Framework - When asked, most people say that they believe regulations should avoid dictating specific technologies but instead should dictate desired outcomes and let industry figure out the best technologies to achieve them. The concern is usually that technologies mandated in regulations will inevitably grow old and the regulated industry would then be blocked from taking advantage of newer, more innovative technologies.

This is often true, but whenever interoperability is necessary to achieve the desired outcomes, a supply chain may benefit by having certain technologies dictated by the regulation.

What is ‘Interoperability'?

Interoperability is a system characteristic that means the system is able to work effortlessly with other systems. In a supply chain context, it means that systems owned by each trading partner are able to communicate with and understand each other and can then work together to do something useful. Interoperability is a highly desirable characteristic but it requires all trading partners to agree on a single approach to communications protocols, data format and content. Typically, interoperability is achieved through the enforced use of standards. The question is who enforces the use of the standards that result in interoperability?

In the automotive and aircraft manufacturing supply chains these standards are dictated by the small number of large manufacturers - the "800 pound gorillas." Suppliers who wish to participate in those supply chains must voluntarily conform in order to have access to those markets.

Traceability Regulationsin the Pharma Supply Chain

Drug traceability regulations of one form or another are under consideration by governments around the world to fight supply chain crimes such as counterfeiting, diversion, tampering, theft and reimbursement fraud. Countries like Turkey, Korea, India, Italy and Brazil are among a growing list of countries that have enacted such regulations.
At a high level, all drug traceability regulations share at least one characteristic:

They require two or more members of the drug supply chain to contribute data that describes their connection with each drug.

That can include information about its manufacture, distribution and dispensing. This information must be understandable to parties inside and outside the supply chain, and the data contributed by each party must be interoperable with the data contributed by the others. To be interoperable, every party must follow the same standards for formatting, storing and sharing this data. But in the pharma supply chain, who enforces the use of those standards?

The U.S. FDA Bar Code Regulation

Back in 2004, the FDA published their final bar code rule that required all prescription drugs distributed in the U.S. to have a linear barcode at the unit level to carry the National Drug Code (NDC). The final rule took effect in 2006. That rule did not specify a particular linear symbology, only that the barcode had to be linear.

The members of the U.S. pharma supply chain benefitted from the fact that the regulation dictated linear bar code technology. That prevented manufacturers from each selecting a different technology to carry the NDC, thus allowing downstream supply chain members to invest in a single reader technology and establish a single operating process to read the NDC. That is, by enforcing this one technology standard the FDA ensured efficient interoperability.

Other Examples

Electronic Data Interchange (EDI) is an example of a supply chain technology that requires interoperability as a characteristic. But here the interoperability is only necessary between two direct trading partners, since EDI documents do not get passed beyond the initial recipient. The files they exchange can be said to be interoperable as long as those two parties agree on the data elements to be included and their formatting. Because these are point-to-point data exchanges between no more than two parties, no regulatory mandate is necessary or desirable.

Electronic pedigrees and generalized supply chain track and trace systems like those under consideration in the U.S. and E.U. pharma supply chains are a lot like the example of the NDC data carrier discussed in our first example above. They only work if they are fully interoperable throughout the entire supply chain. In this case the use of standards is imperative and if they enact any laws at all, here is where the regulations should mandate the specific technical standards and ePedigree or track and trace model that must be used within a given jurisdiction.

Without such a mandate in the pharma supply chain - which does not have any "800 pound gorillas" who can force alignment - the members are unlikely to voluntarily agree on a single approach and interoperability will not occur naturally. But with a regulatory mandate of the technology and the specific model the supply chain would benefit from the efficiencies that result from assured interoperability, just like the FDA's 2004 linear barcode mandate.