Listen as Todd and Todd speak to Greg Cathcart, President & CEO of Excellis Health Solutions about current issues facing the Pharmaceutical Supply Chain to include the latest on global serialization.
Todd S: Good afternoon and welcome back to Life Science Connect Radio. I am your host Todd Schnick joined by my friend and colleague Todd Youngblood.
Todd, the countdown continues to New York City and INTERFEX 2014 and after last weeks stellar conversations giving us a good taste we continue to look forward to this great event.
Todd Y: I do too. It's amazing when I think about just the one-on-one conversations we're having with some of these folks. When we get in the midst of a couple of thousand of them, wow.
Todd S: It's going to be pretty exciting. Leading up to INTERPHEX, Life Science Connect Radio continues with a series of great conversation from some fascinating industry leaders. Let's get to it. On today's show, we want to welcome Greg Cathcart. He is the CEO of Excellis Health Solutions. Welcome to the show Greg.
Greg: Thank you Todd. I appreciate the time today with you guys.
Todd S: We're grateful that you made some time to join us so thank you for that. Greg, before we get into our conversation take a quick second and tell us a little bit about you and your background.
Greg: My background is I'm out of the life sciences industry. I started my career many years ago at a company called Johnson & Johnson. I spent about 10 years there in the supply chain organization. Since then I've worked in the technology side and the consulting side of the life sciences industry as it relates to mostly supply chain and ERP functions.
Todd S: All right. Give us the 10,000-foot view of Excellis. What do you do? How do you serve your market?
Greg: Excellis is a boutique-consulting firm. We focus on the areas of life sciences, CPG, really where we help our customers identify as it relates to their business and technology requirements again, around supply chain issues, around ERP issues, around manufacturing issues and quality issues and specifically in the world of supply chain. The biggest driver in the industry today is all around global serialization.
Todd S: Give us another level of detail on that whole global serialization issue. I mean supply chain has always been a significant challenge for any kind of manufacturing industry but what we're talking about here I think takes us to a whole new level.
Greg: Yea, basically what's happening in the industry, and it started a couple of years ago and it goes between now and 2023, there is a set of regulations around the world; U.S., Europe, China, Argentina, Brazil and other countries that the bottom line is that manufactures will need to package their product and identify their product using 2D data metrics or barcodes and then track that product through the entire supply chain.
So, for manufactures through wholesalers ultimately into retailers and hospitals each item of sale of a pharmaceutical product will have to be tracked by legislation. That's all brand new, not something they had to do in the past.
In the past, it was traditionally at the lock level. Now it is at the unit level. The technology they need and the hardware changes required and the business process changes that are required to put in all this information is going to take them a fair amount of time.
Todd S: Greg, talk about the Drug Quality and Security Act. Based on some of the things that you're experiencing and your customers, I mean how are organizations reacting to these new federal regulations?
Greg: DQS as they call it is the federal bill that was passed by the Senate and the House late in 2013 and signed by President Obama in November of '13. Basically what that did is took an umbrella approach to drug security in the supply chain in the U.S.
Prior to that bill we had some legislation pending in places like California. We already had legislation in Florida and then there were other states that were looking at legislation. The federal government basically said instead of 50 different regulations let's have one, that would be DQSA as it intended to do.
The result of the bill being passed is there are multiple phases between 2015 and 2023 that supply chain participants will need to comply. The first phase of compliance is January of 2015 and the last piece is in 2023. Along that timeframe, different supply chain participants have different requirements that will come in to play during that eight-year period.
Todd S: Greg, how well is the industry prepared for all of this? I mean you got the legislation so that is what it is and folks have to respond to it but when you talk in terms of the hardware changes and even tougher business process changes, how well is the industry going to do in responding to all of this?
Greg: I think they're still trying to figure it out to a point. What I mean by that, we had the California legislation has been talked about an enacted for the last couple of years and people had been preparing for California. The federal bill is similar to California.
The timeframes are a little bit different but the severity of the federal bill is much more relevant at the end of the day. What I mean by that is the California bill was going to be policed and/or enforced by California Board of Pharmacy. The federal bill is going to be policed and/or enforced by the FBI.
So, the importance of the federal bill, the fact that it is also a lot broader, right, it's not just product in one state, it's product across the entire United States, it's all the manufacturers, wholesalers, retailers, hospitals are affected.
