Supply Chain and Technology

Integration of Anti-Counterfeit Technology in the Pharmaceutical Supply Chain

Organisational Background

Rationale for Strategic Action Plan

Strategic Aims and Objectives

Levers and Obstacles

Analysis of Internal Capabilities -- Strengths and Weaknesses

Trends and External Forces -- Opportunities and Threats

Stakeholder Influence

Strategic Action Plan

Key Actions, Actors, and Responsibilities

Timeline and Milestones

Cost Analysis

Risk and Barriers

Mechanisms to Track Progress

Organisational Background

The organization, Cure Pharmaceutical (Cure), operates in the pharmaceutical industry's drug delivery technology segment. Cure is considered a small pharmaceutical company with revenues of one hundred and fifty million. A technology designed by the firm enables patients to take medications without water. This patented Oral Thin Film Technology (OTF) is small, light and occupies much less space after packaging. The technology can be shipped in single dose form or in bulk rolls to the site of patient care. Cure's core business integrates generic drugs that are an effective treatment for a multitude of diseases into its proprietary OTF technology.

Since Cure has a unique delivery system, it distributes OTF both in bulk form and in individual dosing units utilizing authorized and private brokers. Due to this, the implementation of anti-counterfeit technology presents a major challenge. In addition, since some product is cut into dose form from bulk rolls at the site of patient care, simple tracking devices inserted into packaging may not suffice. Furthermore, Cure is a small company with not much redundancy in its manufacturing process; thus, finding a solution for preventing counterfeit drugs without disrupting its operations so that it can continue to supply medicines to the needy is crucial. It is also pertinent to adapt a strategy that allows for Cure's mission in keeping medicines affordable for everyone in need. Counterfeit drugs have a tremendous impact on not only business sustainability, but also social sustainability.

As we continue to grow in emerging markets, the threat of counterfeit infiltration of our brand and value chain increases. For Cure to grow in these markets, the company must rely on independent brokers and secondary wholesalers often controlled by small private entities with little security and control over their distribution chain. This increases the organisation's vulnerability to the risk of counterfeits. Since entering emerging markets, Cure has seen a five percent increase in counterfeit products infiltrating its distribution channels over the last eighteen-month period. Despite the risk, emerging markets offer strong growth potential, and are critical to Cure's overall mission of distributing affordable essential medicines to populations in need. This report provides a strategic plan of action for integrating anti-counterfeit technology in the firm's supply chain. Attention is particularly paid to strategic aims and objectives, levers and obstacles, implementation costs, mechanisms for tracking progress, as well as risks and barriers.

2. Rationale for Strategic Action Plan

2.1 Strategic Aims and Objectives

To address the risk of counterfeits as it expands its operations in emerging markets, Cure will be implementing a blended anti-counterfeit technology consisting of RFID tagging and bar code printing directly on the OTF itself. The RFID technology cure will be utilized both in bulk packing and single dose units. The firm will also be developing an app that allows stakeholders to quickly identify the product via smart phone scan. The overall goal of implementing the anti-counterfeit technology is to eliminate counterfeits from the firm's supply chain, especially with regard to its OTF technology, while at the same time advancing market penetration, promoting patient safety, and ensuring seamless integration. The implementation of the technology will specifically seek to achieve two objectives:

i. To reduce the incidence of counterfeits by 20% by June 2018

ii. To increase product distribution and revenues by 20% by June 2018

The achievement of these objectives will be crucial for building Cure's reputation for delivering authentic, safe drugs to its markets. It will indeed be a crucial source of competitive advantage in the stiffly competitive pharmaceutical industry.

2.2 Levers and Obstacles

Implementing change is often not a straightforward endeavour. It is a process that requires proper planning and careful consideration of a number of aspects (Samson and Bevington, 2012). The organisation must consider its strengths and weaknesses, likely obstacles, external elements, as well as the influence and interests of key stakeholders. These issues will be particularly important if Cure is to successfully implement the anti-counterfeit technology.

2.2.1 Analysis of Internal Capabilities -- Strengths and Weaknesses

Cure boasts a number of significant strengths. First, the organisation has been strongly committed to innovation. The recent introduction of the OTF technology attests to this. The firm has also built a reputation for quality, safe, and affordable drugs. This is an important strength for a pharmaceutical firm. Other important strengths include competent management and personnel, efficient manufacturing, a unique delivery system, impressive financial performance, commitment to social sustainability, and strong relationships with key stakeholders such as suppliers, hospitals, and pharmacies.

Despite these strengths, there are a number of weaknesses that cannot be ignored. First, Cure is a small organisation, meaning that financial constraints can be a major challenge. The firm may not have adequate resources to fulfil its strategic goals and objectives. This is a particularly important challenge given that the firm operates in an industry dominated by powerful and financially strong players with operations all over the world. As simple as it may seem, implementing anti-counterfeit technology may be a costly undertaking for a small firm as the process may often involve modification of the current production processes, resulting in extra costs. Another challenge stems from the firm's supply chain. The firm relies on independent brokers and secondary wholesales to distribute its drugs, which exposes the firm to counterfeit risk as the suppliers lack strong security measures. Pharmaceutical supply chains actually tend to be ideal targets for counterfeiters owing to their inherent complexity (PRNewswire, 2015). Exposure to counterfeits is an even more important weakness as it may more substantially thwart the achievement of the organisation's strategic goals and objectives.

