Study: The benefits of serialization massively outweigh the costs

June 20, 2023
The incredibly positive effects of serialization, traceability, and tighter integration across the supply chain are impossible to ignore.

The Drug Supply Chain Security Act was designed to bring traceability, security, and transparency to the pharmaceutical supply chain. However, for years, trading partners have had questions about what the new law means for the bottom line – even as companies like LSPedia developed solutions that enable trading partners to boost efficiency and save money in the process.

Now, a cost-benefit analysis from South Korea shows the results of a serialization, monitoring, and traceability system that has multiple similarities to DSCSA, offering insights into how the new law can affect businesses in the longer term. The study, reflecting 12 years of operation, tracks results across the country’s entire pharmaceutical supply chain, and measures the net financial benefit and benefit-cost ratio of the projects carried out by its health service.

The study acknowledges that the pharmaceutical supply chain process “has a crucial impact on medication quality and the final outcomes for patients,” a factor that has driven innovation in “integrated management of medicines from production to distribution” to guarantee traceability, enable drug quality monitoring, and fight counterfeiting.  

Integrating information across the pharma supply chain

Six years before the U.S. introduced DSCSA, South Korea created the Korean Pharmaceutical Information Service (KPIS) “to implement an information management system that effectively integrates and tracks pharmaceutical information, codes, and supply chain data.” It operates under the jurisdiction of the Health Insurance Review and Assessment Service (HIRA), which determines maximum reimbursement prices through the National Health Insurance (NHI) and pays the transaction cost of medicines in hospitals and pharmacies.

The new agency’s tasks include introducing serialization of individual products with 13-digit codes, real-time monitoring of supply chain information from pharmaceutical trading partners including “shipping, returns, and disposal,” and carrying out inspections that help determine actual transaction costs.

The creation of KPIS in October 2007 saw the integration of information across South Korea's pharmaceutical supply chain, as the agency tracked the serial numbers of medical products from manufacturing to final sale. KPIS monitors supply details reported by pharmaceutical companies and wholesalers on a daily basis, including "information on shipping, returns, and disposal; managing barcodes and RFIDs; and calculating the amount of supply and actual transaction cost of medicines using NHI claims data and KPIS data."

Saving money and improving outcomes with serialization

Despite the high initial cost of developing KPIS' data system, server, and software — and the challenge of implementing a system that incorporates authorization, supply, distribution, and reimbursement information across trading partners — the benefits more than made up for the pricetag. These included savings from reducing discrepancies in claims figures between wholesalers and dispensers, coordinating accurate drug prices, and helping identify rebates from pharmaceutical companies.

The cost estimate included labor and business operations, the development of the information entry system, and office maintenance. "Financial benefits" were defined as savings that resulted from the program, while "social benefits" were defined as the prevention of recalled medicines from entering the supply chain and the decrease in inventory and disposal.

Taking into account all social and financial benefits, based on NHI cost savings since the establishment of KPIS, the study calculated the net benefit at a stunning $571.6 million, with a benefit-cost ratio of 24.8.While there are key differences in the South Korean and U.S. markets, the incredibly positive effects of serialization, traceability, and tighter integration across the supply chain are impossible to ignore.

This is especially true for U.S. trading partners who work with LSPedia to implement DSCSA, as they’re already seeing efficiency gains and savings. However, the window of time to efficiently implement DSCSA is closing – with five months left to regulatory enforcement, those who haven’t yet complied will find it more difficult and expensive as the timeline gets tighter.

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