Combating Pharmaceutical Counterfeiting And Diversion

steve wood from covectra

In an interview at Pharma EXPO 2014 Steve Wood, CEO & President, Covectra - a company that delivers Serialization and Track & Trace solutions using AuthentiTrack and BLIS - Wood discusses how pharmaceutical counterfeiting and diversion are a worldwide epidemic. Wood also dives into the affects on patients and physicians and how the industry can do more to combat this is issue.

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Interview Transcript:


Todd S:            Alright. Good morning. Todd and Todd live in Chicago, Life Science Connect Radio’s day 3 coverage off and running. Todd, boy, days 1 and 2 were just unbelievable. What a great time. It was great conversations, the innovation, the leadership, the excitement about the industry is just inspiring.

Todd Y:            Don’t forget the people. I think actually for me that’s the coolest part of it. Just interesting, varied backgrounds, folks from all over the place all focused on the same set of issues. I feel smarter just being in the building.

Todd S:            Boy, you and me both. We would be remised as we broadcast this, it is Election Day here in the US and so if you are listening to this, we urge you to get out and vote. That vote matters. Did you vote, Todd?

Todd Y:            I got my absentee ballot in.

Todd S:            That’s a good boy. It’s been a while since I’ve been on the road on election day.

Todd Y:            Well, there’s important stuff going on in Georgia in the election issues.

Todd S:            Yes, there is. Alright. Well, let’s get to our initial conversation we’re going to kick off today. We got a great conversation. Say hello to our guest. His name is Steve Wood, CEO and President of Covectra. Steve, welcome to the show.

Steve:              Thank you, Todd. Good morning.

Todd S:            Good morning. Good to have you. Thanks for carving out some time and appreciate you kicking off your day with us. Steve, before we get into our conversation, do take a quick second and inform the audience a bit about you and your background.

Steve:              Alright. Born in Key West, Florida, raised in Southeastern Connecticut, went to the Naval Academy. It’s been 7 years in the Navy both in nuclear submarines and a bit of duty with the intelligence community, got out and went to business school, and then have been in a series of small businesses for the most part. Got my first exposure to the pharmaceutical security and serialization business in about 2005, and I have been very active in that ever since.

Todd S:            Alright. Did you vote?

Steve:              Oh yes, absentee 2 weeks ago.

Todd S:            Outstanding.

Steve:              I was a good boy.

Todd S:            Good for you and thank you for your service.

Steve:              Thank you.

Todd S:            We appreciate that. Alright. Covectra. Give us the 10,000-foot view, what do you do, how do you serve your market?

Steve:              Alright. First of all, it was founded in 2005 by a Harvard-trained psychiatrist, Dr. David Bear, who was treating patients addicted to opioids. He felt there should be some tools available to combat this. He searched, he couldn’t find any. He then ran across a concept called serialization and thought that he could apply serialization to this problem, and that’s how the company started in 2005.

Todd Y:            Steve, I want to loop back to the opioid part of the story, but take a few more steps back. Talk a little bit about brand protection, product protection, a more general sense of why serialization is so important.

Steve:              Sure. Obviously, the reasons for brand protection are to prevent counterfeits from being used by a patient. From entering the supply chain, we can go into that a little bit more detailed later, but you’ve got… anti-counterfeit has one purpose. Also, diversion – diversion of product.

                        In other words, it’s being intended to go to a certain set of suppliers and distributors and then to certain physicians who are authorized to prescribe to authorized patients. If you have a secure supply chain, that can happen. If you don’t, you can have a lot of problems in terms of patient safety, leakage into the supply chain among other things.

Todd Y:            Let me just ask you this question. With the knowledge we have or the awareness that we have, with the technology that we have, it just strikes me that the pharmaceutical supply chain is still so vulnerable. Why?

Steve:              Because the counterfeiters see a very attractive opportunity for profit. It’s really about economics. If you take a drug like malaria which is made in either Europe or the United States sent into Africa, but by the time that product gets out into the hands of patients or doctors who are administering the malaria drugs to patients, in some African countries, the counterfeit raises up to 90 percent.

                        So it’s staggering and really frightening. In the case of malaria, if you take a counterfeit drug over a week or two, it could end up in death because you’re not treating bacteria.

Todd Y:            Maybe we’re going a little deeper in this than we need to, but I’m just intrigued that how does the counterfeiter’s mind work? I’m going to grab on to the real deal and resell that to some black market dealer and then put the counterfeit thing back into the normal supply chain?

