This document discusses how track and trace technologies can transform pharmaceutical business performance by enabling supply chain as a strategic asset. It provides an overview of trends driving increased focus on supply chains, describes implications of track and trace on supply chain operations and security. The document also presents two case studies, one on a global pharmaceutical manufacturer and one on a leading drug store chain, analyzing potential benefits of track and trace technologies across various operational areas like inventory management, out-of-stock reduction, returns management, and more. It concludes by suggesting pharmaceutical companies need to address compliance responsibilities globally and prioritize an implementation plan to leverage investments in track and trace.

1. Transforming Pharmaceutical Business Performance: The Supply Chain as a Strategic Enabler Robin Koh and Yun Kang SupplyScape, Inc.

2. Leveraging technology with supply chain domain expertise… … to deliver industry’s most relevant Track & Trace based Supply Chain Solutions SupplyScape Driving Product Integrity and Additional Business Value Turning Data Into Actionable Knowledge Pedigree, Serialization & Authentication Business Collaboration & Traceability

3. A Safe & Secure Chain The Evolution Continues Improving Accountability & Control Product Security Transaction Security Physical Auth. Features Serialization Trace Track Authentication Pedigree Pharmaceutical Co Wholesaler Pharmacy Chain of Custody Security Individual Product Security

4. Agenda Trends Driving a Focus on the Supply Chain Track & Trace Implications on the Supply Chain Case Study Suggested Next Steps

5. Patent Expiry and Generic Substitution An Increased Emphasis on Efficiency & Cost US Patent Sales at Risk Number of Generic Filings Impacts on price per dose

6. Global Growth Strategies Emerging Markets Offer Growth, Challenges Source: IMS Market Data, 2007 Year over Year Growth

7. Product Security Incidents The need for better control on Supply Chains Incidents reported: Counterfeits Diversions Thefts (Prescription only, not including Biologics) Worldwide Commercial Impact 65 09 56 08 49 07 44 06 39 05 75 10 04 35 ( Counterfeit drugs — $ billions ) Sources: Center for Medicines in the Public Interest Global Pharma Safety Incidents Sources: Organisation for Economic Co-operation and Development 964 04 196 02 484 03 1,123 05 1,412 06 1,759 07 US Drug Recalls Sources: FDA (CDER) Drug Counterfeit Incidents Investigated Sources: FDA 58 04 27 02 21 01 6 00 11 99 30 03 32 05 54 06 31 07 (# Investigation cases opened)

8. Select Strategic Transformation Programs

9. Supply Chain Traceability Increasing Global Requirements & Complexity (1) Hemophilia products only Est. 2013 Yes TBD Batch # Linear Barcode - TBD Batch Level Korea In effect Batch # Data Matrix / QR Code Biologics Only – Unit Japan In effect Yes SGTIN -96 Serial # - TBD Data matrix Sales Pack Ireland 1 TBD Yes TBD Product Code, Batch #, Date of Mfg, Expiration Date Data Carrier – TBD Sales Pack Brazil Oct 31, 2008 Yes 6 digits - Numeric 9 digits - Numeric Serial # 4 digit – Numeric check digit manufacturer code + serial number + check digits Code 128c Sales Pack China 16 digits - Numeric Including 8 digit sequence # Product License # + Random Sequence # Product code, Serial # Reimbursement data CIP code 13, Lot #, Expiry date Product Code, Batch #, Unit #, Expiry date National Reg. Number , Sequential # Sequential # Product License # Data Required AI(01) + AI(21) 14 digit – Product code 20 Digit – Serial number 13 digits - Numeric TBD 13 digits - Numeric 12 digits - Numeric 9 digits - Numeric 1 letter for Drug Class + 9 digit Numeric Data Format Turkey France Spain Greece Belgium Italy Country Start – 01/08 End – 12/10 Yes Data matrix Lot In effect Yes Code 39 Sales Pack Jan 1, 09 Yes GS1 standard (Data Matrix ECC 200 or GS1 128) Sales pack, transport unit In effect Yes EAN 13 Sales Pack Data matrix on vignette TBD Yes Data Carrier TBD – PDF 417 / Data matrix Sales Pack In effect Yes EAN 128 Sales Pack I2/5 Timeline Mandatory Data Carrier Tracking Level

10. Agenda Trends Driving a Focus on the Supply Chain Track & Trace Implications on the Supply Chain Case Study Suggested Next Steps

11. Supply Network Design Impact of Track & Trace Technologies PharmaCo Distributor Pharmacy Customs CMO/CPO Globalization Acquisitions & Divestitures Outsourcing Capability Constraints Reliability Flexibility

12. Inventory Management The Systematic Reduction of Uncertainty Supply Side Supplier Integration/Collaboration Inventory Visibility Cycle stock/Safety Stock Demand Side Forecasting Actual Demand Rate of Depletion Location Shrinkage Cost Service Time Inventory Min Max

