Mandatory QR codes on APIs: Benefit or burden?

In a notification dated 18th January, 2022, the government of India has made Quick Response (QR) codes on its label mandatory at each level of packaging on Active Pharmaceutical Ingredients (APIs) to facilitate tracking and tracing of the products. The new rule will be effective from 1st January, 2023.

Even though the industry has less than a year for its implementation now, pharma experts and stakeholders, shedding light on this decision, primarily emphasised that this is a crucial step taken by the government that will lead to a number of benefits for the pharma manufacturing domain.

Reportedly, 20 per cent of the medicines that are manufactured in India are counterfeit. As per a government report, three per cent of medicines are of substandard quality.

Highlighting that the mandatory QR codes on APIs will be a huge move in eliminating the sub-standard and falsified medicines, Nakul Pasricha, President, Authentication Solution Providers’ Association (ASPA), said that this decision will facilitate the identification of authentic products, making the system more efficient by weeding out sub-standard and falsified medical products.

“QR codes are a practical solution readily available and easily workable at a nominal price. On the other hand, the benefits are considerable, especially the significant impact it will have in making the supply chain in the pharma industry secure. The Indian authentication industry is capable and capacitated to provide the required solutions,” he said.

This might seem like an insignificant step or something that may be dismissed as a prerogative for the industry, but the real winner would be the end users and patients. It will facilitate the identification of authentic products, making the system more efficient by weeding out sub-standard and falsified medical products. Moreover, considering India’s increasingly important role in the global healthcare system, this step will support its endeavours in securing world health. This will reinforce India’s commitment to medicines safety in India and globally. This step will help distinguish spurious and original drugs and make the ecosystem vulnerable to substandard and falsified products. However, it would be advisable to adopt a robust and comprehensive approach, Pasricha further added.

The Drugs Technical Advisory Board (DTAB), in June 2019, had approved the proposal for mandatory QR codes on the APIs in order to combat falsified drugs.

Later on, a high-level panel was set up in July 2020 to build a framework for implementing QR codes on drug packs. In addition, India had also made it compulsory from 1st April, 2020 that all medicines procured under public procurement will have barcode/QR code at primary level of packaging.

Lokesh Harjani, co-founder and CEO, Onspot Solutions, while explaining about the technology for implementing QR codes on APIs, mentioned that the tracking portion of the system has individual, as well as bulk packaging traceability. The QR codes are linked between the Onspot platform and the manufacturer’s ERP systems in most cases with all dynamic information being added, and stored at the actual point of manufacturing.

In addition, stating the advantages of this technology, he said, “The benefits of this technology are numerous. The first element is the connectivity between brand and consumer through Onspot. The brand can connect directly with the end consumer once the consumer scans the QR code on the product. In real time, the end consumer comes to know the authenticity of the product, any ingredients used, as well as other related information, including MRP, expiry date and more.”

He also said, “Consumer gets the information in real-time, and brand also gets a bird’s-eye view of its supply and distribution chain, including the confirmation that goods were sold for intended markets through geo location.”

Sanofi is one of the pharma companies that is using the technology offered by Onspot Solutions. The company has been deploying the solution for many years and has patents in India and abroad.

“The cost of this technology varies depending upon the customisation and the specific requirements of the brand, it is quite cost-effective. There is no major capital cost, and very low costs towards platform expenditure. Recurring costs are absolute minimum, and in volumes, the system pays for itself in a short amount of time,” mentioned Harjani.

Moreover, according to S Sridhar, President, Organisation of Pharmaceutical Producers of India (OPPI), the move taken by the government will be highly advantageous for the pharma industry.

“QR code technology is led by our smartphone apps, and is a highly efficient way of testing the authenticity of any product. In the pharma industry, QR codes are extremely beneficial, as it helps in combatting spurious ingredients, raw materials, and other APIs’ integration in the supply chain, by providing real-time information, which also helps in tracking and tracing the products in the market. Since the unique non-duplicable QR codes are essentially integrated into the primary packaging of the product, it will be highly advantageous to the industry, as it validates the genuineness of the products. As an industry, we must consider evaluating this,” he emphasised.

