Making sense of serialisation

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With more than 40 countries already implementing or set to enforce their serialisation mandates by 2018, are pharma exporters from India geared up to face this challenge?

Imagine a world where all medicines, from strips of tablets to syrups to vaccines, in every chemist shop in the world, from Africa to America to India, has a unique serial number with information on the origin, shelf life and batch number. If all these numbers can be stored, tracking a substandard or counterfeit medicine to the exact location where it was produced becomes much easier.

Actually, serialisation, or the process of marking products with unique identifiers, is already a reality in most countries for a variety of products, from FMCG to toys to medicines. The next logical level of security is to use these serial numbers, which in most cases is a unique number of alphanumeric code, most commonly encoded into a barcode, to track each pharma product as it moves through the supply chain, from the time it leaves the manufacturer’s gate, to the stockist/distributor and finally to the chemist shelf.

A further level of security is to be able to trace back the journey of each pharma product. Serialisation, combined with track and trace mechanisms, are being seen as one important solution to ensure that substandard or counterfeit medicines are discovered before they do too much harm so that they can be recalled from global markets.

The case for serialisation

The pharma sector thrives on exports and more so the companies from India, resulting in the country being often referred to as the ‘pharmacy of the world’. According to India Brand Equity Foundation (IBEF), India is the largest supplier of generic medicines globally, accounting for 20 per cent of the global export volume. Pharma exports from India stood at $16.4 billion in 2016-17, and is expected to reach $20 billion by 2020, as per estimates from the Pharmaceutical Export Promotion Council (Pharmexcil). India thus has no choice but to be part of the global mandate for serialisation, followed by track and trace systems.

India’s serialisation initiative for pharma products started in January 2011, when the Directorate General of Foreign Trade (DGFT), launched the country’s track and trace system for all pharma products exported from India. The US, the biggest pharma market of the world, has its serialisation mandate, known as the Drug Supply Chain Security Act (DSCSA), which was signed into law on November 27, 2013. Though it is set to be implemented by November 27 this year, enforcement of the product identifier requirement was postponed by a year. The European Union (EU), another important destination for pharma exports, has the Falsified Medicines Directive (FMD), under which new track and trace regulations come into force from February 2019. Countries like Belgium, Greece and Italy have reportedly already made serialisation mandatory. Turkey is often cited as an early bird example of having one of the longest standing track and trace systems in place for all pharma products.

With more than 40 countries already implementing or set to enforce their serialisation mandates, most important export destinations will require some level of serialisation/ traceability in place by 2018. How prepared are pharma exporters from India to face this challenge? Will they lose out on their competitive advantage to exporters from other countries?

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Shaunak Dave

As usual, there are the early birds and the laggards. Shaunak Dave, VP, Asia and CEO and MD, India, Optel Group, points out that outside the US, the maximum number of US FDA plants are located in India and these plants do not have any choice but to comply with US DSCSA regulations. He reveals that the Optel Group started serialisation projects in India around 2011-12 and most big and medium size pharma exporters are today equipped with serialisation at the secondary and tertiary packaging levels to meet India’s export regulations. “Many companies exporting to the US are ready with serialisation but aggregation is still a work in progress as it is not a mandatory requirement as of now. However, it is the requirement from their master distributors and business partners.”

Multiple standards, multiple complications …

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Pradeep Dhargalkar

Serialisation has been successfully implemented in many other sectors, but pharma serialisation has turned out to be more complicated. Comparing the mandates of various countries, Pradeep Dhargalkar, Head of Packaging Development, Unichem Laboratories says, “The four basic data to be serialised remains the same across mandates: i.e. batch number, expiry, GTIN, and serial number. In the EU, apart from serialisation, the pack also needs to be tamper evident.”

But regulators of countries have not been able to agree on which standard to follow. Even when they do decide on a global standard, (GS1 seems to be the most common choice), there are differences in the interpretations, which has turning out to be a nightmare for manufacturers. “Since there is no single global standard, every country has adopted their own regulations, which has made it difficult for manufacturers,” says Shivaji Chakraborty, Asst. GM, Packaging Development, Fresenius Kabi Oncology. He also points out that the Indian guideline is for products which are exported from India, not for products which are being sold in the domestic market. By this logic, manufacturers would need to have different packaging lines for export and domestic markets, adding to the capital expenditure by way of labour costs, separate storage areas, etc.

Explaining further, Dave says,“India’s serialisation guidelines are based on the GS1 standard which is adopted by a majority of countries who have announced this compliance. A few countries like China mandated different standards. Considering the implementation issues, the regulations are under review in China and industry experts believe that it will also be aligned with GS1 global standard.”


