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One in seven drugs sold worldwide is fake

Puerto Rico is a leader in the development of counterfeit-drug detection

BY MARIALBA MARTINEZ of Caribbean Business

June 10, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

Beyond bar codes

Pharmaceutical industry turns high tech to combat billions of dollars in security breaches and losses

Counterfeiting, fraud, and theft within the pharmaceutical industry’s supply chain ranges from conservative estimates of $30 billion to more than $50 billion in annual losses to corporations, according to market studies by such research companies as PIRA International, IMS Health, and the U.S. Food & Drug Administration (FDA).

With worldwide pharmaceutical-drug sales in 2004 of $550 billion, counterfeit drugs amounted to as much as 10% in lost revenue for manufacturers, and it is getting worse. Pharmaceutical counterfeiting is estimated to be growing at an annual rate of 6% to 8%.

Worldwide, the level of counterfeiting (including the pharmaceutical industry) is estimated to be nearly $600 billion a year, including such areas as cosmetics / toiletries ($42 billion to $60 billion); information technology / software ($10.9 billion); music / films ($5 billion); automotive / aircraft parts ($12 billion); apparel ($2.1 billion); and toys / games ($66 billion). Rampant fraud also is found in retail sales of watches, consumer electronics, tobacco, and food. The International Anti-Counterfeiting Coalition stated that an estimated 5% of all worldwide commerce involves counterfeit or diverted products. Product manufacturers not only have to contend with theft or losses within their companies, but also must deal with counterfeit versions of products often produced in countries where labor is cheap and production costs low.

Combating security breaches with RFID

To combat these practices, the pharmaceutical industry has been developing electronic track-and-trace systems such as radio frequency identification (known as RFID) and different security printing-authentication technologies. RFID is an automated data-capture technology that uses an electronic product code (EPC) to identify, track, and store information. Usually found in a tag attached or embedded in a product, case, box, or pallet, the EPC transmits data through wireless communication.

An RFID system is made up of an antenna with a microchip attached, all encapsulated in a glass or polymer material. Known as "smart tags," each can be identified uniquely by its EPC and/or the information embedded in the chip. RFID is different from a bar code because it can be read remotely without having to be in the reader’s line of sight, thereby improving customer checkout time and providing supplementary services such as inventory capability.

While the future of these emerging technologies is difficult to predict, a study by California-based research company Marketstrat indicates the market for RFID tags may rise from $294 million in 2004 to $2.8 billion by 2009, a compounded annual growth rate of 57% for the next five years. Other research companies such as New York-based Datamonitor predict RFID technology, including hardware, software, and services, will be a $6.1 billion market by 2010. Either way, the mandates from private- and public-sector companies to comply with track-and-trace technology will drive the system to its next generations.

According to The Economist, in the past four years, the cost of the cheapest tags has plunged, from $2 to 20 cents, though more realistic prices remain between 25 cents to 35 cents. In the next two to three years, prices are likely to fall to five cents or less. Already, RFID tags are used to track pets and livestock, parts in car factories, and luggage at airports.

Drugs that don’t work

In 2004, the FDA Office of Criminal Investigations initiated 58 counterfeit-drug interventions that involved hundreds of thousands of fake dosage units. Between April 18 and 20 alone, a Drug Enforcement Administration (DEA) operation made 20 arrests in five states, Costa Rica, and three cities in India. For example, Indian nationals have been selling repackaged anabolic steroids, narcotics, and amphetamines made in India and other countries to U.S. consumers over the Internet for over two years. According to DEA sources, as much as 2.5 million doses per month of Vicodin, a narcotic pain reliever, were sold during this period.

Thousands of websites on the Internet now market drugs at cheaper prices to the U.S. mainland, inducing the sale of counterfeit drugs. Most major pharmaceutical companies’ blockbuster products face this problem. Some of the most popular counterfeit drugs manufactured in Puerto Rico include Pfizer Inc.’s Viagra, Lipitor, and Xalatan; Eli Lilly’s Zyprexa, Cialis, and Evista; Merck’s Zocor and Fosamax; Amgen’s Epogen and Neupogen; Johnson & Johnson’s Risperdal and Procrit; and Bristol-Myers Squibb’s Sustiva and Zerit.

Counterfeit-drug cases closed in 2004 included 14 people accused of multimillion-dollar sales of fake Lipitor and convictions in Texas and California for introducing and selling misbranded and unapproved counterfeit human-growth hormones and controlled drugs. Others were convicted for importing thousands of counterfeit Viagra tablets from Beijing and China into the U.S. for resale. An Internet pharmacy scheme also was uncovered and closed that introduced distributed counterfeit drugs from Mexico, India, Pakistan, and China into the U.S. via the Bahamas.

