Radio hosts Todd and Todd interview Ron Guido, President of Lifecare Services, LLC to help you understand the nature of counterfeiting in the pharmaceutical industry and how brand protection best practices can help you preserve the integrity of your product throughout the supply chain, or in Ron’s words, “a very complex supply network."
Todd S: Good morning and welcome to Life Science Connect Radio. I am your host, Todd Schnick, joined by my friend and colleague, Todd Youngblood. Todd, we are just weeks away from New York City and INTERPHEX 2014. I am so looking forward to broadcasting from this great event
Todd Y: I am too. You think about literally the hottest industry that there is around and New York City being the center of the universe, it's going to be a pretty awesome event.
Todd S: We're going to have a good time. Looking forward to it. Leading up to INTERPHEX, Life Science Connect Radio will be bringing you some great conversations from some fascinating industry leaders so let's get right to it. Today say hello to Ron Guido. He's the President of LifeCare Services, LLC. Ron, welcome to the show.
Ron: It's good to be here.
Todd S: It's real good to have you. Thanks for stopping by and joining us. Ron, before we get into a conversation take a quick few seconds and tell us a little bit about you and your background.
Ron: Sure, Todd. Currently I'm the President of a small consulting firm known as LifeCare Services. Its focus is primarily on brand protection and supply chain integrity in the life sciences area.
Formerly I was the Vice President of Brand Protection at Johnson & Johnson. I started with that organization. Seven years ago until my retirement last year from Johnson & Johnson, I was running a rather large brand protection organization.
Todd S: We want to talk a little bit about that work at J & J. Give us the 10,000-foot view of the work you're doing out of LifeCare Services. How do you serve in your market?
Ron: I've got a number of clients, technology-based companies that want to apply their technology in this space of supply integrity and helping them with business strategy as well as some engagements with private clients.
TJ: Ron, just to get us on the same context here, give us a definition of brand protection. What exactly does that mean?
Ron: That's a great question because it's a relatively new business discipline. I think it's important to stress that that brand protection is either unknown or a misunderstood in many circles unless you are in this area. I guess the best way to describe it is it's a business discipline focused on anti-counterfeiting and protecting the integrity of the supply chain. It grew out a number of areas.
In the early days of fighting counterfeiting incidents it would handled by some combination of security people and IP protection attorneys, maybe some brand management but what we've come to realize is this is such a prevalent crime.
It's often referred to as the crime of the 21st century. The growth of pharmaceutical counterfeits is staggering. It requires the development of expertise in this area and to really focus on the ways and means of the counterfeiter and other violations, other breeches to the integrity of the supply chain like unauthorized gray market diversion, like fraud, abuse of the product and so forth.
The brand protection professional is someone who can reach across the company and then also across into the industry to really pull together the risk mitigating measures and the safeguards that are needed to help prevent counterfeits from coming into the supply chain, into the legitimate supply chain.
Todd S: Ron, we want to go deeper into that subject, a very, very important industry-wide subject. I can't imagine having the responsibility of doing that for Johnson & Johnson. Talk about that work and the implications of what you did there and how's that impacting the work today.
Ron: For the listeners who may not be aware, Johnson & Johnson is three major businesses in the life science area. There is, of course, the pharmaceutical business, which is primarily the prescription medicine business. There is medical devices, med/surg products if you will. The third category is consumer healthcare products.
What we recognized early on is in order to defend the brands and help protect our patients and customers around the world we really needed an enterprise approach to brand protection.
What we found, fortunately, is that some of the best practices that are needed in this area to help develop and implement those safeguards do span many different product categories, whether it is a prescription medicine or an over-the-counter product some of the same logic applies and the same process improvements and, of course, the technologies that one would adopt and be used on virtually any product and package.
TJ: Ron, you've mentioned supply chains several times already in our conversation. I'm trying to get my brain around just how long, how many different steps there are in the supply chain in the pharmaceutical industry. There seems like there are an awful lot of opportunities for counterfeiting at every step along that chain. Talk about that.
Ron: That's an excellent insight. When you think about the origin of the supply chains in the pharmaceutical world, obviously every person on the planet is a potential patient that may need a prescription medicine at one time or another.
There's a better term for describing how complex that supply chain is. It's more like a supply network. Anyway, our companies developed the supply chain based upon the ability to get the products out to as many points of distribution and use as possible and as quickly as possible.
