Industry should take lead on TT&A governance

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.com PLC.

Pharmaceuticals and tobacco are most affected by intellectual property rights violations. Pictured, destroyed counterfeit cigarettes. [Shutterstock]

The EU wants to tackle counterfeit pharmaceuticals and tobacco. Tracking, tracing and authentication (TT&A) has a big role to play in this. But who should be tasked with implementing and monitoring it? Craig Stobie explains how the problem should be handled.

Craig Stobie is global life sciences manager at Domino, a British-based developer of commercial inkjet printing, thermal transfer printing, print and apply machines, digital printing presses and laser printing products.

Last year, the European Commission reported that more than 40 million products suspected of violating an intellectual property right, with a total value of nearly €650m, were detained at the EU’s external borders.

The same report mentioned above also acknowledged a 15% rise in goods intercepted by Customs compared to the previous year. Accordingly the European Union has brought forward legislation to tackle the issue in two of the sectors most affected, pharmaceuticals and tobacco.

This legislation, under the Falsified Medicines Directive and Tobacco Products Directive, brings in sweeping requirements across EU member states that makes it a legal requirement for manufacturers to mark their products with a unique identifier, a tamper-proof code or marking, that allows both supply chain operators and authorities the ability to track and trace a product through often complex supply chains.

This is meant to prevent diversion and smuggled or counterfeits entering the market. Additionally, the legislation makes it a requirement that a products are also marked with security feature to authenticate genuine products, which can be related to the identifier or separate.

Both authorities and industry agree that tackling the illicit trade needs to be a priority and that tracking, tracing and authentication (TT&A) can be a vital tool in addressing the issue but there are still areas of debate. One such topic is governance. Who should be responsible for ensuring the agreed systems and solutions are applied correctly and without interference.

The public authorities, regulators and independent standard setting bodies have a crucial role in defining TT&A standards in order to ensure the interoperability of the system, especially across borders. However, the setting of standards should not jeopardise the existence of a competitive level playing field for the suppliers of traceability and authentication solutions.

Legislation which creates monopolies reduces the cost-effectiveness of the solutions deployed and disincentives innovation or even fails to enable implementation in the first place.

The initial failure of anti-counterfeiting measures in the US in the early 2000s should serve as a warning. The original idea was to create a major Food and Drug Administration (FDA) controlled collaborative system that would require Radio-frequency identification (RFID) chips to be placed in every pharmaceutical package, with a designated IT company to champion the software side.

The project collapsed after about two and a half years because pharmaceutical industry constituents largely did not buy in. It was too costly and too prescriptive.

New US legislation governing the TT&A of pharmaceuticals comes into force at the end of this year and now largely refrains from defining technological solutions but allows a number of different technical (but legally compatible) solutions already in the marketplace.

This approach of setting the standards within broad parameters has clear benefits for both industry, the supply chain and authorities as it allows for much flexible approach that reduces cost and time pressures and allows for constant innovation.

This approach has been taken in the case of the Falsified Medicines Directive and looks likely to be favoured in the case of the Tobacco Products Directive too. But concerns have been raised about the issue of control and particularly the storage of data in industry managed solutions.

While the first level of control for any tracking and tracing system is in the hands of the brand owner, who will have a strong interest in securing their own supply chain, it is understandable that the European Union has incorporated oversight for authorities into the legislation.

In the case of data management, the data to be collected should be defined by policy makers, but its collection should fall on brand owners and they should have access to the data at all times to ensure they are able to spot weaknesses or diversions in their supply chain.

The storage of the data itself may be controlled by an independent operator acting in coordination with the public authorities but experience with the implementation of the Falsified Medicines Directive at EU level shows that it is difficult to make national code management centres responsible as gate-keepers of data-flows. This approach is prone to technical failure, as the number of codes quickly becomes overwhelming and data errors often lead to perfectly good products being sent back to manufacturers.

The alternative? All information relevant for law enforcement and national authorities could be transmitted from such brand owner databases to external EU TT&A databases, access to which would be strictly regulated.

This would allow manufacturers the ability to manage their own supply chains but allow the authorities to capture the data they require. These databases should be regularly subjected to external audits and any modifications of data and product recalls should be subject to very clear, transparent and stringent rules to ensure the integrity of the system.

This oversight is undoubtedly a requirement for a system to be seen as trustworthy, both in the eyes of the authorities and in the public. But a clear distinction should be made between system operation and independent control, as it’s all too easy, with complex supply chains and systems, to think it can be simplified by combining the two.

This is a mistake. The identification and operation of the most appropriate system should remain with manufacturers and other economic operators. This allows for the development of competitive systems and solutions that take into account the value of the products they protect, and safeguard a level playing field for operators to ensure the investments required in the system do not act as a discriminatory barrier for SMEs.

Some have argued that letting industry play this part, rather than third-parties, is akin to allowing the fox guard the hen-house.

Given the damage the illicit trade causes the genuine industry it’s much more appropriate to present them as the farmer, but even if concerns are raised the authorities can, and should, build in checks and audits and making sure that any businesses that do display ‘vulpine’ tendencies are appropriately dealt with.