13. Other Supply Chain Initiatives Supply Chain Rationalization KPIs Reverse Logistics Pricing Programs Description Opportunity for Track & Trace Rationalizing the number of supply chain partners for better control on product distribution Understanding the role of additional information in internal & external Process and Result measures Improving visibility into the qty and terms of products being returned to organization Wholesaler and pharmacy register the drug sold to Health Authority, and PharmaCo uses this info to pay discount to wholesaler Track & Trace technologies as an enabler for greater accountability of products Impact of granular information on Write-offs, Stock-outs, Service Levels, Fill Rates etc. Track & Trace technologies can provide visibility into the age of trade inventory and exact terms of sale Free Pricing is a complex system that can be simplified by bypassing much of the data recording and facilitating the verification process by the PharmaCos.

14. Agenda Trends Driving a Focus on the Supply Chain Track & Trace Implications on the Supply Chain Case Study Suggested Next Steps

15. Case Study #1 Overview A Leading Global Pharmaceutical Manufacturer Objective: To understand and quantify benefits in product security and business practice improvements enabled by Track & Trace Key Issues: A few top-selling product lines highly counterfeited and diverted Faced with various global serialization mandates, and in need of justification for what was expected to be substantial investment Integrated production network that makes localized approach challenging

16. Case Study #1 Operational Areas Investigated Product Security Trade Financials Supply Chain Efficiency Out-of-Stock Reduction (Direct Channel) Anti-Counterfeit & Diversion Returns Management Theft & Shrinkage Reduction Clinical Trials Supply Chain Product Complaints Management & Resolution Shelf-life Management Chargeback Management New Product Launch Management Demand Forecasting & Planning Rebates Management Government Pricing Consignment Inventory / VMI

17. Case Study #1 Three Different Approaches Used To Estimate Counterfeit Revenue Loss Online Pharmacy Model Treat on-line pharmacy to be major source of counterfeit, unauthorized generics, diverted. Determine amount of counterfeit purchased on-line Overall Market Size Model Estimate market size by various patient group Determine different between estimated market and actual sales Global Seizures Model Utilize actual seizure data Derive amount of counterfeit sold from seized API Revenue Loss Estimate 1 2 3

18. Case Study #1 Returns Problem Decomposed Returned Products Direct Returns Indirect Returns Sold on Contract Not Sold on Contract Sold on Contract Not Sold on Contract

19. Case Study #1 Returns Reconciliation – Issues and Opportunities Unable to tie individual returned items to the original purchase. Credit is issued based on most recent WAC Difficult to differentiate whether the returns are ‘legitimate’ or not. This is turn poses challenges in enforcing the terms and conditions of contract Returns processing is labor intensive, requiring manually reading and typing the lot # Business Issues/Challenges Opportunities Improved return goods accuracy by issuing credit based on actual purchase price Serial number on the items is tied to the transaction identifier (invoice #, PO #) that can be used to identify to whom the product was sold to  identify ‘illegitimate’ returns Scanning serial number rather than typing lot # results in more efficient returns processing

20. Case Study #1 Hard Savings Identification Yearly Benefits (unit: $ Thousand) Supply Chain & Trade Financials – I Supply Chain & Trade Financials – II Total Product Security Realizable unilaterally by Client Requires data sharing with TP Benefit A Benefit B Benefit C Benefit D Benefit E

21. Case Study #1 Key Success Factor: Getting Downstream Partners to Participate

22. Case Study #1 Key Takeaways As expected, most attractive benefits require collaboration from supply chain Internally realizable benefits do exist, but not as sizable May need to look at areas other than finished goods for internally realizable, compelling benefits Clinical trials, samples, reusable assets, etc. Utilize the same infrastructure for Track & Trace Some benefits require policy changes to be accompanied Data sharing can lead to significant benefit Manufacturers can do so much with data, if they can get it Why would the downstream partners share data?

23. Case Study #2: A leading chain drug store Objective: To understand the potential benefits of Track & Trace enablers Key Issues: Faced with various regulatory requires for Track & Trace Pressure for margin improvement Complexity in operation - # of SKUs, variety in the form and shape, # of locations, etc.

