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Deloitte Paper

Deloitte Paper

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Across the globe, drug and ood contamination areon the rise. Countereit drugs are inltrating the liesciences industry at such a rapid rate that, by 2010, it isestimated that the market value o all countereit drugsin circulation will exceed US$75B or 15% o the globalmarket
1
. Globally, the lie sciences industry lost $90B inrevenue in 2007 due to countereit drugs.The ood industry aces similar threats romcontamination and supplier quality control. In 2005,Premier Foods, the United Kingdom’s (UK) largestood manuacturer, recalled more than 470 productscontaining chili powder contaminated by the cancer-causing chemical Sudan 1
2
. The total cost o the recallexceeded £100M, making it the largest ood recall in UKhistory. Most o the cost was associated with the timeand eort required to locate all the aected products.In response to these threats, regulators in Canada,the United States (US) and the European Union (EU)ushered in a wave o legislation to improve traceabilityor ood and drugs. Spurred by this legislative push,new traceability technologies and standards haveemerged as well.These trends are taking a toll on both the lie sciencesand ood industries. Aside rom the nancial cost oproduct recalls, which can rise into the tens o millionso dollars, the reputational costs can be immeasurable,particularly i death occurs. This underscores the needor consumer businesses to understand how evolvingtraceability legislation and technology stand to aecttheir organizations – rom the supply chain and beyond.This paper reviews those impacts, and provides aroadmap that can help you determine how to respond.
The costs o countereiting andcontamination
A quick review o recent trends highlights the extento the contamination challenge. In the
lie sciencesindustry
, incidences o countereit drugs increasednineold rom 2002 to 2007
3
(see chart). Worldwide,the market value o countereit drugs is expected torise rom US$39B in 2005 to US$75B by 2010
4
. WorldHealth Organization studies show that nearly one outo two medicines ordered online could be countereit
5
,with potentially lethal implications or North Americanand European markets.
Track-and-Trace
Are you in control of your product distribution?
 
   N  u  m   b  e  r  o   f   i  n  c   i   d  e  n   t  s
2000150010005000200220032004200520062007
Source: “Pharma Regulation – EU, US, Asia”, SupplyScane. October 2008
19648411231759
 
il i Ii
1412964
Global drugs saety incidents
   M  a  r   k  e   t  v  a   l  u  e ,   U   S   $   b  n
806040200200520062007200820092010
Source: “Pharma Regulation – EU, US, Asia”, SupplyScane. October 2008
394449566575
Global value o countereit drugs
6
 
2Track-and-Trace
In the ood industry, ood-borne disease and chemicalcontamination are also on the rise. Between 1998 and2004, the number o ood-borne disease outbreaksdoubled in the US, rom 44 to 86
7
. According to a2005 study by the Center or Disease Control, thereare approximately 76 million cases o ood-bornedisease in the US each year, causing about 325,000hospitalizations and 5,000 deaths
8
. As supply chainsbecome more complex, stretching arther aeld into lessregulated environments, the potential or contaminationand countereits rises.
Enter the regulators
As the risks o contamination rise, consumers aroundthe world are demanding corporate and governmentresponse. This has impelled legislative bodies tointroduce a variety o laws, policies, rameworks andprotocols to saeguard the public by improving producttraceability (see map).In the
lie sciences industry
, the US and variousEuropean countries are leading global eorts to establisha drug traceability ramework. Already, 27 states havepedigree requirements, 13 o which are eective today,while Caliornia is slated to mandate an electronicpedigree (ePedigree) requirement by 2015. This stateaction has spurred the Food and Drug Administration(FDA) to develop national standards or drug traceability,which are due or release in January 2010. The USgovernment also introduced the Consumer ProductSaety Improvement Act (CPSIA) in 2007, which requiresall consumer product manuacturers to x a trackinglabel or other permanent mark on all products intendedor children 12 and under
9
.For its part, centralized EU regulations governingdrug traceability are unlikely in light o the act thatpharmaceutical companies are governed by nationalpolicy. Yet, Turkey, Italy and France have alreadyadopted traceability regulations and Europeanconsumer demands may push other EU nations toadopt FDA-driven traceability rameworks.In the
ood industry
, traceability standards in theUS are governed by the Public Health Security andBioterrorism Preparedness Response Act (2002), whichrequires all domestic and oreign ood acilities toregister with the FDA and maintain records neededto determine the immediate previous source, andimmediate subsequent recipients, o ood.In Europe, EU Regulation 178/2002 (also called the“ood law”) makes traceability compulsory or all oodand eed businesses by compelling producers to labeland track ood products throughout the supply chain
14
.In addition, the EU is unding programs designed toimprove traceability by mandating the adoption o aradio requency identication device (RFID) system.
The cost o ood contamination
•2008:MapleLeafFoodssufferedanoutbreak
o listeriosis in one o its meat plants inOntario. The outbreak resulted in 21 conrmedcases o illness, our deaths
10
, $27M inlegal settlements
11
and a severe blow to thecompany’s public image. The company’s stocktumbled nearly 40%, wiping out $580M inmarket value (August 23 – October 23, 2008).
•2008:ThePeanutCorporationofAmerica
suered a salmonella outbreak which led to600 illnesses
12
, nine deaths and an investigationby the US Senate House Sub-Committee.
•2007:MenuFoods,aleadingpetfood
manuacturer in North America, announced arecall o 100 brands o pet ood
13
. The causeo the contamination was cost-ecient wheatimported rom China that had been taintedwith melamine. Menu Foods’ stock began aone-year slide rom nearly $8 a share to under$1 (February, 2007 – February 2008).
 
