Case Study: Tracking and Tracing Drugs in the Pharmaceutical Supply Chain

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Failures or lack of visibility in the many-tiered pharmaceutical supply chain have multiple repercussions. Drug shortages have adverse economic and clinical effects on patients — they are more likely to have increased out-of-pocket costs, rates of drug errors, and, yes, mortality.

Hospitals and health systems allocate over 8.6 million hours of additional labor hours to manage drug shortages each year at a cost of at least $360 million, with alternative therapies, direct purchases outside the hospital’s traditional channel, and cancelled or delayed medical procedures.

The US had about 150 to 300 drug shortages every quarter from 2014 to 2019.

For drug managers, maintaining excess inventory to try to avoid shortages brings significant costs in storing pharmaceuticals — and waste when they are not used. They also struggle with being able to predict where a particular drug is likely to be needed at a particular time.

The average pharma holds 180 days of finished goods inventory, and could free up $25 billion if it reduced that to a target of 80 to 100 days. With increased competition from generics and rival brands, cutting costs in the supply chain lets them redirect money to competitive ends such as funding product development.

Compliance is another issue. Serialization compliance required by the FDA’s Drug Supply Chain Security Act requires manufacturers, re-packagers, wholesale distributors, and pharmacies to be capable of lot-level product tracing and to provide applicable transaction information, history, and statement.

To protect patients and prevent falsified medicines from entering the supply chain, the EU’s Falsified Medicines Directive was passed to increase the security of the manufacturing and delivery of medicines across Europe. The main focus is on counterfeit and falsified drugs that can be ineffective or even dangerous.

By 2023 in the US, lot-level tracing will move to unit-level serialization. Russia’s serialization gives pharma companies until this year for complete unit- and batch-level traceability. Brazil’s track and trace regulations go into effect in May 2022. In South Korea and India, companies must uniquely serialize drug products. Saudi Arabia’s Vision 2030 plan includes adopting technology for tracking all human registered drugs manufactured in Saudi Arabia and those imported from abroad. China has published regulations providing for the development of a new national drug traceability system by 2022.

Regulations that require that manufacturers add serial numbers to medications give them more data than previously, a benefit for having information about the status of drugs wherever they are in the supply chain. But getting this right requires that partners in the supply chain participate in the tracking.  

Track and Trace in Action

Global pharmaceutical company Merck KGaA Healthcare is working on this issue. It maintains about 150 days of drug inventory, which is expensive to keep in-house and particularly wasteful when it comes to personalized drug therapies with short shelf lives. Its supply-and-demand forecasts are 85 percent accurate today.

One of the drugs it manufactures is related to amino oncology drugs. It was looking for a way to improve forecasting for these potentially life-changing and life-saving drugs. These are personalized medications, expensive and valuable. It’s imperative to ensure the drugs make it to the right place at the right time. It all starts with drawing blood from the patient and sending it to the lab, where a therapy is formulated based on the patient’s DNA. The drug created from this must travel along the supply chain in temperature-controlled environments, and it must reach the patient within a specified time frame for treatment.

Merck KGaA Healthcare has piloted a project with TraceLink, using the vendor’s Digital Network Platform to improve supply-and-demand forecasting and reduce shortages of critical immune-oncology drugs. Serialization on its own is still fairly new and even as it matures, TraceLink’s platform focuses on further enhancing the supply chain process. Not only does it generate serial numbers, but it also provides a centralized hub where third-party participants in drug companies’ supply chains can share relevant information such as manifests and product master data with each other. Bringing everyone together on the same platform is a more efficient way of trading this information than drug companies’ having to create point-to-point connections from their internal systems with the systems used by the companies they need to share data with.

Contract drug manufacturers, which in many cases manufacture generics for multiple drug companies, use the platform as well as brand-name big drug companies, and smaller ones that sometimes are the creators of blockbuster drugs. It’s hard for them to track all those relationships.

“With the network, you integrate once and interoperate all down the supply chain to increase visibility and lower the bar to sharing data,” said John Hogan, TraceLink Senior Vice President of Engineering. “The network changes the process of integrating between individual supply chain and inventory systems, which is difficult and for pharmaceutical companies and is not necessarily their strong point.”

The company has defined canonical data formats for internal management; it maps pharma supply chain partners’ data (logistics companies, dispensers, and wholesalers) into that and then back out into the format that another member of the network might need.

Compliance was the first problem TraceLink tackled but it realized the huge value in the data for many other purposes. “If you know how particular products traveled along the supply chain, you have unique insight that can be used for dealing with recalls or obstacles in the supply chain,” he said. “You can make things more efficient and avoid having those problems repeat themselves.”

It’s also providing APIs that other businesses can use when they see other use cases for the Digital Network Platform to leverage its core construction — for instance, to create new user experiences and provide a different preferred view into the same information using built-in machine learning algorithm. “In the future, you can imagine use cases where people involved in clinical trials might want to let their information be shared to prove the efficacy of those trials,” Hogan said.

Over the next five years the pharma track and trace solutions market is expected to surpass $2.38 billion. Other vendors that are in the pharma track and trace space include rfxcel, Adents, Acsis, Frequentz, Optel Group, Arvato Systems, E2open, Retail Solutions, UpNet, iControl and Nulogy.

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