When was the last time you bought diverted product?
Illicit Trade and diversion is a problem which keeps growing. Have you ever purchased a counterfeit product? Would you know if you did?
If you’re a regular online shopper the chancers are good that you’ve come across illicit product, possibly without knowing it.
I was recently at my local barbers getting a haircut when I noticed the container of a popular brand of talcum powder.
Only the logo and product name was in english – everything else was in Indonesian.
My barber mentioned he hadn’t noticed, but bought it because it was being sold cheaply online. This is an example of product diversion.
To highlight the risks of diverted or counterfeit product, there are many articles online about the link between talcum powder and cancer. By purchasing talcum powder on the illicit market you may unknowingly be exposed to asbestos, which causes lung cancer.
Most people know what counterfeits are, but diversion is less well known. Diverted product is authentic product sourced at a discount (or stolen) in one market, and then resold in another market. The diverter pockets the price differential between bought and sold, and the manufacturer (and their authorised distributors) lose out.
Mechanisms that provide track and trace functionality, such as serialisation, are essential for the detection and investigation of illicit trade.
Serialisation can help improve supply chain integrity and counterdiversion
When we talk about serialisation in a supply chain context, it refers to the process where a unique identifier – usually a serial number or barcode – to individual items or products in the supply chain.
In combination with data management, analytics, and a well-developed program, serialisation is a way to realise the tracking and tracing of products as they move through the supply chain and circulate in the market.
Serialisation offers benefits to Supply Chain Integrity:
- Traceability – Serialisation is the traceability mechanism by which manufacturers can track the movement of their product through the supply chain
- Provenance – Serialisation itself will not establish provenance (unless serialisation is uses blockchain), but data related to provenance could be linked with the serial number to indirectly establish provenance
- Authenticity – Serial numbers should be unique and be matched to specific product versions or models, making it possible to identify counterfeit and diverted product through test purchases, ‘mystery shopping’, or seizures by police or customs
Given the safety risks associated with illicit product, its no wonder the pharmaceutical industry is a leading adopter of serialisation:
- The US Drug Supply Chain Security Act (DSCSA) requires serialisation, track and trace capabilities in the pharmaceutical supply chain, from manufacturers to retail pharmacies.
- The 2019 European Union Falsified Medicines Directive (FMD) applies only to presciption medicines produced, imported or distributed in the EU.
- The Chinese National Medical Products Administration (NMPA) has been managing serialisation since it was first introduced in 2013.
- India commenced the serialisation journey in 2019, through its Drugs Technical Advisory Board (DTAB).
Australia is late to the party on serialisation in the pharmaceutical industry, with the Therapeutic Goods (Medicines—Standard for Serialisation and Data Matrix Codes) (TGO 106) being mandatory from 1 January 2023.
How does serialisation work?
Serialisation is the unique identification of each unit of a product, allowing a unit to be identified distinctly within its batch. Serialisation can be applied at multiple levels in any shipment:
- Packaging (item and carton levels)
To maximise efficiency, Serialisation markings must be machine-readable and are typically applied via three techniques:
- QR codes
- Data Matrices
According to the Therapeutic Goods Administration (TGA), a Data Matrix contains various beneficial features not associated with the other methods, including:
- A large data carrying capacity
- Built-in error correction providing reliability and readability in situations where the label is damaged or if the pack is irregularly shaped
- The ability to be easily printed at high production speeds, such as those found in medicine manufacturing environments.
How can small-medium businesses access the benefits of serialisation?
It used to be that product serialisation was an expensive endeavour, but a number of recent articles online suggest serialisation is becoming much cheaper. The costs of serialisation can be quite substantial if not managed properly, but product serialisation can also add value to your supply chain and inventory management practices beyond mitigating illicit trade.
As the technology becomes more common and compliance programs mature, SMBs will be able to leverage their existing systems with serial number generation and management tools and labelling or printing tools to access the benefits of product serialisation.
- Australian Government (2021). Therapeutic Goods (Medicines—Standard for Serialisation and Data Matrix Codes) (TGO 106) Order 2021, Therapeutic Goods Administration
- Curwell, P. (2022). Supply chain integrity and security: what are the risks?
- Curwell, P. (2023). Counterfeits can compromise your Supply Chain Integrity
- European Union Agency For Network And Information Security [ENISA], (2015). Supply Chain Integrity: An overview of the ICT supply chain risks and challenges, and vision for the way forward, Version 1.1, August, https://www.enisa.europa.eu/publications/sci-2015
- Therapeutic Goods Administration (2021). Serialisation and data matrix codes on medicines, www.tga.gov.au
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