Everywhere I go lately I am asked “Do you think the California ePedigree dates will slip again?”. I don’t have any special or inside knowledge but, as usual, I do have a theory about that. I offer it to you here as one possible outcome. You can decide for yourself if you think it is dubious, merely plausible, fully probable, or somewhere in-between.
First, some background. The California drug e-pedigree law was first enacted by the California Legislature and signed by newly elected Governor Schwarzenegger in 2004. It was originally to go into effect in 2007, but in 2006 the Legislature passed additional changes to the law, including a delay to 2009. Then in early 2008 under intense pressure from companies in the supply chain the California Board of Pharmacy exercised their authority (which was one of the changes added by the Legislature in 2006) to push the compliance date to 2011. Finally, in October of 2008 the California Legislature passed more changes to the law, including the current compliance dates that we are currently facing:
Supply Chain Segment
|January 1, 2015||Pharma Manufacturers||Serialize and ePedigree 50% of their prescription drug packages|
|January 1, 2016||Pharma Manufacturers||Serialize and ePedigree the remaining portion of their prescription drug packages|
|July 1, 2016||Pharma Distributors and Repackagers||
|July 1, 2017||Pharmacies||
This legacy of delays, in combination with the many delays that the pedigree provisions of the Federal Prescription Drug Marketing Act (PDMA) of 1987 experienced before it, have led people to be skeptical that any pedigree regulation will actually go into effect on the dates that are specified at any given time. Justifiably so it seems.
So how can you answer the question “Will the California ePedigree Dates Slip Again”? Most slips of the dates in the past have happened within one year of the effective date at the time. We are now a little more than two years away from the first date. Given this history and the current date, how can anyone make a prediction other than “yes, it will be delayed again”?
AND MY PREDICTION IS…
I predict that it will NOT get delayed again. Here’s how I arrive at that prediction.
Things are different now than any time prior to any of the earlier delays. As part of the agreement to push to the current dates, the sponsor of the bill in the California Legislature received assurances from 35 companies and organizations in the U.S. supply chain that they would be ready this time. Those companies include large and small, branded and generic manufacturers, multiple large wholesalers, multiple large chain pharmacies and most of the big industry organizations, including PhRMA, GPhA, HDMA, NCPD and even NACDS.
As a result, many of these companies are out in front with their technology deployments for meeting the law. They have spent many millions of dollars so far getting ready. Most will probably be ready on time.
But not everyone will be ready. Many people think that will become obvious prior to the effective date of the law and that realization will force California to buckle and push the date out even farther rather than having their citizens endure significant drug shortages of some (many?) life-saving drugs. I don’t think that will happen.
MY THEORY: A “NEGOTIATED-FINE” PROGRAM
What I think will happen is that California will keep close tabs on who will be ready and who won’t be ready. They will ask companies who aren’t going to be ready to contact them and self-report. Around the time the law goes into effect for manufacturers they will meet with each of those companies and work out a deal for fines, pro-rated on how many units are not yet compliant, and how much effort the company had expended for preparations prior to the deadline, and with new individualized completion dates with bigger fines if those aren’t met.
The Board of Pharmacy has already said how they intend to enforce the law. In the FAQ document called “Questions and Answers Relating to the California Electronic Prescription Drug Pedigree Law(s)” they say,
“…In addition to other possible sanctions for non-compliance with pedigree requirements up to and including civil fines, injunctions, or criminal prosecutions, the board may cite and fine $5,000.00 per occurrence” (see the answer to Question #2),
and by “per occurrence” they mean “for each saleable unit”. Taken at its most extreme interpretation, that means, a single case of 96 non-serialized and non-pedigreed units could be fined at almost half a million dollars! But that’s the extreme interpretation. The California pharmacy law appears to provide the Board of Pharmacy leeway to adjust their fines by giving…
“…due consideration to the appropriateness of the amount of the fine with respect to factors such as the gravity of the violation, the good faith of the licensee, and the history of previous violations.” (Section 125.9(a)(3) “Citation and Fine”)
In other words, they don’t always have to go with the extreme interpretation. But don’t forget, the state of California is in pretty bad shape financially. The ability to assess fines to large companies for not complying with the pedigree law might be pretty attractive to them. The size of the negotiated fines would probably be as large as possible without causing the manufacturer to stop allowing their drugs to be shipped into California. In other words, probably most of your California profit until you comply.
