• Traceability
  • Manufacturing
  • Pharmaceuticals
  • Compliance

Transparency Increasingly Essential in the Pharma Supply Chain

Written by Robert Brice
September 18, 2017

Supply chain visibility is critical across every component of the pharma sector.

Supply chain visibility is critical across every component of the pharma sector.

The pharma sector has long faced scrutiny that exceeds what is typical for even highly regulated industries.

Pharmaceutical materials are extremely sensitive as they have a direct impact on a person’s health and well-being, meaning any kind of tampering can be dangerous and potentially lethal. Furthermore, high costs in the sector and difficult tracking materials create expense uncertainty, adding to the need to create end-to-end visibility in the sector as mandated by the Drug Supply Chain Security Act (DSCSA). On top of all this, fraud is a major problem in the pharma industry as counterfeit pill markets thrive in an effort to either scam consumers or make easy money through fraud.

As if these issues are not problematic enough, pharma organizations also need to protect carefully against industrial espionage and similar threats, meaning they must not only track every item across the supply chain, but also secure it and document that it has been kept safe. These factors add up to create an incredibly tense supply chain, but the scrutiny is only getting worst. Supply chain challenges in the pharma sector are particularly evident in two parts of the market – identifying drug spending with precision and complying with regulations surrounding cold storage for certain pharmaceutical materials.

LEARN MORE: How mobile data collection can help pharma companies comply with DSCSA requirements and keep counterfeit drugs out of the supply chain »

The Drug Spending Problem

Consider the way that many people end up paying for health care services. A co-pay is given at the hospital or physician’s office to supplement the insurance, then the facility identifies how to bill for care and often sends a copy to the patient and the insurer. From there, insurers identify what they cover and send an updated bill to the patient, detailing what needs to be paid. This process can take weeks of back and forth, particularly when referrals and similar complexities are involved.

All of these complications come into play in the pharma sector but in a slightly different way. A Berkeley Research Group report explained that the pharma market in the U.S. features a situation in which many pharmaceutical deals are accompanied by special discounts, rebate opportunities and fees. All of these provisos may be met with specific conditions and some are only paid when the medication is actually given to the patient. These complexities are coming to a head as rising list prices and increased costs for patients are putting pressure on pharma distribution processes. Essentially, the end customers are getting frustrated with costs and the industry is calling for greater awareness of what expenses actually go into getting medication to patients and where the revenues are going.

The study found that initial gross drug expenditures, which is the value of payments made by patients and health plans at point of sale, is spread across a variety of stakeholders. Manufacturers end up realizing 39 percent of gross drug expenditures, with 22 percent going to the supply chain and 20 percent coming in the form of rebates, fees and the like.  When those gross drug expenditures are compared to the net drug expenditures, which are the final costs to payers, the balance tends to balance out. Put simply, rebates, fees and discounts are countering the price increases to create balance in the sector, and brands are competing heavily to gain an edge through the best deals.

According to the news source, all of this competition to optimize the complex rebate and payment environment through to the medication being given to a patient is making innovation in the supply chain essential. Visibility is needed from the manufacturer out to the benefit manager, wholesale drug seller, pharmacy and, eventually, patient and health plan. As products move between these stakeholders, proper tracking and documentation is necessary to verify all conditions surrounding payments and regulatory compliance.

ALSO READ: Supplement Recall Creates Bad Press for Health Industry »

Cold Storage, Fraud and Logistics

The pharma industry has long had to deal with environmental standards within the supply chain. Different chemicals, medications or pills can only reside in certain environments to remain safe and functional. However, the changing pharma industry is facing an even greater dependence than usual on items that are shipped in a temperature-controlled environment, Logistics Management reported. While temperature-controlled delivery is becoming more common in the last mile of deliveries, particularly in light of ready-to-prepare meal services, the global supply chain is only beginning to gain this full traceability and precision during fulfillment.

The pharma sector is now facing growing pressure to apply this level of control in its operations. In a blog posted highlighted by the news source, Lisa Forian, senior director of product quality management at Johnson & Johnson, explained that temperature control and quality management are becoming more important than ever in the pharma industry.

“The storage and distribution of controlled room temperature life science products are a costly and complex process, and requires attention at every level from packaging to logistics and monitoring to data,” Forian stated. “As we enter an age of biologically based medicines, the need to monitor and control temperature sensitivity is increasing.”

As if the need to monitor environments across the supply chain wasn’t challenging enough, the counterfeit drug problem still looms large. According to Logistics Management, the World Health Organization estimates that approximately 10 percent of all drugs making it to consumers are fake. Greater transparency into the supply chain is needed to document drugs throughout their life cycle and ensure fraud does not occur.

Both temperature control issues and fraud prevention highlight the need for serialization, license plating and mobile data collection tools within the pharma supply chain. Let’s look at each individually explore how they can transform the pharma supply chain:

  • Serialization: Using barcodes to label items from manufacturing through to delivery allows organizations to accurately and easily document asset dispositions within the supply chain. Furthermore, serialization makes it easier to get product histories and similar details so logistics professionals can identify any signs of tampering or similar problems quickly and prevent fraud from taking hold.
  • License plating: In the pharma sector, the number of goods within a shipment can escalate quickly. Imagine a setup with 50 pill bottles in a box, with 50 boxes on a pallet. That shipment would include 2,500 pillboxes. Warehouse employees aren’t going to be able scan each box or bottle in an efficient way, but license plating allows organizations to group inventories within a container and more easily trace products without as much documentation overhead.
  • Mobile barcode scanners: Wireless barcode scanners are invaluable because they allow users to log key shipping details even if they are working in a remote location. These tools make it much easier to eliminate any gaps in the supply chain by extending visibility and allowing for near real-time updates through enterprise resource planning integration.

EXPLORE: Maintaining a Healthy Supply Chain in the Vitamin and Supplement Industry »

Reworking the Pharma Supply Chain

The pharma industry is experiencing a period of rapid disruption. All of the change in the health care sectors is beginning to extend to pharma, adding another layer of scrutiny to an industry that already faces considerable regulatory pressure. Businesses that want to keep ahead of this pressure and avoid problems down the line must move forward on supply chain digitization, something that is increasingly accessible in today’s technological climate. At RFgen, we offer the full suite of tools pharma organizations need to track assets through the entire supply chain and comply with industry regulations.

Additional Resource