Pasricha also opined that the ideal solution must include a mix of physical and digital features providing authentication and increased digital security to reduce system vulnerability. For formulations where the packing is small, QR code will serve the purpose by encoding the detailed information in a small square which is machine-readable. APIs are usually packed in LDPE bags (primary packing) and the labels already have all relevant information in writing as proposed in the notification. Further, these APIs are then packed in aluminium containers/fibre drums/HDPE drums (secondary packing).

“In the notification, it is mentioned that QR code labels are required on both primary as well as secondary packings. The notification does not give clarification about what ‘unique product identification code’ means,” Daara B Patel, Secretary-General, Indian Drug Manufacturers’ Association (IDMA), said.

He further stressed, “These QR codes are not recommended for serialisation by global regulatory agencies. These appear to facilitate a safe and secure supply chain. However, it is not clear how applying a QR code label secures the supply chain. The imposition of the requirement of fixing QR codes on the labels of API packs would be another cost burden imposed on the manufacturers of APIs, and will serve no purpose without any quantifiable benefits. Use of barcodes will increase the cost of drugs without any benefit to consumer.”

Apart from it, he had the view that the SME members may not be able to afford the costs in setting up the machinery that costs above Rs 1 crore and also requires additional skilled manpower. Especially, for MSMEs, it is not possible to implement the system as, apart from being financially unviable, acute lack of requisite manpower and equipment add to the problem.

As of now, no country has commenced implementation of track-and-trace systems. Even the US and Japan, the two largest developed pharma markets, have not been able to ensure the implementation of automated supply chain fully, i.e. from manufacturer, C&F, distributor, stockist, retail chemists, thus rendering it meaningless. Therefore, Patel suggested to keep implementation of the track-and-trace systems either in abeyance or made voluntary till an international consensus is arrived or such time as specific importing countries demand them in the form and format they will finalise.

“Taking advantage of the confusion created by MNCs over fake and counterfeits, the so-called anti-counterfeit solution providers that sell barcode and other technologies are propagating and lobbying for the use of such expensive and impractical methods by making them legally compulsory. Use of barcodes will increase the cost of drugs without any benefit to consumers,” he claimed.

Manufacturers continuously face problems during custom clearance of export consignments. The consignments are being opened and physically examined to verify barcoding. There have been instances of shipments not being allowed to be exported and sent back to manufacturing site.

“Shipments which have been allowed to be exported are being given provisional approval and duty drawback benefits, for such provisionally approved exports, are given only if exporters upload barcode data on the DAVA portal. Further, it may be noted that repacking activity (with inclusion of barcode) is with the State Licensing Authority and they are in a position to ensure that all repacking is done as per the Drugs and Cosmetics Rules and Regulations. Any repacking activity that is not licensed is illegal and all users must ensure that they do not use repacked material from such source. This severely impacts the manufacturer,” he notified.

On one hand, national authentication and traceability projects have been trending internationally for some years now, with China, Brazil, Turkey, the US, and the EU and India (for exports) being pioneers in this area, helping reduce fraud and prevent losses caused by counterfeiting and illicit trade. It has helped these countries to reduce the shadow market in many industries, improved tax collection, and considerably reduced losses incurred by businesses from counterfeit products and illegal trade. India should also implement these measures on formulated drugs as well as in other sectors to join the league of advanced digital economies.

On the other, to execute this, manufacturers will have to buy new machines, digitalise huge data and set up a whole new team which requires large investments. The change in artworks to incorporate barcoding cannot be done unless approval by regulatory authorities of importing country is received. This is a time-consuming and costly affair, which will impact the exports as manufacturers have to wait for such approvals.

The pharma experts and stakeholders need to deliberate whether the move is a security benefit or cost burden for the industry.

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