Back in the day, safeguards weren't a criteria for developing the design of the supply chain. Now that we've seen that there are profiteers out there that come in and inject fake goods or substandard product in some way into that supply chain, we realize that we need those supply chains.
The key to success here is to recognize that the supply chain as we know it now has so many of those hand-offs, as you know. It could be two or three or as many as 10 or 12 different entities are handling that product from the point it leaves a manufacturer's distribution center to the point of dispensing or injection, in the case of a clinic, and that any number of those nodes can become the point of entry of the fake good and goods.
The two words that we continue to use to remind ourselves how difficult this process is safeguarding that safe chain is that the supply chain lacks control and visibility.
It lacks control because no one, no one entity sees from end to end. From a visibility standpoint, each entity is a business entity that purchases the product and then transfers it down in terms of the chain of custody of those drugs.
It was very, very difficult to recognize where a product may go or where it's come from when you're buying or selling the product. Some of those intermediaries are not only the trusted wholesalers but you have secondary distributors who have repackagers.
You have importers, exporters, third party logistics entities and so forth. Certainly, it is a treacherous pathway before the product gets to the end user and that's why we need these safeguards.
Todd S: Ron, you described it as the "crime of the 21st century" and so thus if it's crime there's obvious victims and there are perpetrators. Can you make it real clear exactly who these victims and who these perpetrators are?
Ron: I think that the easier part to answer is the victims. First and foremost, there's trust in the system by the patient that we believe that the manufactures have done the right thing.
That everyone handling that product as it goes through that supply chain and the prescriber and the administrating physician or the pharmacist all have integrity in mind when that product is making its transient to a patient. But, the patient may not be aware that there are other situations that may invite in some counterfeit drugs.
The first victim of a counterfeiter would obviously be the patient that's relying on that medicine. Let's face it, just the term patient means you have some condition or you're in need of some therapy and the medical therapy embodied in these drugs are designed to help that patient. When you have either the absence of that therapy or worse, something harmful, then the patient is the first victim.
The other victims along the way are everyone who is losing revenue as a result of this demand for that product being filled by some pirate, some profiteer who is taking advantage of the good name of that brand and the trusting players along the way. That perpetrator is really violating or creating another set of victims in all those who are losing revenue in the trusted supply chain.
I guess you can argue that other victims would be the people whose jobs are not being maintained relative to fulfilling the true demand by legitimate supply. Those engaged in the work of counterfeiting are stealing the jobs from the legitimate players in the industry.
As far as the perpetrators, it could be anyone. We often say in this space that you can never prevent counterfeiting. You cannot. You can only help to prevent it from entering into that legitimate supply chain.
Anybody could recognize that there are profits to be made, again by leveraging the brand name and by falsifying a product and injecting it into the supply chain. By and large, we call these criminal profiteers although because some of the times they're providing a product that is harmful there's a worse crime.
There's not just a profit motive but these people are some of the vilest criminals on record because they're actually recognize that they may be doing harm and the absence of therapy is doing harm.
In the world of prescription medicines, this is probably the worst kind of perpetrator. If someone says, well if you're making fake watches or harrow, no one gets hurt. Well, people are still victimized by those counterfeit goods stealing the legitimate demand that's out there. I think it's worse when he talk about prescription medicines.
Todd Y: It's intriguing to me Ron that you mentioned the gray market in the context of counterfeiting. It brings to mind the stories of it cost me $5,000 to get my prescription here in the U.S. and I can buy it from Canada for $20.
My understanding of this is that gray market I'm still getting the legitimate, pharmaceutical legitimate product. How is it different dealing with the actual counterfeiting that we've been talking about in gray market when I do have, at least in my impression, was a legitimate product?
Ron: That's a great question because on the surface it seems like gray market diversion is just a crime of economics, if a crime at all, that there is no reason why someone can't buy a product at one price and sell it at a higher price somewhere else in the market.
The problem though with the diversion in prescription medicines is two-fold. One is within the legitimate supply chain those medicines are cared for, handled and stored.
Some may require temperature controls, climate controls of some kind, so when you're diverting that product away from that legitimate supply chain we have no idea how it's being stored or how it's being handling.
Possibly there may be issues relative to expiry date, maybe there's some relabelling that goes on particularly if you're diverting from one language in one country to another country. You may not transfers or translate the patient information and instructions for use.
