For players in the drug distribution business, the countdown is on. In less than two months, every business involved in the pharmaceutical supply chain must be fully compliant with the Drug Supply Chain Security Act (DSCSA)—a 2013 law containing strict traceability requirements for the distribution of certain prescription drugs. Over the past decade, the DSCSA has been implemented in phases, but now the clock is running out. The law takes full effect on Nov. 27, barring any further adjustments or delays.
Among other measures, the DSCSA requires drug manufacturers to affix a unique product identifier, essentially a barcode, to every package so it can be tracked and traced during its journey through the supply chain. To thwart drug counterfeiters, the new law further requires wholesalers and drug dispensers to verify the validity of products they handle to assure they are genuine.
Is the pharmaceutical industry ready for all this? To find out, we spoke with Elizabeth Gallenagh, general counsel and senior vice president, supply chain integrity at the Healthcare Distribution Alliance(HDA), a national organization that represents U.S. health-care distributors. In addition to serving as HDA’s chief legal officer, Gallenagh is also the group’s primary expert on prescription drug traceability, supply chain safety and integrity, distributor licensure, and tax issues. She is a graduate of the George Mason University School of Law and George Washington University.
Gallenagh recently spoke with David Maloney, **{DC Velocity’}s group editorial director, about the enactment of DSCSA for an episode of the “Logistics Matters” podcast.
Q: First of all, can you tell us a little bit about the Healthcare Distribution Alliance?
A: Yes, the Healthcare Distribution Alliance, or HDA, is a national trade organization representing pharmaceutical distributors, also known as wholesalers. We have about 40 members that purchase drugs from manufacturers. They store the products in their warehouses and then fill orders for pharmacy customers throughout the country.
Q: The Drug Supply Chain Security Act will go into final effect in November. What’s the intent of the legislation?
A: The Drug Supply Chain Security Act—or as we call it, the DSCSA—is a law that was enacted in 2013. Its intent was to put together a national framework for drug supply chain security, essentially to enable a tighter, safer, more secure supply chain for the domestic U.S. market.
It involves all trading partners and ultimately will create an interoperable system that enables investigations by tracing a product with every transaction or sale of that product throughout the supply chain, down to the provider level.
Q: What are the law’s major requirements?
A: The law was actually phased in over a period of about 10 years. Many of the major requirements went into effect throughout that initial 10-year period—things like requirements mandating that manufacturers serialize their products and stipulating that trading partners only do business with other authorized trading partners. Authorized trading partners are defined as those that are duly licensed or registered with the Food and Drug Administration (FDA) or licensed by the states.
It also requires tracking of product with every transaction. A transaction is defined as a sale of the product, essentially from one authorized trading partner to another. And as we progress into the final phase, the law will also require serialized data, basically transaction information at the serial-number level that moves with the product through every transaction throughout the supply chain.
Q: You’ve said that the industry has had years to ramp up to comply with the law. Are our pharmaceutical supply chains ready for the final phase?
A: I think that’s still the $64,000 question. I can speak for our members, who have been doing everything in their power to get their own systems and processes ready to receive the serialized products and data, and then to transmit that serialized data with the product to their pharmacy customers.
That said, there are still some gaps in the system. We have been in a “stabilization” period that expires on Nov. 27. During this period, everybody has been testing and bringing product and data transactions live into production. I will tell you that many are ready, but there are still bugs that are being worked out as we race toward November.
I should also note that on Aug. 19, the HDA sent a letter to the FDA stating that “despite a concerted effort, some in the supply chain appear to remain short of reaching our joint goal of complete implementation.” In its letter, the group urged the FDA to “take immediate action to forestall potential disruptions to the drug supply chain and patient care that could stem from incomplete implementation of the enhanced drug distribution security (EDDS) requirements” and asked the agency to adopt “a phased, stepwise approach” to implementing the requirements in order to avoid disruptions to the movement of drugs through the supply chain.
Q: Will penalties be imposed on companies that fail to meet the deadline?