24. Frequency of manual checking of aging Monthly Typical man-hours spent each time X hours Average hourly wage $ Y # of stores Z Today’s practice ~ $ XX M Business benefit Monitors exp-date of individual bottles Eliminate need to check for every bottles in store Man-hour reduction due to T&T ~ X % (incl manual searching & checking, creating and managing current tags, etc.) ePedigree process How T&T can help Stores Case Study #2 Shelf Life Management and Control Made Easier at Store-level

25. Inaccurate supplier mis-pick T&T picking is a self-auditing process, with additional verification step before sending to stores Expected to reduce picking of wrong items and quantity Improvement above 80% expected Minimal impact Individual item tracking allows monitoring of inactive bottles/units in store and generate warnings Otherwise, minimal impact T&Tputs in place a disciplined procedure for returns and transfers to be updated into the system Root causes of inaccuracy % accountable for inaccuracy How ePedigree can help X % Y % Z % V % ~ XX % PI Improvement % Dispensing error Theft & misplacement Unreported transfers & returns % improvement by T&T 50 % 0 % 0 % 50 % Stores Case Study #2 Perpetual Inventory Accuracy Improvement Identified

26. Cycle count frequency Daily Typical man-hours spent each time ~X min Average hourly wage $ Y # of stores Z Today’s practice ~ $ XX M Business benefit PI accuracy improvement ~ XX % % reduction in cycle count efforts ~ X % (excluding controlled drugs) ePedigree process Stores Case Study #2 Inventory Accuracy Leads to Potential Reduction in Cycle Count Effort

27. % of scripts with OOS X % # of scripts/week/store Y Avg retail value of script $ Z Avg markup % V % Out-of-stock (OOS) relevant status Leave for a competitor nearby ~ 5 % Leave for another ABS store ~ 15 % Accept partial fill and/or ~ 80 % return some other time Patient reaction to OOS Ordering Exceptional demand Inappropriate parameters in sys Item not in masterfile Supplier OOS Supplier mis-pick Operational interruptions/ delay Receiving error Dispensing error Theft & misplacement Unreported transfers & returns Supplier delivery failure Inaccurate perpetual inventory Root causes of OOS % accountable for OOS % improvement by Track & Trace ~ X % ~ Y % ~ Z % ~ 0 % ~ 0 % ~ 30 % ~ $ XX M Business benefit Stores Case Study #2 Inventory Accuracy Also Leads to Out-of-Stock Reduction at Stores

28. Sample on-hand qty of an item at DC A If products are received and made available for sale faster, the order point can be reduced Lower order point results in lower average on-hand inventory Rationale for inventory reduction ~ $ XX M Business benefit Assumptions: Inventory holding cost is X% of inventory value per year. Build-to-week is 0.8 for DC A Avg receiving hour for a PO is 6 hours currently, and is reduced to 4 hours DC Case Study #2 Inventory Accuracy Leads to Similar Operational Savings at DC Level Productivity Increase in Receiving Leads to Potential Inventory Reduction Order point = 2880

29. Key Takeaways Case Study #2: Overall benefit at the store level order of magnitude higher, due to scaling factors Rather than a single large benefit area, business case will most likely exist in sum of smaller ones Overall Benefits do exist at all segments of supply chain. It’s matter of identifying where it works at each party, which will most likely be very different for both parties. Type of benefit Prioritization on product lines, locations, timing, etc. Beyond operational There are evolutionary opportunities, and they are revolutionary ones.

30. Agenda Trends Driving a Focus on the Supply Chain Track & Trace Implications on the Supply Chain Case Study Suggested Next Steps

31. What Top Pharmaceutical Companies Need To Be Able To Address Today Compliance responsibilities around the globe Localized approach vs integrated Balance between doing too much vs. taking too much risk Alignment between compliance, product security, and business value initiatives Prioritized implementation plan Alignment between US efforts and global needs Need for greater supply chain control and closer customer access Manifested by strong trends such as wholesaler consolidation, direct distribution, quota system, free-pricing Getting the downstream trading partners aligned Negotiating from the position of strength Knowing what and how much to give and get

32. Business Opportunities in Supply Chain Traceability What if you could? Leverage investments in product serialization initiatives to drive a higher return on product and brand protection? Increase new product launch success by ensuring proper supply into key markets? Establish a global network of trading partners to provide greater visibility into distribution channels ? Overcome barriers to entry into new markets by more efficiently addressing local distribution requirements? Facilitate financial reconciliation across chargeback, rebate, and re-imbursements across your supply network?

33. Experience Nexus and our Global Traceability and Serialization Solutions Today ! Learn how these solutions can help you: Improve brand competitiveness Manage operational complexity Secure compliance Drive supply collaboration Country Information Manager Serialized Product Authentication Trade Event Monitor Trading Partner Directory Trade Event Exchange The information on products, technology or customers contained in this presentation is proprietary to SupplyScape and is offered in confidence . SupplyScape makes no warranty regarding this information. SupplyScape, in its sole discretion and with no notice, may revise, eliminate or otherwise alter any functionality or product plan to which the information disclosed is related. This information is presented solely for discussion purposes . This information should not be used as the basis for any current purchase decision from SupplyScape. Contact Mary Hall today to schedule a demonstration! 781.503.7462, mhall@supplyscape.com