The Deputized Supply Chain

Several people I know from the traceability solution provider community like to tout the similarities between the food supply chain and the pharmaceutical supply chain.  They see similar track and trace regulation in the futures of both chains.  After all, both supply chains are regulated by the same agency (FDA, although food is also regulated by the USDA) and they see them as having similar problems.  But I don’t buy all that.  My friends see the use of common tools (their products, of course) and I might give them that, but these two problems only seem similar on the surface and so, if track and trace regulation is needed for both, the two regulations ought to have only high-level similarities.

THE FOOD SUPPLY CHAIN

The increasing frequency of the scariest problems in the food supply chain are related to accidents—like unintended contact with surfaces or organic matter that contaminate the food with nasty things like E. coli or salmonella—or food that has spoiled as the result of improper storage somewhere in the supply chain—like refrigerators or freezers that aren’t doing their job.  Consumers would benefit from the use of food track and trace in situations like these only when the contamination or spoilage isn’t detected until after the product is split up and distributed down multiple paths.  The track and trace system would improve the speed of the recall and the confidence in its completeness.

Generally, food is distributed to retail outlets inside containers that are packed by the manufacturer or processor.  I’m not an expert here so those of you who are, please correct me, but I don’t think food distributors normally break down cases and ship individual saleable units to retailers.  I think they normally ship full cases, bins and pallets.  For this reason, item-level serialization is not critical to end-to-end track and trace.  However, container-level serialization-based track and trace would be a major benefit to this supply chain.

There is one more thing about the food supply chain that I think is significant for this discussion.  Many of the trading partners at the start of the supply chain are small, independent and technically unsophisticated.  Most of the trading partners at the end of the supply chain are just the opposite:  large corporations with big IT budgets.

THE PHARMACEUTICAL SUPPLY CHAIN

On the other hand, the scariest problems in the pharmaceutical supply chain are more often related to intentional acts by criminals—like counterfeiting, tampering, up-labeling, theft and diversion.  Added to those are the fairly recent and increasingly frequent recalls that result from the allegedly intentional “forgetting” to document the inclusion of a regulated pharmaceutical ingredient inside an over-the-counter (OTC) “supplement”.  I’ve received notices of this last type of recall from the FDA’s recall notice service in just the last few months that included the following undocumented ingredients in OTC products sold on the internet:

Of course, recalls of drugs that are the triggered by accidents do still occur.

Unlike food wholesalers, drug wholesalers, more often than not, break open the manufacturer’s casepack of product and ship individual units to their customers (pharmacies).  Container-level track and trace won’t get you as far as it would in the food supply chain because most containers only make it one hop in the multi-hop supply chain.  To obtain a benefit as comparably “major” in the drug supply chain as container-level serialization would enable in the food supply chain, you would have to serialize at the unit-level.

Also—just the opposite of the food supply chain—the trading partners at the start of the drug supply chain are often corporations that have significant IT resources, while the independent pharmacies at the end are larger in number and they have little IT sophistication.  Of course, there are many pharmacies that are owned by technically sophisticated large corporations, but I think the differences between the food and drug supply chains are still significant when viewed this way.

DIFFERENT PROBLEMS NEED DIFFERENT SOLUTIONS

In my view, the sum total of these differences are significant enough to warrant different approaches to the solutions.  It seems to me that the problems in the food supply chain could be adequately solved through the combination of container serialization and tracing at that level.  Recalls could be made at the lot or container serial number levels.  Since the lot number of contents of each container would be known, a lot-level recall could be translated into specific container serial numbers.  This type of recall would be much more efficient and instill a lot more confidence that the recall’s progress was known at any given time.  It would also enable much more fine-grained, limited-scope recalls to occur—down to a single container if that fit the given situation.

As I’ve already pointed out above, pharmaceuticals would require unit-level serialization to provide the greatest value.  Because the problems being solved in the drug supply chain are more likely than in the food supply chain to be related to activities that are intentional, and because sometimes great efforts have intentionally been applied to keeping the evidence of criminal activity hidden, traceability of drugs should be approached differently than it is for food.  To understand this, you have to think about how an anomaly would be detected in each supply chain.

