States move to comply with drug pedigree laws

June 6, 2005

T o counter the rise in drug counterfeiting, three states now have prescription drug pedigree laws on their books, another 15 have similar legislation in the pipeline, and the Food & Drug Administration is threatening to enforce its long- dormant Prescription Drug Marketing Act (PDMA) regulations related to drug pedigrees by the end of 2006.

T o counter the rise in drug counterfeiting, three states now have prescription drug pedigree laws on their books, another 15 have similar legislation in the pipeline, and the Food & Drug Administration is threatening to enforce its long- dormant Prescription Drug Marketing Act (PDMA) regulations related to drug pedigrees by the end of 2006.

Pedigree laws require wholesalers to show the "genealogy" of the drugs they distribute. In the face of mandatory pedigree tracking of product flow through drug supply chains, speakers at the annual Healthcare Compliance Packaging Council (HCPC) in Philadelphia in May discussed various ways pedigree laws might be implemented and whether increased knowledge of product flow could translate into cost savings.

"A once emerging technology is now a requirement of doing business in 2005," said Michael Wohlwend of Manhattan Associates, a supply chain management company. The need for these regulations appears overwhelming. In 2002, he noted, the pharmaceutical industry estimated that 2% to 7% of all drugs sold globally were counterfeit.

Audit trails supplied by Rx pedigree laws will help forestall this rapidly growing problem, noted Wohlwend. "We are talking here about improving the greater good of this supply chain-minimizing lawsuits, minimizing the gray market, increasing the barrier against counterfeiting."

Further, the increased accountability of the supply chain mandated by the new regulations may offer opportunities to enrich profit margins, offsetting the cost of compliance, said Wohlwend. Industrywide return goods total about $2 billion annually, with return volume at 4% for distributors and 2% for manufacturers. Overstock and outdated products are the top reasons for returned goods. Distributors and manufacturers cite out-of-stock or manufacturing problems for the 8% of order lines they are unable to fill every year.

Pedigrees target such inefficiencies. "You could minimize out of stocks, you could trigger an emergency reorder so you would never be out of stock. We can help wholesalers see which stores need what, and perhaps change routes of delivery," Wohlwend said. "The minute you have a discrepancy, you can create an alert, track it down, and get on top of it in real time, rather than weeks or months later," he said.

Lucia Deus, VP of product development at SupplyScape Corp., presented an update on drug pedigree legislation. The firm specializes in track-and-trace technologies. Deus said that Florida and California, states with the largest Rx volume, are at the vanguard with existing pedigree laws. Nevada also has a law on its books. Arizona, Arkansas, Illinois, Indiana, Iowa, Kansas, Maryland, Missouri, Nebraska, New Jersey, Oklahoma, Oregon, Texas, Utah, and Virginia are considering similar directives during 2005 legislative sessions.

California requires electronic pedigree tracking for all drugs sold in the state effective Jan. 1, 2007. Pedigrees are now required for the 34 top-selling drugs in Florida; all other drugs come under that law as of July 2006. Nevada requires pedigrees for all drugs sold in the state.

The Food & Drug Administration's pedigree tracking recommendations, introduced in 1987, have been postponed time and again. The agency said it would commence enforcement starting December 2006.

SupplyScape, too, hopes to make the new regulations pay off for its clients in more ways than just fraud protection. Improved supply line visibility might enhance out-of-stock and drug expiration management and precision of recalls, according to Deus.

Deus deemed electronic tracking the more efficient and secure way to monitor the buy/sell process. Paper-based systems are more time- consuming, difficult to track, and present more opportunity for forgery, she said. Manhattan Associates is experimenting with a pilot initiative designed to track drugs using radio frequency identification technology, said Wohlwend. "There are tag issues and technology issues to be worked out," he said, "but we've come a long way."