It used to be faux Gucci bags, Rolex watches (possibly without inner workings), and bootleg copies of newly released movies. Now, says Barry McDonogh, vice president of business development at Cranbury-based Systech International, counterfeiting is becoming more dangerous to consumers. “Over the years,” he says, “there has been a broadening of the base of counterfeiting. It’s now food, pharmaceutical goods, parts for airplanes, airbags. They’ve all been counterfeited.”
McDonogh speaks on “Anti-Counterfeiting Strategies in the Supply Chain” on Thursday, May 30, at 6 p.m. at the Central New Jersey section of ISA and IEEE at DeVry University in North Brunswick. Call 732-729-3532 to reserve a spot.
McDonogh grew up in Dublin, where his mother recently retired from teaching and his father works in the insurance industry. He earned an undergraduate degree from University College Dublin in 2001 and a master’s in business from Michael Smurfit Business School in 2002. His background includes working on corporate strategy for Deloitte and Ernst & Young in Dublin, Paris, and London. Before joining Systech last year, he worked for healthcare company United Drug.
In the United States with United Drug, looking for companies to form strategic partnerships with, he came across Systech,which was founded in 1985. Impressed by the potential of the company, which provides tracking software to pharmaceutical and medical device companies, he signed on as a vice president last August.
“Counterfeiting is not new,” says McDonogh. But it is a relatively recent plague in the pharmaceutical industry.
The Wall Street Journal reported one of the first drugs to be counterfeited was Viagra. A fake Viagra pill may disappoint if it is merely an ineffective placebo, not filled with toxic ingredients as counterfeit drugs sometimes are. However, according to recent reports, other fake drugs could have deadly effects even if they lack poisonous ingredients.
One example is the oncology drug Avastin. On three occasions, counterfeit vials of the chemotherapy drug that contained no active ingredients reached doctors’ offices. As recently as February, the FDA warned doctors to be on the lookout for fakes of the drug, which is produced by Roche and costs about $2,500 a vial, and to be cautious about any price that seems too good to be true.
While drug counterfeiting is growing in developed countries, where it is estimated to affect about .5 percent of the supply, the figure is more like 50 to 60 percent in some developing countries, reports say. According to a recent report in Forbes, in addition to lifestyle and cancer medications, HIV, arthritis, and cholesterol-lowering drugs have been compromised. Adulterants have included cement, gypsum, talcum powder, sawdust, industrial solvents, and yellow highway paint, the report said.
Inserting fakes into a legitimate medicine’s supply chain is not easy. “These guys are not operating out of garages,” says McDonogh. “They’re very sophisticated, very experienced.” Counterfeiters tend to operate as organized crime groups,though they have not yet used their skill with the intent to poison large numbers of people. Along the way it costs pharmaceutical companies an estimated $70 billion a year, as of 2010, according to a report from the World Health Organization, and the figure may already be closer to $100 billion.
Fakes often make their way to stores, hospitals, and doctors’ offices via a bogus batch code “Look at a can of soda,” says McDonogh. “Do you see the batch code?” Riding on nearly every consumer product, including medicine bottles, it is a series of numbers that identifies the product by what batch it was made in. Commonly, he says, there are up to 100,000 products in a batch. Counterfeiters read a batch code and add it to their fakes, where it rides along, looking very much like the real thing.
This practice can be counteracted by serialization, which, McDonogh explains, involves giving every single item in a batch its own number. Systech and its competitors now offer this relatively new capability to drug manufacturers through its software products. A report in Life Science Leader, which identifies Bristol Myers-Squibb as “among the first to understand the multiple benefits of serialization,” says that this track-and-trace technology doesn’t completely do away with counterfeiting, but that the tracking that it provides means that discrepancies can be spotted much more easily. As an example, the industry publication says that if a shipment that should contain 48 vials turns up with 49 vials, “.the extra product must be identified and the necessary electronic data exchanged before the additional unit may be sold by the customer.”
Systech is about to launch a proprietary product that, McDonogh says, will add an important layer to serialization, one that should thwart counterfeiters. Called e-Fingerprint, it adds authentication to serialization. Serial numbers are printed on packaging using a two-dimensional black and white machine-readable code, not unlike Q-R codes, the information-laden graphics that are showing up in everything from magazine ads to restaurant promotions. The printing process naturally results in some randomness or noise introduced into the final image. Normally this is ignored, but e-Fingerprints take advantage of this fact to create a means of covert authentication. Systech’s software recognizes the imperfections of each printing, and associates it with a particular serial number. Unlike a number, this randomness cannot be predicted or faked by a counterfeiter.
A selling point for e-Fingerprint, which Systech expects to be ready by the end of the year, is cost, McDonogh says. The cost for adding it to a product will be a small fraction of the cost of other authentication technologies, varying based on the volume of the product being sold, he says. What’s more, the reader is an iPhone. This means that anyone at any point in the supply chain can quickly and easily know exactly what is in a vial or bottle of medicine — or a candy bar or a bottle of wine — if he has an iPhone and the Systech e-Fingerprint app. FDA inspectors, Homeland Security officers, pharmacists, and even consumers will be able to tell whether a product is the real thing. “You don’t need a $10,000 reader,” McDonogh says. The phone in your pocket will do the job.
McDonogh says that e-Fingerprint, which can be used with just about any product in any industry, will expand Systech’s business reach considerably. The company now has offices in three countries and customers across the globe. There are 130 headquarters employees, a number that is expected to expand to 200 within the year to meet the demand that the new product is expected to generate. In addition, the company has signed partners to work in the field deploying the software. McDonogh points to a May 8 agreement with Tata Consultancy Services, an $11 billion a year global company, as an example. Systech will retain ownership of the technology, he stresses, but partners will work with clients on installing and maintaining it.
Alarmed about the dangers of drug counterfeiting, legislatures on the national and state levels are drawing up bills to combat it. California has proposed stringent laws, and bills are currently in the works in the U.S. House of Representatives and Senate.
Meanwhile, many pharmaceutical companies are taking on counterfeiting on their own, fueling Systech’s business and making it more likely that patients can twist open their medicine bottles without worrying about swallowing cement and highway paint in place of the relief and healing they are seeking.