One of the problems faced by the U.S. pharmaceutical-drug industry is drugs manufactured in foreign countries don’t meet U.S. safety and efficacy manufacturing standards. Counterfeit drugs can be missing active ingredients, be diluted, or have lethal impurities or contaminants. Labels, which most patients trust to identify the product, can misrepresent product potency or extend expiration dates. Many times, doctors’ samples are repacked and sold in lots for profit. When a pharmaceutical drug is diverted from its intended destination, it can produce shortages in countries that urgently need the drugs.

Side effects resulting from fake or low-quality drugs aren’t restricted to a lack of effectiveness. In some cases, changes in the drugs’ molecular structure can cause strokes, heart attacks, even death. In Brazil, an imaging agent injected into patients to provide X-ray contrast poisoned and killed at least a dozen patients.

Strong medicine

Many companies around the world are working hard to develop not only RFID, but also other technologies which, if used in combination with RFID, will make pharmaceutical products harder to copy. In February 2004, the FDA issued a report called "Combating Counterfeit Drugs: A Report of the FDA," which highlights measures in six critical areas. Two of these areas are securing the drug product and its packaging, followed by securing the product’s movement through the distribution supply chain.

The FDA is acutely aware of the need to implement new technologies to better protect the drug supply. The agency so far has identified various rapidly improving track-and-trace and product-authentication technologies that provide greater levels of security. A combination of such anticounterfeiting measures as RFID with special inks or holograms added to products, labels, and packages also are being analyzed. RFID’s EPC, a unique electronic serial number in the product, would allow a drug to be tracked through every step of the supply chain. The chemical markers, visible or invisible to the eye, would act as complimentary security measures. All this information can be recorded into a drug "pedigree," a record documenting the drug was manufactured and distributed under secure conditions as it passed through the supply chain.

At the same time, standards are being developed by some of the most recognized benchmark organizations worldwide, including the International Organization for Standardization (ISO). Since this is considered an electronic product technology, EPCglobal Network Inc. has become the technical action group responsible for developing RFID technology standards. The Auto-ID Center, based at the Massachusetts Institute of Technology, began work on RFID technology in 1999 through a partnership between academic researchers and business. In 2003, the Auto-ID Center was transferred to the EPCglobal Network, which will administer and develop EPC technical standards on the technologies sent to the ISO for review and ratification. Final standardization will depend on the FDA, which is looking for track-and-trace standards to be feasible for the pharmaceutical industry by 2007.

RFID and security technologies in Puerto Rico

RFID implementation and other security printing-authentication technologies by Puerto Rico’s pharmaceutical-manufacturing industry will depend on a number of factors. First, all these technologies took on importance after the terrorist attacks on 9/11 and are therefore relatively new to the industry. Second, the FDA will have to emit regulations for each technology, once it is proven effective, before any pharmaceutical company can adopt it. Third, a pharmaceutical company will have to go through FDA validation for the technology adopted for each product, particularly if it involves ink on tablets.

In Puerto Rico, several pharmaceutical manufacturing companies with packaging divisions are starting to implement covert technologies. Cidra’s GlaxoSmithKline Vice President & Site Director Graham Johnson said the company would begin printing barcodes directly onto shipping boxes, which could lead to microprinting barcodes that look like a straight line to the naked eye. Olga Navarro, a spokesperson for Cardinal Health, said one of its local plants is implementing an asset-tracking system to prevent fraud.

Pfizer recently announced it would begin adding RFID tags to all Viagra packaging and shipping components produced in Puerto Rico, one of the company’s most profitable and most counterfeited products. Pfizer Corporate Media Relations Director Bryant Haskins said, "We have been involved with RFID technology since last year and are committed to tagging all Viagra product shipments for distribution in the U.S. While we don’t have final figures for product fraud in our company, taking into account the drugs confiscated, it must be in the tens of millions of dollars, but that is just the tip of the iceberg."

Edgardo Fábregas, Johnson & Johnson Pharmaceutical Sourcing Group-Americas manufacturing operation vice president for Latin America, said he sees the future of RFID in the pharmaceutical industry growing in two directions. "RFID can be looked at from the point of view of pilfering, where companies are losing billions of dollars, or drug counterfeiting, and the need the company has to protect the integrity of its products. J&J has implemented various programs, mostly because major vendors now require it from their suppliers.

