The South African pharmaceutical industry is governed by the Department of Health (DoH), South African Health Products Regulatory Authority (SAHPRA), South African Pharmacy Council (SAPC), the South African National Accreditation System (SANAS), South African Bureau of Standards (SABS) and the medicines pricing committee. The actors in the pharmaceutical industry are manufacturers, distributors, wholesalers and retail pharmacies (Krebs 2018:2). These actors in the pharmaceutical industry need to be fully aware and understand their obligations and duties under the South African pharmaceutical regulatory authority (Chowles 2017:1). Further, the industry is governed by the single exit price (SEP) that is the maximum price which can be charged, irrespective of volume sold (Krebs 2018:2).

Manufacturers, distributors and retailers may not charge any fee other than the SEP. It should be noted that SEP only applies to medicines that can only be obtained from a pharmacy. Products that can be bought at a supermarket, such as paracetamol, are not subject to the SEP. There are maximum allowable price increases set by the Minister of Health on an annual basis (Chowles 2017:1). The South African pharmaceutical market is therefore vulnerable to the risk of counterfeiting. South Africa has a large number of land and seaports which make it difficult to monitor the entry points effectively. This implies that counterfeit pharmaceuticals can enter South Africa from multiple entry points, therefore making illegal importation into the country much easier (Von Holdt 2017:2).

Counterfeiting is the act of intentionally and illegally producing, or mislabelling a product regarding its identity and source to appear to customers as a genuine product. Counterfeit pharmaceuticals may apply to both branded and generic products (Machado et al. 2018:151). Pharmaceutical SCs have experienced an increase in illicit trade, because of the increased attractiveness of the Internet, challenging economic conditions and global and dispersed networks (Li & Yi 2017:102; Lybecker 2008:393). This has also led to fragmented information, which is further exacerbated by the high number of intermediaries and a low degree of collaboration (Taylor 2014:132).

Three possible generic upstream sources of counterfeiting exist (Machado et al. 2018:157; Stevenson & Busby 2015:111–112). The first is national production, essentially, products manufactured in the domestic market. This can result from outsourcing manufacturing to non-reputable manufactures. These non-reputable manufacturers illegally manufacture additional quantities and sell them via an unauthorised channel (Stevenson & Busby 2015:111–112). The second source is imported products or fake items that enter via a country’s ports and borders (Machado et al. 2018:157; Mohamed 2012:8). The third source of counterfeiting relates to independent manufacturers who produce counterfeit products (Machado et al. 2018:157). The sources of counterfeiting in the downstream chain relate to unauthorised distributors; these are importers who receive and distribute counterfeit products via an unauthorised retail channel (DiMase et al. 2016:1837; Machado et al. 2018:158). A common source of counterfeit medication in the South African pharmaceutical SC is medication that failed quality tests. These medicines fell into the hands of corrupt individuals before being destroyed who sells the medicines to unsuspecting parties (Antonie et al. 2018:2).

Firms develop risk mitigation capabilities to enable them to prepare for and reduce the effects of risks (Ambulkar, Blackhurst & Cantor 2016:1400). Firms can use risk mitigation as a systematic reduction in the extent of exposure to risk and the likelihood of its occurrence. Risk mitigation capabilities can be grouped into two categories. Firstly, intra-firm risk mitigation capabilities applied only inside the firm. Secondly, inter-firm risk mitigation capabilities require coordination among SC links.

Supply chain resilience represents an SC’s capability to react to changes and disruptions in business operations (Kamalahmadi & Parast 2016:122; Ponomarov & Holcomb 2009:131). The more resilient the SC, the better the response to disturbances (Sheffi & Rice 2005:44). Resilience enablers allow firms to get ready and adjust to respond positively to disruptions (Kamalahmadi & Parast 2016:122).

