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Patchwork Approach?

Counterfeit drugs in the supply chain pose a real challenge for the industry. State drug pedigree laws in the US seek to put an end to this criminal activity, but increasing calls for national standards suggest that these laws may not be as effective at ensuring the legitimacy of a drug as first hoped.

The federal and state governments in the US have long preferred to fight crime in the pharmaceutical supply chain by imposing various drug pedigree requirements on its members. The progression from one pedigree law to the next is interconnected with historical events, and to fully understand the current situation and what is likely to happen in the near future, one needs to understand that history.

Almost 25 years ago, in response to problems related to the safety, efficacy, storage and handling of pharmaceuticals, Congress passed the first law in the nation requiring a pedigree that documented where the drugs in certain shipments had been since leaving the manufacturer. The Prescription Drug Marketing Act (PDMA) was short on specifics, and the technology required did not yet exist to allow companies to implement it, so in the early 1990s Congress modified the law to add clarity (1). The FDA did not publish the final rules for implementing the pedigree requirements until 1999.

However, under industry pressure, the FDA delayed the implementation of the pedigree provisions in 2000 and again in 2004. On 1 December 2006 the agency finally allowed the PDMA pedigree provisions to go into effect. Within days a small wholesale distributor challenged the regulation in court and a judge imposed a stay of some of the pedigree provisions, allowing others to stand.

A Rise in Supply Chain Crime

Between the late 1990s and December 2006 – the period of time when the implementation of the PDMA pedigree provisions was being delayed – a few street drug criminals in southern Florida figured out that they could obtain legitimate drug wholesaling licences with less cost and effort than it took to obtain a bartender’s licence. Armed with a drug wholesaler licence these criminals were free to buy and sell expensive pharmaceuticals within the legitimate supply chain.

These criminals were delighted to find that law enforcement agencies and judges in Florida at the time didn’t think drug supply chain crime was as important as street drug crime, so they were often released from charges a matter of hours after being caught (2). These criminals got their start by stealing pharmaceuticals and selling them back into the supply chain through legitimate pharmaceutical ‘trading companies’ – distributors who were in business to buy overstocked drugs from manufacturers and other wholesalers at a discount and reselling them to others at a markup.

Even when not required by law, these trading companies often required ‘pedigrees’ from their sellers. These consisted of collections of packing lists and invoices that ostensibly documented the supply chain history of a given shipment of drugs back to the manufacturer. In this digital age, forging packing lists and invoices doesn’t take much investment or skill, and didn’t slow the criminals down.

The ability to ‘unload’ stolen drugs outstripped their ability to find and steal them, so some criminals quickly thought up elaborate ways to increase the number and value of the drugs they sold. On some they changed the label to indicate a much higher dose. In other instances they imported counterfeit drugs from foreign sources and mixed them with legitimate drugs they diverted from the intended destination. The result was a flow of illegitimate drugs into the inventories of these unsuspecting trading companies (2).

Between 1980 and 2005, the wholesale drug distribution industry in the US went through a major consolidation, going from many local and regional distribution companies spread across the country, to only three nationwide distributors handling 87 per cent of the drugs distributed (3). By the mid-2000s those three distributors each owned a trading company branch. When Florida-based criminals increased the amount of illegitimate drugs sold to these companies, products were inadvertently widely distributed throughout the country. Counterfeit, up-labelled, diverted, stolen and tampered medicine started appearing in many states outside of Florida.

States Respond with Pedigree Laws

In the US, the FDA imposes many regulatory requirements on pharmaceutical manufacturers, but none on pharmacies and wholesale distributors. That responsibility falls on each state government.

Not surprisingly, the first state to realise they had a problem in the drug supply chain was Florida. In 2003, the state government passed SB 2312, a law that would require drug distributors to create drug pedigrees that documented the supply chain history of all drugs from the manufacturer and on to the pharmacy. It was to take effect in July, 2006 (4).

The Florida law went beyond the Federal PDMA regulation by defining a drug pedigree as a specific paper form that included actual hand-written signatures, and which bound specific individuals to the truthfulness of the contents of each pedigree. The law allowed companies to optionally represent the pedigree information in electronic form, which required the use of digital signatures in place of the hand-written signatures of the paper forms. Just prior to its effective date, the Florida legislature changed the law so that only a small number of drug sales actually require a full pedigree.

The Florida law also included important new requirements for acquiring a license to distribute drugs in the state. The result of that new requirement was a significant drop in the total number of companies holding that type of license within three years.

