To ensure that the drugs we take are safe, new federal rules require pharmaceutical firms to track prescription drugs from their major raw materials through to the pharmacy. It sounds simple, but that process involves detailed coordination with far-flung raw material suppliers, laboratories, distribuors and pharmacies. It’s a heavy lift.
“In this particular case, it’s important because industry is trying to solve problems that are inherently multidimensional … so industry has to come up with a solution to, ‘move pharmaceutical from the raw material provider through the factory through the distributor pharmacy all the way to the pharmacy today but eventually even to the consumer?’ There are many challenges involved in that process,” said David Closs, the John H. McConnell Endowed Chair of Business Administration and professor of supply chain management at the Eli Broad College of Business.
David Closs
The industry challenge stems from the Drug Supply Chain Security Act (DSCSA), which mandates an electronic, interoperable system to identify and trace many prescription drugs through the supply chain. It’s intended to enhance the ability to help shield consumers from counterfeit, stolen or contaminated drugs, according to the U.S. Food and Drug Administration. Elements of the rule took effect last year with full effect mandated by 2024.
“Historically we may have just looked at, for example, what’s the lowest-cost solution. That‘s important, but that’s not the only issue we have today,” Closs said of how the industry would ensure compliance with the law. “We also have to protect the product and reduce the chance of counterfeit product so, there are multiple ways that the product could be adulterated which requires multiple dimensions for protection which requires firms to involve expertise from many different areas and jointly develop a solution.”
That means bringing together executives in supply chain management, engineering, packaging, the digital realm and other disciplines to look not only at the challenges of meeting the federal rule but, opportunities created by compliance with the mandate. For example, what could be the benefits of using the drug-tracking data to help repay the cost of serializing drugs by tracking product flows through channels of distribution and looking for opportunities for improved efficiencies?
The pharmaceutical industry also has the challenge of coming up with a standard format and avoiding incompatibility headaches like the old Beta vs. VHS videocassette recorder battles of the 1980s.
“It’s critical” to establish common standards, Closs said. For example, years ago, UPS spent tens of millions of dollars designing and developing a circular bar code, which it intended to be used by its peers. But rivals rejected it, fearing being beholden to UPS.
“If you don’t have constituency and collaboration with when designing the infrastructure that you have throughout the supply chain, you end up duplicating,” Closs said.
Closs, through the Axia Institute – a research and education center dedicated to developing effective and sustainable solutions to improve public and private value chains, and where Closs was the founding faculty director — has been working to help the pharmaceutical industry solve these issues in a practical and universal way.
Established by MSU in 2013, Axia partners with industry to solve grand challenges and conduct cross-disciplinary research in areas of value chain optimization, data analytics, engineering, smart packaging, anti-counterfeiting and water and food safety.
Axia hosted a “Pharma Forum” with representatives of many of the major pharmaceutical companies late last year in Midland, MI where Axia is headquartered.
“The rationale behind the Pharma Forum is to bring in the major drug companies – we had six of them there – and say, this is a problem you’re all facing; this is not something you can compete with. If Pfizer does it or if Lilly does it, they are not going to have a competitive advantage,” Closs said. “This is an example of a supply chain change that will make it better for everybody if we work together because it will be less costly and more consistent.”
Axia is an ideal hub for such work. “Axia had been doing research in things like packaging pharmaceuticals. I had been doing research through Axia on value chain and what drives value chain performance,” Closs said.
“There is a significant concern in the pharmaceutical industry regarding counterfeiting and the black market, any way you can illicitly get drugs into the consumer’s hands, it’s something that’s very high-value … it’s hard for the consumer up front to make a judgment, is this an adulterated pharmaceutical or not?” Closs said. “In Axia, from the beginning, we’ve focused on value chain and value chain risk … how do you reduce the risk in the value chain, and that obviously includes things like counterfeiting, packaging, black markets, grey markets; all the ways you can falsely get the product to the consumer.”
“The pharmaceutical industry is an ideal place, because it is a very expensive product; it’s hard to find what’s good and what’s not good, so you have to protect the value chain from end to end to ensure safety to the consumer,” Closs said.
The Pharma Forum was the start of the process in finding solutions to these issues. Axia plans to work with its forum partners throughout 2019 in that quest.