Re-engineering as an enabler involves redesigning the SC to reduce risk exposure, build resilience and overcome SC disruption (Scholten, Scott & Fynes 2014:220). Firms can combat against counterfeiting by evaluating existing sourcing criteria or design decisions (efficiency vs redundancy) from an SCRES perspective that may mitigate vulnerabilities (Christopher & Peck 2004:8; Kamalahmadi & Parast 2016:125). As the pharmaceutical industry is characterised by a high number of intermediates, there is an increased vulnerability to disruptions in the SC such as counterfeiting (Enyinda & Tolliver 2009:227).

Visibility is the ability to reduce information asymmetry, quickly identify disruptions, to implement changes effectively and enable real-time monitoring through SC transparency (Christopher & Peck 2004:8; Ehrenhuber et al. 2015:7). Supply chain transparency can be achieved through early warning communication, information sharing, database and predictive capacity (Tukamuhabwa et al. 2015:5610). Visibility enables firms to monitor important behaviours to enhance threat awareness and better prepare for disturbances (Rashid et al. 2014:290; Tukamuhabwa et al. 2015:5617). The development of traceability systems helps to protect consumers, prevent and respond to adversarial disruptions (Coustasse, Arvidson & Rutsohn 2010:110; Enyinda & Tolliver 2009:225; Speier et al. 2011:731; Taylor 2014:141).

Collaboration is the:

Firms may engage with their customers by encouraging them to actively report suspected products, inquiring about the product’s authenticity or asking about purchases from authorised sellers (Cesareo & Stöttinger 2015:532).

An SCRM culture can be achieved by instilling an ethos of resilience and risk consciousness and to make it the concern of everyone (Christopher & Peck 2004:9; Ehrenhuber et al. 2015:8; Pettit et al. 2013:60). The implementation of an SCRM culture may help to mitigate specific susceptibilities, such as counterfeiting. From the consumer’s point of view, the general awareness of counterfeit risk is supported by fostering an SCRM culture (Cesareo & Stöttinger 2015:531), as direct engagement with them may help them to learn more about counterfeits (Cho et al. 2015:284; Hoecht & Trott 2014:109).

Redundancy as an enabler is the ‘replication of addition of capacity and/or resources that can be invoked during a disturbance to replace the loss of capacity and/or resources during a disturbance’ (Soni et al. 2015:192). This can be achieved by adding additional suppliers to act as shock-absorbers during a disruption. Redundancy is identified as a possible route to flexibility. Flexibility is being able to foresee threats and react instantly (Rashid et al. 2014:290).

Information sharing as an enabler of SCRES refers to the exchange of data and proprietary information among internal and external SC members (Lima et al. 2018:126). The sharing of information, including communication and coordination among all partners in the SC, is important recover from an adverse event (Dekker, Sakaguchi & Kawai 2013:131; Kamalahmadi & Parast 2016:125). In addition, by increasing the visibility of demand information across the SC, risk is reduced. The information that an organisation shares with its SC partners is among the most critical of its assets (Kamalahmadi & Parast 2016:125).

Agility is the ability to thrive in a continuously changing, unpredictable business environment; therefore, firms affected by risks and disruptions, such as counterfeiting, should implement quick SC redesign to reduce the impact of disruptions and facilitate recovery. Firms can respond to the risk of counterfeiting by building agility into their SC through synchronisation of activities through shared information, seeking to reduce complexity and postpone the final assembly and distribution of products, managing processes not just functions and by utilising appropriate performance metrics (Christopher 2016:120; Pettit et al. 2013:60).

Control and trust are both enablers that protect against the entrance of counterfeited products on both sides of the SC (Dekker et al. 2013:131; Kamalahmadi & Parast 2016:125). It is easier for a firm to notify and negotiate with a supplier who committed a violation than to terminate the contract with them and then have to find a new supplier (Lima et al. 2018:130; Machado et al. 2018:152; Stevenson & Busby 2015:130). Further, control and trust increase a firm’s capacity to become resilient to counterfeiting. Trust can be built, and control can be implemented by certification of suppliers, contracts, sporadic visits to manufacturing suppliers and distributors, creating a strict selection criterion for suppliers and distributors as well as inventory inspection (Machado et al. 2018:152–154; Naderpajouh et al. 2015:8).

