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

Organizational 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 organization'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 endeavor. It is a process that requires proper planning and careful consideration of a number of aspects (Samson and Bevington, 2012). The organization 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

It is imperative for the strategic change to build on Cure's strengths. The organization 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. These strengths provide a vital foundation for strategic change.

Despite these strengths, there are a number of weaknesses that cannot be ignored. First, Cure is a small organization, meaning that financial constraints can be a major challenge. The firm may not have adequate resources to fulfill 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 wholesalers 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 organization's strategic goals and objectives.

2.2.2 Trends and External Forces -- Opportunities and Threats

Cure has embarked on expanding its operations into emerging markets. These markets present a significant growth opportunity for the organization, particularly due to their higher incidence of disease compared to developed markets. 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). This trend has important implications for Cure.

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

Source: Ascher et al. (2015)

Capturing the opportunities presented by emerging markets, however, will not be a straightforward undertaking for Cure. The organization must effectively deal with the threat of counterfeits. The World Health Organization (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 problem is particularly more prevalent in developing markets largely due to lack of strong laws and regulations (WHO, 2011). The problem of counterfeits in the pharmaceutical supply chain centers on not just revenue losses, but also patient safety (David, 2011; PRNewswire, 2015).

As a player in the industry, Cure has a responsibility to protect consumers by eliminating counterfeits in its supply chain. The firm can rely on anti-counterfeit technologies such as RFID and bar code printing. These technologies have increasingly become commonplace in the pharmaceutical industry, with the anti-counterfeit drug technology segment being one of the most rapidly growing segments of the industry (Shah, Prajapati and Agrawal, 2010; Bansal et al., 2013; PRNewswire, 2015). Incorporating anti-counterfeit technology presents an opportunity for Cure to not only address the threat of counterfeits, but also improve its competitive advantage in the marketplace.

Improving competitive advantage is a particularly important priority for Cure. The pharmaceutical industry, locally and globally, is characterized by intense rivalry. The industry is dominated by powerful firms; such as Glaxo-Smith-Kline, Gilead Sciences, and Astrazeneca. Compared to the small firm 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.

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 organization 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

It is also important to consider stakeholders when planning and implementing strategic change. Indeed, 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 1 below categorizes the various stakeholders based on their influence and interest.

Table 1: 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 1, 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 2 below summarizes the concerns of each stakeholder group and strategies for engaging them.

Table 2: 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

The objective of the action plan is to implement the anti-counterfeit technology with minimum disruption to the operations of the firm. As mentioned earlier, some anti-counterfeit technologies involve 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 mobilization, staff awareness and involvement, stakeholder engagement, procurement, as well as deployment 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. Table 3 below highlights the key actions that will be involved and responsibility assignment.

Table 3: Key actions and responsibilities

Activity

Details

Responsibility

Change team formation

• Assembling a team from various functions and departments to lead the process

• Role allocation within the team

• Management

Evaluation (costs)

• Assessing the cost of the change initiative

• Change team

Resource mobilization

• Arranging internal/external financing

• Management

Staff awareness and engagement

• CEO presentation

• Staff meetings

• Staff survey

• Management

• Change team

Stakeholder engagement (hospitals, clinics, pharmacies, and distributors)

• Consulting stakeholders; acquiring their views and identifying their concerns

• Educating stakeholders about the initiative and their role in its implementation

• Change team

Procurement

• Procuring the required technology

• Assessing various vendors and selecting the best in terms of quality, cost, and contract terms

• Change team

Official launch

• Formal announcement of the anti-counterfeit technology

• Press coverage

• Management

• Change team

• Stakeholders (hospitals, clinics, pharmacies, and distributors)

Technology integration

• Incorporating the anti-counterfeit technology into products

• Change team

• Hospitals

• Clinics

• Pharmacies