ICRIER-RxGPS recommendations to CDSCO on serialisation

  • Recommendation 1: CDSCO and DGFT should delegate an independent body to undertake (i) an economic impact assessment for domestic serialisation and traceability requirements under consideration, and (ii) a regulatory impact assessment of existing requirements for serialisation and traceability of exports.
  • Recommendation 2: With regard to product exported to a country that has its own serialisation requirements, the “tertiary package” should be considered the highest level of shipping container for export. For example, the pallet will typically be the tertiary package for exports to the United States or the European Union. The homogenous case would be the tertiary package for markets where the case is the highest level of container exported. All levels of packaging below the tertiary package (as defined here) should then be exempt from unique identifier and labelling requirements under the India serialisation and traceability regulations.
  • Recommendation 3: DGFT should grant exemptions on a country-by-country basis, not a manufacturer-by-manufacturer or product-by-product basis.
  • Recommendation 4: Regulators should not define the GTIN indicator digit; it should be set by the manufacturer, as provided in the GS1 GTIN General Specifications.
  • Recommendation 5: NIC should revise the DAVA database and portal to:
  1. Segregate the portal interface for exports and domestic product.
  2. Eliminate the primary package serial number field, or at a minimum, permit the field to be left blank.
  3. Eliminate the pricing information field, or at a minimum, permit the field to be left blank.
  4. Eliminate the requirement to upload product photos.
  5. Permit a single manufacturer to repeat serial numbers for different GTINs.
  6. Provide the option and interface for automatic upload of data via web service.
  7. Prevent a company’s data from being visible to other companies.
  • Recommendation 6: NIC should maintain development and simulation environments to support revisions to the DAVA portal.
  • Recommendation 7: NIC should establish a clear, predictable process for communicating revisions to the DAVA portal.
  • Recommendation 8: In the initial phase of requirements for domestic product, CDSCO should require serialisation of the saleable unit.
  • Recommendation 9: CDSCO should not require manufacturers to capture, maintain, or report any information related to the movement of products by downstream trading partners.
  • Recommendation 10: CDSCO should adopt a four-year, phased implementation timeframe for domestic requirements.
  • Recommendation 11: CDSCO and DGFT should consider alternative approaches that limit data volumes.
  • Recommendation 12: There should be a process for accrediting, certifying, or otherwise auditing serialisation vendors.

Differences in interpretation snowball into implementation challenges across the supply chain. For example, Dave points out that while the Indian regulatory authority’s standards are based purely on the definition of packaging (primary, secondary and tertiary) and therefore considers primary packaging as the first level of serialisation (although this is on hold), this view is not aligned with global mandates from various countries. As per US DSCSA, EU FMD regulation, serialisation begins with the unit saleable pack, says Dave. He reckons that this is one of the biggest challenges as far as technical feasibility and commercial viability is concerned, especially for few packaging configurations like blister, vial and ampoules.

Elaborating further on the differences between global mandates, he points out how the EU FMD mandated not only serialisation but tamper evidence on the unit saleable pack. Also, the requirement for aggregation is not specifically mentioned. However, supply chain visibility and efficiency cannot be attained without aggregation which entails transferring ownership of serial numbers across the supply chain partners, ease of reconciliation at the stage of receipt of goods and handling of exceptions such as receipt of goods, rejection, rework, change of package disposition/ status, etc.

Delayed DSCSA enforcement an opportunity …

Taking heed of these complications, regulators seem to be giving manufacturers some more time to comply with their mandates. On June 30, a draft guidance published by the US FDA announced that though their serialisation mandate, DSCSA would roll out as scheduled this November, they were postponing the enforcement from November 27, 2017 to November 27, 2018.

In a joint response, Delhi-based Indian Council for Research on International Economic Relations (ICRIER), in collaboration with the Alliance for Global Pharmaceutical Serialization (RxGPS) stressed that the delay is limited to affixing the serial number and barcode to packages and homogenous cases, and verification activities related to those packages that are not serialised. The draft guidance does not delay any requirements with regard to product that is serialised. Importantly, this means that beginning November 27, 2017, manufacturers must be able to verify (i.e., match the serial number or lot and expiry) packages that are serialised. Verification is required within 24 hours. This requires systems and processes that provide prompt access to the underlying serialisation data generated by the Indian manufacturing site/ CMO.

ICRIER-RxGPS also states that it should be assumed that FDA expects manufacturers, suppliers, and trading partners to use the additional one-year period as an opportunity to fix problems and challenges, so that necessary systems and process for serialisation—including data exchange between Indian manufacturing site and CMOs and the US manufacturer/ site—are in place and functioning by November 27, 2018.

