E-pedigrees Need Uniformity to Work Effectively

The rapidly approaching December 1,2006, deadline for implementation ofFDA rules to deter drug counterfeitinghas the entire pharmaceutical industrygrappling with how best to respond tothe requirements. Although we all sharethe goal of continuing to ensure thatAmerica's pharmaceutical supply chainis the most secure in the world, it is criticalto recognize the challenges of implementingtrack-and-trace systems suchas those envisioned by the FDA andsome states. Most important, we musttake the steps necessary to make surethat a pedigree system is national, interoperable,and workable.

Although the counterfeiting of certaindrugs—usually high-priced brand nameswith significant sales—is definitely a concern,the good news is that less than 1%of all drugs in America's supply chain arecounterfeit. IMS Health data actuallyshow a decline in the number of incidentsof counterfeiting in the UnitedStates. It remains in the best interests ofindustry, government, and consumers,however, to continue examining how thesystem can be further strengthened.

Efforts to improve security must bemade in a way that is workable for theentire supply chain—from manufacturerto distributor to pharmacy. If standardsare not consistent from state to state,the system may not work. Currently,California and Florida have differentvisions for pedigree standards andrequirements. This situation raises legitimatequestions about whether technologycan be developed that would beacceptable to the requirements of bothstates, as well as those of the FDA andother states.

Although brand and generic pharmaceuticalmanufacturers and authorizeddistributors are exempt from the requirementsof the federal Prescription DrugMarketing Act (PDMA), the fact is thatthey do play a role in providing data towholesalers—and others in the supplychain—which must rely on manufacturers' information in order to comply.

Currently, the industry is striving tomeet the December deadline for PDMAcompliance, but even the FDA has toldCongress that it does not have the staffto fully implement the program. FDA officialstestified this summer that they foreseea partial implementation focused on"high-value" drugs and others that arethe most likely targets for counterfeiters.Full implementation would require allsectors of the industry to consolidate allinformation related to products—such asmanufacturer, manufacture date, shipmentdate, lot number, and quantity—into one record, or pedigree, that is specificto each product and that moveswith that product through the supplychain.

Although this information currently isdocumented (mostly through salesrecords and invoices), it is not in a formatdesigned to provide a pedigree such asthose envisioned. This requirementmarks a fundamental shift in the wayproduct is currently managed throughoutthe supply chain. To further complicatethe situation, moving to a pedigreesystem may prove cost-prohibitive forgenerics, which are not even targets forcounterfeiting.

Let us take a closer look at the issues.

Interoperability

In order for an electronic pedigree (e-pedigree)to work, the system that isdeveloped must be interoperable andreliable across the entire prescriptiondrug supply chain, regardless of how amanufacturer identifies a drug product orwhat kind of software or infrastructure ituses. Without an interoperable system,great confusion would be created withinthe supply chain, because pharmacies,distributors, and manufacturers wouldneed multiple technologies to interactwith each other.

There also is uncertainty about thetechnological standards that are beingdeveloped and whether those will applyconsistently to wholesalers, chain pharmacies,and other retail customers, andwhat expectations those parties willhave. For example, is it reasonable torequire pharmacies, distributors, andmanufacturers to move forward withsoftware or technology infrastructurethat will meet one state's pedigreerequirements, when it is unclear whetherthose requirements will be consistent forthe rest of the country?

Inconsistent State Standards

The varied pedigree standards amongthe states also pose significant challenges.Although there appears to begeneral uniformity in states' efforts tostrengthen wholesale licensing requirements,no 2 states' pedigree requirements or proposals are the same, andthey often differ dramatically from thefederal government's pedigree requirements.Thus, the challenge of complyingwith the numerous pedigree laws soonto be in place in many other states couldbe costly for industry and consumers, ifnot impossible.

Because so many of the decisionsinvolved in compliance depend on thesupport and interaction of supply-chaincounterparts, it is difficult for any partyto proceed without a united effort.Ultimately, attempting to comply with awide number of standards not only is asignificant challenge for industries connectedto the supply chain, but alsocould compromise the integrity of thesupply chain that these laws are strivingto secure.

Specific Generics Issues

Generic manufacturers operate undera different business model than brandmanufacturers—one that is uniquelyaffected by pedigree laws, becausegeneric manufacturers frequently marketa higher number of products withnarrow profit margins. For instance,whereas a brand manufacturer mayneed to implement e-pedigree generationfor 15 to 30 products, a generic manufacturermay need to implement e-pedigreegeneration for 150 to 300 products.For an industry that provides 56% of allprescriptions filled in the United Statesbut accounts for only 13% of thenation's drug costs, major increases inproduction costs will have significantramifications for Americans' access toaffordable medicine.

The FDA's Anti-Counterfeiting TaskForce report recommends that theagency "take an enforcement approachthat focuses on products mostsusceptible to counterfeiting and diversion." Generally, lower-cost genericdrugs are not targeted by counterfeiters.Thus, implementing costly pedigreetechnology to generic drugs mayyield little benefit to the security of thedrug supply chain.

Cost estimates for implementing an e-pedigreesystem range from hundreds ofthousands to millions of dollars. On apurely practical level, it would be problematic,if not impossible, for manufacturersto support different standardsbased on the shipping location of a drugproduct. Additionally, the manual uploadrequired to support paper and electronicpedigrees will hamper the movement ofdrug products and result in delays to customers.We all should want to avoid thecreation of a system that undermines theavailability of less expensive drugs andprevents manufacturers from doing businessin certain states. Such a systemwould lead to less competition and highercosts for consumers.

Solutions

Do these challenges mean that a systemcannot be implemented at somepoint? Absolutely not. Yet, we need tobe careful and thoughtful about how itis created so that we do not producemore problems than we solve. Thegeneric industry has suggested movingforward in phases, beginning with whatneeds the greatest attention—theproducts that are most susceptible tocounterfeiting. This course of actionwould allow the greatest chance forsuccess in securing the supply chainand allow all parties to refine theprocess through trial and error on asmaller scale before testing the initialfeasibility and utility of e-pedigree systemsin the entire pharmaceutical sector.As a next step, a criteria list forproducts requiring a pedigree shouldbe developed, and vendors mustensure that the systems are interoperable.Many state regulatory agenciescurrently are considering these recommendations.

Improving supply-chain security anddeveloping an e-pedigree system thatwill work will take an industry-wideeffort. For the laws to achieve theirgoals, any solution must utilize nationallyrecognized and accepted standardsthat have been tested and proven tofunction, and shown to be cost-efficientand feasible to implement.