The study used a generic qualitative research design. The objective of generic qualitative research is to discover various viewpoints surrounding a specified topic to create a detailed understanding and description of a specific phenomenon (Plano-Clark & Creswell 2014:289). This study endeavoured to create an in-depth understanding of risk mitigation capabilities and SCRES enablers employed by manufacturing, distribution and retail pharmaceutical firms in South Africa to combat counterfeiting. Generic qualitative studies involve semi-structured interviews with multiple participants who are selected through purposive-sampling strategies (Merriam 2009:23–24).

The unit of analysis for this study was pharmaceutical manufacturers, distributors and retailers in South Africa. The sample consists of 12 firms that allowed for a total of 12 semi-structured interviews. Seven pharmaceutical manufacturers, three pharmaceutical distributors and two pharmaceutical retailers were included in the sample. A larger number of pharmaceutical manufacturers were interviewed as the counterfeiting problem tends to occur upstream. The final sample size was grounded in the principle of data saturation (Guest, Bunce & Johnson 2006:74). In this study, the majority of the codes were identified after the sixth interview and the main themes were established. The remaining interviews did not offer any new noteworthy data. Details of the participants are presented in Table 1.

The study used homogenous sampling, a form of purposive sampling, to select firms that have similar characteristics (Creswell 2012:518). This ensured that diverse and valuable information could be obtained on risk mitigation capabilities and SC resilience enablers used by pharmaceutical firms to combat counterfeiting. These pharmaceutical firms needed to be actively combatting counterfeiting. To select individual participants, homogenous and snowball sampling were used (Polit & Beck 2012:518). The following characteristics were used to select the participants: (1) participants had to be employed at the selected pharmaceutical firms; (2) participants had to be in a middle-to-senior management position and (3) the participant had to be involved in the firm’s SCRM practices. Once data collection began, the researchers used snowball sampling by asking participants to recommend another potential participant who would meet the inclusion criteria of the study (Quinlan et al. 2015:181).

Data were collected using 12 semi-structured face-to-face interviews, one per participating firm. Semi-structured interviews are most suitable where the researcher wants to collect information on people’s experiences and opinions in a specific environment (Rowley 2012:262). Detailed insights were obtained from participants by asking open-ended questions. Before commencing with data collection, a pre-test was conducted with one practitioner to assess the appropriateness of the interview questions. Minor changes were made to the discussion guide to improve the flow of the interview. Participants were given assurances of anonymity and confidentiality and were also requested to read and sign an informed consent form.

Thematic analysis was used to analyse the collected data. ATLAS.ti version 8 was used to guide the thematic analysis approach. ATLAS.ti is a sophisticated software programme that systematically analyse complex phenomena hidden in unstructured qualitative data. An exploratory analysis was conducted by listening to the audio-recordings, while reading the transcribed interviews to familiarise the researchers with the data and to create preliminary inductive codes (Creswell 2012:243). These inductive codes were combined with a priori codes identified from the literature and a master code list was drawn up. Relevant segments of text from the transcriptions were then coded and then refined after patterns of themes were identified, which provided meaning to the data (Braun & Clarke 2012:63–65).

Various techniques were employed to ensure the trustworthiness of this study, more specifically credibility, dependability, transferability and confirmability (Polit & Beck 2012:584). Credibility was ensured by making the participants feel at ease so that they were forthcoming, and all their responses were truthful (Shenton 2004:67). Before every interview, participants were reminded that their responses and participation were confidential and that they could decline to answer any question they did not feel comfortable with. Dependability was ensured by creating a comprehensive record of the method used for implementation and the research design (Shenton 2004:72). Transferability was ensured through a comprehensive description of the context of the study, the various participants, their job designation and gender, as well as the length of the interviews with each participant (Shenton 2004:70). Confirmability was established by using open-ended and the appropriate probing questions during interviews and producing accurate, word-for-word transcriptions of all interviews (Milne & Oberle 2005:415–416).