Steve:              Yes, the counterfeiters are extremely capable. They look for products that have a high profit margin and relatively low barriers of entry. So if you look at some of the counterfeit drugs that have been seized by law enforcement, all over the world, even the United States, it looks exactly like the genuine product.

                        There was a problem. People generally think that the United States doesn’t have a counterfeit problem. However, you may have read in the newspapers about 2 years ago there was a problem with a breast cancer drug.

Todd S:            Yes, I remember that.

Steve:              It was apprehended by a customs official and the product was originally made in the US, it was shipped into a Middle Eastern Country and then to the Caribbean to just get out of the supply chain, then into England because most products coming from the UK are considered to be relatively safe, and then into the United States supply chain.

                        Some patients actually died and eventually, the physicians who were using were saying “what’s wrong with this drug?” and turns out, it was a counterfeit. So it is affecting the United States. It is more prevalent in the developing countries.

Todd Y:            These counterfeiters are really sophisticated. I mean, that’s not a couple of thugs on the corner.

Steve:              These guys aren’t making 50 bucks. It’s serious. One point, the packaging machinery technology, a lot of what we see on the floor today is available on the used market and given the technology that’s available today, they can replicate a package such that it looks identical. So the counterfeiters are very smart. They can start up these operations very quickly.

Todd S:            Alright. So patient safety, lost product, threatening to the brand protection, any other negative effects that we ought to be aware of? Or does that pretty much run the gambit?

Steve:              Physician viability. If a physician prescribes an opioid product and law enforcement apprehends it, that physician does have a risk of losing his DEA license which affects his practice revenue.

                        You also have the impact on the payers, and we’re now actually in communication with the payers who are able to monitor the prescription patterns of a patient and notice when there’s a high amount of prolonged use of an opioid product.

                        But by the time they get that information, it’s too late. The patient may be addicted to that product. So it really affects the patients, physicians, the insurance companies and also it impacts law enforcement. Many more policemen have to get involved in this type of thing. So it’s a big problem.

                        There’s some very interesting information on the Internet out of the White House drug office about the prevalence of this, how it has become really, in the opinion of many government leaders, an epidemic and it’s getting worse every year.

Todd Y:            It strikes me that the nature of the counterfeiters themselves are different. We were talking about malaria medications a little bit earlier, and that’s one type of criminal mind, if I can characterize it that way.

                        With opioid abuse, it strikes me that there’s a whole different element in there. Is it just that the opiates are more profitable for the counterfeiter or is there a more dangerous element? I think of Mexican drug cartels and guns. Is there a difference in the 2 counterfeit markets?

Steve:              You have several problems. Sometimes, you have both going in parallel. One is counterfeit of course. The other is diversion where let’s say a shipment, a pallet of opioid drugs may be going to a certain distributor. If the supply chain does not have integrity, there’s a very high risk of it being stolen and diverted out into illicit use by the drug cartel or by some just, you know, some people that want to see opioids to markets that they’re not supposed to go to.

                        What the counterfeiters will sometimes to is take a legitimate product and pull out half of it, insert counterfeit products so that it’s very difficult to distinguish which one of those cases or bottles or cartons of product is fake. So if that’s not detected, that product will go out into the supply chain and end up on retail stores and then consumed by patients.

Todd S:            How deep is the problem though? I don’t think there’s just one level of impact here.

Steve:              No, there isn’t. I do have a couple of statistics that are quite alarming. First of all, every year, in excess of 17 thousand people die from opioid abuse. Five million people are considered to be using opioids for non-medical purpose just for their own recreation, if you will, and 2.3 million people – this is through blind surveys – 2.3 million people have considered themselves addicted to opioids.

                        So it’s a major societal problem that we’ve got and requires action by government, by the pharmaceutical industry, by insurance companies. Something has to be done.

Todd Y:            There’s another aspect of it as one who’s had some surgery done and been prescribed opiates for the pain killers afterward. I would not want to be the patient that legitimately needs one of those medications and is getting counterfeit.

Steve:              Absolutely. Another problem in the pain medication area is that there are certain, because of the reaction that the government industry has done to limit the availability of opioids, some of the people who genuinely need it don’t have access to it.

                        In fact, there are statistics of as many as 11 million people in the US who have chronic pain meaning maybe the back that’s painful for all of their lives, don’t have access to that because of the restrictions that have been imposed. So it’s a very complicated problem.

Todd S:            Alright. So we’ve set the table with the problem. How the heck do we get a handle on it and how do we begin to solve it?

