Fulfilling Track and Trace Requirements in Life Sciences – Part 3: How to Derive Value from your Investment
Since we released SAP Advanced Track and Trace for Pharmaceuticals on September 15th, I had numerous discussions with customers about how to get there, what would come next and especially how to derive value out of the current track and trace efforts. Even though the main target is compliance right now, at the end everybody tries to understand where additional value can be derived which is understandable given the enormous cost of packaging line equipment, changes in warehouse operations and IT infrastructure. So what did you actually get for your Dollars (or Euros, Swiss Francs, Danish Krona or British Pounds for that matter). Did your company already realize any additional value beyond compliance and is there more to achieve?
Packaging lines under control
One interesting aspect that customer shared at last year’s Movilitas “We track” Conference was the fact that their final overall equipment effectiveness (OEE) for a pure-serialization line (i.e.no aggregation in that line) was up from the values before serialization. That customer reported a dramatic dip in OEE initially but once all the little (and larger) issues have been solved, OEE was higher than before. This may be a result of the intensive work on the packaging line, where a lot of the small issues that were not transparent before became visible and had to be tackled for printing and scanning to work properly on the line.. Now, once all those have been solved, the machine could run at higher OEE. However, no customer reported a higher OEE for a line that covers aggregation steps. So as a result we can assume that OEE can stay at current levels or may even slightly increase for serialization only but will go down if aggregation is added. So no additional value to be harvested here!
Even though the different national legislations have been put in place to enable track & trace throughout the supply chain to increase drug safety in the first place, they may also positively impact your ability to track products within the company. With serialized barcodes printed and aggregations stored in a central repository, companies can monitor internal product movements much easier on a much more granular level. And those product movements can span the world very much like external shipments. The ability to uniquely identify a single unit of finished product together with the exact information where this unit is at any point in time may allow much better cold-chain monitoring and provide ad-hoc visibility into the critical supply chain of narcotics as well as extremely expensive products. These benefits may lead to the decision to include aggregation even for products where this is not legally required. However that has to be evaluated against the dip in OEE as discussed above.
Better understand your supply chain
Even if pharmaceuticals world-wide were tracked and traced without gap (which is not the case in most markets anyhow), this would not necessarily increase your external supply chain visibility. To a large extend this is due to the fact that you don’t own the data and / or have no right to use them. In today’s pharma supply chains, the dispensers have the most granular level of data. This is the place where demand becomes visible and that’s why companies like IMS made it a business to crunch these data, mask them and sell them to the Pharma companies. This even has been cemented in some markets through the setup e.g. of the national databases in Europe where the pharmacy view is physically separated from the manufacturers database. The same holds true for the US market where data are sent along the supply chain. As a manufacturer you gain no visibility in the supply chain at all. Even in the final stage of the US legislation with full track and trace being mandated by 2023, manufacturers will not have an unobstructed view on their downstream supply chain. Manufacturers may gain some insights from returns, but the vast volumes will not be traceable for the manufacturer for the same reason: no access to data unless the wholesalers share them.
One monetary benefit that companies may be able to realize would result from the ability to selectively recall products. Imagine a pallet of a finished product that wasn’t cooled properly at some point in the supply chain and therefore the product was severely damaged. You would expect returns that would come in once the product reaches the point-of-dispense and even consumers. Today manufactures have no choice other than to recall the entire batch. In a world where products are serialized and aggregations are known, you can pinpoint the pallet where all returned products were shipped on and therefore could recall all units from this pallet. However, most national systems currently do not support this. This would require some changes, e.g. in the definition of messages for the European Hub which currently supports batch recalls only.
Chargebacks and rebates
One more process that may see a change is that of chargeback claims which is especially important in the US market. Wholesalers request chargebacks from their suppliers as they are forced to sell below their purchase price due to contracts between marketing authorization holders (MAHs) and group purchasing organizations (GPOs) representing the various dispensers. The validation of the chargeback claims at the wholesaler poses a significant effort and duplicates cannot always be avoided at the wholesaler and may not be detected at the manufacturer. In addition it is hard to pinpoint the exact price at which a certain unit was sold to the wholesaler as prices may vary over time. In the future manufacturers may require wholesalers to send the serial numbers with the chargeback request, thus avoiding duplicates altogether and allowing determining the exact price at which the product was sold.
It is still very much a mystery how to retrieve real value from the investements made into serialization and track & trace. Maybe the scenarios mentioned above materialize, maybe not. I wold be interested to hear your comments.
To always stay on top of latest developments and best practices on track and tracea in Life Sciences, watch out for the next blog! Please also feel free to approach us and to follow us on @SAP_Healthcare. We very much look forward to hearing from you, soon!
I feel one very compelling reasons to consider moving sooner rather than later into this space is the danger and damage of litigation. While it is true that the known percentages of counterfeit and adulterated drug product is much higher in the developing countries, many folks as from the beginning of time, seek to find a cheaper alternative to buying from secure suppliers at the in-country price point. This will continue to grow given the costs and prices associated with pharma R&D and manufacture. If a box with a label on it that was counterfeit but appears to be from a legitimate MAH causes an adverse event in the developed countries pharma needs a to be able to clearly demonstrate to a complainant whether a pedigree of manufacture exists or not that traces back to the purported manufacturer. If it cannot because of serialization, then any further litigation would likely fail too.
Also to echo a point made in earlier in this forum, the issue of returns and chargebacks, often a murky topic between manufacturers and trading partners offers a very clear picture of how much, how many and which.