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March 31, 2009   Conference Attendees Share Concerns About Counterfeits

XStream Systems, Inc. in an effort to ascertain attitudes about pharmaceutical safety surveyed industry representatives during two recent conferences. Although the sample is relatively small, it does represent distributors (small and large), specialty providers and manufacturers. The questionnaire that was used is included as an addendum at the end of this overview. Following is a narrative overview of respondent’s views regarding supply chain security.

When asked what the area of greatest vulnerability was in the pharmaceutical supply chain, an overwhelming preponderance of the survey participants identified return goods as an element of serious concern. Other “weak links” that were identified by participants included foreign manufacturing/importation and internet sales through loosely regulated suppliers. So, it seems that with increasing pressure for cost savings in prescription medicines, there may be heightened levels of anxiety about the quality of the products.

The conference attendees who filled out the survey overwhelmingly utilize some method or process of pharmaceutical supply security. All respondents who do use some procedure for incoming receipts represent a variety of processes because there appears to be no consensus regarding a safe reliable method for determining the legitimacy of the product whether it be from manufacturers, distributors or returns from customers. This collective uncertainty seems to have generated a desire for a dependable testing or authentication system that can stand alone and integrate with other non-standardized methods of validation.

Although most of the respondents were aware of the existence of drug identification and authentication technology, a significant portion of them were not familiar with a specific technology or solution. It appears that the conference attendees had a general sense that the technology had been developed, but lacked awareness concerning its availability. This uncertainty is not limited to authentication, however, as multiple systems of track and trace are in the market with minimal integration opportunities available.

When asked about their concerns about the possibility of their warehouses being compromised by counterfeit or adulterated drugs, the responses demonstrated a clear demarcation between distributors/providers and manufacturers.

Handlers and disseminators were very concerned about the devastating potential for harm that fraudulent pharmaceuticals represented for their enterprises. Liability issues and damage to professional reputations were often selected as recognizable risks.

A large plurality of the sampled group feared that their present methods of supply security were not adequate to protect their inventories. In addition, a large majority of respondents believe that the potential exists for some catastrophic counterfeiting event to occur sometime this year (2009).

In summary, the survey respondents from the two conferences who represented distributors, specialty providers and manufacturers exhibited serious concerns about the safety and integrity of the supply chain. The intensity of concern appeared to increase the farther away one was removed from the actual production of the product.

As Congress considers importation of pharmaceuticals as a cost-saving measure, the individuals who took the survey perceived that counterfeiting potential would increase. The elevated risk that might ensue requires effective and stringent methods for securing the supply chain. While pedigree offers some semblance of assurance, it is imperative that identification and authentication technology be employed to protect and insure the integrity of the product.

The following are specific excerpts from the surveys:

• 2/3 of respondents consider the greatest vulnerability of the U.S. pharmaceutical supply chain is with pharmaceuticals from foreign countries, internet sales and loosely regulated suppliers.

• Nearly 75% of distributors and pharmacy providers who responded use some process of pharmaceutical supply security including pedigree tracking, sensor based technologies (RFID, barcodes, etc.), visual inspection, weight inspections and materials analysis but their methods are not uniform. All respondents who do use some procedure ultimately use a variety of processes because collectively they seem uncertain that the methods they have in place can properly protect their inventories from fraudulent or counterfeit products.

• 75% of all respondents were aware of drug identification and authentication system technology but 50% were not familiar with a specific technology or a particular solution.

• 75% of respondents are concerned about counterfeit drugs impacting medication safety to their distributors/providers/patients.

• 75% of respondents are concerned over their financial liability of counterfeit drugs within their inventories.

• 75% of respondents are concerned about their professional reputation being ruined if they were to have counterfeit pharmaceutical in their inventories.

• 2/3 of respondents expressed concern over the issue of counterfeit drugs within the supply chain.

• 75% of the respondents were concerned that their current methods and processes for supply security were not enough to protect their inventories.

• 50% of respondents fear a catastrophic counterfeit event within the U.S. pharmaceutical supply chain in 2009.

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