The Battle for Traceability in Healthcare Supply Chains

Adopting traceability technologies provides more than just enhanced safety. Manufacturers gain valuable data that helps optimize supply chain operations and mitigate risk.

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Counterfeiting is the largest criminal enterprise in the world today, according to the U.S. Patent and Trademark Office, with domestic and international sales, counterfeit, and pirated goods totaling between an estimated $1.7 trillion to $4.5 trillion each year. Fueled by the e-commerce boom, counterfeiting is a growing issue with a significant impact on the global economy. Counterfeit products, especially those in the health sector, pose risks to wellbeing and more, affecting manufacturers, retailers and consumers alike.

The gray market has presented a daunting and incessant challenge to the international health sector. Widespread counterfeiting and product diversion intensified through the COVID-19 pandemic, have put a spotlight on the vulnerability of supply chains in both the pharmaceutical and medical device industries. Counterfeit prescription drugs, unlicensed N95 masks, test kits, and other questionable medical products quickly took center stage. Whether it’s life-saving medications, surgical kits, or PPE, unlicensed replicas compromise patient safety.

Trust is paramount in the world of pharmaceuticals and medical devices. Patients depend on medications and medical equipment to improve their health, manage chronic conditions, and enhance their quality of life. When counterfeit drugs and unlicensed replicas infiltrate the supply chain, patient safety is threatened and trust is breached, leading to a negative impact on brand reputation and customer loyalty.

What’s more, digital retailers inadvertently contribute to the proliferation of counterfeit items and product diversion. Their broad reach and a general absence of oversight turn online platforms into hotbeds for illicit activities. The ramifications of selling counterfeit and diverted goods are far-reaching. They impact manufacturers’ bottom line, jeopardize end-user safety and undermine brand credibility.

Fakes in the Fast Lane

It’s no surprise that the pandemic catalyzed a surge in counterfeit drugs and medical goods. The United States National Library of Medicine has confirmed that the COVID-19 pandemic proved advantageous for the illicit counterfeit pharmaceutical and medical device markets that was already posing a significant challenge globally. However, reacting to these issues as they surface is akin to playing whack-a-mole: problems are tackled only after manifesting and often after causing harm. Such reactionary measures erode business reputation, trigger a decline in sales, necessitate product recalls and elevate the risk of legal ramifications. A proactive approach prevents counterfeit items from infiltrating the market in the first place, and the use of technology is paramount to tackling the healthcare industry’s counterfeiting issue.

Profiting from Pandemic

COVID-19 also played an important role in the surge of counterfeit medicines by disrupting the global supply chain…consequently, the countries dependent on these supplies faced shortages during the outbreak, thus greatly enabling counterfeiters to expand their market in such countries.” If counterfeiters are willing to profit from a pandemic, putting patients and practitioners at risk, there are no limits to the threats from fake medical products entering the market.

The EU FMD (Falsified Medicines Directive) and U.S. DSCSA (Drug Supply Chain Security Act) are notable developments in the battle against counterfeiting and diversion, and medical device manufacturers are beginning to adopt practices already in place for pharmaceuticals. Forward-looking manufacturers stand to benefit greatly from adopting protocols that assure product authenticity through a digital layer of product protection.

This additional layer achieved through digital fingerprinting can further safeguard medical products by leveraging an existing package barcode, verified through a simple smartphone scan. In a comprehensive product security plan, these are vital tools for quickly finding and eliminating counterfeit and diverted products.

Innovative technologies like artificial intelligence (AI) and machine learning (ML) identify anomalies in the supply chain by analyzing large volumes of data in real time, further safeguarding against counterfeits.

Product Diversion in Pharmaceuticals

As product diversion wreaks havoc on the healthcare sector, resulting in the loss of billions of dollars annually, pharmaceutical companies must continually fight criminals who tamper with prescription drugs. Product diversion—or the unauthorized distribution of products to unintended markets or unauthorized retailers—is an ongoing challenge across industries. An example of how diversion works in pharma: A patient fills a prescription for a medication worth several thousand dollars and then sells it for a fraction of the cost in cash. The buyer removes the patient’s information, alters the bottle, and sells it to a wholesale distributor who sells it back to the pharmacy at a discount. The same bottle reenters the supply chain. 

Diversion and counterfeiting go hand in hand. Even if it is an authentic product that was diverted, it is likely that the product was neglected and that it was tainted or diluted somehow. Unfortunately, the ultimate victims of diversion and counterfeiting activities are the patients who often do not get the life-sustaining medicines they need. Further negative consequences of such illicit activity include quality control issues, price erosion, brand dilution and consumer loyalty issues which impact brand integrity.

The Comprehensive Benefits of Embracing Traceability

Adopting traceability technologies provides more than just enhanced safety. Manufacturers gain valuable data that helps optimize supply chain operations and mitigate risk. In a market where consumer safety and market stability are at stake due to counterfeit and diverted products, traceability systems offer a competitive edge.

Enhanced visibility and sophisticated analytics reveal pivotal information about distribution trends, sales patterns, and consumer behavior. A robust tracking system fortifies product authenticity, preserves brand value and, most importantly, ensures consumer safety.

Tackling counterfeiting and product diversion requires a comprehensive approach that blends legal oversight, regulatory governance, and collaborative initiatives. The journey to a counterfeit-free supply chain isn’t a simple one. Ensuring consumer safety requires the seamless integration of innovative technology, strict legal adherence and strategic foresight.