A: There will be penalties. But it’s important to note that the DSCSA is really about setting up the framework for tracking and tracing products—so that a manufacturer will only be permitted to sell its product downstream if it is a serialized product and the manufacturer can transmit the corresponding serialized data with the product. And then a distributor can only receive that product and purchase it if it has the corresponding data.
Q: Of course, this is only possible if you have the right technology in place to monitor and track drugs as they move through the supply chain. What kind of technologies are being deployed to make this possible?
A: The key to all of this is the barcode, which is mandated under the law in terms of the way that product is serialized. Everybody in the supply chain has to have the capability to utilize the barcode. If you’re a manufacturer, you have to incorporate that 2-D barcode with the serialized data into that product’s label. And that should already be in place under the first phases of the law.
Downstream partners will have to be able to read that barcode and import that data into their systems. This also enables verification of the product at the unit level.
In addition, we’re also deploying what we call EPCIS [a global data-sharing standard developed by the global standards organization GS1 that allows businesses to capture and share information about the movement and status of goods]. That is the backbone for getting all of this serialized data flowing to all of the requisite trading partners throughout the supply chain.
Q: As we learned during the push to distribute Covid-19 vaccines, a good number of pharmaceutical products must be temperature- or humidity-controlled. Will these new regulations help ensure that they’re properly handled as they move through the supply chain?
A: The DSCSA doesn’t speak specifically to temperature controls. However, there are other parts of the law [the overall Drug Quality and Security Act, which includes the DSCSA as well as the Compounding Quality Act] that do require those controls to be in place. That said, the DSCSA does require affected parties to do business with authorized trading partners. And in order to be an authorized trading partner, you have to adhere to temperature controls and safety rules for products, product handling, etc.
Q: Many of our pharmaceuticals are manufactured overseas, in China and India, for example. Do foreign manufacturers have to comply with DSCSA requirements?
A: If a foreign entity is producing product for use in the U.S. domestic market, the product has to be approved by the FDA. And it also has to meet DSCSA requirements.
Q: We hear a lot about counterfeit products infiltrating the drug supply chain. Will these new regulations reduce the number of counterfeits in the market?
A: We certainly hope so. All of this really started [as an effort to combat the rise in] counterfeit products and transactions back in the early 2000s. Obviously, the idea is to deter counterfeiters from infiltrating the U.S. drug supply chain. But really, what the law does is provide tools for the FDA and regulatory agencies to investigate suspect and illegitimate product, as well as tools that will enable the trading partners that are involved in the transactions to identify suspect product, flag it, quarantine it, investigate it, and deem it OK or deem it illegitimate based on their investigations.
So it really gives some investigatory and prosecutorial tools to the agencies. And it puts a process in place with the technology and serialization to pinpoint whether something is good product through verification with the manufacturer or through tracing of the product data that has accompanied the product throughout its journey through the supply chain.
Q: Drug prices in the U.S. are notoriously high compared with prices in many other countries. Will these new requirements add to the overall cost of supplying medication?
A: I haven’t seen any data that alludes to DSCSA compliance adding to drug costs. It’s an industry that’s built around efficiency, and so my sense is that [pharma industry players] probably have also built in plans over the last decade to absorb some of those costs. That said, the law also established a national tracking and tracing framework, where before we had a 50-state patchwork of regulations. So there would likely be some efficiencies gained from following a single, nationwide protocol, even though it’s a huge undertaking, versus doing it 50 different ways across the country.
Q: Now that DSCSA is nearing full implementation, how are your members feeling about the process?
A: Our members have been committed to this from the very beginning. We were very involved in negotiating on the legislation and pushing these concepts. We really have been working toward implementation from the get-go and throughout this entire 11-year period; we very much want to get to full implementation. But in the beginning, there may be some hiccups. We may hit a few bumps along the way.
A colleague of mine used to say, “We don’t know what we don’t know.” And I think that at each phase as we deploy new technologies and new processes, we will learn new ways to do things more efficiently. So we’re pushing hard toward November, and we are very hopeful.
