The Coming Wave of Pharma Supply Chain Regulations: Insights from TraceLink NEXUS ’15


New regulations across the globe are coming into effect, requiring pharmaceutical manufacturers, distributors, dispensers, and others up and down the chain to build serialization, verification, and traceability into the supply chain. At TraceLink’s NEXUS ’15 conference, we learned a lot about the impact of these new requirements, how companies are responding, and whether there is an ROI beyond compliance.


The times they are a changin’ for the players across pharmaceutical supply chains, from API suppliers to CMOs, to manufacturers, packagers, distributors, dispensers/pharmacies — just about everyone across the chain. Over the next few years, they are facing a bevy of deadlines for compliance with new regulations around the globe by governments attempting to ensure the integrity, efficacy, and authenticity of their nations’ pharmaceutical supply. By 2018, over three quarters of the world’s legal drugs will fall under one or more of these regulations (see below, Coming Tidal Wave of Pharma Supply Chain Regulations).

Coming Tidal Wave of Pharma Supply Chain Regulations

  • United StatesDSCSA (Drug Supply Chain Security Act), part of the Drug Quality & Security Act (HR3204), sets a series of milestones over several years mandating a unique (e.g. serialized) product ID on prescription drug packaging, tracing of drugs from manufacturers through each step to the primary pharmacy, ability to detect and quarantine suspect drugs and notify the FDA, and licensing of 3PLs handling pharmaceuticals.
  • European UnionFalsified Medicines Directive (FMD, a.k.a. 2011/62/EU), mandates EU-wide controls, including serialized 2D barcodes and tamper-evident packaging, to prevent illegal drugs from entering into the supply chain. In addition, the information needs to link to a repository that stores productand serialization data, provides validation of identity at the point of dispensing, and requires risk-based validation throughout the supply chain.
  • ChinaCFDA (China Food and Drug Administration; previously SFDA) track and trace laws require serialization, tracking from manufacturing through distribution, and reporting to CFDA for all drugs by December 31, 2015.
  • IndiaDGFT(Directorate General of Foreign Trade) Public Notice No. 13 /2015-2020 — mandates serialization of exported drugs at the unit and case level with reporting of serialization and aggregation data to the DAVA portal.
  • South KoreaMFDS (Ministry of Food and Drug Safety) requires all pharmaceuticals to be serialized by January 1, 2016 with new reporting requirements to the KPIS system (Korea Pharmaceutical Information Service) starting in 2016.
  • BrazilRDC 54 (Resolucao da Diretoria Colegiada of December 10, 2013) mandates item- and case-level serialization with serial numbers unique across the legal entity, and unit to case aggregation. The manufacturer must capture product movement and events across the supply chain, including movements by other parties, such as in internal transfer by the distributor from one warehouse to another. These represent the most complex track and trace requirements in the world with a deadline of December 2016. However, recently Brazil’s pharma industry regulatory agency (ANVISA), announced they are suspending at least one deadline for pilots to be completed by December of this year and the entire regulation is being reviewed, in light of feedback from the industry.
  • TurkeyITS (“Pharmaceutical Track and Trace System”) already has serialization and aggregation requirements for all drugs, with requirements to report all product movements into their ITS system.
  • ArgentinaANMAT requires serialization and reporting for an extensive list of pharmaceutical drugs sold in the country.
  • Saudi ArabiaSDC (Saudi Drug Code), issued by SFDA (Saudi Food & Drug Authority), mandates serialization by March 2016. They already have a central database to collect and store all product information.
  • Others — Serialization and/or trace and track regulations have been proposed or passed in Denmark, Chile, Jordan, Ukraine, Columbia, Mexico, Algeria, Nigeria, Australia, Egypt, Japan, and a number of other countries. For an overview picture see Serialization Landscape.

The cumulative mandates from these regulations create a relentless schedule and series of deadlines for the various supply chain participants (see Figure 1 ).