We talk to customers everyday and we help support customers in this space, many of them are not even prepared at all and some of them are further ahead than others and then some are very far ahead. You have the spectrum of preparedness across the supply chain participants.
Todd S: Any other critical differences between DQSA and the California legislation?
Greg: From a legal interpretation, they're generally the same. The big issue though is in California all the manufactures were planning on serializing their product. When they sell product they don't know if it's going to end up in California or not. So they were kind of forced to do all their products.
But the wholesale community and the retail community was only looking at sites, as an example hospitals and/or retail stores in California, wholesalers with warehouses only in California, but now the entire country is affected.
If you look at regional retailers, a hospital chain here in Philadelphia as an example, Children's Hospital Philadelphia, they didn't care about the California legislation but now all of the sudden the federal legislation is going to affect them as well.
Look across the entire United States and there's going to be a lot more affect for those types of organizations. Honestly, I'm not sure if they're ready for it yet.
Todd Y: Greg, let's take a different angle on this thing. If I think of IT systems and inventory management systems and I think that's really what DQSA is doing or at least that's how I'm kind of looking at it, all those kinds of systems over the last decades were implemented to save money and increase efficiencies for manufactures.
Now it's obviously product safety and control and security that's driving this now, but do you see some financial value to the industry in having the level of information that serialization is going to provide?
Greg: Ultimately, we all believe when you have visibility into your entire supply chain so from a manufactures point of view understanding where their product is in the supply chain at the unit level, there's a tremendous amount of value to that.
They can reduce inventories ultimately. They'll know where their product is so that if have too much product in one site but not enough at another site they can balance it a lot easier.
In the wholesale and the retail communities same thing, the ability to know where your inventory is coming from at the unit level, how much you have, what's the expiration date on it, all the way down to unit level. You commented about a lot of these systems being put in over the years. Many have but still in a lot of the small to medium-size companies, they're still dealing with the antiquated technologies.
Some of them are going to be forced to look at their current ERP systems, as an example, which is the backbone of how they do business, and figure out if the ERP systems are up to the capabilities of integration to the serialization solutions that they are going to need as well.
There's going to be a big transformation there. It's a lot of process change and it's a lot of new education for people in these organizations. In the end though, a lot of value to your comment.
Todd S: Greg, you touched on this earlier but I want to get some clarity on it. The list is long of federal regulation that forces compliance deadlines and timelines that seem to be rarely met. Walk us through two things here. Are we going to make the timelines here and if not, what's the impact in the organizations that miss that date?
Greg: It matters to be determined. What's happening right now, the first timeline goes into effect in January of 2015. Then like I said there's multiple other dates along that continuum all the way through 2023. Again, this is U.S. I'm talking about today.
The FDA, by this legislation, has to put out the requirements for compliance within 60 days prior to January of 2015. Right now, the FDA is trying to decide in working with industry of what is going to be the requirements and then ultimately the technology that going to be built to support these requirements. +
So, the date is January '15. My professional opinion is they'll probably give the industry most of 2015 to comply to the first phase as long as the companies are moving.
We expect that when they do audit they'll come in and as long as you have a plan in place and you're implementing technology sometime in 2015 and you'll be able to meet the first set of requirements you'll probably be okay but they haven't said that yet. That's just by history of working with the FDA as it comes to managing regulation.
Todd Y: Greg, let's say I'm the guy charged with the responsibility of getting all this implemented and let's also say that my organization is "typical" of where most companies are at this stage. Two part question. What should I be doing and what other parts of my organization do I want to make sure I have involved in getting all this accomplished?
Greg: That's a big broad question. The transformation will affect... Most companies the projects are being led by the supply chain organization. Support supply chain is IT of course because it's going to be new technologies.
Packaging or packaging engineering or both because you're going to now change a lot of the packaging lines as well as the technologies likes scanners at the back of your warehouses so the packaging and the engineering folks. You're going to have regulatory as regulatory is looking at these requirements.
Most of these major companies as an example are not just selling product in the U.S. but they're selling it globally and there's other regulations out there. Then you're going to have the whole customer interaction team.
Today customer service deals with the downstream trading partners a certain way using certain technologies. Tomorrow that's going to change. They need to also be brought in to the overall project and the program to understand how their relationship with their downstream customers is going to change in the future, both on a technology point of view and a business interaction point of view.
