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The rapidly approaching December 1, 2006, deadline for implementation of FDA rules to deter drug counterfeiting has the entire pharmaceutical industry grappling with how best to respond to the requirements. Although we all share the goal of continuing to ensure that America's pharmaceutical supply chain is the most secure in the world, it is critical to recognize the challenges of implementing track-and-trace systems such as those envisioned by the FDA and some states. Most important, we must take the steps necessary to make sure that a pedigree system is national, interoperable, and workable.
Although the counterfeiting of certain drugsusually high-priced brand names with significant salesis definitely a concern, the good news is that less than 1% of all drugs in America's supply chain are counterfeit. IMS Health data actually show a decline in the number of incidents of counterfeiting in the United States. It remains in the best interests of industry, government, and consumers, however, to continue examining how the system can be further strengthened.
Efforts to improve security must be made in a way that is workable for the entire supply chainfrom manufacturer to distributor to pharmacy. If standards are not consistent from state to state, the system may not work. Currently, California and Florida have different visions for pedigree standards and requirements. This situation raises legitimate questions about whether technology can be developed that would be acceptable to the requirements of both states, as well as those of the FDA and other states.
Although brand and generic pharmaceutical manufacturers and authorized distributors are exempt from the requirements of the federal Prescription Drug Marketing Act (PDMA), the fact is that they do play a role in providing data to wholesalersand others in the supply chainwhich must rely on manufacturers' information in order to comply.
Currently, the industry is striving to meet the December deadline for PDMA compliance, but even the FDA has told Congress that it does not have the staff to fully implement the program. FDA officials testified this summer that they foresee a partial implementation focused on "high-value" drugs and others that are the most likely targets for counterfeiters. Full implementation would require all sectors of the industry to consolidate all information related to productssuch as manufacturer, manufacture date, shipment date, lot number, and quantity into one record, or pedigree, that is specific to each product and that moves with that product through the supply chain.
Although this information currently is documented (mostly through sales records and invoices), it is not in a format designed to provide a pedigree such as those envisioned. This requirement marks a fundamental shift in the way product is currently managed throughout the supply chain. To further complicate the situation, moving to a pedigree system may prove cost-prohibitive for generics, which are not even targets for counterfeiting.
Let us take a closer look at the issues.
In order for an electronic pedigree (e-pedigree) to work, the system that is developed must be interoperable and reliable across the entire prescription drug supply chain, regardless of how a manufacturer identifies a drug product or what kind of software or infrastructure it uses. Without an interoperable system, great confusion would be created within the supply chain, because pharmacies, distributors, and manufacturers would need multiple technologies to interact with each other.
There also is uncertainty about the technological standards that are being developed and whether those will apply consistently to wholesalers, chain pharmacies, and other retail customers, and what expectations those parties will have. For example, is it reasonable to require pharmacies, distributors, and manufacturers to move forward with software or technology infrastructure that will meet one state's pedigree requirements, when it is unclear whether those requirements will be consistent for the rest of the country?
Inconsistent State Standards
The varied pedigree standards among the states also pose significant challenges. Although there appears to be general uniformity in states' efforts to strengthen wholesale licensing requirements, no 2 states' pedigree requirements or proposals are the same, and they often differ dramatically from the federal government's pedigree requirements. Thus, the challenge of complying with the numerous pedigree laws soon to be in place in many other states could be costly for industry and consumers, if not impossible.
Because so many of the decisions involved in compliance depend on the support and interaction of supply-chain counterparts, it is difficult for any party to proceed without a united effort. Ultimately, attempting to comply with a wide number of standards not only is a significant challenge for industries connected to the supply chain, but also could compromise the integrity of the supply chain that these laws are striving to secure.
Specific Generics Issues
Generic manufacturers operate under a different business model than brand manufacturersone that is uniquely affected by pedigree laws, because generic manufacturers frequently market a higher number of products with narrow profit margins. For instance, whereas a brand manufacturer may need to implement e-pedigree generation for 15 to 30 products, a generic manufacturer may need to implement e-pedigree generation for 150 to 300 products. For an industry that provides 56% of all prescriptions filled in the United States but accounts for only 13% of the nation's drug costs, major increases in production costs will have significant ramifications for Americans' access to affordable medicine.
The FDA's Anti-Counterfeiting Task Force report recommends that the agency "take an enforcement approach that focuses on products most susceptible to counterfeiting and diversion." Generally, lower-cost generic drugs are not targeted by counterfeiters. Thus, implementing costly pedigree technology to generic drugs may yield little benefit to the security of the drug supply chain.
Cost estimates for implementing an e-pedigree system range from hundreds of thousands to millions of dollars. On a purely practical level, it would be problematic, if not impossible, for manufacturers to support different standards based on the shipping location of a drug product. Additionally, the manual upload required to support paper and electronic pedigrees will hamper the movement of drug products and result in delays to customers. We all should want to avoid the creation of a system that undermines the availability of less expensive drugs and prevents manufacturers from doing business in certain states. Such a system would lead to less competition and higher costs for consumers.
Do these challenges mean that a system cannot be implemented at some point? Absolutely not. Yet, we need to be careful and thoughtful about how it is created so that we do not produce more problems than we solve. The generic industry has suggested moving forward in phases, beginning with what needs the greatest attentionthe products that are most susceptible to counterfeiting. This course of action would allow the greatest chance for success in securing the supply chain and allow all parties to refine the process through trial and error on a smaller scale before testing the initial feasibility and utility of e-pedigree systems in the entire pharmaceutical sector. As a next step, a criteria list for products requiring a pedigree should be developed, and vendors must ensure that the systems are interoperable. Many state regulatory agencies currently are considering these recommendations.
Improving supply-chain security and developing an e-pedigree system that will work will take an industry-wide effort. For the laws to achieve their goals, any solution must utilize nationally recognized and accepted standards that have been tested and proven to function, and shown to be cost-efficient and feasible to implement.