Do We Even Need To Mandate Drug Pedigrees Anymore?

  Important Notice To Readers of This Essay On November 27, 2013, President Barack Obama signed the Drug Quality and Security Act of 2013 into law. That act has many provisions, but one is to pre-empt all existing and future state serialization and pedigree laws like those that previously existed in California and Florida. Some or all of the information contained in this essay is about some aspect of one or more of those state laws and so that information is now obsolete. It is left here only for historical purposes for those wishing to understand those old laws and the industry’s response to them.


Drawing by Zsuzsanna Kilian



Currently well over half of the U.S. states have a drug pedigree law of some kind either on the books, in the process of being enacted or proposed in their legislature.  No two laws are exactly the same.  That fact is quite painful for the national participants in the supply chain and it gets a little worse every time a new law is enacted or a change is made to an existing law.  For this reason, the conventional wisdom among many supply chain participants, industry organizations, solution providers, and even the regulators themselves is that a nationwide pedigree law would be better than 50 different local laws.

Many of these entities are in favor of replacing those state laws with one administered by the U.S. Food and Drug Administration (FDA).  I don’t challenge that.  In this essay, I’m challenging the very need for any U.S. pedigree requirement at all.  Let me explain.


That’s right.  State pedigree laws are a response to the shocking crimes against the U.S. supply chain that occurred between the late 1990’s and 2005, primarily, though not entirely, in Florida.  Katherine Eban documented these crimes so well in her excellent 2005 book,  Dangerous Doses:  How Counterfeiters Are Contaminating America’s Drug Supply (also available in paperback as Dangerous Doses: A True Story of Cops, Counterfeiters, and the Contamination of America’s Drug Supply) that I highly recommend it to everyone.

Back during that time, it was common practice for legitimate wholesalers to buy small quantities of drugs on the secondary market—that is, these drugs were bought from someone other than the original manufacturer.  The assumption was that these drugs were for sale because the current owner had bought too much legitimate product and would not be able to sell all of it before the product became too close to the expiration date, so they chose to sell it in on the secondary market at a reduced price.  Buyers normally required some form of documentation to prove that the sellers had originally bought these drugs from a legitimate source to reduce the risk that they were buying counterfeit product.  This practice had been going on successfully and very profitably in the industry for many years.

As Eban documents, in the late 1990’s, criminals discovered that they could easily forge the documentation they needed to “prove” legitimacy and so they began selling more and more illegitimate drugs—that is, stolen, counterfeit, up-labeled, diverted and tampered drugs—to these legitimate wholesalers through this secondary market.  Those wholesalers then often merged those drugs with the stock of drugs that had been bought directly from the manufacturers and then these drugs were sold to unsuspecting legitimate customers.  Viola, a small but critically significant percentage of illegitimate drugs made it into the legitimate supply chain.

But the problems that Eban documents so well won’t happen in the U.S. so easily anymore.  A month before Dangerous Doses was published in May 2005, the Office of the Attorney General of New York State initiated an investigation into the secondary market for pharmaceuticals in the U.S. supply chain and that investigation culminated in a settlement with one of the large U.S. drug wholesalers.  I should point out that I don’t have any first-hand information or knowledge about this case or the settlement other than what I have read from public sources.

The agreement, signed in December 2006, required this particular wholesaler to cease all participation in the secondary market for pharmaceuticals, among other things (see the full text of the agreement at “ASSURANCE OF DISCONTINUANCE PURSUANT TO EXECUTIVE LAW §63(15)”).  While the settlement was only with one U.S. wholesaler it apparently scared the other large wholesalers enough that they also voluntarily stopped trading pharmaceuticals on the secondary market in 2005/2006.

This was a pivotal event because it was the secondary market—the “grey” market—where illegitimate drugs were able to make it into the legitimate supply chain that these wholesalers dominate.  By closing off this huge entryway, criminals were locked out.  With that one settlement, the Office of the Attorney General of New York ended the war with criminals that Dangerous Doses exposed with a decisive victory.  As a result, the criminals moved on.  The vast majority of the U.S. pharmaceutical supply chain is now clean at the wholesale level.


Most of the criminal activity has moved out of the legitimate supply chain, mostly onto the internet.  You know, the internet, where criminals can sell drugs directly to the few consumers who are dumb enough to think that someone will sell them legitimate prescription drugs, but do so illegally by not requiring a prescription.  That is, they think that some faceless company would be willing to knowingly break one law, but could then be trusted to provide real pharmaceuticals at below market prices.  In the age of the internet, how do you protect people who are that gullible?

