Edition 58
It’s 2014; Do You Know Where the Counterfeits Are?
by Marc Rosenblatt, Director of Business Development, Veracity Network

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When considering the tremendous growth of the counterfeit drug market both in the U.S. and throughout the world, we are more inclined to focus on the forward side of the supply chain. Furthermore, the industry along with government officials have concentrated almost entirely on track and trace solutions which, while offering a level of protection against diversion, does not ensure the quality of the product inside the package.

In an effort to understand where counterfeits are entering the supply chain, Veracity Network, Inc. “Veracity” conducted pilot programs at strategic points in the U.S. supply chain with companies representing manufacturers, distributors and return companies. By utilizing an innovative technology designed specifically for the supply chain environment, non-technical personnel are able to easily and quickly verify the authenticity of the pharmaceutical product while still in their sealed packaging. With just the push of a button, the XT250™ Pharmaceutical Screening System (see Figure 1) easily detects counterfeit product, displaying results as simple pass/fail in as little as 20 seconds. The XT250™ examines crystalline structures of a sample object, inside any sealed container, using Energy Dispersive X-Ray Diffraction (EDXRD). X-ray Diffraction is widely recognized as the most reliable tool for the crystal structure analysis of pharmaceutical solids and crystal form identification. This methodology consists of applying an x-ray beam through a sample object and then collecting the diffracted x-ray pattern “fingerprint”. The diffraction pattern is then processed through a Material Recognition Software Engine (MRSE), which then compares the unique features of the Sample Material against the selected Reference Material in the MRSE library database. Figure 2 illustrates the MRSE matching process. This particular example displays the fingerprint for counterfeit Artesunate (used primarily for the treatment of malaria) matched up against authentic Artesunate found in the MRSE library.

Based on the results of the pilot programs (see Figure 3), there is great concern that counterfeit product affects many areas in the U.S. supply chain. Of even greater concern is that the highest counterfeit rates were found in return areas. Compared to the World Health Organization’s counterfeit estimate of 3% of the U.S. drug supply, these areas appear to be an easy way for counterfeiters to make money. This should not be a total surprise given that counterfeits can be introduced at various points in the supply chain eventually flowing downstream to returns areas.

Let’s examine the two types of product returns:

Salable product return areas are a major threat given the potentially dangerous product can be restocked and sold to another customer. An unsettling example of this occurred during one of our distributor pilot programs. The system detected a number of counterfeit products that were sent back as returns. Upon further examination, it was discovered that the sealed bottles contained counterfeit replacements for the valid product. Unfortunately, this type of activity is all too common, threatening the safety of the general public and costing the industry million of dollars each year. By deploying counterfeit detection technology as part of their salable returns process, all returns would be screened prior to the acceptance of a return.

On the other end of the spectrum are unsalable returns. These returns are typically sent back through return processors whose primary role is to handle the final disposition of the product and determine the customer’s credit compensation. Given that these types of returns are not introduced back into distribution, there has been little to no attention paid to this area. This mindset is exactly why counterfeiters love reverse logistics. Manufacturers typically are only informed of a small fraction of the counterfeit products that are in distribution at any given time. Tests are performed by the manufacturer in an attempt to understand the counterfeit formulation and collect data that will be used for investigation and potential prosecution. By deploying counterfeit detection technology as part of the unsalable returns process, the manufacturer would have access to considerably more counterfeit product and more importantly would be able to conduct geographic trend analysis of specific formulations.

Regardless of the type of return, there are financial implications that ultimately impact the entire industry. By eliminating the credit compensation associated with counterfeit product returns and ease of access, we are directly or indirectly taking money from the counterfeiters and putting it back into the legitimate supply chain. Everyone, except the counterfeiters, wins.

In summary, the counterfeit industry continues to be a low-risk, high-reward business and outside of non-intrusive methods (i.e. pedigree, holograms, 2D, RFID), which have had limited success, the industry has struggled with providing protection against counterfeits. While these non-intrusive methods enhance the security of the supply chain, they do not test the material inside the sealed bottle and therefore provide only limited protection. Proposed legislation introduces a uniform system of tracking and tracing drugs, which on its own will not prevent counterfeits from entering the supply chain. Management training has drilled into our brains to “think outside the box” to come up with the best solution to the counterfeit problem. Perhaps it’s time we stop thinking outside the box and actually start looking at what’s inside the box. The challenge is getting supply chain partners to work together and recognize their level of responsibility in protecting the general public. In the end, the only losers are the counterfeiters.
Marc Rosenblatt is the Director of Business Development for Veracity Network, Inc. Veracity provides technology and services to protect the pharmaceutical supply chain. Mr. Rosenblatt has over 15 years of reverse logistics experience within the pharmaceutical industry providing innovative solutions to pharmaceutical manufacturers, distributors, hospitals, pharmacies, and government agencies. Mr. Rosenblatt holds a Bachelors of Business Administration from Hofstra University. For additional information, please contact Marc Rosenblatt, Director of Business Development at marcrosenblatt@veracitynetwork.us

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