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
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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
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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:
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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”
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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?
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Differs from business interruption policies
– Loss of income from damage at company’s or supplier’s
facility
– Property damage
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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
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“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
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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
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Personal injury
Damages
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild
A Process, Not a Solution
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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
drestaino@foxrothschild.com
Pharmaceutical & Medical Packaging Leadership Summit
© 2011 Fox Rothschild