Ed Silverman , Contributing Editor09.05.13
For an industry that regularly remonstrates over the balloon-size holes in the supply chain, the pharmaceutical legislation winding its way through Congress contains a curious provision. Some of the most desirable features for improving the ability of manufacturers, distributors, pharmacists and regulators to keep tabs on individual shipments will not fully kick in for a decade, at least.
Yes, you read that correctly. A full 10 years would go by before the U.S. would have an electronic traceable system for individual products, or units, according to a bill championed by the U.S. Senate this past summer. In the interim, a system would be in place to trace lots along with some interim requirements for product investigations and other elements to put safety standards in place.
If this seems like a long time: it is! But before we delve into the political machinations that resulted in this disappointing legislation, consider the efforts in the U.S. House of Representatives. A bill that passed out of this particular chamber only requires a draft guidance in 2027 and there is no requirement for a final rule about a unit-level traceable system. In short, the House offers even less certainty than the Senate.
This is a remarkable turn of events for a nation that has, in recent years, been consumed with stories of counterfeit medications promoted by unscrupulous brokers or sold over the Internet. Consider the numerous warnings issued last year by the FDA when counterfeit vials of the Avastin cancer medication appeared in physician offices in several states.
The episode involved numerous physicians who purchased lower-priced, but phony cancer medicines — $1,700 a vial compared with about $2,300 for the real thing, which is sold by Roche. A former salesman for a Canadian pharmacy, who pleaded guilty to a felony for selling misbranded and unapproved cancer drugs, is now serving six months of house arrest and five years of probation.
Then there were raids on Internet pharmacies. Last fall, the FDA and law enforcement authorities took action against more than 4,100 such operations, including filing civil and criminal charges, seizing products and closing down websites. In all, more than 18,000 illegal pharmacy web sites were shut down and about $10.5 million worth of pharmaceuticals worldwide were seized.
But counterfeiting is not the only problem plaguing the supply chain. There is also diversion brought on by worsening shortages of some medicines, particularly those used by hospitals. At one point, a survey conducted by the Premier buying cooperative found the average mark-up for drugs in short supply was 650%. And this same Congress held hearings into gray market activity.
And who can forget the daring theft — as if imitating an episode of ‘The Sopranos’ — of some $70 million in drugs taken through the roof of an Eli Lilly warehouse? Such burglaries are on the rise. Through May, some $3.3 million in cargo thefts occurred, which works out to an average of $172,500 for each heist, according to FreightWatch International, a logistics security provider that tracks commodity thefts.
All of these events occurred within a short time of one another and came not long after the FDA began cracking down on reimportation. The combined impact of the ensuing stories and the possibility that any one of these episodes had the potential to affect countless American households provided the impetus to do what Congress had been avoiding — pass a bill to track and trace prescription drugs.
Given the circumstances, though, one might have expected Congress to devise legislation to improve the supply chain as soon as possible, or at least sooner than later. Instead, we are witnessing a spectacle in which the proverbial lesser of two evils is discussed. “Our view is the Senate bill can’t be weakened,” says Gabrielle Cosel, a drug safety expert at Pew Charitable Trusts, which has pushed for legislation.
How did we get to this point? One way to explain this is simply fear. More than 30 states have passed laws requiring so-called e-pedigrees, a reference to steps required to prove proper possession of medicines along the supply chain. But only California has passed a law that requires a universal standard for track-and-trace (T&T) technology at the specific unit level.
A national system, of course, is lacking and since the California law is supposed to go into effect in 2015, drugmakers and wholesalers fear that other states may follow suit in the interim, creating an unwieldy patchwork of regulations across the country that would increase costs. Even Congress understands that such a development would not easily improve oversight and safety.
Looking past the fear, however, none of the interested parties could agree on exactly what to do next. In general, the pharma industry has been overwhelmingly supportive of the recent legislative push, but then there is the practical matter of cost — as in what will it cost to implement a full-scale, unit-level T&T system in a short of amount of time? And what are the costs to do so at all?
As one example, warehouses, trucks and pharmacies would all need scanners for reading bar codes placed on every bottle in each lot that is shipped. Unless Congress bestows investment credits for purchasing equipment, industry players have to pony up the funds themselves. For smaller pharmacies, in particular, the costs may be steep. But for all involved, the expenses must be absorbed.
There are other realities at work, of course, and this reflects differing stations in the world. For instance, generic drugmakers have fewer concerns about counterfeit versions of their medicines. After all, these companies already sell copycat medicines that, generally, cost much less than the price of brand-name medications. In other words, the market for counterfeit generics is not believed to be very big because of the lesser margins on those goods.
