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TRANSCRIPT
Effective Brand Protection & Supply Chain Integrity Strategies
Ron Guido
President, LifeCare Services, LLC
September 9, 2014
Agenda
Call to action to safeguard healthcare supply
Supply chain vulnerabilities
Anti-counterfeiting best practices & technologies
Confessions of a counterfeiter
Implementing supply chain integrity strategies
What would you do?
1. Surgeon informs your company that she implanted fake mesh in 42 hernia repair patients.
2. FDA discovers a counterfeit version of one of your branded drugs and asks you to recall all inventory of that drug until the scope of the problem is known.
“No tolerance” policy for
counterfeiters and illegal diverters
Counterfeiting & Diversion – perhaps your greatest competitive threats ever
Counterfeiting & Intentional Adulteration --- Illegal Diversion &
Theft
Have become significant global problems threatening supply integrity
1. Places patients & consumers at risk
2. Places brand reputation and company image in jeopardy
3. Erodes both top and bottom line business value
Counterfeiting is a large and growing business ($1.7T by 2015)
10% of total world trade is counterfeit; $700B in ’13; growing 20% p.a.
Drugs & medical devices- 3rd most counterfeited category
The WHO estimates that 8-10% of the world’s drug supply is fake (~ $80B)
Diversion enables counterfeiters
Diversion is how counterfeits are inserted into legitimate channels
Diverters are motivated by profits not patient care
2013 Seizures by Source Country per DHS
China and Hong Kong together remain the primary source country for counterfeit and pirated goods, representing 94% of all IPR seizures (24,000) by domestic value ($1.7B).
India and Pakistan both made the “Top Ten Source Countries” due to seizures of counterfeit pharmaceuticals which accounted for 85% of the value of all IPR seizures from both countries.
Supply Chain Vulnerabilities
1. Lack of control throughout the supply chain
2. Lack of visibility into product flow
3. Distributor compliance (to safe & secure practices)
4. Reverse logistics
5. Cargo theft
6. Pricing arbitrage
7. Repackaging from original containers & labeling
8. Uncoordinated incident investigations
9. Internet – lack of regulations & unknown sources of supply
10. Inventory flow asynchronous to financial transactions
Brand Protection
Purpose
Brand Protection, as a business discipline, focuses on securing product supply to help protect patients/consumers and sustain business value. BP sets strategic direction for your company’s anti-counterfeiting measures, operational practices and public policy.
Business Value Protection
Consumer Safety
Brand & Company Reputation
Comprehensive Approach to Supply Integrity
People
Organizational Commitment
Capabilities & Competencies
Enforcement & Prevention
Processes
Suppliers
Manufacturing
Distribution
Technology
Authentication
Track & Trace
Complementary
Technologies
Interactive Cross Industry & Public Sector Collaboration
Safe & Secure Supply Chain Best Practices
Executive Mandate: Brand Protection Governance
1. Incident Reporting and Management
2. Awareness and Education
3. Market Monitoring
4. Commercial Insights
5. Distributor Compliance
6. Contract Manufacturing
7. Product Protection Technology
8. Product Returns & Destruction
9. Transportation Security
10.Facility Security
Is the product and packaging
genuine?
Is the chain of custody intact?
Framework for Product Protection
Safe & Secure Supply Chain
Product Authentication
Product
Identity
Physical
Features
Product Movement
Track Trace
Point Authentication
Flow
Visibility
1. Overt/Covert Packaging Markings
2. Unique Identifier Serialization- Unit of Sale
3. Package Insert Couponing
4. Website-based Package Verification
5. Mobile Phone Authentication
6. Dose Formulation Authentication
7. Covert Tracking Devices
8. Geographical Information Systems
Anti-Counterfeiting Technologies
It may seem like a boatload, but “we’re going to need a bigger boat”
Supply Chain Integrity Requires Technology Adoption Serialization and track & trace with field authentication systems
1. Serialization
3. Authentication
2. Track & Trace Solution
Integrated Technology
1. True Demand Sensing
2. Inventory Optimization
3. Management of Returns
4. Management of Recalls
5. Isolation of Stolen Cargo
6. New Product Tracking
7. Expiry Date Tracking
8. Reduction of Diversion
9. Distributor Performance
10. POS Pricing Accuracy
Track & Trace Potential Business Benefits
New Business Model for Trading Prescription Drugs: Payments between trading partners and inventory transfer records are triggered simultaneously by the act of scanning serialized bar codes as proof of safe passage.