To a manufacturer like Fresenius Kabi’s Chakraborty, this means that “the authorities will not randomly check consignments. In case of non-compliance, there is no penalty. Companies who have already implemented serialisation have to verify the data within 24 hours in case there is any query from the market/ authority.”

Adding another dimension, Dhargalkar explains that as per Section 582(b)(1)(C), manufacturers must begin to provide the transaction information, history and statements in electronic format only. He predicts that with serialisation/ aggregation, productivity in the initial few months shall be impacted. “Over the long term, (we) can expect a drop of minimum two per cent.”

… or a double edge sword?

However, the delay in enforcement of the product identifier requirements under DCSCA might turn out to be a double edge sword. As the joint response from ICRIER-RXGPS points out, “The draft guidance does not address or account for the DSCSA provision on “grandfathering”, which is intended to allow the sale of unserialised product in inventory. The June 30 guidance does mention the forthcoming guidance document on grandfathering of inventory as clarifying the grandfathering rules for packages produced during the enforcement discretion period. Stakeholders are working to add clarity to this issue and ensure that unserialised product in inventory may be sold. Till such time a guidance is released regarding “grandfathered products”, there will remain some uncertainty about adjustment of production volumes. This, in turn, may inflict losses upon smaller CMOs that are yet to implement the requirements for serialisation.”

They also point out that the current draft guidance suggests that the enforcement discretion only applies to products that are sold by the manufacturer before November 27, 2017. This would require careful management of inventory.

ICRIER-RxGPS opines that given that US is one of the largest export destinations for Indian pharmaceuticals, the nature of compliance would percolate down to the lowest level in the supply chain. And therefore smaller pharma companies and CMOs which are yet to meet the obligations under FDA’s draft guidance are likely to lose business, at least in the short run. This is because they do not yet possess the wherewithal, due to numerous challenges, including lack of vendors with expertise to provide IT solutions, lack of adequate of capabilities and readiness, etc. Further, it would affect their ability to immediately phase out fixed costs incurred.

Summing up, ICRIER-RxGPS emphasises that the time should be used to focus both on the process of affixing serial numbers and barcodes and the process of exchanging the data necessary for verification. Companies should not assume that additional delays will be issued.

No time to waste

So while pharma manufacturers might be heaving a sigh of relief and be tempted to put serialisation on the back burner as November 27, 2018 seems a long way off, this is definitely not an option. As a joint response from ICRIER-RxGPS points out, “One year is not a significant amount of time for serialisation implementation. Companies should continue to work diligently to implement serialisation. Delays in vendor lead-times for equipment, software, and services impact a CMO’s ability to meet its deadlines. Planning ahead and allowing extra time to anticipate potential delays is prudent.” The authors also point out that there are also approaching implementation deadlines for the EU and Russia; so it is especially important not to delay progress.

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Shivaji Chakraborty

Chakraborty is of the opinion that, “It is always advisable to stick to the existing plan and implement it as soon as possible. This will allow the organisation to conduct some trials and testing to avoid complaints from the market in future.”

Dhargalkar concurs, saying, “Since the implementation date is now postponed by one year, it is more important to see how the overall pharma industry will maintain the tempo for new packing lines machinery with solution providers.” He includes cloud testing with software and also hardware for revising printed packaging components, including labels so as to facilitate systems in the distribution and supply chain.

The legal ramifications

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Jean-Pierre Allard

“Legally speaking, companies not serialising their product after November 27, 2017 are not respecting the law,” says Jean-Pierre Allard, CTO, Optel Group. Explaining further he says, “To make a parallel, the FDA is like the policeman that tells you he will not arrest people driving under 120 km/h in a zone where the maximum is 100 km/h. If by going at 110 you have an accident and kill someone, there will be more charges against you and you have more chances to be accused as your conduct was illegal. After the draft guidance was issued, some consultants in the serialisation business declared that, similarly, a company that does not serialise in the first year could expose itself to pursuits if a counterfeit version of its product kills or arms someone. I personally believe this is a little bit far-fetched but technically speaking, yes the risk exists.”

Analysing the draft guidance Allard says that though it does not does not give more details on the requirements in the law, it however gives an assurance (and this is repeated several times in the document) that no actor within the supply chain (manufacturer, repackager, distributor, wholesaler) will be penalised by any means if they produce or transact products without a serial number produced between November 27, 2017 and November 26, 2018. “Basically, it gives one more year to manufacturers to be compliant,” is his interpretation.