"Our emphasis is still to prevent counterfeiting and offer safe and secure drugs. We have had a few [counterfeiting] incidents with some of our most important products, such as cancer treatments. So, it is important we try to secure the medicines for our patients. In addition to RFID, we also are exploring the use of tablet imprints, but this requires regulatory tests and approvals. With inks that are trademarked in the food industry, none of these studies need to be done; but the invisible inks being created with different formats do need regulatory approval. Eventually, they can become part of a company’s intellectual property. Still, the productive life of a secure process is around nine months before a counterfeiter breaks the code," Fábregas said.

What needs to happen is for the island’s pharmaceutical-manufacturing industry to align behind the new technologies to provide safe products, said Puerto Rico Manufacturers Association President Reynaldo Encarnacion. "We need to focus on this technology to assure our position in the pharmaceutical industry’s supply chain. If, as we wish, the final product begins to flow from Puerto Rico to the world, this is an opportunity to develop the technology here. I see RFID as a business opportunity. Just as Hewlett-Packard has taken advantage of this opportunity, there are other local companies doing so–Ponce’s Checkpoint Inc. and Aguadilla’s Sensormatic Inc. For the good of Puerto Rico’s pharmaceutical industry, we have to make sure this technology is developed locally to create local employment opportunities.

RFID expert Mike Nichols, Intermec Technologies systems consulting manager, told CARIBBEAN BUSINESS he believes it will be the manufacturer’s serial number in the antenna chip that makes it the most secure technology because it can’t be changed. "With RFID tags, you are responsible for putting in whatever information you want but, given enough time, a counterfeiter can duplicate it. However, if the silicon wafer’s serial umber is used, no one can duplicate that number because it is created when it is manufactured."

According to Nichols, the FDA is allowing pharmaceutical companies to come up with different technologies to secure their products without mandating them. What the FDA hopes to see is what emerges as optimum technology so it can regulate it, instead of driving regulations too early. At this point, it is estimated 20% of RFID tags are damaged during the manufacturing process, elevating costs per tag.

Companies continue to run pilot programs, looking for the best technologies to service multisector needs. Connecticut’s Purdue Pharmaceutical recently announced it was trying out an electronic pedigree-tracking system to record movement of its drugs. Canada’s Cathexis Innovation Inc. has patented IDBlue, an RFID pen with wireless Bluetooth technology (short-range wireless communication), which collects information and transmits data to a pocket PC, laptop, mobile phone, or desktop computer. In the United Kingdom, RFID may be introduced in pharmacies within the next 12 months, after a three-month pilot program successfully tagged 180,000 medicines.

Aguadilla’s Hewlett-Packard shows the way

Interestingly enough, Hewlett-Packard Corp. (HP), one of the top technology-driven companies in the world, has been exploring ways to secure pharmaceutical products from manufacturing site to final destination within the supply chain. In 2001, HP established one of eight Centers of Excellence (CE) around the world in its Aguadilla complex.

While other CEs concentrate solely on RFID development, Puerto Rico’s CE is the only location divided into three areas: RFID, Security Printing, and Package Coding, offering customers a combination of proven technologies that can be integrated into their particular industry’s supply chain.

Iris "Chiqui" Santos, HP Inkjet Supplies Organization operations manager, recalled the need to establish a CE in Puerto Rico began with a vision to transform the company’s business on the island as the local economy was being challenged by globalization.

"One of the things I tried to identify was how other companies where facing these business evolutions," said Santos. "We met with groups from different industries in informal settings to discuss areas in which we could collaborate. During one meeting with a pharmaceutical-industry company, its need for RFID came up. We began to exchange ideas with different pharmaceutical-manufacturing companies on the island and discovered that in addition to tracking their products, they also needed to protect them against fraud, counterfeiting, and theft. That is how our end-to-end product tracking and authentication solutions were born."

In Aguadilla, the entrance to HP’s CE is inconspicuous, set in a large area where dozens of the company’s Ink Jet Supplies Organization employees work. The CE has about 15 engineers grouped into three divisions–RFID, Security Printing, and Package Coding. Each division operates separately and has its own production lines, printing, and other supply-chain areas reproduced.

"Our CE is a showcase where customers can see and try their products using our technologies," said Jorge Badillo, CE Director & HP Design & Development Engineering manager. "The pharmaceutical industry has federal regulations it must deal with before implementing new technology in its manufacturing plants. What the CE does is provide a setting where experimenting with a security solution takes place away from that regulated environment, with professionals who previously have participated in the process.

"Every customer’s counterfeiting problem is unique and HP’s CE provides the flexibility to create a personalized solution to the problem. Depending on the nature of the security breach, the multiple points where counterfeiting can take place along the supply chain, and the way products are handled from the manufacturing end until reaching the consumer, we recommend using more than one technology [to protect the product]. Each solution must be flexible since counterfeiters copy technologies as fast as they are created. The combination of security technologies must change often, just as the U.S. dollar’s security features are altered periodically," Badillo explained.