That is one dimension of it. That when you're diverting product away from the legitimate supply chain those who are handling and trading that product are not necessarily interested in preserving the integrity of the product. You may end up getting a substandard product. Although it is genuine, it may have been violated in the course of that transient.
The second issue though is the fact that when you're dealing with this convoluted supply chain we've always found that in every case of the counterfeit entering the supply chain it's been supported by gray market trade. In other words,
If you have a pure, legitimate supply chain there's no reason to accept a counterfeit into the supply chain. But, if you believe you're buying genuine product at a reduced price, that's the perfect place for the counterfeiter to inject their fake material in and among the diverted goods.
So, I think it is two-fold problems. It's the diversion that also provides the pathway for counterfeiters to enter into a legitimate supply chain and it's also the integrity of the drugs that have left that secure and controlled supply network.
Todd Y: Political pressure is around this gray market thing. There is a lot of debate. . . Back to my example I used earlier, $5,000 in the U.S. or a hundred bucks from Canada. Is there political pressure in just make dealing with this whole issue much more challenging?
BB: Let's face it, in any product, any product group, there will always be market-based pricing. So, that's not going to go away. There are high-priced markets, low-priced markets and that fuels the gray market diversion opportunities for those who want to price arbitrage. In fact, parallel trade is perfectly legal for many items including pharmaceuticals in places like the European Union.
The intent of brand protection is not to prevent diversion or pricing differentials. It's to prevent the unauthorized diversion where those not skilled or authorized to handle delicate pharmaceuticals are now intercepting the normal flow of trade for the purpose of profiting but in the course of that transaction they may be inviting harm into that product.
On the political pressure side, yes, we certainly know that across the world health care costs are high. Relative to what? Relative to last year and the year before. So, there's increasing demand for these products and therefore the total spending by a country or a channel of trade continues to grow higher.
If we can bring pricing together, you know, collapse the extremes, it possibly could reduce the gray market diversion and reduce some of the profits that the counterfeiters are seeing. In general, the market forces are what's generating the price differentials right now.
Todd S: Ron, we're running low on time. A finally question, where do we go from here? How will the industry deal with this issue in 2014 and beyond?
Ron: There are some basics. Again, if you look at the essence of this discipline, you know, how do we mature as an industry in the course of brand protection, there's probably five things that we need to do as an industry. One is to generate a collective industry response.
In other words work together so that all these disparate entities, all these disparate stakeholders along the supply chain, need to get together and all manufactures need to get together and figure out how do we redesign the supply chains to make them safe.
The second part is to adopt the best practices. What are those practices that help build stronger walls around the legitimate supply and help to recognize the threats that come from someone trying to infiltrate that supply chain. Many of the companies need to strengthen their security and their safeguards for their businesses downstream.
Third would be adoption of technology, whether it be a track and trace system with serialization or applying authenticating marks to a package and to the dose itself. Technology can aid us in quickly identify whether a product is genuine or not.
The fourth, as you alluded to, is to work with the public sector and to have this public/private sector collaboration to develop the laws, to develop the regulations and the penalties and so forth relative to safeguarding the supply chain.
Then probably the most significant thing that's lacking right now is just the public awareness, that the consumer is complaisant by buying product off the internet, for instance, without a prescription, not knowing your source of supply, to just a general awareness that this problem is large and it's growing and it affects public health.
So getting the message out there to the average consumer, to the physicians, to all the handlers of drugs in the supply chain and making them aware of where the risks lie and how to identify the threats to the supply chain.
Todd S: I assure you Todd and I will do what we can with our platform to get that message out. Ron, I hate to say it but we're out of time. Before we let you go how can people get in touch with you and learn more about the work you're doing out at LifeCare Services?
Ron: Thank you. I guess the best way is just a direct email, which is RonGuido7@gmail.com.
Todd S: Ron Guido, the President of LifeCare Services, LLC. It was great to have you my friend. Thanks for stopping by and joining us.
Ron: My pleasure.
Todd S: That wraps today's show. We'll enjoy seeing you at INTERPHEX in New York City March 18th through the 20th. You can catch Life Science Connect Radio broadcasting live from booth 1265. On behalf of today's guest, Ron Guido, my co-host, Todd Youngblood, I'm Todd Schnick. We'll see you soon on Life Science Connect Radio.