By contrast, brand-name drugmakers have been much more vocal about counterfeit medicines. Pfizer, in particular, has been especially visible as its executives tour state legislatures to decry the dangers of counterfeits and Internet pharmacies. Those brand-name companies have more sales to lose from knock-offs, hence the aggressive effort to work with the FDA to squelch violators.
At the same time, the brand-name drugmakers also formed the Pharma Cargo Security Coalition to combat the overall increase in pharma thefts and to fight the notion that warehouses, in particular, are easy marks in the wake of the infamous escapade at the Lilly warehouse in Connecticut, which is still a widely discussed event more than three years after the fact.
Of course, generic drugs are also stolen, but brand-name companies have had impetus (and size) to push Congress to pass a law. The question now, though, is what kind of law will actually emerge and will it make a sufficient difference? Or will we continue to see counterfeits, diversions and thefts for years down the line, if not indefinitely?
For the moment, let us imagine what happens if the Senate bill becomes law, an outcome that advocacy groups, such as Pew Charitable Trusts, have pushed assertively. Under this scenario, as noted, the overall track-and-trace system will not begin for 10 years, but there are steps that will occur along the way that, presumably, will mark some improvements over the existing situation.
For instance, serial numbers would be assigned to individual products; in effect, this would be an entirely new form of packaging. There is also a requirement for a bar code, which is another visual indicator that manufacturers would have to validate with those serial numbers. And by the sixth year, wholesalers will also be expected to validate the source of products.
This is, however, only a first phase that envisions validation and tracking product lots, not tracking at the unit level. The second phase would involve implementing an electronic traceable system for individual products, but again, that would not get under way for 10 years. So by 2024, maybe, a nationwide system would finally exist.
Meanwhile, as Pew’s Ms. Cosel notes, 180 days after enactment of whatever law emerges from Capitol Hill, the U.S. Department of Health & Human Services Secretary would be required to issue guidance on suspect and illegitimate products, while standards for unit-level tracing, including an interoperable data exchange, would follow in 18 months.
But what about the T&T law that is supposed to go into effect in California in less than two years? Any measure that Congress passes and becomes law would preempt the state law, which is another way of saying the law in California would be superseded. So while passage of a law would amount to a sign of progress for most of the country, it would amount to a setback for California.
As for the House bill, the legislation would require manufacturers to place bar codes on each drug package by 2015, but there is no requirement for wholesalers or pharmacies to adopt a computerized T&T system capable of reading bar codes until, as we already noted, until 2027. And again, this would only become mandated if HHS issues a rule.
So what is likely to happen? Advocacy groups, such as Consumers Union and Pew Charitable Trusts, are reluctantly backing the Senate bill simply because the House bill is a lousier alternative, at least as far as making real changes to the security of the national supply chain. This is a classic instance in which political compromise underscores lowest-common-denominator solutions.
Whether the Senate bill will become reality, of course, remains to be seen. A House and Senate conference will likely hammer out final language — and engage in further horse-trading. Any attempt to weaken the already meager Senate bill will not bode well for patients, though, and that seems to be an issue that is sorely overlooked in this discussion.
Then again, this is not surprising, if only because the industry coalition that backed the legislative push — the Pharmaceutical Distribution Security Alliance — has a membership that includes drugmakers, biotechs, wholesalers, pharmacies and third-party logistics providers, according to its website, which does not list specific companies by name.
However, you will not see mention of hospitals or professional societies for physicians, or patient advocacy groups, for that matter. Other than pharmacies, these are the stakeholders that are closest to the people whose safety has been compromised in recent years by the gaps in the supply chain. They have seen the damage done and know that patients will not benefit from a 10- or 12-year wait.
At the end of the day, the long-running effort to create a national track-and-trace system has become an embarrassment — for Congress and for the businesses that fought to ensure that adoption is enacted at a snail’s pace. Brand-name drugmakers, in particular, will have no one to blame but themselves the next time they encounter gobs of counterfeit medicines that could have been caught sooner with a more stringent system.
But the real harm is to patients. Unfortunately, Congress seems to have overlooked this point, even though a T&T law was to have protected citizens, not industry finances. Meanwhile, you can expect another few years in which counterfeits and gray-market goods will mix in with legitimate medicines. Have a problem with that? Don’t bother writing your Congressional representative.
Ed Silverman is a prize-winning journalist who has covered the pharmaceutical industry for The Star-Ledger of New Jersey, one of the nation’s largest daily newspapers, for more than 12 years. Prior to joining The Star-Ledger, Ed spent six years at New York Newsday and previously worked at Investor’s Business Daily. Ed blogs about the drug industry at Pharmalot, at www.pharmalot.com. He can be reached at ed.silverman@comcast.net.
