Blue Sphere Health

Pharmaceutical Serialization: Killing the Cost Monster

Pharmaceutical serialization (and/or epedigree) has been on its way for a long time. The uncertainty has been in the timing and the exact compliance requirements. Manufacturers didn’t know where or when serialization would turn up first, but they assumed that it was going to be scary. Sometimes the uncertainty and hyperbole that surrounded the subject reminded me of the chorus of the hit song by UK band The Automatic:”What’s that coming over the hill? Is it a monster?”

Now, at last, the apparition coming towards us is resolving into something we can see and start to deal with. The technical details of how drug traceability could work have been thought through. The European Federation of Pharmaceutical Industry Associations (EFPIA) has piloted its ideas in Sweden with apparent success – albeit in a limited geographical frame. They are now in the first stages of procuring the services and IT infrastructure to roll out their proposed European Medicines Verification System (EMVS) across the European Union. The German securPharm consortium is carrying out another pilot project with multiple stakeholders. The European Directorate for the Quality of Medicines (EDQM) has scoped out its eTACT project and intends to pursue it further. For a discussion of these three projects in more detail, download Blue Sphere Health’s free new white paper from

The problem of how to code and trace drugs reliably and securely is a tough one, but progress has been made. The format wars of the last decade are now behind us at least. We know that datamatrix codes, not RFID, will be the predominant data carrier. The consensus (with some outliers, e.g. China) is that the international code format will use the GS1 standard rather than proprietary or local systems. Diverse groups have put aside their differences to propose collective solutions. In Europe, the stakeholder-led group includes EFPIA, the wholesalers organisation GIRP, repackagers EAEPC and pharmacists group PGEU. The US has seen similar activity with the Pharmaceutical Distribution Security Alliance putting forward a united and constructive front to US legislators.

The Technical Uncertainty Monster has been, if not killed, then at least stunned into temporary submission. But this is no time to be complacent. Now we have to watch out for his angry brother, the Cost Monster. The estimated running costs of the EMVS system, as released by EFPIA recently, are 1.3 – 2.2 Euro cents per pack. Since generics are typically five-fold cheaper than the branded equivalents, if applied equally the burden would fall disproportionately on cheaper medicines. A compromise will probably need to be worked out that takes pack price into consideration when setting the levy on manufacturers.

Grossed up for pack volumes in the EU, this cost range implies an annual running cost of 130 – 220 million Euros. The implementation costs in the first couple of years are likely to be a multiple of this figure. Let’s break these costs down and look at some of the more vulnerable areas where the Cost Monster might strike:

System design:
The suppression of various industry stakeholders’ vested interests in the name of a bigger cause has been impressive so far. To keep things as streamlined as possible all sides should continue to build trust and share infrastructure whenever possible. There is an argument for keeping pharmacy transaction data for pharmacists’ eyes only and away from manufacturers and to be fair the drug makers are not seeking access to point of sale information. However, physically separated dual database systems, such as securPharm seems to advocate are not the answer and would cause unnecessary complexity if rolled out across Europe. Database providers can design access rules that allow clear and secure segregation of data without the I/O movement and synchronising of information that multi-instance designs might require.

The EU has 27 member states. The more we can do to minimise the diversity of national systems the cheaper the overall cost will be. The EFPIA model will provide a national system blueprint that will be available as a pre-configured starting point to those states that don’t want to develop their own infrastructure. The same approach needs to be taken for pharmacy implementation and training elements of the roll-out. Re-using and adapting existing materials and processes will be critical to keeping costs under control.

Some countries (Belgium, Greece, Italy, possibly France although this is controversial) are granted a multi-year opt-out under the Falsified Medicines Directive, meaning they can continue with national traceability systems. In the interests of the greater good and of cost minimisation for manufacturers, it would be helpful if these states worked to harmonise with the EU framework as swiftly as feasible rather than delaying.

System implementation:
The IT consultancy and services element of rolling out any pan-European or federal US system will be huge. Even small process improvements and simplifications will add up to big savings over time. For this reason, the initial implementation should be as simple as possible – involving only those stakeholders and processes that are needed to get the traceability system started. Trying to implement epedigree will be hugely more expensive than starting with serialization. The lot-level approaches as advocated by PDSA are an even simpler first step.

Pharmacy integration:
The pharmacist is the key control point for drug traceability systems, so the rapid and efficient integration of pharmacies into any wide scale approach is critical. In focusing on the big-ticket IT components like databases, routing systems etc, we should not underestimate the complexity of getting tens of thousands of drugstores on board. Just ask Aegate who have spent years adding pharmacies to their systems in Belgium, Greece and Italy and still have nowhere near full penetration. Pharmacy point-of-sale software is a highly fragmented market making the IT integration task harder. Many stores use barcode scanners which are not compatible with datamatrix codes and will need to be replaced. Some rural pharmacies don’t have the reliable broadband internet connection needed for real-time authentication. Collectively these issues represent a vulnerable soft underbelly for the Cost Monster.

Support costs:
Things will not go right all the time, even when teething troubles have been solved. Providing transaction support in the pharmacist’s native tongue (the EU has 23 official languages) will require creative approaches. These issues have been solved in other industries (e.g. financial services) so pharma should look outside itself and not fall into its habitual trap of reinventing the wheel.

Most of the patient safety aims of pharmaceutical serialization will be solved with a relatively simple, uniformly applied and globally interoperable traceability system in each major region. This will be secure, with multiple separate access rights. Pharmacies will be integrated efficiently and quickly, recognising the network effect that comes with rapid and widespread participation. Design, installation, operation and support costs will be reasonable, using best practice from other industries to avoid unnecessary cost burdens on patients and taxpayers.

Alternatively, we can hide behind the sofa while the Cost Monster runs amok.

Contact me at mark(dot)davison(at)bluespherehealth(dot)com to discuss these issues in more detail and in confidence.

Photo: Silus from flickr

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