A STUDY ON THE ELECTRONIC SUPERVISION MODEL

OF DRUG DISTRIBUTION

Zi-Kui Lin, Zi-Sheng Dong

School of Economics and Management, Beijing Jiaotong University, Beijing, China

Ying Lu

State Food and Drug Administration Information Center, Beijing, China

Key words: Drug logistics, Drug distribution, Electronic supervision, Supervision model.

Abstract: Drugs, as a special commodity, is directly related to people's lives and health, so it is essential to effectively

supervise the drug distribution process Current electronic supervision of drugs effectively regulates the

market order, but it also faces with many problems, such as high cost in the comprehensive promotion and

low efficiency of logistics operations. Therefore, this paper summarizes the principle of current electronic

supervision and analyzes the existing problems. Based on these and combined with the characteristics of

flow conservation in pharmaceutical logistics system, this paper presents a new model of electronic

supervision and compares it with the current model, in order to solve the problems in China's current

pharmaceutical distribution supervision.

1 INTRODUCTION

Drug is a special kind of goods that's related to the

health and the safety of people. In order to safeguard

people's health, maintain the society stability and

promote the healthy development of China's

pharmaceutical industry, it's very important to

strengthen the management of drugs, and ensure that

people can get safe and effective drug timely. As a

channel between the producers and patients, The

distribution of drug involves logistics, capital flow,

business flow, information flow and other

complicated process, and the supervision of it is not

only an important part of the supervision work, but

also the key to ensure the quality of drug,

standardize drug distribution channels, stop the fake

drugs’ manufacturing and selling, and promote the

reformation of drug circulation system.

In order to achieve the goal of supervising and

administrating drug distribution, State food and drug

administration has established a regulatory

mechanism for complaint, random inspection and

supervision, but these regulatory mechanisms

happen after the distribution, when most of the

counterfeit drugs have entered the market and

threatened people’s safety and health. In addition,

with the changes in the function of drug

administration and supervision, the supervising and

administrating task in the field of food and drug has

gradually increased, so the limited supervisors

cannot undertake the current heavy task, and it's no

longer suit the current work for the supervision of

drug distribution that relying on "crowd strategy"

and “large area of investigation”.

So our country urgently needs a high-efficiency

means for drug distribution that can run

automatically all the time to standardize drug

distribution channels, stop the fake drugs’

manufacturing and selling, and ensure that people

can get safe drug timely. Electronic supervision is an

innovative means that State food and drug

administration is implementing.

From the initial narcotic drugs and the first kind

of psychotropic substances in 2007 and the "four

major categories of key drugs" in 2008 to the 307

kinds of drugs in National Essential Drugs List in

2011, the implementation of the scope of electronic

supervision is gradually expanding. According to the

statistics, narcotic drugs and first kind of

378

Lin Z., Dong Z. and Lu Y..

A STUDY ON THE ELECTRONIC SUPERVISION MODEL OF DRUG DISTRIBUTION.

DOI: 10.5220/0003585903780383

In Proceedings of the 13th International Conference on Enterprise Information Systems (SSSCM-2011), pages 378-383

ISBN: 978-989-8425-54-6

 2011 SCITEPRESS (Science and Technology Publications, Lda.)

psychotropic substances involve of 18 drug

manufacturers, and 560 drug wholesalers; the second

kind of psychotropic drugs, blood products,

vaccines, and Chinese medicine injection, which we

call "four major categories of key drugs", involve of

568 drugs manufacturers and 13000 drug

wholesalers; the 307 essential drugs involve of 3567

drug manufacturers, accounting for 76% of all

manufacturing enterprises. Thus, the drug electronic

supervision is pushing on steadily and safely.

2 PRINCIPLE OF CURRENT

DRUG ELECTRONIC

SUPERVISION

Current drug electronic supervision mainly rely on

China's drug electronic supervision network, which

is an information net the State food and drug

administration adopts to supervise the drugs

manufacturing and circulation enterprises. Moreover,

it is also a net system based on the Public

information service platform which covers all over

the country, and the methods and tools by which the

State food and drug administration implement for

electric supervision. Their working principle can be

concluded as “One code throughout, all process

supervised”.

2.1 One Code Throughout

By the rules of State food and drug administration,

the drugs which are listed on the China’s drug

electronic supervision network to implement electric

supervision have to be pasted one universal drug

electric supervision code, which is called “E-ID”.

Otherwise any kinds of drug are not allowed to be

put on the shelves of pharmacy agent. The electric

supervision code will accompany with the drug

during the whole flow process.