Yes, you read that correctly. A full 10 years would go by before the U.S. would have an electronic traceable system for individual products, or units, according to a bill championed by the U.S. Senate this past summer. In the interim, a system would be in place to trace lots along with some interim requirements for product investigations and other elements to put safety standards in place.
If this seems like a long time: it is! But before we delve into the political machinations that resulted in this disappointing legislation, consider the efforts in the U.S. House of Representatives. A bill that passed out of this particular chamber only requires a draft guidance in 2027 and there is no requirement for a final rule about a unit-level traceable system. In short, the House offers even less certainty than the Senate.
This is a remarkable turn of events for a nation that has, in recent years, been consumed with stories of counterfeit medications promoted by unscrupulous brokers or sold over the Internet. Consider the numerous warnings issued last year by the FDA when counterfeit vials of the Avastin cancer medication appeared in physician offices in several states.
The episode involved numerous physicians who purchased lower-priced, but phony cancer medicines — $1,700 a vial compared with about $2,300 for the real thing, which is sold by Roche. A former salesman for a Canadian pharmacy, who pleaded guilty to a felony for selling misbranded and unapproved cancer drugs, is now serving six months of house arrest and five years of probation.
Then there were raids on Internet pharmacies. Last fall, the FDA and law enforcement authorities took action against more than 4,100 such operations, including filing civil and criminal charges, seizing products and closing down websites. In all, more than 18,000 illegal pharmacy web sites were shut down and about $10.5 million worth of pharmaceuticals worldwide were seized.
But counterfeiting is not the only problem plaguing the supply chain. There is also diversion brought on by worsening shortages of some medicines, particularly those used by hospitals. At one point, a survey conducted by the Premier buying cooperative found the average mark-up for drugs in short supply was 650%. And this same Congress held hearings into gray market activity.
And who can forget the daring theft — as if imitating an episode of ‘The Sopranos’ — of some $70 million in drugs taken through the roof of an Eli Lilly warehouse? Such burglaries are on the rise. Through May, some $3.3 million in cargo thefts occurred, which works out to an average of $172,500 for each heist, according to FreightWatch International, a logistics security provider that tracks commodity thefts.
All of these events occurred within a short time of one another and came not long after the FDA began cracking down on reimportation. The combined impact of the ensuing stories and the possibility that any one of these episodes had the potential to affect countless American households provided the impetus to do what Congress had been avoiding — pass a bill to track and trace prescription drugs.
Given the circumstances, though, one might have expected Congress to devise legislation to improve the supply chain as soon as possible, or at least sooner than later. Instead, we are witnessing a spectacle in which the proverbial lesser of two evils is discussed. “Our view is the Senate bill can’t be weakened,” says Gabrielle Cosel, a drug safety expert at Pew Charitable Trusts, which has pushed for legislation.
How did we get to this point? One way to explain this is simply fear. More than 30 states have passed laws requiring so-called e-pedigrees, a reference to steps required to prove proper possession of medicines along the supply chain. But only California has passed a law that requires a universal standard for track-and-trace (T&T) technology at the specific unit level.
A national system, of course, is lacking and since the California law is supposed to go into effect in 2015, drugmakers and wholesalers fear that other states may follow suit in the interim, creating an unwieldy patchwork of regulations across the country that would increase costs. Even Congress understands that such a development would not easily improve oversight and safety.
Looking past the fear, however, none of the interested parties could agree on exactly what to do next. In general, the pharma industry has been overwhelmingly supportive of the recent legislative push, but then there is the practical matter of cost — as in what will it cost to implement a full-scale, unit-level T&T system in a short of amount of time? And what are the costs to do so at all?
As one example, warehouses, trucks and pharmacies would all need scanners for reading bar codes placed on every bottle in each lot that is shipped. Unless Congress bestows investment credits for purchasing equipment, industry players have to pony up the funds themselves. For smaller pharmacies, in particular, the costs may be steep. But for all involved, the expenses must be absorbed.
There are other realities at work, of course, and this reflects differing stations in the world. For instance, generic drugmakers have fewer concerns about counterfeit versions of their medicines. After all, these companies already sell copycat medicines that, generally, cost much less than the price of brand-name medications. In other words, the market for counterfeit generics is not believed to be very big because of the lesser margins on those goods.
