April 2006 | Case Studies | I.T. Toolkit

Pharmaceutical Logistics: Countering Counterfeits

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To comply with a Florida regulation for tracking pharmaceuticals through the supply chain, wholesale distributor H.D. Smith implements an electronic pedigree solution.

State and federal governments are working hard to keep counterfeit drugs off the market. In 2004, the U.S. Food and Drug Administration initiated 58 counterfeit drug investigations, up from 30 in 2003, and only six in 2000.

To keep counterfeits from reaching consumers, nearly a dozen states have passed laws requiring pharma companies to have "drug pedigrees"—documents that track products as they move through the supply chain—in order to legally sell pharmaceuticals there. Florida's law requires companies to start tracking drugs this July; in California, the deadline is Jan. 1, 2007.

Many pharmaceutical firms are turning to software to help them comply with the new regulations. One such company is H.D. Smith, a national wholesale distributor of pharmaceuticals and other medical products.

The Springfield, Ill., firm is nearly ready to comply with Florida's law, after conducting a successful pilot last summer using E-Pedigree, an electronic pedigree system from SupplyScape, Woburn, Mass.

H.D. Smith is now ramping up the solution at its distribution center in Pompano Beach, Fla. Once that facility is up and running, the company will implement E-Pedigree at its other DCs in California, Illinois, New Jersey, and Texas.

Paper or Electronic?

Drug companies can comply with the new tracking laws by using either paper or electronic pedigrees. An electronic pedigree is a tamper-proof record of every stage a drug passes through in its progress from manufacturer to retail pharmacy or other dispensary.

Manufacturers can create the pedigree, or a wholesaler might do so when it receives a shipment from a manufacturer. Each time the product changes hands, a company adds information about the transaction and "signs" the pedigree using a digital certificate.

When the product reaches the pharmacy, that company must authenticate the pedigree to confirm that all previous transactions were documented correctly. With a paper pedigree, authentication involves a series of phone calls or faxes.

"Electronic pedigree software contains a self-authenticating mechanism. If the software can open and read the pedigrees, users know all the nested digital signatures inside those pedigrees are intact," explains Brenda Kelly, vice president of marketing at SupplyScape. "It's proof that the pedigree documents were not adjusted, forged, or tampered with."

Pedigree Pilot

H.D. Smith and SupplyScape set up a pilot system to create electronic pedigrees for products shipped from Stamford, Conn.-based drug manufacturer Purdue Pharma's North Carolina warehouse to wholesaler H.D. Smith's Springfield DC last summer.

Before beginning their pilot, H.D. Smith and Purdue both spent time integrating E-Pedigree with their warehouse management systems (WMS) and other existing IT solutions.

"We wanted to integrate E-Pedigree with our RFID initiative," says Robert Kashmer, H.D. Smith's vice president of information technology. Unisys hosted the software during the 60-day pilot, which was very successful, according to Kashmer.

"We did not have any false starts," he says, and the company did not need to refine the system before its full-scale implementation.

For its full E-Pedigree rollout, H.D. Smith is installing the software in Springfield, where the company hosts its entire enterprise's management systems.

Though Florida's law requires wholesalers—not manufacturers—to create drug pedigrees, some manufacturers decide to initiate the tracking documents for internal business reasons.

"If manufacturers provide a pedigree, we accept it. If they do not provide one, we initiate it, based on the Florida legislation," Kashmer says.

Happily, manufacturers, wholesalers, and pharmacies don't have to agree on one single electronic pedigree software package in order to do business together. A messaging format that allows different electronic pedigree systems to exchange data was recently developed by The Pedigree Messaging Work Group, part of EPCglobal, the standards body for RFID technology.

SupplyScape announced in February that it worked with competitor VeriSign of Mountain View, Calif., to make their systems interoperable based on this emerging standard.

Linking the Data

Drug pedigrees serve two purposes. First, they allow each company receiving the drug to understand who owned it at every link in the supply chain. "This gives companies confidence that the drug has always been owned by legitimate companies that treat the product properly," Kelly says.

Second, drug pedigrees help inspectors locate the source of a problem in case tainted or counterfeit drugs do somehow make their way into the marketplace.

Much or all the data companies add to a pedigree comes from their existing information systems. H.D. Smith draws its pedigree data from its WMS. Other companies need interfaces to enterprise resource planning or transportation management systems, while some users must enter data, such as tablet quantities or expiration dates, directly into E-Pedigree if their systems don't provide that data.

Using E-Pedigree, companies can associate a pedigree with three product units: bottle, case, or lot number. "H.D. Smith supports all three levels, depending on what the manufacturer provides," explains Kashmer.

Product may arrive at H.D. Smith's DC in serialized units—bottles or other units that use RFID tags or two-dimensional bar codes as unique identifiers—or in serialized cases, which associate one ID with all bottles in the case.

Because Florida's law doesn't require manufacturers to provide serial numbers, when H.D. Smith receives product with no unique identifier, it will associate a pedigree with all the units covered by a single lot number.

Most products in the pharmaceutical supply chain—even the 1,000- to 2,000-tablet bottles used to package drugs at the wholesale level—don't have serial numbers. Wholesalers use various techniques to associate a non-serialized bottle with a pedigree, such as identifying it by its storage location in the warehouse, or by the date it arrived in the facility, explains Kelly.

SupplyScape works with wholesalers to understand the various ways they organize warehouse operations, and has built business rules into its software to accommodate those different approaches.

"Depending on how wholesalers set up operations, they can make sure they match pedigrees to the correct bottles," Kelly says.

Serializing individual units is not yet common practice in the industry, but some manufacturers have started putting RFID tags on their products. Purdue, for example, used RFID tags on OxyContin bottles shipped during the pilot with H.D. Smith, and Pfizer is incorporating them into wholesale packaging for Viagra.

Manufacturers using RFID usually include a serialized bar code as well, in case the recipient doesn't have equipment to read the electronic tags.

While some pharmaceutical products pass through more than one wholesaler before reaching a pharmacy, H.D. Smith ships directly to retailers. The company's customers can use a web browser to view a pedigree containing information up through the point where the wholesaler sent the shipment out the door, Kashmer says.

Beyond the Regulations

Because H.D. Smith already has a proprietary WMS, it doesn't look to SupplyScape for functions beyond the ones required to meet the new pedigree regulations.

But SupplyScape offers optional modules that leverage data collected for pedigrees to achieve other goals, such as managing inventory to avoid out-of-stocks, tracking shelf life information, and assisting with targeted product recalls.

"Because the pedigree collects information at a granular level, it provides wholesalers and pharmacies—the people in the operations areas—with more detailed information than they had previously," Kelly says.

Along with H.D. Smith, another wholesaler currently implementing SupplyScape's technology is FFF Enterprises of Temecula, Calif. FFF is a leading distributor of human plasma products and flu vaccines. SupplyScape will host the E-Pedigree system for FFF, which will offer its customers two ways to receive pedigrees.

"FFF can transfer pedigrees electronically to customers, or their customers can view pedigrees on a web site," Kelly says.

H.D. Smith has begun managing electronic pedigrees in Florida, but it has not yet laid out a timetable for applying the software to its other DCs.

"Based on the performance in Florida, we will start focusing on additional DCs," Kashmer says.

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