But there is still one place where criminals have been able to retain a toehold in the legitimate supply chain and this can expose U.S. consumers to illegitimate product even if they only fill their prescriptions at legitimate pharmacies—whether brick-and-mortar or legitimate internet.  That is, these consumers are doing everything right.  Somehow, stolen and counterfeit drugs (part of what I classify as, “illegitimate drugs”) are still being found, however rarely, in the inventories of legitimate pharmacies.  It’s a big mystery that Federal and State investigators are apparently currently pursuing.

And where are all of the stolen drugs going?  Cargo theft is on the rise in the U.S. and around the world.  You wouldn’t think that professional criminals like those would normally steal things unless they have a ready market to sell into.  Who is buying these drugs?  Are they all making it back into the legitimate supply chain?  Some have, but how?  That information isn’t being released yet for some reason.  (See Adam Fein’s excellent essay, “How did stolen GSK product end up in pharmacies?” and my earlier essay “How to Stop Pharmaceutical Cargo Theft”.)

If the wholesale segment of the U.S. supply chain is clean, how can this occur?  I don’t know, but I can’t wait for arrests to be announced because, for this situation to exist, there have to be criminals not too far behind it and their methods should be exposed so we can close whatever hole in the supply chain they are exploiting.  But please allow me to speculate on what could be happening.


If the big wholesalers are only buying their drug supplies directly from the manufacturers, as they have pledged, it should not be possible for stolen or counterfeit products to just appear in their inventories.  A criminal is in business to get paid, so they wouldn’t just sneak it into the inventory of an unsuspecting wholesaler.  Besides, wholesalers have pretty good security in their facilities, so I don’t think it is likely that these drugs are entering the legitimate supply chain through any wholesaler who has made the pledge.

I also don’t think it’s productive to consider that the manufacturers might somehow accept counterfeit or stolen drugs.  After all, they make the drugs, they don’t buy them.  And even when the drugs are made on their behalf by a contract manufacturer, they have solid sampling and testing regimens in place that would detect anything like this long before it reached consumers.

There are only a few possible ways I can think of for this condition to exist:

1.  Legitimate wholesalers ignoring their pledge to only buy direct from the manufacturer

It is possible that wholesalers who have made the pledge to only buy their supplies directly from the manufacturer are sometimes quietly not following that pledge.  If this is happening, they would be buying some of their stock from someone other than the manufacturer and would therefore open up the possibility that they are moving illegitimate product into the legitimate supply chain.  Technically such a wholesaler would not be committing a crime as long as the “alternate source” they buy from holds a valid wholesaler’s license.

In my experience, it’s not hard to find people who believe this is exactly what is happening.  Indeed, the settlement that the one wholesaler signed with the New York Attorney General’s office expired this past January (see paragraph 33 in the settlement), presumably releasing them to return to their old practices if they so choose.

However, I don’t believe this is what is happening.  From my observation the wholesalers who made this pledge have a genuine interest in a secure supply chain and would not revert to the business practices that led to the problems documented in Eban’s book.  Am I biased?  Perhaps.  Time will tell, but for now I am at least willing to list it as a possibility.

BTW, there are a small number of specialty drugs that even these wholesalers cannot buy directly from the manufacturer due to exclusive distributor arrangements.  I’m not including those drugs in this category and you shouldn’t either.  The “pledge” is that these wholesalers would buy drugs directly from the manufacturer when they can.

2.  Legitimate wholesalers who are unable to make the pledge to only buy directly from the manufacturer

Not all wholesalers have made the pledge to only buy directly from the manufacturer, because they can’t.  Regional wholesalers, or wholesalers who service niche markets often sell volumes of some drugs that are too small to meet the minimum purchase requirements of some pharma manufacturers so they are not able to make a pledge like the high-volume, nationwide, full-line wholesalers can.

If these legitimate companies want to serve their pharmacy customers with a wide selection of pharmaceuticals, they may be forced to buy some of their stock from one or more other wholesalers and thus cannot pledge to only buy direct.  It is possible that some of these wholesalers may buy drugs on the secondary market where there is still a chance they could fall prey to the kind of criminal activity that Eban documented in her book.  If that were to happen, these companies could unwittingly distribute illegitimate drugs to their customers.