Summary: The New Reality in Pharmaceuticals Distribution - 2014
1. Counterfeiting and illicit diversion of healthcare products are serious and growing concerns
2. We have a shared responsibility to help safeguard all who use or benefit from our products
3. Preserving brand reputation and increasing consumer confidence is essential to sustainable business growth
4. Safe & Secure Supply Chain management is now an essential competency for all health care businesses
5. The immediate call to action is to implement proactive safeguards embodied in brand protection best practices
Confessions of a Counterfeiter… Exploiting the not-so-best practices of the bio-pharma supply chain
My Confessions to the Bio Industry
Myth: Despicable Evil Wrongdoings
Truth: Opportunistic Business Activities
“Imitation is the Sincerest Form of Flattery”
Charles Caleb Colton (1820) …an English cleric
Employees at fake Apple stores in China
Confession #1 My Market Space: The Facility of Global Commerce
• Free trade agreements & move towards global economy
• Growth and capitalization of emerging markets
• China has become “the world’s factory”
• Internet – lack of regulations
• Under-resourced regulatory and enforcement agencies
• Lack of respect & protection for IP in some countries
The 1st key to my success is a general lack of control and visibility of supply chain activities
Confession #2
My Targets: Multi-National Brands with High Demand
• Reputable brands- highly recognizable logos
• Global brands register trademarks everywhere
• Price is nice but not as important as volume
• Areas of prime interest: apparel, media products, software, electronics and healthcare, especially drugs
The 2nd key to my success is high volume, recognizable goods, they get less scrutiny than specialty items
Confession #3
My Modus Operandi: Never Be Seen with the Goods
• My manufacturing site not visible to legitimate supply chain
• Cross a border as soon as possible
• Utilize gray market diverters to “dilute” fake products
• Ship across borders in small quantities rather than bulk
• Utilize my friends & family for import/export operations
• Avoid “track & trace”. Embrace “clueless & apathetic”
The 3rd key to my success is to create as much time & distance between my sales and the point where the absence of a genuine is discovered
Confession #4 My Technology: Invest in Packaging
• Always purchase genuine products to use as a template
• Objective is to fool the inspectors not the users
• Source from same suppliers used by targeted brands
• Utilize discarded genuine packaging whenever possible
• Plant closings offer plethora of resource opportunities
• Auction sites offer equipment to reproduce anything
• “Anti-counterfeiting technologies” are amusing failures
The 4th key to my success is to check for mistakes, most arrests begin with package flaws or documentation errors.
Confession #5
My Favorite Pathway: Reverse Logistics are E-Z wins
• Famous brands have liberal returns policies
• If sales are slow or risky simply return the goods to the brand owner for genuine credit
• Product destruction procedures assume trustworthy 3PLs
• ‘Dumpster-diving’ for used packaging can be lucrative
The 5th key to my success is to exploit the ‘trust without verification’ commercial practices of most popular brands
Confession #6 My Inspiration: Supply Chains Lack Visibility
• IP rights holders quickly “sell-out” their brands to intermediaries creating attractive gray zones
• Contract manufacturing opens the door for shadow operations
• Trivial audits by Gov't agents create false sense of security
• All supply chain traders & retailers are looking for a bargain
• The internet – the counterfeiters’ expressway to profits
• Retailers/consumers don’t care about source of supply
The 6th key to my success is that records of trade are asynchronous to money and inventory flow
Confession #7
My Legal Defense: Laissez Faire
• Controls impede free commerce
• Consumers want “a bargain”
• Economic development trumps international harmony
• Counterfeiters create jobs & sell goods at discount prices
• Brand owners create demand for a category- “generics” will usually suffice
• If customs agents can’t “authenticate” in the field, they must allow goods to continue on their way
The 7th key is my success is that consumers are naive, trusting and apathetic
Confessions Summary
1. Counterfeiting is an art form so please refer to me as an artist not a criminal
2. The stage is the (vulnerable) supply chain and you are the bad actors on it
3. Trust without verification is your downfall and my windfall
4. This is just the beginning…it will take a super hero to stop me now….
Thank you for your attention,
it‘s time to go…
Back to Ron….
Going Forward: 5 Strategies to Help Achieve Supply Integrity
1. Integrate best practices and other preventive measures into the fabric of R&D and Operations • Ongoing market monitoring and channel buys
• Awareness & education across all stakeholders
• Distributor contract terms for ACF practices and data sharing
• Multi-layered brand protection technology
• Revise product returns & asset destruction processes
• Establish metrics to track opportunities & results
2. Provide leadership to industry alliances and public outreach programs, influencing laws and regulations
3. Evolve from market surveillance to business intelligence through supply-demand & trade analytics
Going Forward: 5 Strategies to Help Achieve Supply Integrity
4. Implement track & trace systems in supply chain for compliance to the DQSA and to gain operational benefits • Supply/demand balancing
• Inventory optimization & reduced shortages
• Improved recall & returns processes
• Efficiency & effectiveness of chargebacks & rebates
• New goods tracking
• Cargo security
5. Design and pursue Brand Protection maturity model across full spectrum of prevention categories • Benchmark vs. peer companies
• Evolve from tactical responses to a preventive business discipline
‘No tolerance’ policy for counterfeiters and illegal diverters