2.2 All Process Supervised

The registered drug manufacturers should apply for

drug electric supervision code from China's drug

electronic supervision network before they produce

drugs. Then the code should be adhered to drug’s

minimum sale unit. Before the drug’s entrance to the

warehouse of manufacturers, these codes will keep

the state of being “not activated”, the corresponding

drugs cannot be searched on the drug electronic

supervision network, and the drug can't circulate.

Initially, the enterprises will scan and upload the

information of the code before the single drug with

electric supervision code entering the warehouse of

drug manufactures. Soon the corresponding drug can

be searched on China’s drug electronic supervision

network, thus these kinds of drugs come into effect,

and then the flow was legal. It is just by the working

theory of “write in” and “write out” that those drugs’

process supervision comes into reality. As is showed

in figure 1. (Note: Nowadays, China’s drug

electronic supervision network has not covered all

the nation’s drug agents and consumers.)

Taking pharmaceutical wholesale enterprise as

an example, pharmaceutical wholesale enterprise

must scan each electronic supervision code and

upload the information to China's drug electronic

supervision network as soon as it receives the drugs

from manufacturers. The system will check the

information one by one automatically with the" write

off" information from manufacturers, until

confirming all medicines arrived are correct. Then

pharmaceutical wholesale enterprise records the



Figure 1: Principle of current drug electronic supervision.

A STUDY ON THE ELECTRONIC SUPERVISION MODEL OF DRUG DISTRIBUTION

379

information in their own "account book", and we call

this process "write in"; When delivery, the

pharmaceutical wholesale enterprises must scan each

electronic supervision code, and upload the

information The system will check the information

one by one automatically with the" account book",

until confirming all medicines outbound are correct.

Pharmaceutical wholesale enterprise eliminates the

drugs from its "account book", and we call this

process "write off." If a single product goes wrong,

the system will alarm, and "write in" or "write off"

will not proceed. Through the "write in" and "write

off" process of the entire circulation, the background

database system of China's drug electronic

supervision network records every single product’s

major pharmaceutical logistics "path" from the

manufacturer to the final sale, so that consumers can

inquire the basic information of the drugs he bought,

while the food and drug administration departments’

real-time supervision of the whole process of drug

distribution can be achieved.

3 THE PROBLEMS EXISTING

IN CURRENT DRUG

ELECTRONIC SUPERVISION

MODE

The current model of drug electronic supervision

resolves many problems that exist in the traditional

supervision, makes the automatic and real-time

supervision to the circulation process possible,

ensures in stipulated time to complete the recall of

problem drugs, improves the extent of

comprehensive utilization supervision resources,

promotes the drug regulatory departments’ work

efficiency at all levels , effectively regulates the drug

distribution market order, and guarantees people's

safe drug use. The current drug electronic

supervision mode takes the minimum sale unit as

drug regulatory object, which is "an object, a code",

and it also records most of the logistics "path" of a

single product from drug manufacturers to the final

sale of drug companies. However, with the gradual

expansion of the supervision scope, current drug

electronic supervision will face more and more

challenges.

3.1 High Cost of Comprehensive

Promotion

In current electronic supervision mode, the cost

includes enterprises’ annuity of access key, labelling

system renovation cost of drug manufacturers’

production line, information collection equipments

cost of drug circulation, and maintenance cost of

electronic supervision network system.

Drug product and business enterprises need to

apply for access key to join the electronic

supervision network; and the key digital certificate’s

annual service fee is 300 Yuan per enterprise.

Taking 3850000 drug enterprises to calculate, the

current drugs electronic supervision annual

enterprise access key fee will reach 116 million

Yuan. To meet the requirements of electronic

supervision drugs, the manufacturers which have

accessed to the network must affix electronic

supervision code to each single product, which

requires transformation of the original production

line to increase the labelling system. If each drug

manufacturer production line labelling system

transformation needs a million Yuan, the full

implementation of current electronic supervision

mode will at least cost 47 million Yuan. The current

drug electronic supervision model for each single

product needs the circulation process "write in",

"write out" operation, which requires all links in

drug circulation use information collection devices

to collect and unload information. If each enterprise

purchasing information collection device needs to

spend 100 Yuan, the full implementation of current

electronic supervision mode will at least cost 380

million Yuan.

In addition, considering China’s electronic

supervision network system’s upgrade and

maintenance cost, at least millions Yuan per year

will need.