3.  Returns through a legitimate wholesaler

For this scheme to work, a criminal needs to buy a significant amount of legitimate product from a legitimate wholesaler, then return those drugs for credit, but instead of physically returning the real product, the criminal ships back the counterfeit or stolen product and the unsuspecting legitimate wholesaler then unknowingly redistributes the illegitimate product to other customers.  The criminal would then sell the good product to someone else.

But there are a number of reasons this is highly unlikely.  First, to make enough money to justify the crime, the criminal would have to be licensed as a wholesaler, otherwise they wouldn’t be able to sell the good drugs to someone else in volume.  If they were a pharmacy, they could dispense those drugs to unsuspecting customers, but the volume would be too low to be very profitable.

Second, if the criminal has a ready buyer for the good drugs they would receive from their original legitimate purchase, why would they bother with the return? Why wouldn’t they just sell the illegitimate drugs directly to that buyer?

4.  Criminal wholesalers and/or pharmacists/pharmacies

In all 50 states it is a crime to purchase regulated pharmaceutical supplies from any company who doesn’t hold a valid license as a drug wholesaler in that state.  Any wholesaler, pharmacy or pharmacist who buys drugs from an unlicensed source is a criminal subject to prosecution, prison time and/or fines.  It is possible that any illegitimate drugs found in the inventory of a given wholesaler or pharmacy could have arrived there because the business owner, or an employee has actually crossed the line and become a criminal themselves.  This is not an unknown occurrence.

Take for example the case of Pamela Arrey of Glenelg, Maryland who pled guilty earlier this year to a number of charges, one of which was that she bought drums of expired medicines from an unlicensed source and dispensed them to patients out of two pharmacies she owned in the Baltimore area.  This sad story shows just how far a licensed pharmacist went into the dark once she made the conscious decision to step across that line and become a criminal.

I’m not the only person who is wondering where all the drugs stolen recently in cargo thefts are going.  In a CBS BNET blog post over the summer (“Stolen Advair Shows How Pharmacies Are the Crime-Infested Ghettos of the Drug Business”, pharma industry blogger Jim Edwards explains his theories about where it is going.  Unfortunately he quotes heavily from a CIO Magazine article from 2007 which contains quotes from people who relate stories from the early 2000’s, right back in the era before the wholesale segment was cleaned up.  It’s no surprise then that the stories are scary and that Edwards’ opinion is so blunt.  Katherine Eban already covered those stories, and did a better job of it.  I’d like to hear about the results of more recent investigations.


If drug pedigrees are to put an end to the movement of illegitimate drugs into the legitimate supply chain, they would have to block all four of the potential paths of entry into the legitimate supply chain that I listed above, and maybe others I haven’t thought of.  I listed these four potential paths, not because I believe all of them are currently resulting in that movement, but because these are the only ways I can think of that could possibly result in it.  If only one of these ways turns out to be the actual path that these drugs have taken into the supply chain, then drug pedigrees would have to be able to block that one path.  Because we don’t yet know which path or paths it is, pedigrees would have to be able to block all four.  So would they?

Here is my list again with my thoughts on what effect pedigrees might have on them.

1.  Legitimate wholesalers ignoring their pledge to only buy direct from the manufacturer

I think a truly solid drug pedigree mechanism would prevent legitimate drug wholesalers from unwittingly buying and then redistributing illegitimate drugs because the criminal would not be able to forge pedigrees that appear to be “clean”.  Rather than exposing themselves to possible discovery, criminals would probably stop offering their illegitimate product for sale to a legitimate wholesaler (one who has chosen to ignore their pledge, that is).  However, if the buying wholesaler is known to not routinely bother checking the validity of the pedigrees for the product they buy, then pedigrees might not have any impact on this potential path.

2.  Legitimate wholesalers who are unable to make the pledge to only buy directly from the manufacturer

Just like the first path above, I think a truly solid drug pedigree mechanism would also prevent these legitimate wholesalers from unwittingly introducing illegitimate product into the supply chain, but with the same caveat as above.

3.  Returns through a legitimate wholesaler

Just as the two paths above, as long as the pedigree mechanism is solid and the legitimate wholesaler involved checks the validity of the pedigrees of the returned product, I think this potential path would be blocked.

