New Standards and Regulations Create R&D Tax Credit Opportunities for the Pharmaceutical Packaging Industry
Pharmaceutical-Packaging
Faced with a highly dynamic and
increasingly strict regulatory environment, the pharmaceutical
packaging industry must turn towards innovation as a means to
succeed.
This article will present some of the recent and upcoming
changes in regulations concerning pharmaceutical packaging and
describe how federal and state R&D tax credits can be a
strategic tool in assisting companies in adjust sting to new
standards.
The Research
& Development Tax Credit
Enacted in 1981, the Federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent of eligible spending for new and improved products and
processes. Qualified research must meet the following four
criteria:
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include employee wages, cost of supplies, cost
of testing, contract research expenses, and costs associated
with developing a patent. On December 18, 2015, President
Obama signed the bill making the R&D Tax Credit permanent.
Beginning in 2016, the R&D credit can be used to offset
Alternative Minimum tax and startup businesses can utilize the
credit against up to $250,000 per year in payroll taxes.
Pharmaceutical
Packaging Overview
Packaging encompasses the collection of
components that surround a pharmaceutical product from its
production until its use. Packaging pharmaceutical products is
a multi-faceted and strategic task. Packages are not only
responsible for providing life-saving drugs, medical devices,
and medical treatments, but they must also ensure safety,
identity, convenience of handling, and proper delivery.
According to research firm Transparency Market Research, the
global pharmaceutical packaging market is expected to grow at
a compound annual growth rate of 5.6 percent from 2012 to
2018, eventually attaining an overall market value of $73.04
billion in 2018.
The expiration of patents and the consequent delivery of
greater numbers of generics into the market, as well as a
growing demand for customized treatments and drug delivery
devices should make sure the need for pharmaceutical packaging
steadily rises.
Despite favorable prospects, producers of pharmaceutical
packaging solutions must face various challenges, which
include addressing product requirements while ensuring that
customer, marketing, retailer, and supply chain needs are
satisfied.
The following sections give an overview of the regulatory
challenges for the pharmaceutical packaging industry and how
innovation can help overcome them.
Industry Standards and
Regulations
The regulatory landscape for pharmaceutical
packaging is a very dynamic one. Designers and manufacturers
must be able to comply with evolving requirements, which
directly influence economics, risks, and product development.
New and proposed changes in the U.S. Pharmacopeia, for
instance, promise to shape future developments in
pharmaceutical packaging. The U.S. Pharmacopeial
Convention (USP) is a scientific nonprofit organization whose
standards are enforceable in the United States by the Food and
Drug Administration (FDA) and used in over 140 countries.
The USP is currently updating its guidelines concerning
pharmaceutical packaging. The organization aims to delineate a
general and chemistry-based approach for establishing the
safety and quality of pharmaceutical packaging systems and
their materials of construction.
USP’s new guidelines are based on the notion that the most
definitive way to establish a packaging system’s suitability
for use is to test the packaged drug product, the packaging
system, and the packaging system’s materials of construction
and assess whether interactions, potential or real, between
the drug product and the packaging system are within
acceptable limits.
To enable accurate suitability assessments, the organization
provides standards for tests, procedures, and acceptance
criteria. In the case of leachables (trace amounts of
chemicals originating from the packaging system that end up as
contaminants in medicinal products), USP underlines their
potential impact on the safety and efficacy of products and
provides guidelines for chemical analyses and toxicological
safety assessments.
According to the organization, a packaging system is
chemically suited for its intended use if:
- The packaging system is
constructed from well-characterized materials as
established by testing;
- The packaging system's general
physicochemical properties have been established;
- The packaging system's
biocompatibility (biological reactivity) has been
established;
- The packaging system has been
established to be safe by means of the appropriate
chemical testing and toxicological assessment (including
extractables and leachables testing);
- The packaging system is chemically
compatible with the packaged product, as established by
appropriate compatibility assessments (e.g., stability
studies).
Further updates to the United States Pharmacopeia and The
National Formulary (USP–NF) are planned for publication in
2015, including a revision of the chapter entitled “Packaging
and Storage Requirements”, which should bring significant
changes, additions, and edits to packaging definitions.

In addition to industry-specific standards, pharmaceutical
packaging companies must comply with broader regulations, such
as the Poison Prevention Packaging Act (PPPA) of 1970, which
mandates certain products to be packaged in child-resistant
containers. Even though the act itself dates from over
four decades, regulation is constantly evolving to match new
data.
