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Serialisation: What's it gonna cost you?
21-07-2018

#Serialisation: What's it gonna cost you?

Adapting packaging lines, implementing a new anti-tampering system, a 2D data matrix with a unique serial number, software adjustments, efficiency loss because of slowed production, and costs related to data exchange between European and national data banks. These terms probably sound dreadfully familiar to those involved in serialization.

Falsified medicines can easily be confused with their authentic counterparts but may contain ingredients of bad or toxic quality, or in the wrong dosage; posing a very real risk to patients.  This threat to global health is answered by a comprehensive strategy both at a European and international level in the form of serialization. The EU Directive: 2011/62/EU aka Falsified Medicines Directive (FMD) is intended to prevent the entry into the legal supply chain of falsified medicinal products; thus creating a safer environment for patients.

So how does it work?

The basic set-up is the following:

  • Manufacturers register packaging to the European system (EU-Hub)
  • EU-Hub Transfers data to the national systems (NMVS)
  • Pharmacy holders and wholesalers are connected to the national systems
  • Wholesalers perform risk-based sampling
  • Pharmacies scan the product to check the status of a serial number and sign them off
  • Competent authorities receive reports to enable research possible falsification

&

  • The patient is ‘assured’ a safer product

The scheme below gives a broad overview of how the system is designed.

Higher costs per packaging

Obviously, nothing is free and to no one’s surprise, the current hot topic is the price of medicines, which is bound to rise. The European Commission has already carried out an impact analysis in 2015 (Ecorys) to determine the effect of FMD on the price of drugs. They estimated a rise of up to 3 euro cents per packaging in general (so no differentiation between innovative drugs or generics etc.)

Other reports show significantly differing numbers like a report from CapGemini in which the additional costs of the FMD for the Dutch manufacturers of generic medicines are estimated at an average of € 0,17 per packaging.

Investments for manufacturing companies

As for the manufacturing companies that will be affected, the organization ‘Medicines for Europe’ has estimated that updating packaging and production lines will cost the average company 5 million with an additional 2 million annually for running and maintenance costs. According to their calculations serialization will cost the entire pharma industry 5 billion to update packaging and production lines and also 90 million the implement the EMVS accompanied with an equal amount annually to keep it up and running.

These additional costs that companies will be facing can vary to a great extent as they depend on factors like:

  • Adaptation of packaging processes with new packaging lines, set up and testing, artwork, and implementation of software and data-connections
  • Generation and management of serial numbers
  • Training
  • Registration dossiers
  • Higher stocks
  • Contribution to NMVS and EMVS
  • Project costs

Also, depending on total revenue, the number of products, and their presentations, FMD costs will vary per manufacturer. Especially for companies with relatively low volumes and/or low margins in a relatively small medicines market, costs will be ‘higher’ due to the vigorous investments (which have no guarantee of any possible payback). For instance, this will put a lot of pressure on generics and small scale companies, which may consequently choose to discontinue certain products or worse.

The intended result of increased patient safety will be paired with significant costs in any case and may even be too much to handle for some of the smaller companies. But how much exactly? Based on our experience we’ve come up with a calculation tool which should give you some insight into the ballpark figure to help you prepare.

RECEIVE OUR CALCULATION TOOL HERE.

Considerations

So, now you may have a ballpark figure, but what’s next? Preparing a business case, funding and actually getting started are the logical next steps. It might be helpful to consider using Lean Six Sigma as a methodology, this approach offers various tools that are well-suited for projects like these. And though compliance with the FMD is the primary objective you may very well be able to realise substantial savings in the process to compensate for these investments.

Feel free to contact us to find out how or any other questions you might have.

Blog by: Nick Veringmeier


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