Pharmaceutical & Medical Packaging Leadership Summit © 2011 Fox Rothschild 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 - Identifying issues - Identifying risks - Identifying solutions - Identifying problems  Knowledge is power

Pharmaceutical & Medical Packaging Leadership Summit © 2011 Fox Rothschild Theft and Risk  Theft - Target products  High-value drugs  Widely used drugs  Drugs that can be abused - Methods of theft  Stolen trucks  Warehouse theft  Pilfering at the plant

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 - 45,000 bottles - Stolen lots later appear in expired returns

Pharmaceutical & Medical Packaging Leadership Summit © 2011 Fox Rothschild Theft and Risk  Risk - Geographical factors  Follow the interstate highways - Manufacturing location - Warehousing location - Transportation methods - Unattended loads  Flexibility for other “signals” and other purposes - Drug shortages - Modifying flu vaccine shipments to respond to changing conditions

Pharmaceutical & Medical Packaging Leadership Summit © 2011 Fox Rothschild Security  Targets  Likely loss areas  Likely loss days of the week  Product risk factors  Additional risk factors - Controlled dangerous substances - Other vulnerabilities

Pharmaceutical & Medical Packaging Leadership Summit © 2011 Fox Rothschild Security  Controlled dangerous substances - Federal rules apply to manufacturers, distributors, dispensers and others and require registration under 21 C.F.R. - Rules also include:  Physical security controls, e.g., vault  Perimeter security and electronic alarms  Limited access –Limited area –Limited number of employees  Keys, combination locks and cages - Registrant remains responsible for security

Pharmaceutical & Medical Packaging Leadership Summit © 2011 Fox Rothschild Security  Security precautions - 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 - Personnel - Routes - Rest areas - Using all available information  Planning - Static planning - Non-static, Non-routine planning

Pharmaceutical & Medical Packaging Leadership Summit © 2011 Fox Rothschild Contracts and Contractors  Contracts - 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 - Your screening process  Financial wherewithal  Claims history  Contractor’s hiring processes  Security and security officials  Risk management personnel - 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 - Does it cover all situations? - Amount of coverage / value of goods - Limitations on liability - Subrogation - Other insurance-like protections  Internal “reserve”  Self “insured”

Pharmaceutical & Medical Packaging Leadership Summit © 2011 Fox Rothschild Insurance  Supply-chain disruption insurance - Can you get it? - What will it cover?  Differs from business interruption policies –Loss of income from damage at company’s or supplier’s facility –Property damage  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  “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  Physical risk to employees, drivers, etc.  Stand-by / emergency services  Chain of custody / documentation / “pedigree” statements  Recalls  Consumer returns - Proof / counterfeits - Request for compensation - Expiration  “Use” date  Temperature / Refrigeration  Has the efficacy of, e.g., insulin been compromised - Liability  Personal injury  Damages

Pharmaceutical & Medical Packaging Leadership Summit © 2011 Fox Rothschild A Process, Not a Solution  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