3.2 Heavy Load of Information System

The number of annual drug sales is about 150

million. If we adopt current electronic supervision

mode to supervise all drugs sold in China, the

electronic supervision network system will have to

handle at least ten billions of "write in" and "write

out" data. Coupled with data from previous years,

electronic supervision network data processing

system will face a huge challenge. With hundreds of

millions information stored in the background

system of China’s electronic supervision network, it

ICEIS 2011 - 13th International Conference on Enterprise Information Systems

380

may lead to the system’s slowly run thereby to

reduce the supervision efficiency, meanwhile it also

increases the risk of system crash or paralyze. Once

the system is paralytic, drug product and business

enterprises will be unable to carry out normal

inbound and outbound work, business operations

will be affected, and drug supply will be suffered,

which even bring about serious social problems.

3.3 Low Efficiency of Enterprise

Logistics

Current drug electronic supervision model requires

drug product and business enterprises must collect

and unload each single drug’s information in order to

complete the process of "write in", and “write out".

For large scale drug product and business

enterprises, the information collection operation will

directly affect the efficiency of logistics, and

one-dimensional code in the form of drug electronic

supervision makes it difficult to achieve mass of

information collection, which severely limits the

enterprises’ operational efficiency.

Overall, current drug electronic supervision

mode has a high cost of comprehensive, and the

benefits are limited, so the foreground is not

optimistic. Therefore, China still needs to explore

others effective technological means to supervise the

drug distribution, rectify market order, curb the fake

drugs’ manufacturing and selling, and ensure that

people can get safe and effective drug timely.

4 NEW MODEL OF

ELECTRONIC SUPERVISION

FOR DRUG DISTRIBUTION

In China, each kind of drug on sale has a

corresponding drug approval number. A drug

approval number corresponds to a production of a

pharmaceutical manufacturer. Therefore, if you want

to supervise the distribution process of a certain kind

of drugs, in theory the supervision of effective drug

approval number can be enough.

Drug manufacturers, who obtain a drug approval

number, can be drug’s legitimate pharmaceutical

manufacturers. Meanwhile, in order to supervise the

drugs quality of pharmaceutical manufacturers, and

trace and review of the marketed drugs production

history, we use “batch number" to identify the drugs

in the same production cycle. Therefore, drugs with

the same approval number and the same batch

number can be considered by the same manufacturer

who use the same materials in the same production

process, and the nature and quality can be considered

to be basically the same only installed in the

different sub-drug sale unit. In this case, China's

drug supervision and management departments can

use the same batch number and the approval number

of drugs as a whole in supervising drug distribution.

According to the relevant provisions of China's

current electronic supervision, for the drug product

and business enterprises, once drugs’ purchasing or

selling occurs, the two parties must scan the

electronic supervision code of each single product

and upload the electronic supervision code, trading

notes and other related information to China's drug

electronic supervision network. Therefore, if we

implement electronic supervision for all kinds of

drugs, all systems’ inflow and outflow can be

supervised in real time in the pharmaceutical

logistics system, including manufacturers,

wholesalers, and retailers.

When there are no illegal drugs between the

distribution and no problem of logistics activities,

for the drugs with the same approval number and

batch number, the flow monitored in the

pharmaceutical logistics system should be

conserved, as shown in Figure 2.



Figure 2: Flow conservation in pharmaceutical logistics

systems.

In Figure 2, beginning from the drugs flow into

the pharmaceutical logistics system to a certain

moment, the cumulative amount of manufacturer

sending to the pharmaceutical logistics system

should equal the sum of the cumulative amount

returning from the logistics system to manufacturer,

the cumulative sales to consumers and inventory of

drug logistics system of the present moment.

 It can

be

expressed by an equation:

Delivery amount=Return amount+Sales+Inventory

For each constituent in the supervision system,

the system’s cumulative input flow is equal to the

cumulative output flow and the current inventory of

system. An equation can be showed as follows:

A STUDY ON THE ELECTRONIC SUPERVISION MODEL OF DRUG DISTRIBUTION

381

Input flow=Out flow+Inventory

Here, we call the equation "addition sum

relationship", and the difference of the "total input

flow" minus the "total output flow" and "the current

system inventory", which we call "supervision

coefficient of pharmaceutical logistics system total

network flow", being expressed with

γ.

For the drugs with the same approval number

and batch number, the initial inventory of each

constituent in the supervision system is zero before

distribution. When China's drug electronic

supervision network receives the information

uploaded by the constituents in pharmaceutical

logistics system, the system will automatically

calculate the “supervision coefficient of

pharmaceutical logistics system total network flow”

and calculate each constituent’s current inventory

based on "addition sum relationship", and then the

result will be compared with zero. In this way, we

can monitor the drug logistics system timely and

automatically. The inventory of each constituent

should not be less than zero in pharmaceutical

logistics system.

