How to improve security through an interconnected supply strategy

Counterfeiting and product diversion is a growing issue for pharmaceutical supply chains. Many companies are operating within silos and without transparency, which is increasing their risk. In this interview, Dr. Dieter Peters, former Executive VP of Global Product Security at Grünenthal, sheds light on some of the most serious counterfeiting incidents he has witnessed, the human factors which led to these and how an interconnected supply strategy can offer a solution.

RELATED: Join Dr. Dieter Peters and David Ward, former Head of Procurement for Europe and Emerging Markets at Merck, for their webinar on how to leverage an interconnected supply strategy to reduce counterfeiting. Sign up now!

Pharma IQ: What do you believe are the foundations for a secure supply chain?

Dieter: Whenever we talk about the supply chain, it all starts with procurement. You need to make sure that you procure from someone with integrity that you can trust.

Unfortunately, there are a lot of bad actors so you need to have the right measures of control in place. Pay attention to what you are buying and from whom. Sometimes, it is the small stuff, which doesn’t cost must, which can ruin your business.

By having the right suppliers you can build the right foundation for your business

The other element comes from understanding your customer. A lot of companies have issues translating customer demand into production and supply demand. You need solid, trustworthy systems in place and checks and balances to ensure you are producing accurately to the demand in the market.

There is also the critical human element. We are all driven by objectives, bonuses and business strategies. These may be coming in from different directions and driving different outcomes. It’s important that these are aligned or risks emerge.

Pharma IQ: Over the course of your career, what have been some of the most serious counterfeiting and supply chain security incidents you have faced?

Dieter: Well, at one point, one of our factories and warehouses was robbed by an armed gang. Lives were in danger. It was the most severe incident I personally experienced. It really showed me that even when you have a guard and security measures in place, when it comes to situations like these, you are more or less on your own.

I’ve also seen employees blackmailed, with their families threatened, to convince them to steal pharmaceuticals from a warehouse.

In this instance, we have to ensure protection measures are in place. So our employees can say to blackmailers that yes they will do it, but they will also be caught immediately because of our security measures.

Other incidents are far more standard. Such as pharmaceuticals being taken from along the supply chain and sold in other countries where they can receive a higher margin.

We’ve also faced operational errors where a 3PL transporting your pharmaceuticals may take the wrong road or drive somewhere else, so your products end up in a situation beyond your control.

You also have counterfeit versions of your products suddenly in different markets and you need to identify them quickly and remove them.

Pharma IQ: It seems like the human factor of the supply chain is one of the most difficult ones to manage. How can you ensure your employees act with security in mind?

Dieter: There is no miracle recipe for that, to be honest.

Along the hierarchy, you need to get to know people and get a feeling for them. Ask yourself, am I working with the right people. And it’s not just on an individual level, it’s also the culture in the company and especially the leadership culture.

It all starts from the top. You really need to look at the leaders and see what kind of culture they drive. You need to have support from leadership to break down fences and address the bad apples.

You also have to be careful of incentives. If they are contradicting and people are rewarded for different things, then it will not work.

Pharma IQ: On the regulatory front, we have definitely made positive strides, in particular with the EU FMD and the DSCSA, but have we done enough?

Dieter: I personally think that these directives and regulations are a big move forward. But I am a little bit concerned that people now think everything is safe. My experience has been that what has been created by human beings can often be circumvented by other human beings. I’m now waiting to see what the criminals come forward with next.

Sometimes you may even create a system that can actually make it easier for bad actors to do what you’re trying to stop them from doing. For example, if you look at the Euro banknote. They were changed to be more difficult to falsify, but then the first version was actually far easier to counterfeit than the old banknote.

Other systems within a regulation can also create a greater number of issues. For example, parallel imports are required by law in the European Union. If you really look at this, it’s an opening gate for misuse.

Without the right structure and pre-planning, you can end up giving criminals more possibilities to circumvent the system.

One of the weaknesses of the European system is also the lack of full transparency across the value chain. Some parties are just not interested in this or are concerned you would misuse the transparency for your own business optimization. But when you lack transparency, you weaken the system and the controls in place around your products.

Pharma IQ: Is transparency a common problem across the supply chain?

Dieter: Well, historically, when you look along the supply chain you have a lot of silos and the communication across these isn’t optimal.

This needs to be changed. End to end, from procurement to delivery to the customer, needs to be a smooth process. It needs to enable communication and full transparency, with an understanding that it is about the ‘we’ not ‘I’.

From this, you can then analyse, streamline and electronically track this process.

Under the EU FMD, you have to have transparent data. This is essential. You need to have one set of numbers, one version of truth, so that there is clear understanding from all parties of what is happening along your value chain.

If you have this in place, so the right people are talking to each other at the right stage, then I think you have the foundation to get to interconnectivity.

Pharma IQ: What advice would you give to those who are struggling to ensure security across their supply chain?

Dieter: First of all, before you start anything else, if your organization is not functioning correctly then you are doomed. Don’t look beyond the company first. Instead, make sure that your internal operations are processes are running smoothly.

Then, it’s all about how you connect with your suppliers, 3PLs and distribution centres. You have to make sure you understand who you are working with and build open, transparent relationships. Be sure to check who you are procuring from and working with and do your due diligence.

If you can address these two things you are 90% of the way there.

When your supply chain is working properly, then you minimize your risk. But it must be remembered, that in certain countries it will always be more difficult to protect your supply chain and your people from criminal activities. The best you can do is put strong measures in place to protect them and build a good culture so people can be honest with you.