The Falsified Medicines Directive (FMD): What should wholesalers and Logistics Partners consider?
The Falsified Medicines Directive (FMD) 2011/62/EU will come into full force on the 9th February 2019. With approximately 1% of medicines sold in developed markets being counterfeit, the global counterfeit drug market is worth US$200bn a year. The legislation aims to prevent counterfeit or unauthorised prescription medicine entering the legal supply chain, providing greater protection for patients.
With less than a year to go until the regulation comes into force, wholesalers and logistics providers know they need to do something now to become compliant. But, some may not know exactly what that looks like in practice.
Christian Taylor, Serialisation Business Consultant, Zetes takes a look at some of the key challenges and practical questions relating to achieving compliance.
What do the requirements mean for different parts of the supply chain?
At the beginning of the supply chain, the pharmaceutical manufacturer has responsibility for serialising cartons, sealing the product and then uploading the unique identifiers to the European Hub, known as the European Medicines Verification System (EMVS).
At the end, the dispensing pharmacist must be able to scan, verify for authenticity and decommission that product against a national hub, known as the National Medicines Verification System (NMVS). If the pack matches the information in the repository, the pack is decommissioned and dispensed to the patient. Alternatively, if there is a warning related to the pack, the package will not be dispensed to the patient and an investigation will be made to see if the medicine is falsified.
This leaves the middle of the supply chain, where there is also a requirement for wholesalers and logistics providers to implement a ‘risk based’ approach to verification and decommissioning of product passing through their operation. In some cases, they will also need to decommission product.
To achieve compliance by February 2019, wholesalers will need to implement a system that enables verification, decommissioning or recommissioning of packages, linking with the respective country’s national hub.
What’s involved from a practical sense?
In simple terms wholesalers and logistics partners need three components:
1. The ability to scan 2D data matrix barcodes, either using mobile hand held devices, desktop scanners or automated imaging technology.
2. A software application that enables the pack, once scanned, to be verified instantaneously against data held on the National Medicines Verification System (NMVS), managed by the local National Medicines Verification Organisation (NMVO). In some cases, such as for ‘Article 23’ organisations wholesalers will also need the software to decommission or recommission product.
Decommissioning could also be required where the product is being exported out of the EU, or where damage is incurred. For example, if a forklift driver accidentally drives into a pallet and breaks the tamper proof seals on a product, it can no longer be sold and would need to be decommissioned immediately.
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3. The ability to capture and record all events associated with verification and decommissioning for a period of up to 10 years.
The immediate priority for wholesalers must be to comply in the most cost-effective and efficient way possible. For some, there could also be additional business value that comes with being compliant. The ability to manage a serialised warehouse brings greater track and trace capabilities and further safeguards businesses and patients alike.
Can an organisation achieve compliance without overhauling legacy systems?
In short, the answer is yes. There is a concern that in order to introduce FMD compliance into the warehouse, a costly ‘rip and replace’ approach is required. This doesn’t have to be the case. For reduced complexity, speed and cost effectiveness, businesses should look to partner with organisations that can provide a single source solution – warehouse process and technology integration expertise, a data/event visibility platform and seamless connection with a national medicines verification system.
Expertise of integrating with existing WMS or ERP systems is highly advisable. This can provide significantly reduced implementation times (crucial with such tight deadlines) at a much lower cost.
Can a wholesaler communicate with the European Medicines Verification Organisation (EMVO)?
No, Market Authorisation Holders (MAH) are the only organisations that are able to communicate directly with the European Hub (EMVO). However, wholesalers will not only need to have the capability to handle the product but also the ability to send data to and connect to their respective country’s national hub (NMVO) or potentially multiple national hubs if importing.
Any information that is reported by an MAH to the European hub will be sent directly to the relevant national hubs, which can then be accessed by wholesalers, parallel distributors and pharmacists.
The important thing for organisations to consider at this time is that currently, no one is handling the data of individual products on the line. In order to be compliant and report to the national hubs, wholesalers and logistics partners are going to have to review current processes and ensure they can handle data for any single packet within their warehouse.
What about Article 23?
Article 23 is yet to be fully defined, it will cover any prescription medicine destined for non-healthcare institutions e.g. schools, prisons, dentists etc. Ultimately, those organisations wouldn’t have the authority to log into the national hub to decommission a product. Wholesalers delivering to these places will hold the responsibility of verifying and decommissioning prior to delivery.
Beyond compliance; future proofing supply chains
Ultimately, serialisation can be seen as the entry level for track and trace, enabling businesses to capture all of their supply chain events. The ability to capture and store data this way – creating complete real-time visibility and greater traceability will unlock efficiencies throughout the entire supply chain. It is very likely that legislation will progress in the coming years. It can already be seen in other countries that have undergone serialisation, which have now moved on to track and trace. Behind this legislation, there are distinct efficiency and quality advantages to be found.
The complexity of the pharmaceutical supply chain cannot be disputed, but if organisations embrace these regulatory changes – using them as an opportunity to optimise their supply chains, update data flows and break down silos – they can create true business value, making it pay to be compliant.
There’s no denying that the benefits of the FMD regulation far outweigh any of the complexities. If wholesalers and logistics partners use this opportunity to improve capability within the warehouse, they will open up the ability to build comprehensive and agile visibility infrastructures. This will not only ensure compliance by the 9th February 2019, but these infrastructures can be built upon further, putting wholesalers in a better position to react to any further regulation changes with ease.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”