It really hits a broad spectrum of the organization and that's where a lot of people are not looking at the transformational opportunity here. They're looking at it as a let me just fix some widgets on a packaging line and serialize my product. It's much bigger than that.
Todd S: Greg, you said at the top of the show that you've spent a considerable part of your distinguished career dealing with the technology side of things. You're throwing out some dates in this conversation that range from 2015 to 2023.
We can't even wrap our head around what technologies are going to be doing in 2023. Walk us through how the pace and the rapidity of the technological change is going to impact the industry. What should we be trying to be cognizant of what's coming down the road and how it's going to impact the industry? It's quite fascinating to ponder.
Greg: Again, like I said earlier, because of the California legislation there is some technologies in place and are being sold today. Most of them are being sold and deployed to meet the California requirement.
Since the federal requirements aren't dramatically different, even though we don't have the final FDA requirements, we expect the FDA to be similar to what California had already put in their requirements but until we get that final nod we don't know.
Some of the technology is around things like EPCIS, enterprise, product code, information system, they've already been developed and deployed and are being implemented still today in many companies. That's more of your enterprise level.
That's a solution that manages all the serial numbers, makes sure that they don't get cross-contaminated, as an example, along different product lines. Then your line level and warehouse level solutions. Again, there's been serialized requirements going back to 2017 in countries like Turkey.
The manufactures have already started developing and implementing package line solutions as far back as 2005 or 2006. They have learned. Have they completed a large quantity of their packaging lines? No. Do they still have a big effort in front of them?
But the technologies I feel pretty comfortable both at the line level and at the enterprise level have been implemented rigorously enough today that we've been able to understand their capabilities and of course understand their limits and work with those manufactures and vendors to fix/upgrade those technologies.
With that all said, with the implement for 2015, most likely is going to change two or three times between then and 2023. So we really make sure and we guide our customers to your comment earlier, to understand what you can do today to get enough, we call it, to comply enough. You don't want to buy the perfect system today because we don't know what the perfect system really is just yet, right.
So, have something in place that can meet the 2015 requirements but really have an eye on the prize for the 2023 requirement and work with industry and work with your vendors to make sure that they understand your requirements as well.
TY: Along these same lines, Greg, the technology that is and the innovations that are coming at us, pull out your crystal ball. What kind of technological innovations do you see on horizon that are going to make this whole job probably easier and more effective and less expensive?
Greg: The challenge with the question I think is to outfit a packaging line, as an example, in a manufacturing company is going to take you six months in costs, on average, a half of a million dollars.
If you're a company with 100 of them or 150 of them there's no silver bullet I guess I should say to be able to implement those hundred lines. There's a lot of hard work and engineering; taking equipment out, putting new equipment in, integrating that to the software that runs that equipment, revalidating everyone of those lines and that software.
So there's not really a silver bullet out there. It's going to be a lot of hard work, grit and determination. I think the secret is can those vendors speeding up their ability to support the manufactures. Can they make the six-month timeframe on average go down to four, as an example.
To date that hasn't happened. The reason it has not happened is they are all very busy. They're all getting more and more business because of all this growth and they just can't keep up with pace of hiring fast enough for folks to come in and help them build their technologies.
Todd S: All right. Todd we’re going to have to have Greg come back to the show because we have a lot more to discuss with him but for today, Greg, I'm afraid to say we're out of time. Before we let you go, how can people get in touch with you and where can they learn more about Excellis Health Solutions?
Greg: Just go to our website, www.ExcellisHealth.com. The other alternative is Excellis runs an organization called Global Track and Trace. It's an industry consortium. The website for that is www.GlobalTrackandTrace.org.
We have a meeting coming up in May. We'll probably have 150 participants from industry there and really it's a collaborative meeting to have everybody together and trying to figure out what they're going to do to satisfy these requirements. People are still relatively in the dark.
Todd S: Todd, we've have to sneak into that meeting. Greg Cathcart, the CEO of Excellis Health Solutions. Greg, it was a pleasure to have you. Thanks again for stopping by and joining us.
Greg: Thank you Todd. Thank you Todd. Take care.
Todd S: That wraps today's show. We'll enjoy seeing you at INTERPHEX in New York City March 18 through the 20th and you can catch Life Science Connect radio broadcasting live from booth 2065. On behalf of today's guest, Greg Cathcart, my co-host, Todd Youngblood, I am Todd Schnick. We'll see you soon on Life Science Connect Radio.