Fighting counterfeiting within the supply chain

Stanley Chia, senior vice president at e-invoicing supplier, Tungsten Network, details the importance of secure supply chains in the age of the counterfeit drug.

Pharmaceutical supply chains are increasingly complex and highly regulated. The whole industry is facing huge pressure to perform and as a result, having an agile and robust supplier base is becoming more and more essential. The number of counterfeit drugs and product recalls as well as sophisticated cybercrime attacks are also highlighting the need for supply chains to be transparent and collaborate closely.

Illegal activity

According to the Pharmaceutical Security Institute, the number of worldwide counterfeit drug incidents increased from 196 in 2002, to 2,108 in 2012 to 3,509 in 2017. Current estimations of the worldwide cost of counterfeit drugs are in the range of $75 billion. As a result, governments across the world are stepping up their efforts to combat this illegal trade. From February 2019, the Falsified Medicines Directive will come into force across the EU and require all prescription medicines to come with a security feature enabling hospitals, pharmacies or healthcare providers to verify their authenticity. In the US, the FDA’s Drug Supply Chain Security Act outlines requirements to develop and enhance drug supply chain security by 2023. These developments are good news for pharma companies as they try to manage product quality and security.

Another key challenge is managing product recalls when or if they happen. The US Recall Index, a measure of publicly announced recalls across a variety of industry sectors in America, showed a sizeable jump for pharma in 2017. Over the whole year, 325 products were recalled, compared to 289 in 2016. When a recall happens, manufacturers must communicate clearly and swiftly with the entire supply chain, from wholesalers to pharmacies—and even patients in some cases—and collect the faulty items.

Finally, pharma companies are regularly being targeted by cyber-criminals. Whether intellectual property, private patient health data or commercially sensitive information, there is huge scope for fraudsters to obtain valuable data and so pharma companies are on high alert to mitigate the risk and protect their customers.

In the light of these varying challenges, collaboration is becoming more and more important. Pharma supply chain relationships need to be healthy so that information can be passed up and down the chain effectively and all partners can see the full picture and plan ahead more accurately. This applies both in terms of supply and demand but also when things go wrong.

Knowledge is power

The only way to fulfil these responsibilities is to have an agile, efficient and highly-optimised supply chain and an in-depth and up-to-date knowledge of all your suppliers. As with all industries, the more a business knows about its supply chain, the greater its ability to mitigate against risk. However, within pharmaceuticals, this is amplified as the stakes are so high and no one can afford to have a weak link. With increasing pressure for companies to maintain comprehensive records on their suppliers, the need for enhanced vendor master management has never been more urgent or relevant.

If pharma businesses perform these essential checks at this stage of the process, they can then have confidence that no matter what challenges get thrown their way their suppliers will be responsive and robust enough to survive.

Solid data

It is important that pharma companies use statistical and financial data as evidence to inform their decisions about suppliers. They need to know if suppliers are at risk of becoming insolvent, or are involved with financial crime or politically sensitive situations. When agreeing to a new contract, businesses should first check the trading status of a supplier and be certain they are compliant and registered with all the appropriate authorities. They should ask for comprehensive company details, bank account data and information about registered signatories to help build a clearer picture of a potential supplier. It is important to cross reference this information against sanction, watch and law enforcement lists to help identify those who have connections with financial crime. Running a credit score check can also help minimise problems down the line as having a network of suppliers with a low-risk credit rating will increase the likelihood of being paid on time, while also ensuring the companies you are dealing with are financially sound.

Because this is a huge task and requires teams to trawl through vast quantities of data in various different jurisdictions, it makes sense to use integrated and up-to-the-minute digital solutions, such as the recently launched Mastercard Track, to help with the process.

All of these checks and balances will become even more vital as the pharma industry expands into emerging markets. As it establishes new supply chains with unknown, overseas suppliers, having a detailed insight and knowledge of your supplier will be a linchpin of the supply chain process.