Drug Quality and Security Act becomes law

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Pharmaceutical CommercePharmaceutical Commerce - January/February 2014

Long-awaited track-and-trace law ushers in a new era of pharmaceutical supply-chain monitoring; compounding pharmacies get a new structure also

A fall 2013 survey by PwC of US consumers shows that concern about drug safety rises, the younger the respondent. Source: HRI Consumer Survey, PwC, 2013

It was just about five years ago (September 2008) that, during a tense, heavily attended meeting of the California Board of Pharmacy, the decision was made to delay—until 2015—a state-level rule to require strict traceability of pharmaceutical packages from point of manufacturer to the retail- or hospital-pharmacy shelf, which had been set to go into effect in January 2011. In the intervening years, California has stuck to the 2015 deadline and that, in large part, was the clarifying point that pushed manufacturers, wholesalers and others to develop an alternative plan—especially one that embodied a national, rather than state-by-state, structure.

With the signing of HR 3204, the Drug Quality and Security Act of 2013 (DQSA), the stage is set for what will eventually be a national drug-tracking system from manufacturer to dispensing pharmacy. For the first few years, only lot-level information will be tracked; later, following public hearings, pilot tests and FDA regulation-writing, item-level tracking will be established.

The kernel of this effort goes all the way back to the Prescription Drug Marketing Act of 1987, where mention was made of developing a “pedigree” for drug products. FDA made several attempts to impose an industry regulation, but the efforts were stalled by several rewrites of the law in the 1990s, and in 2006, a court ruling derailed the policy until new legislation was passed. Multiple attempts to write that law never came to pass, most recently in an effort to work legislation into what became the FDA Safety and Innovation Act of 2012 (aka “PDUFA V”). That effort, spurred by the formation of the multi-stakeholder Pharmaceutical Distribution Security Alliance (PDSA), a lobbying group in Washington, gave impetus to the 2012 effort and then again this year. PDSA solved, more or less, the conflicting views of manufacturers, distributors and retail pharmacy.

Along the way, the issue of compounding pharmacies, and the lack of federal-level oversight of their operations, became a vital concern in the aftermath of the New England Compounding Center scandal, which cost the lives of 64 patients (so far) and injury to hundreds more. The Senate worked up a bill that combined tracking rules with regulation of compounding pharmacies; and that became the foundation of a House bill, HR 3204, that was voted in the House in the late spring, and then by the Senate in November. Pres. Obama signed the law on November 27, 2013.

Uniform national policy

The most immediate effects of the new law:

  • With the explicit acceptance (written into its legislation) of California, DQSA now invalidates the California traceability rules and timetable; rather than a 2015 deadline to begin applying ID codes to pharma packages, the process will begin in 2017; and a full-blown electronic tracking system won’t be required until around 2023. DQSA has a “uniform national policy” clause that precludes “more stringent” state actions. Tracing transactions at the lot level (as opposed to the item level—a source of much industry hand-wringing) will commence after January 1, 2015.
  • There is now a national registration/licensure standard for US wholesalers (which, to the extent that they are involved in drug distribution, could involve manufacturers as well), repackagers, and—for the first time in a drug-distribution context—third-party logistics providers (3PLs). These licenses will build on already-existing state-level statutes; while aspects of this requirement will be effective by January 2015—which puts some time pressure on FDA to issue relevant regulations—the formal date for licensure standards is two years after the bill becomes law, or, presumably, November 2015.
  • Requirements for compounding pharmacies oblige FDA to set up a voluntary program under which high-volume compounding pharmacies can register as licensed “outsourcing facilities” and pay fees (dedicated to inspection and audit procedures), beginning in October 2014. There will also be multiple reporting and coordinating requirements between FDA and state boards of pharmacy; a national registry of licensed outsourcing facilities; and new labeling requirements.

The 150-page DQSA is unusually explicit about many aspects of pharmaceutical distribution practices but, as is the case for most federal legislation, the real activity begins after FDA issues proposed and then final regulations. The first of several public meetings is to be held a year from passage of the law, and pilot demonstrations are to be held for evolving industry practices.

Supply-chain competition?

Without question, it’s now open season for packaging-line equipment vendors, IT networking providers and industry consultants to begin pitching their services to manufacturers and wholesalers; retail pharmacy will follow shortly thereafter. Most multinational manufacturers—including some generics producers—have already equipped at least one of their packaging lines. Contract packagers are getting on board as well, as have some 3PLs.

Some of this activity will translate into competitive advantage for some manufacturers, but it remains to be seen how much of a spur to action that will be ahead of the federal deadlines. The Big Three wholesalers have already stated that they will require manufacturers to supply transaction information electronically (which goes beyond the paper-or-electronic requirements in DQSA). “Wholesalers will soon have mass quantities of serialized information, and we haven’t had that before,” notes Elizabeth Gallenagh, general counsel for HDMA. “The ability to test data handling will be an advantage to industry overall.”

When retailers begin putting pressure on distributors and logistics providers to supply transaction information, that will spur them forward as well. If such private-sector practices don’t directly translate into competitive advantage, they will likely put a cost pressure on manufacturers and distributors who will rely on costly manual processes. “There’s a lot of potential for entrepreneurs to push the system forward,” suggests Allan Coukell, senior director of drugs and medical devices at Pew Charitable Trusts (Washington, DC), a policy group that has been involved with pharma supply-chain integrity issues.

Label changes

Attendees at the HDMA Track and Trace Seminar, held in November, advanced the implementation discussions, even as the law was being debated in the Senate. A key part of the legislation—and a change from how drug serialization had been approached up to last year—is that recording and transmitting product data at the item level will be delayed for upwards of 10 years. But HDMA seminar attendees heard a slightly different take on this. A panel discussion representing the Big Three wholesalers encouraged manufacturers to begin item-level serialization now, even if it will be years before a regulation is in place. For one thing, manufacturers will have to ensure that the appropriate lot number (on a package) matches the lot number specified on a carton or pallet of product. For another, most vendors of serialization equipment are designing their systems (and are being evaluated on the basis of) providing item-level data.

Whether or not the item-level serialization is built in now, several speakers advised manufacturers to schedule sufficient time to rework product labels for serial numbers. Both linear and 2D-datamatrix barcodes are specified in the GS1 barcode standards that most companies are contemplating using; additionally there is a requirement for “human understandable” forms of the codes. All this means allocating sufficient space for the codes on product labels, as well as to coordinate the placement of the codes with the automated inspection and packaging equipment. “Give yourself at least a year to work through all these artwork changes,” said Michael McBride, EDI administrator at Hi-Tech Pharmacal (Amityville, NY), which presented a case study on their serialization work of the past year. “A serialization project on behalf of a brand owner can take six to nine months to set up,” said Justin Schroeder, executive director, marketing development services, at Packaging Coordinators Inc. (Rockford, IL), the former Anderson Packaging contract packager. He noted the case of one client, whose single product is supplied in 85 configurations, for national and international markets; each configuration calls for its own label, and each label needs to be evaluated for how to incorporate the serialization data.

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