(1) When

γequal to zero, there are two cases:

1) If each constituent’s current inventory of the

monitored system is nonnegative, it means there are

no illegal drugs mixed, that’s to say, the drugs are in

normal circulation.

2) If a constituent’s current inventory of the

monitored system is negative, it means this

constituent (wholesaler or retailer) have a more

cumulative outflows than inflows, that is to say this

constituent produced and sold illegal of drugs, or this

constituent did not report the inflow information, and

drugs distribute abnormal in this condition.

(2) When

γis less than zero, it means there are

illegal drugs mixed, drugs distribute abnormally.

This is because one constituent (wholesaler or

retailer) in the network of the pharmaceutical

logistics system purchased illegal drugs, then

uploaded the inflow information, the supervision

system calculates the constituent’s current inventory

through "addition sum" relationship and finds it

increase, so the current inventory of the

pharmaceutical logistics system will equal the

increase, resulting in cumulative inflows will be less

than the sum of cumulative outflows and current

inventory, making the “supervision coefficient of

pharmaceutical logistics system total network flow”

is less than zero.

(3) When

γis greater than zero, it means some

drugs have not flowed into the monitored system, or

there is a constituent sold drugs to other enterprises

out of this system, although both cases belong to

illegal operations, but no matter what kind of

situation, the drugs flowing are legal drugs, no

illegal drugs mixed.

It is necessary to indicate that this new model of

electronic supervision for drug distribution is only

applicable to the drugs with the same approval

number and batch number, if we want to apply this

mechanism to monitor all drugs, just using the above

mechanism respectively for all the drugs with the

same approval number and batch number.

5 THE COMPARISON OF TWO

DRUG ELECTRONIC

SUPERVISION MODES

The new mode of electronic supervision on drug

circulation put forward in this paper is based on

China’s current drug electronic supervision; it is an

innovation of electronic supervision. Compared with

China’s current drug electronic supervision mode,

both similarities and differences exist.

From table 1, we know that the new mode can

achieve the same results with China’s current

electronic supervision, but because of the new

mode’s regulatory precision expands to the varieties

grade (namely the drugs with the same approval

number and batch number) from the single grade, it

will reduce the regulatory costs greatly.

At the same time, using the new mode, China’s

drug electronic supervision network just needs to

record the flow information in each constituent

(manufacturers, wholesalers, retailers) of drugs with

the same approval number and batch number, which

greatly reduces drug electronic supervision’s

information processing load, and makes it possible

to achieve mass of information collection, thereby

enhancing the efficiency of enterprise logistics.

6 CONCLUSIONS

Using the new mode of drug electronic

supervision, the problems existing in current drug

circulation electronic supervision such as high cost

of comprehensive promotion, heavy load system

information, and low efficiency of business logistics,

all have been solved very well. In order to enhance

ICEIS 2011 - 13th International Conference on Enterprise Information Systems

382

Table 1: The comparison of two drug electronic supervision modes.

Items Current drug electronic supervision mode New mode of drug electronic supervision

Regulatory scope The whole country

An administrative areas or the whole

country

Control mode General investigation, beforehand control General investigation, beforehand control

Regulatory precision Single drug The same batch number

Regulatory cost High Low

Regulatory efficiency High High

Drug identification Drug electronic supervision code approval number and batch number

Anomaly judgment

Whether the information of “write in” and “write out”

completely match

Whether the flow of drug logistics system

is conservative

Drug recall Support Support

Process supervision Realizable Realizable



the efficiency of State food and drug administration

at all levels, standardize the market order of drug

circulation, and guarantee people's safe drug use in a

better way, our country should carry out the new

mode of drug electronic supervision vigorously.

REFERENCES

State food and drug administration. The announcement of

reiterating the relevant regulations about new

pharmaceutical manufacturers and business enterprises.

[EB/OL].2000, 6. http://www.sda.gov.cn/WS01/CL00

55/9610. html.

Netease. 307 kind of basic drugs labeled "id", involving

76 % of Chinese enterprises [EB/OL]. 2010, 8. http://

news.163.com/10/0804/08/6D7SGRNM000146BC.ht

ml.

State food and drug administration. The announcement

about implementing electronic supervision of all

varieties of basic drugs. [EB/OL]. 2010, 6. http://www.

sda.gov.cn/ WS01/ CL0055/ 50136.html.

APPENDIX

This paper is supported by the fund “RFID

technology research of drug safety retroactive

management” (Number: 2008BAI55B07)



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