How pharmaceutical companies work to prevent organized crime in their supply chains

Moving pharmaceutical products from one side of the world to the other is no easy feat. From coordinating with manufacturers, airlines, and ocean freighters to making sure the drugs stay at the right temperature, there are a lot of balls in the air—and organized crime.

Organized crime is “a very large problem” in the pharmaceutical supply chain, Danny Ramon, intelligence and response manager at supply chain technology company Overhaul, told Healthcare Brew.

While pharmaceutical cargo thefts make up a relatively small proportion of total US cargo theft (about 2.9%), pharma companies tend to lose a lot of money when a theft occurs. In 2010, for example, thieves targeted an Eli Lilly warehouse and stole at least $60 million worth of pharmaceuticals.

Generally, organized gangs can potentially steal many products during a theft incident. If a trailer full of prescription drugs is stolen and law enforcement isn’t able to recover it, the drugmaker has to destroy the entire lot of that drug for safety reasons, which could include another five or six trailers’ worth of pharmaceuticals, Ramon said. And those products can be life-saving treatments.

Because of the risks, pharmaceutical companies invest a lot of money to secure their supply chains. Though the cost is hard to pin down, a 2021 McKinsey analysis found that some pharmaceutical companies invest as much as $50 million in technology to reduce supply chain risks.

“Pharmaceutical companies are far and away the biggest spenders when it comes to supply chain security,” Ramon said. “The acceptable losses in the pharmaceutical industry are much, much lower than they are in other industries.”

Building a secure supply chain

To build out a supply chain security program, pharma companies will typically conduct a risk assessment of the threats facing a shipment of drugs in transit, Amy Shortman, VP of product marketing at Overhaul, told Healthcare Brew.

The companies will check the facilities their drugs move through to ensure the third parties are following good distribution practices, she said. These standards include things like making sure warehouses are clean and kept at a temperature that won’t damage the drugs.

Pharma companies will also use technology, like IoT devices, to track shipments in real time, Shortman said.

“Staying ahead of organized crime groups is a very difficult thing to do because organized crime groups, just by nature of the organization itself, are more agile than a pharmaceutical company is,” Ramon said.

Overhaul recently began using artificial intelligence (AI) to identify risk factors of an organized crime incident in real time, Shortman said. The AI aggregates data from past incidents and finds patterns, such as locations where incidents typically occur, so a pharma company can be better prepared to respond.

“We can shave valuable minutes off of responses,” Ramon said.

Shortman said that the use of technology can sometimes even stop crime from happening in the first place.

“What we have seen is that when [organized crime groups] realize technology is being used on the shipment and that we can get police there […] in a matter of minutes, it prevents them because they’re weighing up the return on investment of ‘Is this worth it? Am I gonna get caught?’” she said.

So while investing in a secure supply chain can be a costly investment up front, it pays off in the long run, according to Shortman.

“The return on investment from making sure that you’ve got a program that’s really uplifting the regulations—making sure everyone’s doing what they’re supposed to be doing—is a small price to pay for the quality of the medicines that’s delivered to patients at the end of the day,” she said.