What history tells us about why the future of pharma serialization solutions hinges on the question of open vs closed

One of the most widely referenced examples of new technology adoption is the classic tale of VHS vs Betamax.  In the 1970’s and 80’s a ‘war’ was being waged as to who would dominate the home video recording space.  Two primary technologies emerged- VHS and Betamax- but only one would survive as the defacto ‘standard’.  In many ways the VHS vs Beta example shows the importance (and potential outcomes) when ‘open’ and ‘closed’ systems compete- and interestingly has some very strong parallels to the current state of pharma serialization solutions.

Let’s briefly look a little deeper into the VHS vs Beta battle.  Credit goes to two editorials on this topic (¹:https://www.everything80spodcast.com/vhs-vs-beta/ and ²:https://www.netquest.com/blog/en/blog/en/legendary-products-vhs-vs-beta)

In the mid 1970’s the Betamax format dominated the emerging video recording space through its use in professional studios and other commercial applications.  When time came to adapt this technology for home consumer use, competition arose.  Shortly after Betamax another recording format emerged known as VHS.  VHS was viewed as having inferior picture quality but took a drastically different approach when considering its market positioning.  The creator of VHS, JVC, outlined the following: ¹

• The system must be compatible with any ordinary television set.
• Tapes must be interchangeable between machines.
• The overall system should be versatile, meaning it can be scaled and expanded, such as connecting a video camera, or dub between two recorders.
• Recorders should be affordable, easy to operate and have low maintenance costs.
• Recorders must be capable of being produced in high volume, their parts must be interchangeable, and they must be easy to service.

Additionally, JVC set out a strategy to license the VHS format to any interested manufacturer. “JVC preferred to sacrifice the profits of licensing their VHS technology for the sake of instituting a dominating standard. In 1984, only 12 companies supported the Betamax format compared to the 40 manufacturers that supported VHS.” ²

In short, JVC set out on a path of ‘openness’, compatibility and adoptability.

Meanwhile, the creators of Beta maintained a ‘closed’ position.  They relied more on marketing efforts rather than recognizing the desires of the market (e.g. longer recording times, lower cost) and most importantly they kept licensing extremely restrictive and expensive. ²

It’s important to note that the creator of Beta was a little-known-company called Sony.  Sony bet on its perceived market position to drive adoption of the Beta standard- so much so that “There [had] always been this idea that Beta was vastly superior [to VHS]… but when you look back at the technical details of two average machines they ended up being almost identical. A big reason for this idea was as much due to [Beta] being marketed that way by Sony. People began to just buy into it… Sony actually could have controlled the whole industry but their attempt to dictate the industry standard backfired.” ¹

So how does this relate to pharma serialization solutions? Those who have been in this space, working with serialization vendors, will immediately recognize the many parallels between the VHS vs Beta story and the current landscape of serialization providers.  And in my opinion, some of the parallels are almost eerily on-point. 

As such the question of open vs closed should be top-of-mind as the industry marches towards DSCSA 2023 and other global requirements which will demand greater interoperability. Companies who have been down the serialization road for many years as well as those that are just now starting their serialization journey have some new things to consider when evaluating their solution options.

First let’s provide some context into what ‘open’ means in pharma serialization.    Open does NOT simply mean open-source software nor does open mean unsecured, unobstructed access to data.  My view of ‘open’ means two key things:

1. The industry recognizes the advantages of normalizing (e.g. standardizing) and centralizing (albeit through de-centralized technologies) end-to-end serialization/traceability data in an industry-wide data platform- which is owned collectively by the industry and not any single for-profit entity
2. The industry promotes, and quite frankly demands, permissioned access to this data be given to any viable provider-  which in turn fosters a competitive landscape that rewards solutions based on their ability to deliver value from the data. 

Of course, these are not new concepts by any means.   These are concepts- easily identifiable by the existence of solution ‘marketplaces’- that have already been proven in other industries and by other solution landscapes (See: Google, Amazon, Salesforce among many, many others).

But let’s consider these points in the context of today’s pharma serialization space- despite any and all marketing claims- hopefully most of you would agree that the current tangled-web of serialization data exchange deployed between largely ‘closed’ systems is not sustainable for 2023 and beyond.  Moreover, the current landscape of solutions certainly does not adhere to the characteristics of ‘openness’ noted above.  The industry, however, has managed to get by largely due to the fact there has not yet been a need/requirement which demands such broadscale interoperability.  (Remember: as I’ve noted in past posts- there are many manufacturers who are fully compliant with DSCSA today and are doing nothing more than physically serializing items and then holding on to the data- no significant data exchange or interoperability is required)

Simply put the current approach won’t work for 2023 and quite frankly the industry shouldn’t want the current approach to work.  Continuing to build upon what’s been done to date (I’m a broken record in saying this) will only lead to unnecessarily higher fees, even less flexibility and lower potential for additional value creation.  Consider the reality that some vendors are arbitrarily raising their annual fees year over year for no justifiable reason while customer’s feel ‘trapped’.  That’s a scary proposition if it were to continue to play out over the next 5/10/15 years.

But there is some reason for optimism-  as I’ve noted before there are efforts underway, whether as part of FDA pilots and otherwise, that are evaluating and demonstrating other approaches to traceability.  And likely for the first time we have providers that have the scale to drive such disruptive change.   Be it SAP/MediLedger’s collaboration or IBM’s re-emergence in this space (and I’m sure other providers as well- before I get the nasty-grams), the common thread is these efforts are centered on concepts rooted in openness.  Now of course commercial interests will always be in play, so I’m certainly not insinuating that SAP or IBM (or anyone else) are taking on these efforts out of the pure goodness of their hearts.  Their approaches must represent something noticeably different than what we’ve seen from vendors to this point- restating again- the focus must shift from building a business model based on simply owning/maintaining/exchanging data to one that can justify its value based on what it does with the data.

For me the most fascinating part of the next 12 months will be watching which vendors give signals of ‘openness’ and which vendors give signals of staying ‘closed’.   There are very clearly vendors who have already obtained a perception of being ‘closed’ through their promotion of alternative ‘standards’, limitation of 3^rd party integrations and inflexibility to cater to customer’s specific needs (I see you Betamax).  It will be fascinating because, in fact, the marketing blitz has already started- and many of the attempts at showing 'openness' have in fact made clear these vendors will very much stay 'closed'.   I have a unique perspective in this area because in addition to supporting pharma's through their serialization journey I am also a solution provider- one that specifically provides solutions that are designed to be complimentary to the traditional enterprise serialization platforms- so quite literally on a daily basis I am engaging serialization vendors to understand their position on 'open' integrations.

So let me offer some thoughts on the marketing perception vs reality-   offering a 'platform' component does not automatically qualify one as an 'open' solution.  In fact there is quite a big divide between over-using typical buzzwords that portray 'openness' and actually demonstrating it.  The real test comes in proving ones support for fostering collaboration with any provider- be it a close partner or the fiercest competitor.  That's the true test that pharma companies need to pay attention to- because that's the signal of whether their vendor's approach is in the best interest of the industry or solely the best commercial interest for themselves.

I look forward to continued engagement with vendors on pursuing truly 'open' integrations.

If by-and-large the industry agrees that ‘openness’ at the core is the only sustainable method for 2023 compliance and beyond than many companies have some serious thinking to do about the future of their serialization solutions.

And if you’re a pharma at the start of your journey, especially if your timelines and/or scope allow you to consider one of the now many alternative solutions to meeting serialization compliance- why not see how things play out over the next few months as the FDA pilots complete and other initiatives pick up steam?  

Best to make strategic decisions based on where the collective industry is going rather than where it’s been.