

Drug pedigree data provides valuable information and protection for every business linked to the pharmaceutical supply chain. ePedigree technology saves time, enhances security, and fosters trading partner cooperation, making tough, new pharma supply chain requirements easier to swallow.

Improving Compliance Collaboration and Security

Bio/pharma companies, retail pharmacy chains, 3PLs, specialty wholesalers, repackagers, and medical device kitters comprise the core users of SupplyScape's Product Security ePedigree (PS-ePedigree). The solution meets the requirements of states with current pedigree regulations, as well as the requirements of the FDA Prescription Drug Marketing Act (PDMA).

One PS-ePedigree user, Associated Pharmacies Inc. (API), Scottsboro, Ala., operates as a buying cooperative for more than 1,000 independent pharmacies in 40 states. It provides pharmacy owners with the buying volume leverage to reduce costs for brand and generic prescription drugs, and over-the-counter products.

"Our initial interest in e-pedigrees began when Florida required pedigrees on all products not purchased direct from the manufacturer," explains Clint King, vice president and general manager of API. "We realized that in order to offer pedigree information outbound, we had to know who provided which products on our shelves. We also had to know the lot number, delivery dates, and other information.

"We implemented a new ERP system, then began paperless picking, which let us track incoming and outgoing lots electronically," he adds. Because the company had no programmers on staff, it wanted a solution it could implement quickly with no major impact on its operation.

In April 2007, API implemented SupplyScape's e-Pedigree data management solution to improve regulatory compliance, supply chain security, and trading partner collaboration.

"We didn't have to install any hardware in-house," states King. "SupplyScape provides an online, off-site server that is redundant and backed up properly. All we had to do was get our data fields populated and loaded into SupplyScape's server. That allowed us to provide pedigrees to our distributors and pharmacies."

API went from project startup through testing with suppliers, Web portal setup, and live pedigree processing in two months.

The company's server serializes cases for putaway. The receiving clerk matches the product with its purchase order, then applies a putaway label on the case. This internal serial number stays on the case throughout its stint in the warehouse.

"Then, when we pull the product, we scan that serial number, and tie it back to the original purchase order, along with the lot number, expiration date, and date received," reports King.

API uses its ePedigree technology in conjunction with case-level serialization to improve supply chain security and visibility. As a result of serialization at both inbound receipt and outbound sales pick, the company knows the location of the physical drug product for any pedigree in its system.

The ability to exchange pedigrees electronically makes it easier for upstream trading partners to do business with API, and enhances downstream pharmacy trust in API and its products.

"Another benefit is that it makes recalls easier to track," notes King. "We can drill down into our system and determine the pharmacies that received specific lot numbers."

Most pharmacies API sells to don't have the software to accept electronic pedigrees, so they need paper pedigrees. "SupplyScape gave our pharmacies an online tool so that, in the event the pharmacy was being audited, it could log into the Web site and retrieve any requested pedigree for any item," King says.

API would like to see pedigree requirements simplified. "We hope for a national guideline to alleviate the confusion of complying with different state regulations," says King.

Harvard Makes a Smart Choice

Axway Corporation's Synchrony ePedigree technology, which won the 2007 HDMA iBusiness Solution Award, allows users to enhance operational efficiency by linking physical inventory movements with B2B transactions such as purchase orders, ship notices, and invoices. This linkage provides greater visibility into the supply chain.

Harvard Drug Group, Livonia, Mich., which maintains eight locations throughout the United States, selected Axway technology in mid-2005 and went live with it one year later.

"It wasn't difficult to integrate with our existing technology, especially because the communication was through XML," reports Dan Alcock, systems analyst. "Of course, we had to make some changes to our warehouse management system so it could provide the pedigree information that we needed to store and transmit."

Harvard made sure the WMS created and sent the XML files in the proper format, then tested the Axway technology to make sure it processed the information correctly.

"The only products we receive that require inbound pedigrees are those not coming directly from manufacturers," notes Alcock. "In most cases, we still receive paper pedigrees from these companies."

On the outbound side, though, Harvard's customers are typically other distributors, and it transmits pedigrees to most of these customers electronically. "They also use Axway," he states.

One early benefit of the technology, according to Alcock, is that it allowed the company to continue to do business in Florida. "We also gained some new business because some other distributors were not able to provide pedigrees back then," he adds.

Internally, the technology has provided the company with more visibility into the supply chain, especially with the product that it ships to its customers.

"This helps us in two ways," he notes. "First, we have a tighter returns process. Before, a customer could have returned a lot that they hadn't purchased from us. That can't happen now."

Second, in the event of a recall, Harvard can quickly identify the customers to which it had shipped lots.

ePedigree technology not only prepares the company for increasingly stringent governmental regulations, but also pays off in terms of improved efficiency, both internally and with supply chain partners.

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