Because of the nationwide nature of the drug distribution network in the US, other large states started to experience the effects of the criminal activity occurring in Florida. California and New York detected the sharp rise in illegitimate drugs in the legitimate supply chain shortly after Florida did. This led the California state government to pass SB 1307 in 2004, which included a drug pedigree requirement that was to take effect in 2007 (5). The law was more sweeping than the Florida law, in that the pedigrees would have to be in electronic form and it would require drug manufacturers to initiate the pedigrees. This was the first time manufacturers were to be involved.

Then, in 2006, California passed an important change to their pedigree law. Firstly, it moved the implementation date from 2007 to 2009. More importantly, the update included an explicit unit-level serialisation requirement. Manufacturers would now need to place a unique identifier on each package at the lowest level sold to pharmacies.

This new requirement caused quite a stir in the industry. By 2008, manufacturers, distributors and pharmacies made presentations to the California Board of Pharmacy explaining how complex these new requirements were, and how they could not be implemented by 2009. In March of 2008, the Board exercised a provision in the law that allowed them to push out the compliance date to 2011.

In September 2008, the California legislature passed another update to the pedigree law that set the compliance date to the staggered schedule that exists today. Manufacturers must comply with 50 per cent of their products by January 2015 and the remaining 50 per cent by January 2016. Distributors and repackagers must comply by July 2016, and pharmacies by July 2017 (5).

New York State Responds in a Different Way

The Office of the Attorney General of the State of New York also detected the increased criminal activity in the legitimate drug supply chain, but instead of imposing a drug pedigree law, Elliot Spitzer and team investigated the root cause of the increase. They found that the increasing number of illegitimate drugs in the legitimate distribution network seemed to be entering through the trading companies of the three nationwide distributors. In 2006, the Attorney General’s office signed an agreement with one of those distributors to end their practice of buying from the secondary drug market (6). The other two nationwide distributors followed suit soon after. Today, all three of these distributors voluntarily buy their stocks only from the original manufacturers and thus have closed a door of easy entry to criminals nationwide.

The Patchwork of Drug Pedigree Laws

Recent experience proves that pedigree laws and safer buying practices by the major distributors have not completely solved the problem. Illegitimate pharmaceuticals can still enter the legitimate US supply chain. In 2009 a truckload of drugs was stolen in North Carolina en route from the manufacturer. One of the drugs was Levemir, a longacting insulin that requires continuous refrigeration. Author Katherine Eban documented the path of the stolen Levemir in an article last year (7). Less than a week after the theft a small licensed drug distributor less than 200 miles from the location of the theft received a shipment of Levemir in the middle of the night. That first distributor quickly sold the Levemir to a second small licensed distributor, who then sold part of it to a third small licensed distributor. The third distributor then sold it to a national retail pharmacy chain, which distributed the Levemir to their retail outlets. Reports of adverse reactions to Levemir cropped up around the country soon afterward.

Interestingly, the stolen Levemir passed through Maryland on its way through the supply chain. Maryland has a drug pedigree requirement and the second distributor apparently complied with the law by providing the third distributor with one. The pedigree allegedly showed that the Levemir had been purchased from one of the big nationwide distributors. Apparently, no-one checked to confirm the accuracy of the pedigree contents, so all it did was provide the buyer with a false sense of security that the drugs were legitimate.

A more recent case was revealed earlier this year, dealing with counterfeit Avastin that was allegedly purchased by 19 physician practices in the US last year. The counterfeit drug was allegedly imported illegally by a small licensed distributor and then illegally distributed. Fortunately it appears that the physician practices were notified by the US Food and Drug Administration (FDA) before patients were administrated the counterfeit substance (8).

The US drug distribution network operates on a nationwide basis for the vast majority of drugs consumed by patients. However, the laws governing the distribution of drugs are enacted and enforced by the 50 individual states. This has led to what has come to be known as the patchwork of drug pedigree laws. According to the Healthcare Distribution Management Association (HDMA) about half of the states currently have a drug pedigree regulation on their books in one form or another (9). Many are similar but none are identical, and some – like California – are unique.

In the face of this discrepancy, back in 2007 the US Congress instructed the FDA to develop standards for the unique identification of drugs at the unit-level and for authentication and track and trace of drugs. So far, the FDA has only published their standard for unique identification of drugs, the Standardized Numeric Identifier (SNI) guidance (10). They have recently indicated their intention to publish their standard for drug track and trace by the end of 2012. That guidance will be non-binding but it may have some influence on the states and/ or Congress.

Several bills have been introduced into Congress over the last few years that, if enacted, would have mandated some form of technology to protect the pharmaceutical supply chain. So far, none have made it out of the committees they were introduced into. Any federal pedigree or related laws that are actually enacted would likely pre-empt all of the state pedigree laws and eliminate the patchwork. While only the California pedigree law explicitly states that a federal law would pre-empt theirs, the other states would likely remove their laws in favour of a future federal law.