In 2012, for
instance, the Consumer Product Safety Commission issued a rule
that requires child-resistant packaging for any
over-the-counter or prescription products containing
imidazolines equivalent to 0.08 milligrams or more.
Imidazolines are a family of drugs indicated for nasal
congestion and/or ophthalmic irritation.
PPPA regulated substances are also subject to the Consumer
Product Safety Improvement Act of 2008, which determined that
child-resistant packaging must be tested for compliance with
consumer product safety requirements in order to obtain
certification.
Since February 2010, manufacturers and importers must make
certificates of conformity available to retailers and
distributors of affected products. State level inspections are
performed by Attorney General Inspectors to enforce this
regulation.
The regulatory environment for pharmaceutical packaging is
constantly evolving. Innovation is key in helping companies
keep up with ever more stringent requirements, particularly
when it comes to demonstrating that a package is chemically
suited for its intended use as well as developing
child-resistant packaging. Federal R&D tax credits can
support innovative compliance efforts and increase their
chances of success.
Serialization and
Traceability
Counterfeiting is defined as “manufacturing
products and packaging similar to the originals and selling
the fake as authentic products.” By infiltrating
legitimate supply chains, counterfeits threaten the reputation
of pharmaceutical manufacturers and, more importantly,
endanger the health of users.
The increase in packaging forgery is a major driver of the
counterfeit market, which constitutes a $75 billion global
industry. In response to this daunting scenario, a
growing number of countries are implementing new serialization
and traceability legislations, aimed at enhancing security at
the pharmaceutical supply chain.
On November 27, 2013, President Obama signed the Drug Quality
and Security Act (DQSA), which outlines critical steps to
building an electronic, interoperable system to identify and
trace certain prescription drugs as they are distributed in
the United States.
Start
Date |
Trading
Partner(s) |
Requirement |
11/27/2014 |
Third-party
logistics providers |
Report
licensure and other information to FDA |
1/1/2015 |
Wholesale
distributors |
Report
licensure and other information to FDA |
1/1/2015 |
-Manufacturers
-Repackagers
-Wholesale distributors |
Lot-level
product tracing: provide transaction information,
history, and statement |
1/1/2015 |
-Manufacturers
-Repackagers
-Wholesale distributors
-Dispensers (primarily pharmacies) |
Establish
systems for verification and handling of suspect or
illegitimate product. |
1/1/2015
|
-Manufacturers
-Repackagers
-Wholesale distributors
-Dispensers
-Third-party logistics providers |
Must be
authorized, as defined by the FD&C Act |
7/1/2015 |
-Dispensers
(primarily pharmacies) |
Lot-level
product tracing: provide transaction information,
history, and statement |
Over the ten-year period that started in
2013, drug manufacturers, wholesale drug distributors,
re-packagers, and many dispensers (primarily pharmacies) will
work in cooperation with the FDA to develop a
“track-and-trace” system that will 1) enable verification of
the legitimacy of the drug product identifier down to the
package level; 2) enhance detection and notification of
illegitimate products in the drug supply chain; and 3)
facilitate more efficient recalls of drug products.
Title II of the DQSA, the Drug Supply Chain Security Act,
imposes interim, lot-level requirements and deadlines, which
are summarized in the chart above.
The act further establishes item-level serialization and
traceability requirements. By November 2017, product
transaction data must be available electronically, and a
standardized numerical identifier must be affixed or imprinted
on the label at the product and case-level. Complete
unit-level traceability should be achieved in 2023.
Simply put, the idea behind serialization is to provide a
transaction history (also referred to as pedigree) outlining
all the changes in ownership of the drug - from the initial
sale by the manufacturer through wholesalers, distributors,
and pharmacies until it reaches the consumer.
This is possible by affixing a unique and traceable serial
number to every package, bundle, case, and pallet. The
identifier will be read many times as the product makes its
way through the supply chain and, each time, an entry will be
made in a database to document custody.
The new regulation should greatly benefit the pharmaceutical
industry and its anti-counterfeiting efforts. However,
compressed timelines and new requirements can pose significant
challenges to manufacturers, which must find ways to achieve
compliance while also minimizing costs and maximizing returns
on investment. Innovation and industry-wide collaboration
should play a central role in such comprehensive transition.
Drug giant Pfizer, for instance, is already deploying
serialization throughout its packaging lines. The company is
also building out a cloud-based IT solution that integrates
with its contract manufacturers to ensure compliance with
upcoming deadlines.
While some companies create internally developed solutions,
others resort to commercial off-the-shelf serialization
systems specially designed to meet the needs of the
pharmaceutical industry. One example is Marlton, New
Jersey-based Acsis, which launched “Serialization in a Box”, a
complete turnkey solution that identifies, applies, and
captures data at the unit, bundle, carton, and pallet level.
