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Addressing Serialization and e-Pedigree Mandates

Ensuring the security and traceability of healthcare shipments is of growing importance, especially as the counterfeiting of healthcare products continues to rise. An important step is for the U.S. to adopt legislation that creates uniform national standards and enforcement for serialization and licensing (to preempt a patchwork of state-level regulations). While it has been a slow process, progress is being made on the legislative front.

In thinking about policy, especially at the federal level, it is important to focus on: “What problem are we trying to solve?” In this situation, it is ensuring access to safe medicines and preventing counterfeit drugs from reaching consumers.

Estimates are that globally, there are $75 billion per year in counterfeit drugs. In total, counterfeit, expired, and adulterated drugs are estimated by the World Health Organization to cost $230 billion annually. While the U.S. supply chain is the safest in the world, it is still vulnerable. In some third-world markets it is estimated that 40–50% of the drugs are counterfeit. The presence of these drugs creates safety issues for patients around the world.

While not specifically mentioned in the legislation, the concept of pedigree was born in 1987 as part of the Prescription Drug Marketing Act (PDMA). The idea was to set minimum federal standards and document the sale of drugs along their path to ensure they were verified. However, technology at the time was limited and states retained the authority to create and enforce standards. Different states undertook differing approaches, resulting in a patchwork of compliance and enforcement.

To date, 21 states have done nothing, 18 states have adopted final rules, 8 have enacted legislation, 2 have enacted legislation with rules and development, and 1 has proposed legislation. For example, only the state of Florida defines and licenses third-party logistics providers (3PLs), while California has passed a series of legislation dealing with serialization and e-pedigree. This inconsistent patchwork adds complexity and cost and fails to best leverage technology to protect consumers.  This situation calls for creation of national and uniform policies.

In creating a federal policy, several important issues must be dealt with, including: 

  •  Preemption. This involves federal policies preempting state policies, which is a sensitive issue for some elected officials. Yet even officials who are generally opposed to federal preemption understand the importance here of a national policy with consistent enforcement. 
  • Uniform standards for serialization and pedigree. Serialization and e-pedigree often are blended together, but are distinct concepts. Pedigree is a transaction statement. Serialization is a unique identifier that goes on a saleable unit that allows the unit to be tracked. The idea is to create a way to trace goods throughout the entire healthcare supply chain, instead of multiple, ineffective, non-interoperable systems.
  • Interstate commerce. Drugs are shipping across the country as part of interstate commerce, not commerce within just one state. Requiring a person driving cross country to get a separate driver’s license in each state would be seen as ridiculous, yet that is analogous to what is happening today when drugs are shipped to different states, which have different standards and licensing requirements.
  • Federal 3PL licensing standards. 49 states today don’t even define and license a 3PL.  Instead 3PLs have registered as wholesale distributors, even though a 3PL never buys, sells, or owns the product.  Having a uniform 3PL definition with consistent and stringent federal licensing standards is the best policy to enhance safety, enforcement, and reduce costs.  Licensing can be administered at the state or federal level, or by an authorized and accredited agency.
  • California. To California’s credit, the state is working to make serialization and pedigree happen. But there are issues with the timing, cost, creation of an interoperable system, and the concept of pedigree itself.  Regardless of paper or electronic, a pedigree can be counterfeited easier than the drugs.  Serialization should be the focus.

Regardless of whether federal legislation is passed, or if state rules remain in place such as legislation in California that takes effect in 2015, companies must be prepared to implement these policies. That involves identifying the many pain points; considering the impact on systems, integration, distribution processes, and costs; and putting an implementation plan in place.  Implementation won’t be easy, but reducing counterfeiting and ensuring patient safety are important undertakings for policy makers and supply chain leaders. 

And serialization is a global issue. As countries such as China, Brazil, and Turkey are creating serialization standards, it is essential for the U.S. to adopt global standards and show leadership in this area. Otherwise, the U.S. could end up with competing systems, instead of a collaborative system that works with other countries in this global fight against counterfeit drugs.

What is your perspective on this?  How do you see this developing situation?  Share your thoughts below and join the conversation!

Category: Healthcare
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