2.2.2 Trends and External Forces -- Opportunities and Threats

There are a number of opportunities Cure can take advantage of to enhance its competitive advantage in the marketplace. One of the opportunities relates to emerging markets. With developed markets increasingly becoming saturated, emerging markets (especially Latin America, Russia, India, Turkey, China, and Africa) have been identified as significant sources of growth for multinational firms wishing to expand their operations across the globe. These markets present a particularly important growth opportunity for pharmaceutical companies given the higher incidence of disease. A recent report authored by Ascher et al. (2015) indicates that emerging markets have significantly surpassed developed markets in pharmaceutical spending. As shown in figure 1, the report further demonstrates that emerging markets will grow more substantially by 2020 compared to their developed counterparts (Ascher et al., 2015).

Figure 1: Pharmaceutical sales growth by region, 2015-2020, $ billion

Source: Ascher et al. (2015)

Technological advancements also present a significant opportunity for pharmaceutical firms. With the rise of counterfeits, anti-counterfeit technologies such as RFID and bar code printing have increasingly become commonplace in the pharmaceutical industry (Shah, Prajapati and Agrawal, 2010; Bansal et al., 2013). The anti-counterfeit drug technology segment is actually one of the most rapidly growing segments of the larger pharmaceutical industry (PRNewswire, 2015). Firms specifically dedicated to authentication technologies have increasingly sprung up. Indeed, technology has provided a valuable solution for addressing arguably the most pressing concern for players in the pharmaceutical industry. By taking advantage of modern anti-counterfeit technologies, Cure can improve its competitive advantage in the marketplace.

Further opportunities emanate from the legal environment. In an effort to curb counterfeits, many countries around the world have enacted legislations aimed at mandating the serialisation of drugs at the point of manufacturing (PRNewswire, 2015). Serialisation has indeed been termed as an enduring solution for eliminating counterfeits in the pharmaceutical supply chain. Pharmaceutical firms can now count on this legal development to address the problem of counterfeits.

In spite of technological advances and legal measures, the threat of counterfeits remains a major threat for pharmaceutical firms and the industry at large. The World Health Organisation (WHO) estimates that 10% of all drugs in the worldwide supply chain are counterfeits, and that the drugs occasionally have toxic elements that can cause death (Abel, 2010). The incidence of counterfeits tends to be particularly higher in emerging markets where laws and regulations for counterfeits are not as strong as in developed markets (WHO, 2011).

Whereas the problem of counterfeits affects virtually every industry, the problem is more significant for the pharmaceutical industry. This is because the problem centres on not just revenue losses, but also patient safety (PRNewswire, 2015). Counterfeit drugs can cause serious public health hazards and critical safety concerns. They can cause secondary illnesses and even death (WHO, 2011). Ordinarily, drug consumers are not in a position to determine the authenticity of drugs as genuine and counterfeit drugs come with similar features in terms of packaging, shape, and size. Therefore, pharmaceutical firms are primarily responsible for protecting consumers. Counterfeit drugs can also result in the loss of confidence in a pharmaceutical firm by key stakeholders and the general public, which can have dire consequences on the firm including loss of revenues and even total collapse (David, 2011).

Another important threat relates to competition. The pharmaceutical industry, locally and globally, is characterised by intense rivalry. Indeed, the threat of rivalry is strong. The industry is dominated by powerful firms such as Glaxosmithkline, Gilead Sciences, and Astrazeneca. Compared to the small Cure, these firms boast extensive operational history, immense financial strength, state-of-the-art infrastructure, and robust research and development (R&D) capabilities. In fact, Cure can be likened to small fish in an ocean full of sharks. Without remaining aggressive, Cure's share of the market can readily be lost to the sharks. Other threats that may be worthy of consideration include unfavourable government legislation and hostile economic events such as recession. Table 1 below provides a summary of the internal and external environment (SWOT analysis).

Table 1: SWOT analysis

Strengths

• Innovation

• Quality, safe, and affordable drugs

• Competent management and personnel

• Efficient manufacturing

• A unique delivery system

• Impressive financial performance

• Commitment to social sustainability

• Strong stakeholder relationships

Opportunities

• Emerging markets

• Anti-counterfeit technology

• Legal advancements -- mandatory serialisation

Weaknesses

• Small organisation

• Financial constraints

• Supply chain deficiencies -- risk of counterfeits

Threats

• Counterfeits

• Competition

• Others -- unfavourable government legislation and hostile economic events

On the whole, despite the constraints it faces as a small firm in a highly competitive industry, Cure has what it takes to implement the anti-counterfeit technology. The organisation has the necessary technical, human, and financial resources to integrate the technology into its supply chain. Implementing the technology will improve the firm's competitive advantage as it bolsters its operations in emerging markets.