NEXUS ‘15 — Learning from Industry Leaders and Practitioners on the Front Lines

It was within this context that I attended the NEXUS ’15 conference in D.C., organized by TraceLink, where there were a number of informative and enlightening presentations and interactive discussions on these topics. We all learned a lot by listening to the executives and practitioners on the front lines, within the manufacturers, CMOs, distributers, and dispensers that actually have to make this all work.

Impact on Cost, OEE, Complexity, and Risk

There was some blunt talk about the impact that these regulations will have on adding cost and complexity. This should not be confused with lack of support for these regulations or attempt to delay implementation. In fact, most attendees seemed quite supportive of the goals of these new requirements, but were also realistic about the fact that these new capabilities don’t come for free, requiring new machinery, new systems and processes, and some added labor costs. Someone pointed out that, at least for a time, implementation usually has a negative impact on OEE.1 In addition, it adds complexity and some risks, such as what happens if the wrong serial numbers are applied to a batch of product (as happened to one of the companies attending). On the other hand, risks in the supply chain will be lowered over time. And there were discussions of how to derive value beyond just compliance (more on that below).

Source: ChainLink Research
Figure 1 — Relentless Stream of Regulatory Deadlines Looming

Implementation is Multi-Functional

Much of the discussion was on the practical implementation steps needed to bring in the new equipment, systems, and processes and how they impact many different functions in an organization. Standard operating procedures (SOPs) need to be reworked for plants and distribution centers. IT will need to get involved to figure out how to integrate the production line with enterprise systems. Procurement people need to become educated about the requirements in order to look not just for the lowest price solution, but also look for the best fit for solving the problems; buying a solution that is proven and actually works.

Preparing to Go Global

Companies also should strive to build in the flexibility for growth and anticipate the coming requirements of global markets, rather than just solving one market or one capability at a time. One person talked about the challenge of bidding for large public tenders in countries with new regulations coming, such as say bidding on vaccines in Brazil. They pointed out that you may or may not win, but you still have to be prepared in case you do win the business.

Artwork, Printing, and Related Considerations

Another area brought up several times was labeling and packaging artwork. The manufacturer or CPO needs to see whether there is space in their existing artwork for the 2D barcode and whether or not the current equipment is capable of printing it properly. These things need to be considered early in the project plan so that nothing becomes a surprise bottleneck or source of delay. One participant said they did testing by printing the first few labels at different sites and sent them to various end points around the world, making sure the label formats were correct and that each label survived shipment and could be reliably machine read throughout its journey. They also considered what their policies for tolerance of exceptions or unreadable labels should be and what threshold should trigger rejection a shipment. Other complexities include figuring out the decommissioning of serial numbers and what to do with rejected serial numbers; do you need to reclaim them or not.

Need for Real-time Responses

Another discussion point was whether real-time verification is needed, in particular for returns. One distributor said that today they process returns in real-time. They said if it takes 24 hours to get verification from the manufacturer (which the regulation allows), they will need another whole warehouse just for returns. I’m not sure if the ‘whole warehouse’ comment was hyperbole or not, but the point was clear — they can’t afford to have a process where they initiate a return and then set it aside waiting up to a full day for an answer. So they are trying to figure out how they can initiate the request early and obtain the information before the returned product shows up at their dock.


Regulations require that companies accepting ownership of drug products ensure they have received compliant product. When serialization regulations begin, this will mean that wholesalers and other supply chain members will need to verify they have received appropriately serialized product at the saleable unit level, even for products in sealed cases which they receive. In addition, verification inquiries will also result in the need to verify serialized identifiers at the saleable unit level. No one thinks it is practical or sensible to have to open up each and every case at each handoff on its journey through supply chain to confirm what is in it. RFID labels on each unit could be read without opening the case, but very few are taking that path, primarily due to the added cost of the RFID tags. The vast majority are opting to use 2D barcode and using aggregation2 to know what is in the case. One person from a wholesale distributor said “The distributors are very aligned; we feel we have to do aggregation.” Another said that for manufacturers, aggregation is not just about collecting the data, but also building the capabilities to push it to the WDs.