3Track-and-Trace
Additionally, Canada is emerging as a leader in thedevelopment o ood traceability standards. TheCanadian Food Inspection Agency (CFIA) introduced theCanadian Cattle Identication Program (CCIP) in 2001and the Sheep Identication Program in 2004. The CFIAhas begun implementing the National Agriculture andFood Traceability System (NAFTS), which aims to providetimely and relevant traceability inormation to enhanceemergency response and market competitiveness. Andin 2006, GS1 Canada released Can-Trace, a set o datastandards and requirements or national whole-chainall-product ood traceability
15
.
The technological response
The growth in regulation has led to the developmento an entire industry providing technological traceabilitysolutions to consumer businesses. Traceability systemsinclude both hardware (ID tags, printers and scanners)and sotware components (ePedigree, serialization andtrack-and-trace). The principal sotware components are
describedbelow:
While there is debate over which technical platormsor standards or traceability systems will prevail, the
followingfourprojectionsarelikely:•
The standard:
Electronic systems will likely prevailover paper-based traceability systems as they oereciency and cost advantages, and are currentlypromoted by both the FDA and European Federationo Pharmaceutical Industries and Associations (EFPIA).
•
The technology:
RFID technology will likely prevailover 2D barcodes due to its advantage in speed,range and storage capacity, as well as its unique abilityto scan multiple items at once rom any orientation.In addition, the cost o RFID technology is expected toall to 5 cents per tag.
•
The transmission protocol:
XMLwilllikelyprevail
over EDI as it allows or platorm-independentdata compression with aster transmission rates.GS1 Health and EPC Global recently developed an
ePedigreesystembuiltusingXMLserialization,which
has been backed by the FDA.
•
The sotware:
LargeEnterpriseResourcePlanning
(ERP) systems are likely to prevail over best-o-breedtraceability solutions as they oer seamless integrationwith enterprise systems. Major ERP players SAP andOracle already oer traceability modules as part otheir product suites, while smaller best-o-breed track-and-trace rms are likely to be acquired by otherERP vendors.
Map o global lie sciences and ood traceability regulations
Canada
•2001:CanadianCattle
Identication Program(CCIP) requires cattle to betagged with unique ID
•2006:CAN-TRACEfood
traceability standards
Europe
•2007:EFPIAguidancepaperonimplementing2Dbarcodesfor
pharmaceutical products
•2002:Thefoodlaw,requiringtraceabilityoffood•2005Italy:EU“Bollini”,alabelthatfeaturesaproductlicense
number and a serial number
•2006France:Codicationandtraceabilityrequirementsthrough
implementation o 13 digit ID code or pharma products
•2008Turkey:Phasedimplementationof2Dbarcodes
World Health Organization
•2006:InternationalMedicalProductsAnti-Counterfeiting
Taskorce (IMPACT) to promote awareness o drugcountereiting and encourage cooperation among leadingplayers in anti-countereiting legislation launched
Source:WHOPressRelease2006
United States
•2005:Floridamandates
paper based pedigrees
•2008:Californiaextends
deadline or ePedigreerequirements to 2015
•2010:ePedigree
requirements orpharmaceutical products,led by the FDA
China
•2008:Nationalprogramtocombatdrug
 countereiting through the State Foodand Drug Administration (SFDA)
•2009:Requiresalllocaldrug
manuacturers, re-packagers, andimporters to be registered with the SFDA,and to print serial numbers on all saleableunits, cases, and pallets
Source:www.supplyscape.ca/webinar
Brazil
•2008:Preliminary
consultations withindustry experts ondeveloping a drugtraceability systemin Brazil
Sotware elements o traceability systemBrie description
ePedigreeUsed to generate an electronic maniestthat contains shipment details, includinglot number, serial number and detailsrelated to manuacturing, packaging andinvoicing.SerializationUsed to generate unique serial numbersor every unit produced that can beused to trace the product across thesupply chain.Track and traceSystems that help veriy the authenticityo the product based on a unique serialnumber or lot number printed on theunit packaging.

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