Steve:              First of all, it takes a combined effort on the part of government industry and the payers to attack this problem. Now, the government has started to impose a number of requirements for new drugs that are going to be approved, that are considered to be opioids.

                        They’ve required what’s called a abuse deterrent formulation, in other words to even if the product gets into the hands of someone who is addicted to opioids, which by the way can happen after taking only 4 pain killers. Some people have that tendency.

                        With abuse deterrent formulation, they’re able to basically change the way those molecules are combined or are protected, so when they enter this system, they can only dissolve into the bloodstream in a certain rate.

                        What they’re trying to do is prevent someone from crushing the tablet and then snorting it basically. So if they do that with the drug that’s been made using this abuse deterrent formulation, then they may be successful.

                        What can also help that is to do what’s called abuse deterrent packaging where they put a barcode for example on each unit dose and then they use that to monitor the behavior of the patients.

Todd Y:            What about physical security? Is that part of the answer, too? Or is that too simple-minded?

Steve:              No, there are a number of incidents every year where warehouses are broken into and numerous pallets are taken out of that. In that case, that would be considered diversion.

                        But what may happen with some of that diverted medication is a counterfeit product would be substituted for half of it and then it’s repackaged, put back into the supply chain.

                        So every year there are incidents where in my case, in Massachusetts, the thieves actually cut a hole in the roof, dropped down into the warehouse to break the locks inside and make off with over 2 tractor trailers filled with medication. So it’s a big problem.

Todd S:            You indicated that the 3 entities that have a role to play here is government, industry, and the payers. Is the industry doing enough and if not, what needs to be done?

Steve:              We believe that the industry could do more. Again, we think that they’ve made some good progress in abuse deterrent formulation but we recommend that the industry consider abuse deterrent packaging so that the physicians and the pharmacists are able to use today’s technology for tracking who gets the medication, how often is it used, periodically call them back, and again, using either mobile phone or an iPad scanner to scan those barcodes, enter them into database where you can actually track the behavior of those patients.

                        This also creates a deterrent for the patients who know that someone is monitoring their behavior and they just can’t really take this. We have a big problem in the school system today where you may have heard the term “pharm party” and these kids, teenagers will go to a party and everyone will contribute some prescription medications into a bowl and people will blindly select a medication out of there. In our days, we used to get a case of beer. Today?

Todd S:            It was simpler.

Steve:              Yes. And safer. So in that case, they just take who knows what type of medication out of a bowl and consume it. It’s a very serious societal problem that we’ve got.

Todd Y:            We haven’t specifically talked about serialization other than I mentioned earlier in our conversation. So I’m assuming that’s the basis for all of the tracking that you were just talking about.

Steve:              Yes, serialization is a wonderful technology. It has many benefits. Obviously the governments all over the world have implemented deadlines. The United States deadline for serialization is the fall of 2017; Brazil is requiring by the end of 2015; China, 2017; and Europe, 2018.

                        So the governments are now saying that every prescription drug by a certain date has to be serialized at various levels. The primary package, the case and the pallet so that it’s very easy and convenient to track these products as they go through the supply chain.

                        In the case of a product like an opioid which is considered a controlled substance, you can go even further and serialize it down to begin a dose and then use those a barcodes on those packages to monitor the behavior of a patient.

Todd S:            Alright. Well, Steve, our conversation is running long although I’m not complaining. This has been a very informative conversation. I would love to give you a chance to talk a bit more about Covectra. You are here exhibiting. What are you principally showcasing?

Steve:              We’re in booth W642 and we’re showing our serialization system which we have developed in partnership with Rockwell Automation, and we have the ability to do a comprehensive serialization solution from a database that generates serial numbers, sends them down to a packaging site.

                        Then the data that is used to generate the barcodes and print the barcode on the package is distributed out to the packaging lines, captured, sent back up to the database, and when the package gets shipped out, it goes through several layers of distribution at each point. The bar codes are scanned, the data is uploaded and we have a way to track it from manufacturer all the way to retail and ultimately to the consumer.

Todd S:            Alright. Steve, we are now out of time. Before we let you go, how can people get in touch with you and learn more about Covectra?

Steve:              Our website is www.covectra.com. Again, my name is Steve Wood and my email address is swood@covectra.com and we would love to hear from you.

Todd S:            Steve Wood, CEO and President of Covectra. Steve, it was really great to have you. Thanks.

Steve:              Thanks very much, Todd.

Todd S:            For sharing some valuable information. Alright. Well, day 3 off and running. That wraps this segment. This has been Life Science Connect Radio, Todd and Todd signing off from Chicago. Our live coverage will be right back.