4.  Criminal wholesalers and/or pharmacists/pharmacies

Here is where it gets interesting.  If a wholesaler, or one of their well-positioned employees, is a criminal, they could theoretically introduce illegitimate product into the wholesaler’s inventory by circumventing the pedigree check.  But that wholesaler would not be able to sell that product to a legitimate pharmacy customer as long as the pedigree mechanism is solid and the pharmacy checks the validity of the pedigrees for the drugs they buy.  So for wholesalers, pedigrees would do their job by blocking or exposing the criminal act.

But what if the criminal is a pharmacist or a well-positioned employee of a pharmacy?  Think of a situation like that of pharmacist Pamela Arrey that I mentioned above.  In that situation the illegitimate drugs would be knowingly bought by the employee and introduced into the “supply chain”.  It’s not much of a supply chain considering that the bad drugs are introduced right at the endpoint.  In fact, I personally don’t consider the pharmacy alone to be “a supply chain” so, to me, illegitimate drugs introduced there should not be considered to be introduced into the supply chain.

How would pedigrees help here?  The single opportunity for a pedigree validity check would be with the pharmacy, but in this instance, that’s where the criminal is.  A criminal is not going to bother checking any pedigrees because they already know they won’t check out.  The consumer who is dispensed the illegitimate drugs will never know because pedigrees are supply chain technologies that are not passed on to them (they wouldn’t know how to interpret them anyway).  Supply chain pedigrees stop at the pharmacy…in this case, at the criminal.

At the very least, in this kind of situation, pedigrees—or the lack of them if mandated—could be used to make it much easier to prosecute the criminal(s).  But if they won’t help detect the crime, easier prosecution might not matter very much.

Without the benefit of a pedigree mandate, when an investigator asks a criminal in a pharmacy where they bought the illegitimate drug that was just found in their inventory, they will certainly say they bought it from a wholesaler, even when they know they actually bought it illegally.  It would be quite easy for the criminal pharmacy worker to tell that lie, because they will certainly have some documentation that shows that they have bought that same kind of drug from one or more legitimate wholesalers in the past.  Since there are currently no serial numbers or even lot numbers indicated on shipping documents or invoices, no one can tell whether those documents refer to the illegitimate drug package being investigated, or some other one that has already been dispensed.

Here a drug pedigree would help to focus the investigation on the actual criminal, but only after the illegitimate drug was detected by some other means.  Without pedigrees in this situation, the criminal would be able to cast doubt into the mind of the investigators and erroneously implicate the innocent wholesaler.

Also, without pedigrees the wholesaler would have no way to definitively prove that they did not supply the illegitimate product, further casting doubt about who is the actual criminal.  Considering the history of criminal wholesalers and the unknowing complicity of legitimate wholesalers who once traded in the secondary “grey” market in the early 2000’s–all of which is so well documented by Katherine Eban–it may not be surprising if an investigator holds some suspicion of that wholesaler today.

I would also like to note to the proponents of Point of Dispense (POD) authentication that a POD approach would not prevent this kind of criminal attack on the supply chain.  Would the criminal bother to authenticate drugs that they know to be illegitimate?  No.


A full pedigree mandate for all drugs in the U.S. supply chain would carry a heavy price tag throughout the supply chain.  As long as the mandate included the requirement that all buyers validate the entire pedigree, and as long as the technology used enables a rigorous validity check, I think that drug pedigrees would effectively block all of the paths of entry of illegitimate drugs into the U.S. supply chain, except when the criminal is in the pharmacy.

The question is, which of the four paths of entry I have listed are actually taking place today?  I don’t know, but I hope investigators from the FDA and the California Board of Pharmacy have a better idea and that they use that information to drive decisions about pedigree mandates from here on.

If it turns out that these drugs are entering “the supply chain” directly at pharmacies, then pedigrees will contribute no value in detection, and only some value in the prosecution of the criminals.  Is that worth the cost?

2 thoughts on “Do We Even Need To Mandate Drug Pedigrees Anymore?”

  1. Would the criminal bother to authenticate drugs that they know to be illegitimate? No.
    Unless the Pharmacy Benefit Manager required it for payment.

  2. Dirk,

    Great points. I have enormous respect for Ms. Eban’s research, but her case studies and examples are far out-of-date. Her editorial in the New York Times earlier this year was highly misleading, which why I was so critical of her in “Reality Check on Supply Chain Security” (“).

    Perhaps the pedigree laws are becoming like the TSA: Using Tomorrow’s Technology to Protect Us from Yesterday’s Threats.


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