Tracking Product

Source: Image by PublicDomainPictures from Pixabay

One manufacturer said their wholesale distributors (WD) wanted aggregation data from them and they would have to invest in that, but they (the manufacturer) also would love to get visibility from the WD down to the warehouse level and who it was sold to. A person from a WD said they weren’t sure if the warehouse-level visibility was feasible or not, since they probably won’t scan intercompany transfers as that just bogs down their operations, but they will capture the data when they sell it. The manufacturer said that in particular they want to know whenever specific serial numbers that were supposed to be sold to retailer X were instead sold to retailer Y. The WD said being able to send that data to the manufacturer is “a desired state, but right now our eyes are on 2019,” which is the deadline for WDs to verify and accept only valid serialized product, including returns. The WD said they are going from lot level to serialized products and will have to manage a mixed/hybrid environment of the two for up to 8 years.

Role of Intercompany Pilots

Discussions like this about the need and desirability of exchanging these data back and forth between the players in the supply chain highlights the importance of intercompany pilots to work out the kinks and ensure interoperability. One person said they are piloting one partner at a time, getting the issues resolved, learning from it, and operationalizing it. A representative from a hospital dispenser added, “Manufacturers, please don’t forget us when talking about saleable returns. We should be part of the pilots too.” TraceLink pointed out that they have a solution called Product Track that acts as a hub for distributing serialization information between trading partners.

Another person added about working together, “Serialization is not a competitive space. It is a compliance space and regulators encourage sharing. If any player in the chain fails, we all fail. So we need to succeed together. Globally you want to build solutions once that can scale and adapt.

A WD said, “We have over 2,000 suppliers and from each one we have to get all their ASNs in the correct format before we receive the product. Now it is against the law to receive the product without it. It goes into quarantine until you get the data. There’s a lot of work to be done across the industry.

Difference in Company Size

One CPO said that in general (but with plenty of exceptions) large pharmaceutical firms have a better understanding of what they want and need to do. Smaller ones, especially those that specialize in early stage, clinical development, don’t have an opinion of what is to be done and prefer to be spoon fed a solution.

Role of the CMOs from the CPOs

One person asked whether CPOs are doing anything on their own, or are they completely driven by manufacturers? Someone responded that CPOs are mostly waiting for the manufacturers to tell them what they need, because the CPO doesn’t want to make investments before they are needed. He said, this means the manufacturer should approach the CPO sooner rather than later, because they will be serving other accounts as well and you don’t want to be at the end of the line.

Another person said these regulatory requirements are strengthening distinction between the CMO vs. CPO, because many CMOs are not really good at packaging, so this pushes them to move out of packaging altogether. Another person said they work with about 800 unique CMOs, primarily in EU or Europe, and only about 60 were even thinking about serialization, fewer of them actually doing it.

One of the biggest issues for the service provider (CMOs or CPOs) is a lack of clear signal from the brands. They said that talking about deadlines is not enough. The brands need to give the CPO/COM specific requirements for the technical integration because the exchange of serial information varies greatly from brand to brand. The CPO who brought up that point said they found 21 unique sets of requirements among their 30 top brands.

Beyond Compliance?

A key question that came up several times was whether there were any benefits to be realized beyond compliance with the regulations. A consistent answer was given almost every time, with practically the same wording being used, “Right now, it’s all about compliance.” One person said they will be focused on trying to undo the reduction in efficiencies and OEE and build it back up to where they were before. He added, “Nobody is looking beyond compliance to what else can done.

One wholesale distributor added, “Most wholesale distributors are not even prepared for piloting. We are focused not on 2023 [the date for end-to-end traceability], but 2019 which requires us to use a serial number in a practical way and how to do verification on returns. We are not focused on ROI opportunities. However, although we don’t have the bandwidth to pursue ROI opportunities now, we want to know what they are for the future. We have some thoughts for internal pilots beyond compliance, some of which might be low hanging fruit, but currently we are not committed to any of them.

