by Jeff Sandgren
A Brand Integrity Nightmare
The thieves started by cutting a hole in the roof. Then they rappelled down into the factory, disabled the alarms, and proceeded to load up a tractor trailer with an estimated $75 million worth of antipsychotics and other drugs, pallets and pallets of them, and drove clean away. No, this is not the plot of the next James Bond thriller; this is the true story from earlier this year of the daring heist from a major Eli Lilly warehouse in Connecticut. As cited in a recent Wall Street Journal article, there have already been 10 major pharmaceutical thefts this year, valued at a total of $110 million, following 46 drug thefts valued at a total of $184 million last year, according to Dan Burges, director of intelligence at the U.S. division of FreightWatch International, a supply-chain security consultancy.
Then it gets worse, because the drugs don’t just disappear. Sometimes they find their way back into the consumer goods supply chain, AFTER being cut with impurities to multiply their volume and street value. It’s a serious health threat to patients and consumers – and a brand integrity nightmare for the Brand Manager. Consider these examples cited by Joshua M. Sharfstein, M.D., Principal Deputy Commissioner Food and Drug Administration (FDA) in congressional testimony earlier this year:
- In 2007 and 2008, contaminated heparin (a blood-thinning drug) from China was linked to deaths and a number of serious allergic-type reactions here at home.
- Counterfeit Tamiflu was discovered during the novel H1N1 outbreak.
- In 2007, Xenical capsules ordered over the Internet were found to be composed only of talc and starch.
- In January 2010, counterfeit Alli was discovered, which did not contain the active ingredient but instead contained varying amounts another stimulant, which can lead to serious toxicity if used by certain people.
So why haven’t we been better able to prevent this? In the past several years, there has been significant progress in “Track and Trace” solutions, which involve placing identifiers on manufactured goods, then using those identifiers to follow the merchandise as it moves through the supply chain and ultimately into the hands of consumers. So why haven’t these solutions been deployed to protect consumers, and the brand reputations of the products supplied to them?
Track and Trace Issues
“Track and Trace has bad equity,” explained Yogendra Jain, CTO and co-founder of Covectra. Part of it stems from a strong association in the industry’s collective mindset between Track and Trace solutions in general and the particular subset of those solutions involving Radio Frequency Identification (RFID). RFID made a much heralded burst into the scene several years ago, with all the pundit hype of a Stephen Strasburg debut … minus the 14 strike-outs. Or, depending on your definition, with the 14 strike-outs. To be clear: there have been some exciting successes in RFID, and the ongoing development both technically and commercially will deliver many more in the years ahead; but the hype destined it for over-promising/under-delivering, before it even began, with an ROI that remains elusive for many applications.
Yet RFID is only a small slice of the solution set for Track and Trace. According to Reik Read, Senior Analyst Supply Chain Technology for Robert W. Baird & Co., “There’s more gravitational interest in 2-D bar coding.” What’s more, in this case, the focus is on consumer protection and brand integrity: about making sure that the authentic goods in their quality-controlled condition make it to the consumer with the authenticity and condition intact and therefore with the all-important Brand Promise equally uncompromised. Very shortly, the FDA will issue a guidance establishing a standard for unique identification for prescription drug packages, which ultimately will help in identifying the whereabouts and authenticity of drug packages and distinguish them from counterfeits. By October 2012, all manufacturers and repackagers of Pharmaceutical Drugs in the US have to have applied package level standardized numerical identifiers (SNIs) to their lines according to the standards put forth by the FDA. Similar initiatives are underway in Europe, and are expected to be completed before the end of 2010. So how could there be bad equity with such a noble product mission?
A New Approach
Before we deal with their answers to the Big Questions of brand integrity, here’s some background on Covectra itself. A company in the midst of transition, Covectra has in fact just rebranded itself. The company, formerly known as PhamoRX Security, is a provider of multi-layered brand protection solutions, competing with other vendors like Cognex and AlpVision. Recognizing the value of such solutions for premium brands as well as for pharmaceuticals, Covectra’s solutions are built on a foundation of serialization track & trace, multiple taggant solutions, and what Jain describes as “a deep expertise in cloud computing, and making branded products ‘sticky’ (i.e. more interactively engaging)”.
But Covectra’s approach mirrors its view of the problem, a broad solution set that engages manufacturers, distributors, pharmacists, prescribers, law enforcement and, ultimately, patients – an end-to-end brand protection ecosystem. But a solution platform that encompasses so many users has, of necessity, a big job in education ahead of it. “It’s a huge learning curve,” says Yogendra Jain, and the value chain is difficult to demonstrate, much less ensure. Pending regulatory requirements certainly contribute to the value proposition. So how do you create the impetus to overcome the learning curve? Covectra sees a even more powerful driver in a very different zone: increasing brand loyalty. “We have to START with brand loyalty,” says Jain. “Putting track & trace first is like putting the cart before the horse.”
Consider, for example, pharmaceuticals with expiring patents. Pharma Brand Managers have a large stake in keeping patients on the branded product. Adherence is another value driver, both for the patient (more consistent dosage and treatment) and for the Brand and Retailer (less lost consumption equals higher sales). Covectra’s solutions, based on serial track & trace, combined with an easy consumer-facing portal for web and mobile access, seek to “offer a way for the Pharma Brand Manager to improve dialogue with consumers and stakeholders”, according to Jain.
One way to improve the dialogue is to help the consumers authenticate products themselves. Imagine a concerned mother wanting to make completely sure about the medicine she is picking up for her child. Covectra’s simple Brand Loyalty Integrity Services (BLIS) smart-phone application lets her snap a picture of the 2D barcode, upload, and instantly confirm that the product in her hands is the authentic one that left the warehouse intended for the retail store where she is now standing. Better still, with that authentication might come any manner of additional brand-loyalty-building communications from the Brand Manager: offers for discounts, website links for personal support, or healthcare tips. By triggering off the simple act of consumer authentication, a direct communication link will have been formed between the individual consumer and the Brand.
Covectra is working to enable a day when a heist like that from Eli Lilly, slyly trying to insinuate itself back into the supply chain, has to run the gauntlet of a much broader set of stakeholders – up to and including a smartphone-savvy network of concerned patients and caregivers – who are continuously monitoring authenticity, alerting Brands at the first sign of infraction, and hopefully giving law enforcement better information to help them clamp down on the counterfeiters and thieves.
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