Ethical clearance was obtained from the University of Pretoria, Faculty of Economic and Management Sciences Research Ethics Committee, reference number: 15 107 932/2019. Each participant was required to read and sign an informed consent form before the start of the interview. The form accentuated that participation in the study was voluntary and that the participant could withdraw at any time, and provided assurances of anonymity and confidentiality. The latter requirement was achieved by using pseudonyms and removing any reference to the names of individuals and firms in the transcripts and the final presentation of the data.

The first theme links back to research question 1 as it considers the sources of counterfeiting for the South African pharmaceutical industry. This theme involves two sub-themes: upstream sources of counterfeiting and downstream sources of counterfeiting.

Risk mitigation capabilities to combat counterfeiting links back to research question 2 as it identifies the specific risk mitigation capabilities employed in the South African pharmaceutical industry. This theme involves two sub-themes: intra-firm risk mitigation capabilities and inter-firm risk mitigation capabilities.

Resilience enablers to combat counterfeiting links back to research question 3 as it identifies resilience enablers employed by the South African pharmaceutical industry to combat counterfeiting.

Eleven participants indicated that there is currently limited visibility in the South African pharmaceutical industry because of the use of batch tracking. Batch tracking does not enable firms to track individual products throughout the SC. However, the shift to serialisation in the South African pharmaceutical industry will increase the visibility of the pharmaceutical SC. Additionally, the increase in transparency, accountability and responsibility enabled by visibility inhibits illegal behaviour because it is easier to link it back to the firm. Moreover, visibility promotes collaboration by sharing sensitive information among SC agents. See the supporting quotation below:

As indicated by seven participants, firms can assist the government to identify and seize counterfeits by developing internal teams to provide information and report incidents. Collaboration is considered to increase pharmaceutical SC costs for counterfeiters, by establishing licences or certifications to their distributors so that local pharmacists would not collaborate with counterfeiters. The quotation below clearly illustrates this point:

‘We ensure the products that we stock and distribute is licensed by the manufacturer, registered and approved by SAHPRA… we need to ensure that when a manufacturer comes to us to distribute his products, we need its registration and get his documentation to say that he may sell his products to us, that list of products has to be checked against the list of the DoH … to ensure that those are also in line. So, we are so limited in terms of the products we can store and distribute. For us to buy a counterfeit product from the street or from a manufacturer not registered is not who is not licensed the products it manufactured registered or licensed.’ (P4, male, operations manager – translated from Afrikaans)

Five participants indicated that a risk management culture enhances awareness of risks, such as counterfeiting. Further, direct communication with customers reduces vulnerability through enhancing brand reputation. This is supported by the following quotation:

Information sharing within and among firms tends to increase risk awareness as indicated by five participants. These firms can engage with customers by establishing communication channels to share information pertaining to counterfeiting risk. This enables the reporting of suspected products, customer inquiries about the product’s authenticity or purchases from authorised sellers. Refer to the exemplary quotations below:

‘We collaborate with our supplier, our distribution agent. They in term belong to a body, you know, that that meets on a regular basis, you know, with other pharma manufacturers and also other farmer distributors. And they will share, you know, best practices risks, et cetera. And then they will bring those controls into, into, yeah.’ (P7, male, distribution manager)

As found by Cho et al. (2015:281), Hoecht and Trott (2014:108) and Lima et al. (2018:123–124), firms develop visibility, collaborate with industry members, develop a risk management culture and share information with SC and industry members as resilience enablers to combat counterfeiting. However, firms in the South African pharmaceutical industry did not acknowledge flexibility, agility, sensing and redundancy as resilience enablers to combat counterfeiting as found by Lima et al. (2018:123–124).