Are Drug Pedigrees the Solution?

As the Levemir example demonstrates, drug pedigrees will not end crime in the drug supply chain. In that particular case the State pedigree law did not require the buyer to check the accuracy of the pedigrees they received. If members of the supply chain were required to check the accuracy of every pedigree they receive, all the way back to the manufacturer, it would require a huge investment in technology by all parties. Only the Florida and California laws require this type of check.

So if pedigrees cannot always guarantee that patients will be protected, why do states see value in them? In the Levemir case, investigators were able to use the allegedly fake pedigree to prosecute those who supplied it. Even a faked pedigree has some value in finding and stopping some of the criminals involved. However, patients were still harmed by consuming the counterfeit Levemir.

Product identifier authentication at the point of dispense (POD) is one alternative to the concept of drug pedigrees and it appears to be the preferred approach in Europe. In this approach, only the drug manufacturers and pharmacies must invest in real-time data communications capabilities so that just prior to a pharmacist dispensing the drug, the manufacturer confirms that the product identifier and serial number are valid. The checks would include those designed to detect recalls, thefts, diversions and counterfeits. Because these checks would occur just prior to patients being given the drug, POD authentication should be able to ensure that patients are not harmed by illegitimate drugs.

Critics of the POD authentication approach point out that it does nothing to help identify and prosecute the criminals who would continue to profit and perhaps to introduce more and more illegitimate drugs into the supply chain (11).

Despite the current prevalence of drug pedigree regulations in the US, it is not certain that they are a long term fixture. Companies in the US pharma supply chain are not happy with the existing laws because of the large investment in technology necessary to meet them. These companies are making their desires known through lobbying Congress (12). It is possible that Congress will mandate a nationwide pedigree scheme, POD authentication or some other approach to securing the pharma supply chain prior to 2015. As that date gets closer, you can expect the debate to get louder.

  1. US FDA, Prescription Drug Marketing Act – Pedigree Requirements under 21 CFR Part 203, available at www. compliancepolicyguidancemanual/ ucm073857.htm, accessed 21 April, 2012
  2. Eban K, Dangerous Doses: A True Story of Cops, Counterfeiters, and the Contamination of America’s Drug Supply, 2005
  3. Healthcare Distribution Management Association, 2007-2008 HDMA Factbook, 2009
  4. Healthcare Distribution Management Association, Florida Pedigree, available at www. affairs/florida.asp, accessed 21 April, 2012
  5. Herold V, California Prescription Drug Pedigree Requirement, available at www.nabp. net/events/assets/ Herold.pdf, accessed 21 April, 2012
  6. Office of the Attorney General of New York, State Reaches Agreement With Cardinal On Drug Trading Issues, available at state-reachesagreement- cardinal-drugtrading- issues, accessed 21 April, 2012
  7. Eban K, Drug Theft Goes Big, CNN, available at http://features.blogs., accessed 21 April, 2012
  8. US FDA, Counterfeit Version of Avastin in US Distribution, www.fda. gov/drugs/drugsafety/ucm291960. htm, accessed 21 April, 2012
  9. Healthcare Distribution Management Association, 2010 HDMA Map of State Pedigree Legislation/ Regulations, available at www. seminars/2010tnt/pdfs/06j_hdma_ state_pedigree_10-22-10.pdf, accessed 21 April, 2012
  10. US FDA, Guidance for Industry Standards for Securing the Drug Supply Chain – Standardized Numerical Identification for Prescription Drug Packages, available at regulatoryinformation/guidances/ ucm206075.pdf, accessed 21 April, 2012
  11. Rodgers D, What are Pedigree Laws Trying to Accomplish Anyway?, available at what-are-us-pedigree-laws-trying-to. html, accessed 21 April, 2012
  12. Taylor P, Stakeholders push lot-level traceability model at committee hearing, SecuringPharma, available at stakeholders-push-lot-leveltraceability- model-at-committeehearing/ s40/a1199, accessed 21 April, 2012

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Dirk Rodgers is a Senior Consultant in the US healthcare supply chain. He has contributed to many of the industry groups that were formed to investigate solutions to the problem of counterfeit and other illegitimate drugs in the legitimate supply chain. He served as co-chair of a number of key technical work groups in GS1 and GS1 US. These include the original GS1 EPCglobal Drug Pedigree Messaging work group that created the DPMS pedigree standard, the Network Centric ePedigree (NCeP) work group and the RFID Barcode Interoperability Guideline work group. Dirk holds a BSc in Electrical and Computer Engineering from the University of Wisconsin- Madison. Dirk writes the industry blog at
Dirk Rodgers
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