Security technology at its best

HP’s CE is abreast of security solutions developing worldwide, particularly for the island’s large pharmaceutical-industry presence. While RFID is an excellent track-and-trace technology for products, Badillo says it literally can fall apart once a product reaches the supply chain’s first level. It is at this point where the product’s pallet or container will be segregated and sent to different cities, states, or countries. With no counterfeit security features embedded on the product, it will be lost to electronic tracking.

"What we propose is a program with different technology layers that provides continuity [in the tracking and tracing of products,]" Badillo said. "This also complies with the FDA’s [future request for] electronic pedigrees, an electronic record of where the product was or where the product came from, should there be a product recall. We are trying to design a program that adjusts to the pharmaceutical industry’s different distribution channels."

CE’s Security Printing division finds ways to print images as small as one-twelfth of an inch on pharmaceutical tablets. By using thermal inkjet technology and inks made of chemicals approved by the FDA for human consumption, information such as individualized serial numbers, lot numbers, manufacturing-plant identification, and other security features can be printed.

In addition to printing the image, there is a system that inspects the image to assure it is correct. The information is then collected in a database. It can do two-dimensional matrix images (two-dimensional barcodes) where thousands of serial numbers can be registered. Around 385,000 different serial numbers can come from a 14-character by 14-character matrix image to identify a tablet. The image also can be printed with HP visible inks or invisible ultraviolet / infrared inks.

The CE’s Package Coding Division features HP’s Indigo digital-press technology. Using special HP Indigo inks, print and graphics experts design secure algorithms known as covert or invisible images that can only be detected by ultraviolet light. Different covert techniques include magnetic printing, encrypted codes, hidden overprints, microdisplacement of glyphs (graphic characters), and metal fibers. Most covert printing is done with invisible inks and only is detected by machines. Overt printing, which can be seen, is also available by creating holograms, colorshifting inks, difficult-to-replicate alignments, microtext printing, and visible watermarks.

"Indigo’s key technology is based on its inks," said Julio Rodríguez, Packaging Coding Division manager. "Instead of a liquid, it is more of a paste that uses an electrostatic charge to print, similar to a laser printer. The quality of the impression is smoother since it uses less contact or pressure on the label than other printers, which translates into a safer and more secure printing product. The press also has the capacity for up to seven different ink channels, which can produce proprietary colors or marks for our customers."

Carlos Martínez, CE project manager, added: "Every drum rotation [of the press] creates a unique image that disappears as soon as it is printed. This is how we can create serialized labels or labels with different security features without having to stop the press to switch from one product design to another. We also can switch the covert and overt images when counterfeiters catch on to the security features a company is using to protect its product. All of this can be done without having to stop and reset the press as must be done with an offset process."

Last, but not least, is the CE’s RFID division, which has a small-scale production line to demonstrate different track-and-trace solutions. RFID tags depend on a reader for identification, which recognizes the EPC and transmits the information to a database.

"Our laboratory helps demonstrate how to implement RFID as part of a company’s track-and-trace program," said Alipio Cabán, HP’s CE Software Designer engineer. "Different equipment is used to make tests and improve the use of this technology within the supply-chain process."

The RFID laboratory is used to reproduce the product-labeling and packaging process. With a pharmaceutical industry average of 400 to 600 bottles packaged per minute, the CE determines how many antennas and readers are needed and where they should be positioned for optimum efficiency.

"An important part of the analysis process is how to determine what will work in a particular environment, given the amount of noise or radio frequency interference that is present," said Cabán. "We have designed a frequency analyzer that takes various readings of an RFID area. The final results of this tool are processed with a software program also created by HP, resulting in a physical layout of where to place the RFID hardware."

Many engineers who work at HP in Puerto Rico came from the pharmaceutical industry. During the production-design process, most engineers have previous and extensive knowledge about the industry and can incorporate their expertise into the creation of new and better processes. HP’s CE not only is developing RFID to track-and-trace products. Other alternatives for RFID include monitoring and providing temperature readings and detecting access violations to secure or private areas.

Information from RFID readings is electronically transmitted to the company’s database, which will store such information as location and timestamps of all actions throughout the supply chain, including when it was produced, packed, shipped, received, and examined. Other personnel with access to the company’s database can obtain the information through a global data-synchronization network, which provides a standardized method of finding both history information and object-level information.

HP’s CE has submitted copyright protection to the U.S. Patent & Trademark Office on discoveries of new technologies and uses for existing technologies in end-to-end product-tracking and authentication solutions.

This Caribbean Business article appears courtesy of Casiano Communications.
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