Anti-Counterfeit Technology in Pharmaceutical Supply Chains

Organisational Background

Cure Pharmaceutical (Cure) operates in the pharmaceutical industry's drug delivery technology segment. Cure is considered a small pharmaceutical company with revenues of $150 million. A technology designed by the firm enables patients to take medications without water. This patented Oral Thin Film (OTF) Technology 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 — effective treatments 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, utilising authorised and private brokers. Because of this distribution model, 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 limited redundancy in its manufacturing process; finding a solution that prevents counterfeit drugs without disrupting operations — so that it can continue to supply medicines to those in need — is therefore crucial. It is also pertinent to adopt a strategy that upholds Cure's mission of keeping medicines affordable for everyone. Counterfeit drugs have a tremendous impact on not only business sustainability, but also social sustainability.

As Cure continues to grow in emerging markets, the threat of counterfeit infiltration of its brand and value chain increases. 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 chains. 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 into the firm's supply chain. Particular attention is paid to strategic aims and objectives, levers and obstacles, implementation costs, mechanisms for tracking progress, and risks and barriers.

Strategic Aims and Objectives

To address the risk of counterfeits as it expands its operations in emerging markets, Cure will implement a blended anti-counterfeit technology consisting of RFID tagging and barcode printing directly on the OTF itself. The RFID technology will be utilised in both bulk packaging and single-dose units. The firm will also develop a smartphone app that allows stakeholders to quickly verify product authenticity via 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 simultaneously advancing market penetration, promoting patient safety, and ensuring seamless integration. The implementation 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, and will represent a significant source of competitive advantage in the highly competitive pharmaceutical industry.

Internal Capabilities: Strengths and Weaknesses

Implementing change is often not a straightforward endeavour. It is a process that requires proper planning and careful consideration of multiple aspects (Samson and Bevington, 2012). The organisation must consider its strengths and weaknesses, likely obstacles, external forces, and the influence and interests of key stakeholders.

Cure boasts a number of significant strengths. First, the organisation has demonstrated a strong commitment to innovation, as evidenced by the introduction of the OTF technology. The firm has also built a reputation for quality, safe, and affordable drugs — an important asset for any pharmaceutical firm. Other notable 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, several weaknesses cannot be ignored. Cure is a small organisation, meaning financial constraints can be a major challenge. The firm may not have adequate resources to fulfil all its strategic goals, particularly given that it operates in an industry dominated by powerful, financially strong players with global operations. Implementing anti-counterfeit technology can be a costly undertaking, often requiring modification of current production processes and incurring additional expenses. Another weakness stems from the firm's supply chain: reliance on independent brokers and secondary wholesalers exposes the firm to counterfeit risk, as these distributors typically lack robust security measures. Pharmaceutical supply chains are ideal targets for counterfeiters owing to their inherent complexity (PRNewswire, 2015).

External Environment: Opportunities and Threats

There are a number of opportunities Cure can take advantage of to enhance its competitive position. One significant opportunity relates to emerging markets. With developed markets becoming increasingly saturated, emerging markets — particularly in Latin America, Russia, India, Turkey, China, and Africa — have been identified as important sources of growth for multinational firms. These markets present an especially strong opportunity for pharmaceutical companies given the higher incidence of disease. A report by Ascher et al. (2015) indicates that emerging markets have significantly surpassed developed markets in pharmaceutical spending and are projected to grow more substantially by 2020.

Technological advancements also present a significant opportunity. With the rise of counterfeits, anti-counterfeit technologies such as RFID and barcode printing have become increasingly commonplace in the pharmaceutical industry (Shah, Prajapati and Agrawal, 2010; Bansal et al., 2013). The anti-counterfeit drug technology segment is one of the most rapidly growing segments of the larger pharmaceutical industry (PRNewswire, 2015), with firms dedicated specifically to authentication technologies multiplying rapidly. By taking advantage of modern anti-counterfeit technologies, Cure can meaningfully improve its competitive position.

Further opportunities stem from the legal environment. In an effort to curb counterfeits, many countries have enacted legislation mandating the serialisation of drugs at the point of manufacture (PRNewswire, 2015). Serialisation has been termed an enduring solution for eliminating counterfeits in the pharmaceutical supply chain, and pharmaceutical firms can count on this legal development to help address the problem.

In spite of technological advances and legal measures, the threat of counterfeits remains a serious concern 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 counterfeit, and that these drugs occasionally contain toxic elements that can cause death (Abel, 2010). The incidence of counterfeits tends to be particularly high in emerging markets, where laws and regulations are not as stringent as in developed markets (WHO, 2011).

The problem of counterfeits is especially significant for the pharmaceutical industry because it centres not only on revenue losses, but also on patient safety (PRNewswire, 2015). Counterfeit drugs can cause serious public health hazards, secondary illnesses, and even death (WHO, 2011). Ordinarily, drug consumers cannot determine the authenticity of a product, as genuine and counterfeit drugs often share similar packaging, shape, and size. Pharmaceutical firms therefore bear primary responsibility for protecting consumers. Counterfeit drugs can also erode stakeholder and public confidence in a firm, with potentially dire consequences including revenue losses and even organisational collapse (David, 2011).

Another important threat relates to competition. The pharmaceutical industry is characterised by intense rivalry. It is dominated by powerful firms such as GlaxoSmithKline, Gilead Sciences, and AstraZeneca, which boast extensive operational histories, immense financial strength, state-of-the-art infrastructure, and robust research and development capabilities. Without remaining aggressive, Cure's market share can readily be lost to these larger competitors. Other threats worthy of consideration include unfavourable government legislation and hostile economic events such as recession.

The SWOT analysis is summarised below:

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.

Weaknesses: Small organisation; financial constraints; supply chain deficiencies and risk of counterfeits.

Opportunities: Emerging markets; anti-counterfeit technology; legal advancements and mandatory serialisation.

Threats: Counterfeits; competition; 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 the technical, human, and financial resources necessary to integrate anti-counterfeit technology into its supply chain. Implementing the technology will improve the firm's competitive advantage as it bolsters its operations in emerging markets.