Some Ideas About ROI Beyond Compliance

Though they are laser focused on compliance right now, it doesn’t mean that companies haven’t thought about possible ROI beyond compliance. One manufacturer said, “You must include long term ROI in your pitch to top management.” One area discussed was the opportunity to improve shipment accuracy. Another was the ability to do more precise and timely recalls. One person said, “If there was a problem we didn’t detect while manufacturing and we need to do a recall, instead of bringing back the whole lot, we may be able to do sub-lot recall.

Another area discussed was reduction in grey market and counterfeits. One person said, “A lot of people look at the regulations as a burden. But we are talking about the integrity of the pharmaceuticals. We wonder why we haven’t had this capability earlier — the ability to make sure we know where the product has been and has it been handled appropriately.

One manufacturer talked about using this data to reduce incorrect chargebacks. They said, “Every time a chargeback comes in, there is no guarantee that the reimbursement being asked is the same as the price sold for. With the serial number, you can tell the exact price you sold it for and can reject or correct the incorrect prices.” Another generics manufacturer added, “Besides chargebacks and returns, our commercial team is looking to use serialization to validate rebates.

Cost of Delay

One person talked about how some of the major brands, like Pfizer, have become thought leaders with deep knowledge and practical experience of what has to be done and what is possible, while other companies, especially small and medium sized firms, haven’t even thought about it. As time goes on and the urgency builds up, the laggards will become more engaged — and panicked. It takes time to learn about, put together a proof of concept, work out the kinks, conduct pilots, get interoperability working, operationalize, and roll out across the business. This was a key message, to get started now. By November 2017, a unique a serial number needs to be on every unit of product in the US supply chain, or you can’t sell it.3 As one person pointed out, “The FDA is dead serious about this. If you are not compliant, you can’t sell product and you will be out of business.

Doing Well by Doing Right

One person advocated implementing serialization more broadly than just as required in the regulated countries. They talked about how serious the problem is in sub-Saharan Africa, where 30%-60% of drugs are counterfeit (compared to less than 1% in the US and EU). They said, “Regulatory and legislative process will probably never do anything about it. Counterfeiters make so much money, they can pay off officials. Fifty thousand children die each year because their Malaria medicine is counterfeit. You could do the right thing and at the same time recapture a big part of the business. We ran a program with mobile technology using serialized labels on individual products (instead of whole package) because many people can’t afford to buy the whole pack. We promoted and explained the app with a standup cardboard display. People would authenticate their medicine using their mobile phone. They were able to scan their product until they got a green light [indicating authentic product]. In 3 months, we got 30% uplift from that.” This story reinforces the notion that you can do well by doing right.

A Worthwhile Conference

In all this was a very worthwhile and enlightening conference. It seemed everyone there had something to contribute to the greater collective understanding. I commend TraceLink for their non-commercial, highly educational approach to the event and the tremendous amount of effort they put to recruit good speakers and ensure high quality content and interactions. We learned a lot about the practical realities and challenges facing pharma supply chain players as they face the coming regulatory requirements. It was apparent that people are seeing the urgency, striving to work with partners, and racing to meet compliance deadlines, but with an eye towards reaping additional ROI at some point in the future — once they catch their breath!

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1 OEE = Overall equipment effectiveness, a measure of how effectively a manufacturing operation is being run including the amount of product produced with per given amount of resources. — Return to article text above
2 Aggregation is the ability to track and correlate, with a high degree of confidence, what is in each case. One approach is whoever fills the case records exactly what items were put in it and then uses a tamper-evident seal to ensure that what they put in is still there throughout its journey. This requires that others in the supply chain are able to access that aggregation information. — Return to article text above

3 The FDA does provide exceptions to the serialization requirement for products that have already been shipped before the deadline and are in the supply chain. — Return to article text above

To view other articles from this issue of the brief, click here.

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