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Pharmaceutical Theft Prevention
How to Manage Supply-Chain Risk
November 8, 2011
Presented by
David Restaino, Esq.
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Making Informed Decisions
All risks cannot be erased
Some risks can be managed
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Identifying issues
Identifying risks
Identifying solutions
Identifying problems
Knowledge is power
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Theft and Risk
Theft
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Target products
High-value drugs
Widely used drugs
Drugs that can be abused
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Methods of theft
Stolen trucks
Warehouse theft
Pilfering at the plant
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Theft
Employee theft
Theft from truck at rest area by breaking
window
Theft from warehouse entered through
roof
Drug stolen in transit
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45,000 bottles
Stolen lots later appear in expired returns
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Theft and Risk
Risk
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Geographical factors
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Follow the interstate highways
Manufacturing location
Warehousing location
Transportation methods
Unattended loads
Flexibility for other “signals” and other purposes
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Drug shortages
Modifying flu vaccine shipments to respond to changing
conditions
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Security
Targets
Likely loss areas
Likely loss days of the week
Product risk factors
Additional risk factors
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Controlled dangerous substances
Other vulnerabilities
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Security
Controlled dangerous substances
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Federal rules apply to manufacturers, distributors,
dispensers and others and require registration
under 21 C.F.R.
Rules also include:
Physical security controls, e.g., vault
Perimeter security and electronic alarms
Limited access
– Limited area
– Limited number of employees
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Keys, combination locks and cages
Registrant remains responsible for security
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Security
Security precautions
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Personnel
Alarms
Locks and codes, vaults and cages
Seals
Restricted access areas, physical barriers
Security audits
Information technology, e.g., GPS, cameras
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Security
Transit
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Personnel
Routes
Rest areas
Using all available information
Planning
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Static planning
Non-static, Non-routine planning
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Contracts and Contractors
Contracts
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Apportioning liability
Ownership of goods during storage, and
during transit: when do you formally take
ownership?
Insurance
Should you prevent sub-contracting?
Responsibility to report a loss
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Contracts and Contractors
Contractors
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Your screening process
Financial wherewithal
Claims history
Contractor’s hiring processes
Security and security officials
Risk management personnel
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Your hiring process
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Shipping Documents
Bills of Lading
Purchase Orders
“Standard” Terms and Conditions
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Insurance
Contractor’s Insurance
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Does it cover all situations?
Amount of coverage / value of goods
Limitations on liability
Subrogation
Other insurance-like protections
Internal “reserve”
Self “insured”
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Insurance
Supply-chain disruption insurance
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Can you get it?
What will it cover?
Differs from business interruption policies
– Loss of income from damage at company’s or supplier’s
facility
– Property damage
May allow for recovery of lost income from all calamities /
perils
– Non-physical damage
– Information technology piracy, sabotage, crime, shortage of
labor, electrical outages … BUT CHECK THE POLICY!
– High-end pricing
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Insurance
“Certificate of Insurance”
“Additional Named Insured”
Primary v. secondary insurance
Claims-made vs. occurrence-based
policies
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Other Impacts
Physical risk to employees, drivers, etc.
Stand-by / emergency services
Chain of custody / documentation / “pedigree” statements
Recalls
Consumer returns
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Proof / counterfeits
Request for compensation
Expiration
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“Use” date
Temperature / Refrigeration
Has the efficacy of, e.g., insulin been compromised
Liability
Personal injury
Damages
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
A Process, Not a Solution
Make informed decisions
Vertical and horizontal integration
Apportioning liability now
Taking reasonable precautions
Holistic risk management
Wisely choosing business partners
Non-routine, non-static planning
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Other Benefits?
Reduce counterfeiting?
Reduce adulteration / substituting
cheaper raw materials?
Minimize potential violations of fraud and
abuse laws?
Reduce “whistleblower” complaints?
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
Contact Information
David Restaino, Esq.
609.895.6701
[email protected]
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild