Based on data from FreightWatch International, 13% of cargo
thefts involved pharmaceuticals during the first quarter of this year. While
the number of thefts has declined, the average loss has not, increasing from
$154,000 from last year, same period, to $235,000 this year. Counterfeit drugs
are also a growing concern. According to the US Federal Drug Administration
(FDA) and the National Association of Boards of Pharmacy, 1% to 2% of drugs are
counterfeit in the US. With more than four billion prescriptions filled in the
US each year, worth an estimated $310bn, 1% equals about four million packages
that may be counterfeit.
States have taken steps to increase the security of
pharmaceuticals. For example, California’s latest attempt will go into effect
in 2015. It will require all medications to have a serial number and be
accompanied by electronic records detailing every instance the product change
hands. While the California requirement is a good move to secure the
pharmaceutical supply chain, it is only one state. The total cost for companies
within the state to implement this requirement is estimated at $3.5bn. Other
states have different requirements. This has created a current situation of
confusion within the industry, added costs and opportunities for thefts and
counterfeit to occur between states.
As such, the US government is taking steps to establish a
national track and trace program. Currently, there are two bills under
consideration that differ slightly. Both bills will require companies to track drugs
among supply chain partners including wholesalers, distributors and packagers.
Also, the bills will require the FDA to establish a licensing program for third
parties that provide outsourced logistical services to support pharmacuetical
manufacturers, wholesalers and dispensers. Among the differences between the
two bills is whether to require lot or unit level tracing system.
Complying with a national requirement may prove costly for
those companies involved; however, the benefits should outweigh the costs by
creating much needed efficiencies. In fact, many pharmaceutical companies are
already investing in such IT solutions. According to UPS’ Pain in the(Supply) Chain Survey, technology investment is among the top strategies
companies utilize to increase efficiencies and competitiveness. And, as noted
in Ti’s brief, Pharmaceutical supplychains move towards cloud computing, September 15, 2012, pharmaceutical
companies such as Pfizer and GlaxoSmithKline are already utilizing SaaS
solutions to interact and collaborate with supply chain partners.
For logistics and transportation providers, additional
federal regulatory requirements will likely increase logistics costs. Larger
providers such as DHL and UPS should be able to handle these costs and pass
much, if not all, on to their customers. However, niche providers may struggle
to handle these additional costs.
