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Medical business uses technology to fight counterfeit drug problem

on June 7, 2011 Source:

Few medical technology companies make their sales pitches by showing the glowing television commercial of someone else’s technology. But Tom Mercolino routinely fires up an IBM ad to introduce his product.

In the ad, IBM (NYSE:IBM) touts its pill bottle bar coding technology that helps spot counterfeit drugs. Viewers see inside a pharmaceutical manufacturing facility, where a worker picks up a pill bottle and reveals the bar code on the bottom.

“Smarter medicine is safer medicine,” is Big Blue’s refrain.

Then Mercolino explains how his Research Triangle Park, North Carolina-based startup, CertiRx, takes pharmaceutical verification a step further. The company’s technology embeds a tiny tag into the medicine itself that allows for identification and authentication to fight fraudulent pharmaceuticals.

“They make smart medicine,” said Mercolino, who is raising money now to expand the business. “We make smarter medicine.”

Counterfeit drugs are a growing, worldwide problem for the pharmaceutical industry. The Pharmaceutical Security Institute, a non-profit group whose members include pharmaceutical manufacturers, estimates the counterfeit drug market is between $75 billion and $200 billion in size.

Approaches on how to spot counterfeit drugs actually came from other industries. Holograms, invisible inks and magnetic threads were incorporated into packaging, said Marv Shepherd, director of the Center for Pharmacoeconomic Studies at the University of Texas-Austin and a board member of the Partnership for Safe Medicines. Such technologies came into wider use in the late 1990s and 2000s as the tide of counterfeit drugs rose.

But counterfeiters found ways to get their fakes into real packaging. These days, a counterfeit product is so good that the naked eye can’t distinguish a real drug from a fake, Shepherd said. Even chemical analysis can be insufficient. A fake drug could have just enough of the active chemical ingredient to pass tests but not enough to offer clinical benefit.

Mercolino developed the concept for CertiRx’s technology while he was an executive at Johnson & Johnson’s (NYSE:JNJ) Corporate Office of Science and Technology, the division responsible for external R&D. Mercolino’s commercialization experience includes inventing what is now a widely used HIV monitoring technology while working for Becton Dickinson (NYSE:BDX). At J&J, Mercolino became aware that counterfeiters were defeating security measures on packaging. The next level of security is to focus on the drugs themselves.

Much of what makes up typical pharmaceutical products are inactive ingredients called excipients. These compounds are stabilizers of the active ingredients and filler that allows the dosage to be formed. The U.S. Food and Drug Administration has a list of these ingredients, which are considered safe. The CertiRx technology makes tags from these inactive ingredients. Because those ingredients are already deemed safe, CertiRx doesn’t need to take the tags through clinical trials.

The tiny CertiRx tags provide a unique “signature” on the product’s surface or in the product itself-- liquid or tablet medication. Tags are viewed through a reader. But Mercolino says the tags go beyond identification, providing details down to the specific batch of manufactured product.

Fred Eckel, executive director of the North Carolina Association of Pharmacists, said he hasn’t seen much demand from pharmacists for verification technologies. Morrisville, North Carolina company Centice’s drug verification system has had slow pick up from pharmacies. Eckel sees such technologies getting more traction among drug companies or distributors who could use them to prove to their customers the legitimacy of their products.

Mercolino said large pharmaceutical companies are CertiRx’s target market. The companies would incorporate tags into drug manufacturing processes. The technology could also be used by law enforcement.

CertiRx isn’t the only company with pharmaceutical tagging technology. Shepherd, who is not familiar with CertiRx, estimates about a dozen companies have tagging technologies. Mercolino counts Pennsylvania company ARmark Authentication Technologies and TruTag Technologies, based in Hawaii, as CertiRx’s closest competitors.

Compared to those technologies, CertiRx doesn’t require creating new tags for every batch of drugs, Mercolino said. That makes the technology less expensive. It’s also possible for the manufacturer to take over the encoding, which some clients would prefer to do. Mercolino said the CertiRx tags can link details of a drug to its packaging, enhancing the overall authentication. In fact, Mercolino doesn’t view IBM’s bar codes as competition. Big Blue could be a partner if the technologies are combined to fight drug fraud.

CertiRx, which has received some financial support from J&J, as well as an award from NC IDEA, is seeking an investment of up to $1 million. The financing would be used to expand the product and service offering. CertiRx is also searching for a pharmaceutical company to license the technology.

The pharmaceutical industry is looking for new anti-counterfeit measures, Shepherd said. Turkey and Brazil are implementing tracking systems using serial numbers on every bottle of every product. Closer to home, California regulators have set “E-Pedigree” requirements with a 2015 target date for establishing a track and trace system using methods such as bar codes. Drug tags could be part of such systems. Mercolino concedes that no technology makes drugs absolutely counterfeit proof. But he says tags raise the level of deterrence.

“Its presence has value in and of itself,” Mercolino said.

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