The aim of this study was to determine the sources of counterfeiting and the specific risk mitigation capabilities used to combat counterfeiting in the South African pharmaceutical industry. Further, this study aimed to determine the resilience enablers used to combat counterfeiting in the South African pharmaceutical industry. The first research question addressed the sources of counterfeiting for the South African pharmaceutical industry. This study confirms the findings of DiMase et al. (2016:1835–1836), Machado et al. (2018:157), Mohamed (2012:8) and Stevenson and Busby (2015:111–112), indicating that a source of counterfeiting is local manufacturing of counterfeited products, unauthorised distributors and imports of counterfeit products. The study expands on current literature by identifying sources of pharmaceutical counterfeiting related to outsourced manufacturing and distribution, diversion, non-reputable doctors or pharmacies and Internet sales, lack of accessibility to doctors and pharmacies and affordability of pharmaceutical products. Managers can consequently develop strategies to respond to the sources identified in this study. This can be performed by constantly monitoring their SC members and industry collaboration. This will enhance information sharing between all role players.

The second research question addressed the specific risk mitigation capabilities employed in the South African pharmaceutical industry. This study confirms the findings of Lima et al. (2018:121–122), indicating that by developing R&D strategies and internal structure firms can combat counterfeiting. Further, through strict government law and regulations, collaborating with industry members, creating partner strategies, constant monitoring of SC members, raising risk awareness, training members to identify counterfeits, strengthening their brand image, developing authentication technologies and traceability will enable them to effectively combat counterfeiting. However, this study found that there is a lack of use of data analytics solutions in the South African pharmaceutical industry to combat counterfeiting. Using data analytics in the pharmaceutical industry could increase the ability to analyse information generated by customers anywhere and can thus enable a firm to identify problems and take corrective actions. Moreover, this study contradicts the findings of Lima et al. (2018:121–122) by indicating that firms cannot increase or decrease their prices to combat counterfeiting. This is because the South African pharmaceutical industry is governed by the SEP, preventing manufacturers from increasing or decreasing the prices of products that need to be bought with a prescription. Changing the price for over-the-counter (OTC) products will have no effect as these products are extremely easy to come by and counterfeit. Managers can determine which of the mitigation capabilities they do not possess and develop these to combat counterfeiting.

The third research question addressed resilience enablers employed to combat counterfeiting. This study supports the findings of Lima et al. (2018:123–124), Hoecht and Trott (2014:108) and Cho et al. (2015:281) by indicating that firms develop visibility, collaborated with industry members, developing a risk management culture and shared information with SC and industry members. However, firms in the South African pharmaceutical industry did not acknowledge flexibility, agility, sensing and redundancy as resilience enablers to combat counterfeiting. Therefore, firms in the South African pharmaceutical industry may only have limited SCRES. Managers need to develop resilience enablers to combat counterfeiting. This can be performed through the implementation of redundancy to achieve flexibility and effectively combat counterfeiting. Increasing sensing in the pharmaceutical industry could increase the ability to analyse information generated by customers anywhere and can thus enable a firm to identify problems and take corrective actions.

Because of the qualitative nature of the study, only 12 perspectives of the sources of counterfeiting, risk mitigation capabilities and resilience enablers to combat counterfeiting were obtained. Furthermore, the study did not measure which risk mitigation capabilities strengthen resilience enablers. Therefore, it would be valuable for future research to make use of a quantitative research design to include a larger sample and to effectively determine which risk mitigation capabilities strengthen resilience enablers to combat counterfeiting. Future studies can therefore investigate the nature of the relationships between these constructs.

In addition, limiting the study to one developing country limits the generalisability of its findings and transferability to other developing countries. Therefore, future research should be conducted in other developing countries to increase generalisability and to confirm the findings of other developing countries. The study did not determine which specific mitigation capabilities contribute most to effectively combatting counterfeiting. Future research should attempt to gain an in-depth understanding of which specific mitigation capabilities contribute most to effectively combatting counterfeiting. This can be performed by conducting case studies at firms that have been affected by counterfeiting and determining which capability contributed most to combatting counterfeiting.