The innovative solution combines industry-leading
serialization software with cutting-edge material handling,
vision, and printing equipment to create a ready-to-use
serialization system that is robust, cost-effective, capable
of integrating with existing equipment, and easy to deploy and
maintain.
The solution uses smart camera vision systems, developed by
Natick, Massachusetts-based Cognex. These critical components
not only validate the presence, accuracy, and readability of
various labels, but also ensure product safety and package
integrity.
Smart cameras are an example of how crucial automation is when
implementing a successful serialization strategy. If done
manually, this time-consuming task undermines
cost-effectiveness and becomes prone to untraceable errors.
A
partnership between Yardley, Pennsylvania-based Xyntek, a
serialization, track-and-trace, and machine vision system
integrator, and ESS Technologies, a designer, manufacturer,
and integrator of packaging machinery and robotics,
capitalizes on robotic automation to streamline serialization.
Together with
Italian company Antares Vision, they developed the TaskMate
Robotic Case Erector/Loader with integrated track-and-trace
capability. Using Xyntek-Antares’ Tracking System software
and the Omnivision 360° Bottle Tracking System for
serialization and aggregation, this innovative solution
allows pharmaceutical and medical device manufacturers to
automate the case packing process and provide unit-level
serialization, traceability, and authentication for all of
the products being packed.
In addition to enabling compliance with both national and
international regulations, emerging serialization solutions
enhance end-to-end supply chain visibility, which can unleash
significant benefits, including optimized asset performance
and reduced chargebacks.
In other words, even though compliance with new serialization
requirements may require investment in new technology, returns
should not take long. Serialization itself will generate
considerable efficiency gains throughout the supply chain as
it enables a comprehensive gathering of information that could
help understand, streamline, and automate the processes
involved.
In our globalized economy, the need for an international
approach further accentuates the challenges of traceability.
U.S. serialization requirements are just a component in a
patchwork of diverse regulations. Therefore, global companies
must build harmonized solutions that allow for
country-specific adaptations.
The table below represents information from the most recent “Pharmaceutical
Track-and-Trace Serialization Playbook” and
summarizes the current state of serialization in different
markets.
European Union
|
The
European Union Directive 2011/62/EU on falsified
medicines drives requirements across Europe for tampered
evidence, serialization and tracking. Compliance begins
in 2017, and for countries with existing serialization,
in 2023. In order to allow identification of a pack of
medicinal products, a serial number must contain, at a
minimum, a manufacturer product code and the pack
number. The serial number may be combined with other
product related information such as (a) packaging batch
or lot number (b) expiration date (c) national
reimbursement number. |
China
|
In
China, a system has been established to track each
movement of pharmaceuticals throughout the supply chain.
Full implementation of the Chinese system was expected
in March 2015. The Chinese National Drug Code (NDC) plus
serial number is required to be printed on primary and
secondary packages up to the pallet with hierarchy
information for the products listed on the essential
drug list, which includes 502 products. The China Drug
Identification, Authentication and Tracking System
provides an online portal for the registration of
products and serial numbers. Saleable items are encoded
with a linear ISO-128 barcode containing a 20-digit code
comprised of the NDC, serial number, and check digits. |
Brazil
|
Recently
passed Brazilian legislation requires brand owners or
importers to collect specific trade data about their
products as they move through the supply chain after
December 10, 2016 - information include the national
drug registry number, serial number, expiration date,
packaging LOT number in human readable form, and a
DataMatrix symbol. Manufacturers and importers must
apply the Brazilian Unique Medicine Identifier (IUM) to
saleable package and bundles. Shipper cases must also
have a unique identifier. |
South Korea
|
After
January 1, 2015, packages in South Korea must include
the item’s identity as a GTIN, a unique serial number
for each item, packaging LOT, and expiration date in
human readable form and a DataMatrix symbol.