From the solution provider point of view too, Allard cautions that ”by no means (should) the extension in enforcement be seen as a signal to stop the (serialisation) effort. The extension allows solution providers to breathe more and to increase the quality (more checks) instead of focussing primarily on the delivery time.” For manufacturers that did not started yet, it allows them to stay in business and they must see this one year as their last chance to become compliant, is his advice. Addressing manufacturers who are in the process of working towards compliance or already compliant, Allard says they must see this one year as an opportunity to run serialised batches as much as they can and to take the time to analyse their process and make changes and tests so that the extra step of serialisation is not reducing their throughput.

A work in progress

There is no doubt that serialisation is a steep learning curve, so how are pharma companies in India coping? Optel Group’s Dave reveals that just a handful of companies from India have completely implemented end-to-end solutions. So also, very few of them have started considering compliance with EU FMD regulations and implementation guidelines.

Dhargalkar confirms that Unichem Laboratories is already compliant to Indian DGFT requirements for serialisation. As far as other export destinations are concerned, they are in the process of getting compliant to the US requirements while (compliance to) EU will be completed before their implementation date.

Thus, Dave opines that the one year delay in enforcement for US DSCSA is positive news for the Indian pharma industry “if we take advantage of it to re-validate serialisation strategy in a holistic way and start acting now. Late implementation means compromise on quality, stressful working and (being) susceptible to serious business risk.”

Working together

While the US FDA might seem to be doing the industry a favour by recognising ‘that some manufacturers may need additional time beyond November 27, 2017, to ensure that products are properly labelled with a product identifier’, the delay seems to be driven by their concern ‘to minimise possible disruptions in the distribution of prescription drugs in the US.’

Stakeholders in the serialisation process, including industry associations of pharma distributors, retailers, generic drug manufacturers and solution providers can take some credit for the one year delay. After all, it was their description of the challenges of implementation of product identifier requirements that resulted in the decision to delay enforcement.

Lines 90 to 95 of the June 30 draft guidance primarily mention two reasons. Firstly, a limited number of vendors that that have the expertise to provide solutions related to information technology systems for data management or specific equipment for packaging or manufacturing lines. And secondly, the lack of capabilities and readiness of contract facilities that perform manufacturing operations on behalf of the manufacturer.


Benefits of serialisation beyond regulations

  • Better rotation of the stock: When one picks a product in the warehouse prior to ship an item, one scans it serial number (its identity), so if the system knows that there are still products, from a previous batch, that are on the warehouse shelves, it will tell the operator to pick the older ones instead (before they expire).
  • Better quality: When aggregation is used, it becomes almost impossible to pack a shipper case without the correct count. Also, if a product is rejected after any quality check during the packaging, the serial number is identified as “inactive” until someone with the proper access right scans it to change its status back to “active”. In comparison, before serialisation, any one could put back a product on a conveyor and no checks would be done.
  • Better control: The serialisation solutions produce reconciliation report more precise and accurate than ever.
  • Better understanding: The serialisation solutions produce performance reports. Thanks to all the timestamps associated with serial numbers events (like print event, inspection event, packing event), the report can give an  indication to the packaging engineer where he can improve the packaging process. In other words, it gives a way to become Industry 4.0 compliant.

(Source: Jean-Pierre Allard, CTO, Optel Group)

IMAGE: Implementing timeline for manufacturer serialisation of salable units


Thus the common challenges posed by serialisation seems to have united competitors. Allard represented the Optel Group, as one of the nine companies at a US FDA public meeting held in October 2016, where these stakeholders expressed concerns about the tight timeline. “We were the only solution provider presenting and I started my speech saying that I was not here to represent Optel, but also to represent my competitors who are in the same situation.” He argued in this presentation that while there were around 15000 packaging lines that needed serialisation, only around one fourth of these lines had been serialised so far.

Once again, in April 2017, Optel sent an official letter to the FDA reiterating their concerns about being able to support all the manufacturers to complete the serialisation roll-out of the their packaging lines.

The fallout of not being in step

Stakeholders in India’s pharma sector have held similar interactions with regulatory officials involved with the country’s pharma serialisation and traceability initiative. One such meet was convened by the Delhi-based Indian Council for Research on International Economic Relations (ICRIER), in collaboration with the Alliance for Global Pharmaceutical Serialization (RxGPS), Washington DC in early March this year. The meet was attended by policymakers from India and the US, spanning the Central Drugs Standard Control Organization (CDSCO), National Pharmaceutical Pricing Authority (NPPA), United States Department of Commerce, US FDA, India Field Office, World Health Organization. Industry were associations like Indian Drug Manufacturers’ Association (IDMA) and Pharmexcil, civil society (Partnership for Safe Medicines India) and representatives from top pharma companies based in India also attended.