In foods, the traceability system itself has no ability to detect the anomaly.  That’s because the triggers would come from chemical/biological tests of the products themselves, or after a group of people become ill after consuming some of the food.  The traceability system would only jump into action after-the-fact to help get the product off the market and out of the hands/stomachs of consumers as quickly as possible.

You could do the same thing with pharmaceuticals because detection can occur through the same two processes I just outlined for food, but the traceability system itself could also be used to actually detect the type of activities that criminals would prefer to remain hidden—and it could trigger suspicion long before anyone is harmed by the illegitimate product.  This is what would result if every drug purchased within the legitimate supply chain included a check of the drug’s full certified chain of ownership up to that point.  This is exactly what is embodied in the Florida and the California Pedigree Laws.

THE DEPUTIZED SUPPLY CHAIN

Do you see the difference?  With food, there really isn’t a need to check the full certified chain of ownership each time the food product changes ownership because the purpose of the track and trace system would be to help expedite a recall should the food ever be found to be contaminated.  But in the drug supply chain, the purpose of the chain of custody would be to help expose, as early as possible, any criminal activity within the supply chain.  To do that, you would want to check the chain of ownership at every transaction point.

But that’s hard.  It takes time, technical sophistication and a lot of data flying around everywhere.  Plus, the introduction of illegitimate drugs into the supply chain is believed to be very small in the U.S.—so small that when compared to the number of legitimate drugs that pass through the supply chain, the number of illegitimate drugs is almost imperceptibly small.  Left up to their own choices, most trading partners in the drug supply chain would probably choose not to bother checking each transaction in this way.  And that’s why the Florida and California Pedigree Laws mandate that it be done.  They effectively “deputize” each legitimate trading partner to help watch for the introduction of illegitimate products.

Deputizing trading partners in the drug supply chain makes sense to regulators who are too understaffed to be able to monitor even a fraction of the supply chain transactions that occur every day.  This model of business regulation is fairly new but could become increasingly common as state and federal budgets come under increased pressure.  It allows a relatively small agency to do the work of a huge one, because all of the regulated companies are deputized to do some of the monitoring.  Perhaps the program most similar to the type of self-monitoring found in the Florida and California Pedigree Laws can be seen in the Suspicious Order Monitoring (SOM) programs that have recently been imposed on drug wholesalers by the U.S. DEA (Drug Enforcement Administration).  This is another way that drug wholesalers have been deputized to assist a regulatory agency.  It also, by the way, is more confirmation that the participants in the pharmaceutical supply chain are responsible for supply chain security.

TARGETED TRACK AND TRACE

I think that supply chain participants would be more open to deputization if the number of products being monitored started out small before growing over time.  The California Pedigree Law attempted to do something like that by requiring item-level serialization of only 50% of each manufacturer’s product line by 2015.  But the problem is, the remaining 50% must be serialized only one year later.  That’s too fast to be meaningfully helpful to most companies.  It may make more sense to target track and trace monitoring on a select number of products initially, taking a risk-based approach when selecting which products to start with.  Then, over time (more than one year) start expanding the number and/or type of products that would be serialized and traced.  This is a very rational approach that would achieve most of the goals of the pedigree laws, but without causing wild transitions in business practices—going from not-serialized to serialized for all products over a very short period of time— in the supply chain.

I only raise this idea now because the FDA has been given the authority to develop a track and trace standard that could be imposed by later regulation (a future adoption of the Buyer-Matheson proposal perhaps).  Could it include another deputization?  Perhaps we’ll find out sometime after the FDA gets the final Serialized Numeric Identifier (SNI) guidance out of the way in the next two months.  Stay tuned for new announcements by the FDA at that time.

One thought on “The Deputized Supply Chain”

  1. Dirk you make an excellent comparison – and distinction – between the food supply chain and the pharma supply chain chain. But once one begins to consider the increasing representation of food and crops as being of a certain quality (i.e., organic, greener, low carbon footprint, GMO free, etc.) than they actually are (a form of counterfeiting) then the difference may not be as great as one thinks. When it comes to the food supply chain, food safety is one side of the coin. On the other side of the coin is the consumer’s right – I dare say – to know that the food they are consuming is actually as represented by the food supply chain. But, again, an excellent analysis and comparison of both chains. I have added this post as a reference to the Agricultural Funding Opportunities group on LinkedIn at http://tinyurl.com/afogrp

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