Manufacturer must include a barcode or RFID tag on
distributed pharmaceuticals that are domestically
manufactured or imported. Cases must also include the
same information in linear, GS1-128 barcodes. |
Turkey
|
In
Turkey, a 2012 law requires serializing and tracking for
all unit-level items that are reimbursed by the Ministry
of Health. Manufacturers must imprint the item’s
identity using a GS1 GTIN, a unique serial number, the
packaging lot number, and expiration date in both human
readable form and a machine readable GS1-encoded
DataMatrix symbol. Information is posted into the
Pharmaceutical Track-and-Trace database as the goods
move through the supply chain, allowing for the
verification of its origins. |
Argentina
|
Argentine
law requires serializing and tracking using GS1 encoded
DataMatrix symbols for all unit-level items that are
reimbursed. Manufacturers must imprint the item’s
identity using a GS1 GTIN, a unique serial number, the
packaging LOT number and expiration date in both human
readable form and a machine readable GS1-encoded
DataMatrix symbol. |
India
|
The
Indian Directorate General of Foreign Trade requires all
pharmaceuticals exported from the country to be
serialized. A recent update to the regulation requires
that labeling - covering the Global Trade Item Number
(GTIN), batch number, expiry date and a unique serial
number - is made available on the primary packaging in
human-readable form, beginning June 30, 2015. Deadlines
for secondary and tertiary packages were January 2014
and 2012, respectively.
|
Recent serialization and traceability
requirements make for a challenging and yet exciting time for
the pharmaceutical packaging industry. Innovative efforts
aimed at the development of unique packaging solutions and
creative information systems will directly influence
competitiveness in this emerging regulatory landscape.
Federal R&D tax credits could play a strategic role in
assisting companies through this period of regulatory
transition. Credits are available to support both the
developers of serialization solutions and those implementing
serialization strategies.
Anti-Counterfeit
Packaging Technologies
Emerging serialization and traceability
regulations promise to go a long way in the fight against
counterfeit pharmaceuticals. Innovative technology can help
implement successful track-and-trace systems and contribute to
detecting, deterring, and disrupting criminal efforts.
Examples include the
use of radio frequency identification (RFID) combined with
tailor-made anti-counterfeit software. RFID consists in the
wireless exchange of information between a tagged object and
a reader, which allows said objects to be uniquely
identifiable.
The electronic tagging of products facilitates the creation
and update of a chain of custody from the point of
manufacturing to the point of dispensing. RFID tracking
systems simplify the access to the so-called ePedigree,
allowing manufacturers, distributors, and retailers to rapidly
identify, quarantine, and report suspected counterfeits.
Different from barcodes, RFID tags are unique for all items
and significantly difficult to copy or tamper with. Pfizer,
GlaxoSmithKline, Purdue Pharma, and Johnson & Johnson are
examples of major pharmaceutical players who have implemented
large-scale item-level RFID tagging.
Headquartered in Rensselaer, New York, Integrated Liner
Technologies (ILT), a provider of caps and silicone septa
liners for vials, pharmaceutical bottles, and test tubes, has
recently introduced an RFID version of its products, designed
to allow customers to verify the authenticity of products and
track their electronic history.
ILT’s Smart Septa system combines passive RFID tags with a
software-as-a-service hosted server, which users can access to
learn data about a tagged product.
Forensic markers have also been proven effective in preventing
counterfeit. These state-of-the-art solutions require
laboratory testing or dedicated field test kits to
scientifically verify authenticity. Examples include chemical,
biological, and DNA taggants, isotope ratios, micro-taggants,
and nano-printing.
DNA taggants are particularly promising for the pharmaceutical
packaging industry. Custom DNA sequences containing
information (manufacturer’s name, facility location, etc.) are
embedded into a host carrier, such as ink, which is then
printed onto the packaging or label.
By incorporating unique DNA sequences that cannot be
reproduced, this technique offers an unprecedented level of
security and constitutes an effective forensic means to verify
a product’s legitimacy.
Based in Stony Brook, New York, Applied DNA Sciences (APDN)
delivers cutting-edge anti-counterfeit solutions through
high-resolution DNA authentication. In March 2015, the company
announced a landmark in the deployment of its SigNature DNA
technology as a physical or chemical drug formulation
identifier (PCID) in the pharmaceutical industry.
APDN has successfully marked over ten thousand prescription
drugs, acetaminophen gel-tabs, and aspirin tablets with
DNA-embedded ink, and proven that such information is
forensically detectable in a field-deployable format.
The ability to authenticate drugs on the spot should greatly
benefit the pharmaceutical industry. APDN expects that a
combination of SigNature DNA with fast, simple, low-cost DNA
analysis tools could be implemented in importation sites,
central distribution locations, and large pharmacies or
clinics, pioneering an unprecedented way to protect the
pharmaceutical supply chain.
Conclusion
The pharmaceutical packaging industry must
be able to adapt to ever-evolving standards and regulations.
The ability to innovate, creating new products and processes,
is key for guaranteeing timely compliance and continued
competitiveness. Federal and state R&D tax credits are
available to support innovative companies in times of
regulatory transition.