By contrast, brand-name drugmakers have been much more vocal about counterfeit medicines. Pfizer, in particular, has been especially visible as its executives tour state legislatures to decry the dangers of counterfeits and Internet pharmacies. Those brand-name companies have more sales to lose from knock-offs, hence the aggressive effort to work with the FDA to squelch violators.
At the same time, the brand-name drugmakers also formed the Pharma Cargo Security Coalition to combat the overall increase in pharma thefts and to fight the notion that warehouses, in particular, are easy marks in the wake of the infamous escapade at the Lilly warehouse in Connecticut, which is still a widely discussed event more than three years after the fact.
Of course, generic drugs are also stolen, but brand-name companies have had impetus (and size) to push Congress to pass a law. The question now, though, is what kind of law will actually emerge and will it make a sufficient difference? Or will we continue to see counterfeits, diversions and thefts for years down the line, if not indefinitely?
For the moment, let us imagine what happens if the Senate bill becomes law, an outcome that advocacy groups, such as Pew Charitable Trusts, have pushed assertively. Under this scenario, as noted, the overall track-and-trace system will not begin for 10 years, but there are steps that will occur along the way that, presumably, will mark some improvements over the existing situation.
For instance, serial numbers would be assigned to individual products; in effect, this would be an entirely new form of packaging. There is also a requirement for a bar code, which is another visual indicator that manufacturers would have to validate with those serial numbers. And by the sixth year, wholesalers will also be expected to validate the source of products.
This is, however, only a first phase that envisions validation and tracking product lots, not tracking at the unit level. The second phase would involve implementing an electronic traceable system for individual products, but again, that would not get under way for 10 years. So by 2024, maybe, a nationwide system would finally exist.
Meanwhile, as Pew’s Ms. Cosel notes, 180 days after enactment of whatever law emerges from Capitol Hill, the U.S. Department of Health & Human Services Secretary would be required to issue guidance on suspect and illegitimate products, while standards for unit-level tracing, including an interoperable data exchange, would follow in 18 months.
But what about the T&T law that is supposed to go into effect in California in less than two years? Any measure that Congress passes and becomes law would preempt the state law, which is another way of saying the law in California would be superseded. So while passage of a law would amount to a sign of progress for most of the country, it would amount to a setback for California.
As for the House bill, the legislation would require manufacturers to place bar codes on each drug package by 2015, but there is no requirement for wholesalers or pharmacies to adopt a computerized T&T system capable of reading bar codes until, as we already noted, until 2027. And again, this would only become mandated if HHS issues a rule.
So what is likely to happen? Advocacy groups, such as Consumers Union and Pew Charitable Trusts, are reluctantly backing the Senate bill simply because the House bill is a lousier alternative, at least as far as making real changes to the security of the national supply chain. This is a classic instance in which political compromise underscores lowest-common-denominator solutions.
Whether the Senate bill will become reality, of course, remains to be seen. A House and Senate conference will likely hammer out final language — and engage in further horse-trading. Any attempt to weaken the already meager Senate bill will not bode well for patients, though, and that seems to be an issue that is sorely overlooked in this discussion.
Then again, this is not surprising, if only because the industry coalition that backed the legislative push — the Pharmaceutical Distribution Security Alliance — has a membership that includes drugmakers, biotechs, wholesalers, pharmacies and third-party logistics providers, according to its website, which does not list specific companies by name.
However, you will not see mention of hospitals or professional societies for physicians, or patient advocacy groups, for that matter. Other than pharmacies, these are the stakeholders that are closest to the people whose safety has been compromised in recent years by the gaps in the supply chain. They have seen the damage done and know that patients will not benefit from a 10- or 12-year wait.
At the end of the day, the long-running effort to create a national track-and-trace system has become an embarrassment — for Congress and for the businesses that fought to ensure that adoption is enacted at a snail’s pace. Brand-name drugmakers, in particular, will have no one to blame but themselves the next time they encounter gobs of counterfeit medicines that could have been caught sooner with a more stringent system.
But the real harm is to patients. Unfortunately, Congress seems to have overlooked this point, even though a T&T law was to have protected citizens, not industry finances. Meanwhile, you can expect another few years in which counterfeits and gray-market goods will mix in with legitimate medicines. Have a problem with that? Don’t bother writing your Congressional representative.
Ed Silverman is a prize-winning journalist who has covered the pharmaceutical industry for The Star-Ledger of New Jersey, one of the nation’s largest daily newspapers, for more than 12 years. Prior to joining The Star-Ledger, Ed spent six years at New York Newsday and previously worked at Investor’s Business Daily. Ed blogs about the drug industry at Pharmalot, at www.pharmalot.com. He can be reached at ed.silverman@comcast.net.