DQSA: a bargain for the life sciences industry

Pharmaceutical CommercePharmaceutical Commerce - January/February 2014

The Drug Quality and Security Act will change industry for the better

A favorite movie of mine from the 1970s, The Candidate, shows a US senatorial candidate, played by Robert Redford, thrashing through all the behind-the-scenes mechanics of what was then a fairly modern version of campaign politicking. At the end, having unexpectedly won, Redford looks at his campaign manager blankly and asks, “What do we do now?”

That feeling is certainly the case with what dominated healthcare news in the latter half of 2013—the Affordable Care Act—with the unfortunate realization that the “What do we do now?” question never got properly addressed after the law passed in 2010. But a similar feeling can be had with another healthcare-related piece of legislation: the Drug Quality and Security Act (DQSA), signed into law in November.

If nothing else, DQSA can now be the shorthand for what has been called, over a decade of law-making, “pharma track-and-trace,” “serialization,” “e-pedigree” and “anti-counterfeiting.” In reality, what got the bill passed, finally, was the more recent urgency around compounding pharmacies and the need to provide FDA with better tools to manage a process that is half-pharmacy, and half-manufacturing. In the Senate, existing legislation on drug serialization and tracking got bolted together with new legislation on the compounding pharmacies, and together the momentum was enough to get the bill to President Obama’s desk. (Business Week recently noted that there were 684 healthcare bills introduced in 2013; DQSA was one of six that passed.)

Going forward, the compounding-pharmacy part of DQSA will rapidly become a specialized area of FDA oversight, affecting a relatively small number of high-volume companies (most brick-and-mortar neighborhood pharmacies will continue the practice, more or less unchanged). But the serialization and tracking part will affect every manufacturer, every wholesaler and distributor, and even participants new to FDA oversight, such as 3PL (third-party logistics) firms that handle healthcare products.

PriceWaterhouseCoopers, in its Top Health Industry Issues for 2014 report, estimates that DQSA will cost manufacturers $10—$50 million each. Multiply that by, say, the 50 manufacturers that have substantial packaging operations of multiple products, and you get a figure of $500 million to $2.5 billion. I will freely admit that it’s easy for me to recommend spending someone else’s money, but: $2.5 billion represents less than 1% of one year’s sales in the US for the industry. Moreover, the spending needn’t happen all in one year (and in fact has already been occurring at most of the larger branded and generic manufacturers).

So, the “why” part of “what do we do now?” question is fairly easy to answer: for that investment, the industry is going to get tighter control of drug distribution, lower returns, better security and—the biggest ROI of all—a better view of marketplace activity, which will provide multiple paybacks through understanding marketplace trends.

The “how” part of “what do we do now?” is still being worked out, but the industry now has a reasonable timetable to produce data, coordinate activity with trading partners, and analyze results. We’ll be covering this evolution in every forthcoming issue of Pharmaceutical Commerce, and the prospects for getting the industry to a better place are truly exciting.

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