2.2.3 Stakeholder Influence

Stakeholders comprise important enablers and obstacles of change. They can either accelerate the implementation of change or hinder it. Therefore, an important step in change management entails identifying and addressing the needs and concerns of key stakeholders. In fact, the success of a change initiative is in large part dependent on how effectively stakeholders are engaged (Hayes, 2014). As per stakeholder management theory, stakeholders are engaged depending on their level of influence and interest in the change initiative (Scharioth and Huber, 2004). The stakeholder influence matrix particularly identifies four categories of stakeholders: high influence high interest stakeholders, high influence low interest stakeholders, low influence high interest stakeholders, and low influence low interest stakeholders (Freeman, 2010). This aspect must be put into consideration if the change initiative is to be successful.

The major stakeholders in this case include the board, the management, employees, shareholders, hospitals, clinics, pharmacies, distributors (wholesalers and brokers), and patients. Other stakeholders may include suppliers, the media, and the government. Table 2 below categorises the various stakeholders based on their influence and interest.

Table 2: Stakeholder influence matrix

Influence

High

• Shareholders

• Board of directors

• Management

Low

• Press

• Government

• Suppliers

• Employees

• Distributors

• Hospitals

• Clinics

• Pharmacies

• The public

Low

High

Interest

As shown in table 2, the board and management of the firm represent high influence high interest stakeholders. They are the major players, meaning that the initiative may not see the light of the day without their commitment and support. Employees, distributors, hospitals, clinics, pharmacies, and the public (patients) represent high interest low influence stakeholders. These stakeholders may have a lesser influence, but their participation in the initiative is vital. Therefore, they must be kept informed throughout the implementation process. Shareholders represent high influence low interest stakeholders, while the press, government, and suppliers represent low influence low interest stakeholders. Irrespective of their fairly limited influence and interest, these stakeholders have unique concerns that must also be addressed. Table 3 below summarises the concerns of each stakeholder group and strategies for engaging them.

Table 3: Stakeholder Management Plan

Stakeholder

Concerns

Strategy, Responsibility, Frequency, Channel of communication

Board of directors

• Shareholder wealth

• Profitability and return on investment

• Strategy: keep informed of milestones and progress throughout all implementation stages

• Responsibility: management

• Frequency: twice a month

• Channel: print, email, meetings

Shareholders

• Profitability

• Dividends

• Strategy: inform about the success of the initiative

• Responsibility: the board

• Frequency: annually

• Channel: annual report

Management

• Relevance of the initiative to the firm's strategic goals and objectives

• Profitability

• Return on investment

• Strategy: keep informed of milestones and progress throughout stages of implementation

• Responsibility: project team or person in-charge of the initiative

• Frequency: weekly

• Channel: print, email, meetings, telephone

Employees

• Awareness of the technology and its importance

• Roles and responsibilities

• Expectations

• Motivation, rewards, and compensation

• Strategy: engage and involve employees throughout the entire process of implementation; provide issues reports

• Responsibility: management and/or project team

• Frequency: monthly

• Channel: print, email, meetings

Hospitals, clinics, pharmacies, and distributors

• Awareness of the technology

• Role in enforcing the technology

• Strategy: provide education about the technology

• Responsibility: management

• Frequency: as often as required

• Channel: print, email, meetings, stakeholder forums

The public (patients)

• Drug safety

• Strategy: communicate reduction in counterfeit incidences

• Responsibility: management

• Frequency: as often as required

• Channel: media, packaging

Suppliers

• Business growth

• Strategy: provide new guidelines for procurement and performance

• Responsibility: management

• Frequency: as often as required

• Channel: print, email, meetings, telephone

Press

• Informing the public about the initiative and the firm's commitment to eliminating counterfeits

• Strategy: ensure seamless flow of information between the firm and the public

• Responsibility: public relations function

• Frequency: as often as necessary

• Channel: press releases

Government

• Adherence to the relevant rules and regulations

• Strategy: secure the necessary government approvals and comply with pertinent rules and regulations

• Responsibility: management

3. Strategic Action Plan

A major objective of the action plan is to implement the anti-counterfeit technology with little or no disruption to the operations of the firm. As mentioned earlier, some anti-counterfeit technologies involving adjusting production processes, which may cause disturbances in the supply chain, ultimately leading to a temporary drug shortage. It is imperative for the implementation to be done without causing significant disruption to the supply chain.

3.1 Key Actions, Actors, and Responsibilities

The objective of the change initiative is to integrate anti-counterfeit technology into Cure's supply chain with a view to reducing the incidence of counterfeits and increasing product distribution by 20% by June 2018. The achievement of this objective will require a number of actions. These include change team formation, change initiative evaluation, resource mobilisation, staff awareness and involvement, stakeholder engagement, procurement, as well as launch of the anti-counterfeit technology. The formation of a change team will be important for leading the implementation process (Hayes, 2014; Hussey, 1998). The team will be particularly responsible for evaluating the costs of the entire initiative, arranging stakeholder engagement forums, conducting staff awareness, and procuring the required technology. The role of the management is to provide the necessary resources, support, empowerment, and authority.