Based on discussions at the meet, ICRIER and RxGPS released a white paper in May, titled, ‘Implementing India’s drug serialisation and traceability requirements to advance patient safety and support global trade’. Importantly, the paper contained 12 key recommendations to CDSCO. (See box: ICRIER-RxGPS recommendations to CDSCO on serialisation)

Commenting on the action taken so far on the recommendations, a joint reply from ICRIER-RXGPS states that although the white paper has been circulated among various policymakers and implementation agencies in India, a specific timeline towards addressing these recommendations has not been issued thus far.

Commenting on the third recommendation, dealing with country-by-country exemptions, ICRIER-RXGPS says that there is concern that the exemption process has become even more complicated. The situation that must be avoided is that perfectly good product manufactured in India for the US market is delayed or stopped at customs due to confusion on the exemptions—this is a realistic possibility unless the exemption process is simplified and streamlined. Similarly on the fifth recommendation, dealing with serial numbers unique by GTIN, not by manufacturer, NIC committed to make this change to the DAVA database at a March 27th workshop, but no action has been taken. The joint note from ICRIER-RXGPS cautions that all of these issues could cause export and distribution of product from India to be stopped.

Beyond serialisation

20170831ep42There is no doubt that the implementation of serialisation/ track and trace systems will add to the steps in the manufacturing process. This translates into capital expenditure, loss of time to set up these systems, train the workforce, etc.

In fact, the ICRIER-RxGPS white paper of May estimates that the implementation timeline for manufacturers for serialisation of salable units, is as long as 57 months, from the initial stage, project development planning and team selection, followed by capital approval, selecting and securing vendors and partners, procuring long lead items (which could take as long as one and a half years), installing and validating equipment and systems, integrating them with partners and reporting systems before beginning to roll out the actual serialisation process.

In a best case scenario, the white paper says that this timeline could be cut down to 46 months, if the procurement of long lead items can be completed in a year’s time.

Given the heavy investment, are there ways to increase the RoI? Sure there are, claim solution providers and the extra year’s time can be used to put in place better systems and processes to increase RoI.

While the prime objective of implementing track and trace is to fight against counterfeits to enhance patient safety, Optel Group’s Dave says that supply chain visibility, revenue protection, tax/ incentive (for) fraud elimination, protection against diversion, and efficient recall are additional benefits of implementing such solutions. Further spelling out these benefits, his colleague Allard says implementation of serialisation and track and trace systems would lead to better rotation of stocks, better quality, better control and better understanding. (See box: Benefits of serialisation beyond regulations)

Given the multiple mandates and the costs involved, most companies in India are not in a position to think beyond serialisation right now. They would echo Unichem Laboratories’ Dhargalkar stance that for now, the focus is on compliance. Fresenius Kabi’s Chakraborty also cautions that serialisation can only ensure supply chain integrity if track and trace is implemented. “Serialisation plus authentication can ensure the customer about the originality of the product.”

What happens now?

Regulators and industry must realise that with all the investment in serialisation, it is not a foolproof solution. As the ICRIER-RxGPS white paper published in May this year, cautions, ‘Serialisation is one of many tools necessary to ensure quality, authentic products are delivered to patients. It does not, however, address all issues related to pharma quality and safety. In addition, when serialisation information is not properly used or protected, that information can be used improperly to give substandard and falsified medicines the appearance of legitimacy, creating the exact security threats that traceability systems are intended to prevent.’

Dave also emphasises the need for global harmonisation of standards and exchanging data between governments, saying,“Counterfeits are a global issue and the operation nexus is intercontinental. It has to be handled globally with effective synchronisation and harmonisation among various governments and agencies.”

Regulations are in a constant state of flux, with regulators striving to balance their duty to safeguard the needs of their citizens, as well as work with industry to see how best this can be done. There are early signs that regulators from other countries are taking their cue from the US FDA’s delayed enforcement of the DSCSA. For example, while India’s DGFT considers primary packaging as the first level of serialisation, it seems to have put this on hold for now. So also, industry observers report that the Government of China is also planning to align with global GS1 standards and may plan for 2D code serialisation. Thus all stakeholders will need to work with, rather against, each other, to set common standards. Only then, can we achieve the common goal of increased patient safety through more secure pharma supply chains.

(Disclaimer: Opinions and recommendations attributed to ICRIER are that of its Health Policy Initiative team members and not that of the institution itself.)

viveka.r@expressindia.com