Manufacturers could choose to claim that they didn’t violate the law, that it was actually the wholesaler who violated the law when they carried their non-compliant drugs across the California border. In fact, I’ve also predicted that the wholesalers will refuse to carry non-compliant drugs across that border after their deadline (see my essay “Who Will Decide Which Pedigree Model You Will Invest In?”).
Because it will be outside of their power to make those drugs conform, wholesalers would probably have to be a part of the negotiation between each manufacturer and the board. At least they would need to be given a pass, so they won’t be fined for delivering non-compliant drugs after those negotiations are complete. Pharmacies too, if the non-compliance exists that long (July 2017).
Remember, this is just a theory, but a supply chain this big won’t be fully ready for change this big on a specific date—even when you stagger the dates (see “Plateaus of Pharma Supply Chain Security”). Considering the legacy of delays, some companies aren’t likely to spend the money to fully comply until after the deadline is past. So, in my view, if California expects to hold onto their current deadlines without crippling drug shortages, they will have to come up with some kind of clever technique like this negotiated fine program.
WHAT ABOUT FEDERAL PRE-EMPTION?
On the other hand, California may not need to resort to clever techniques if Congress passes a clever law that cleverly preempts all state pedigree and track and trace laws. Readers of RxTrace should be well aware of the current effort by a group of Congresspeople who are asking for comments from stakeholders and the public on their discussion draft of a potential bill that would do just that (see RxTrace: Federal Pedigree and also “The Preemption Provisions Built Into The California Pedigree Law”).
As I pointed out last week, just about the only thing in that draft that isn’t a “policy option” is the preemption clause (see that clause on page 116 of the draft). After all, that would be the whole point of the bill.
What are the odds that effort will result in the elimination of the California Pedigree Law? I’m not currently part of that effort so it’s hard to judge its viability (and if I were a part of that effort I probably wouldn’t be able to say) so let’s just give it a 50-50 chance of happening prior to 2015. Is that enough for you to skip preparations?
Leave a comment below and tell us. Also leave a comment if you have any other ideas for clever techniques California might use to retain their deadlines.
9 thoughts on “Will The California ePedigree Dates Slip Again?”
It’s amazing that the Federal Legislation aims to block the only effective effort to thwart counterfeit entry. Obviously none of the folks writing this legislation have first hand knowledge of counterfeiting and the damage it can cause. That they would try to get this passed post-election in a lame duck session of Congress speaks volumes. We’ll see how it proceeds.
As always I enjoy your posts. However, you do offer up one point with which I totally disagree: “but a supply chain this big can’t be fully ready for change this big on a specific date—even when you stagger the dates”. This is not about the supply chain but about individual companies and they CAN do it IF they WANT to do it. Pharma companies can do anything they want when they want. Will they is the crux of the issue. They’ve had more than enough time, way more as have EVERY channel member. Manufacturers actually have the easiest part of implementation especially when it is a bar code. They’ve been tracking lot’s for years so tracking bar codes is easy and even easier if they are only shipping full cases. The rest of the channel members have historically been the ones fighting the tracking of lots (which is both a safety issue and cost issue).
Otherwise, I’m totally in synch with you on your views and predictions. I might be more optimistic about the preemption. I suspect that has a LOT of support behind it specifically to put a halt to CA that we aren’t seeing. A lot of companies in the supply chain have deep pockets to help influence this type of legislation/policy.
I look forward to seeing you in December at the conference!
Good point. I’ve used the wrong word to describe what I meant to say. What I meant to say is “…but a supply chain this big won’t be fully ready for change this big on a specific date–even when you stagger the dates”. My point is, no matter when you pick the date(s) some companies are just going to gamble that the date will get pushed out, especially now that we have seen so many delays. So some percentage of companies just won’t be ready this time, or any time. With that simple little word change I think we are now in full agreement, no?
Having read your article and the comments I must admit I am in line with all the views and your prediction that CA will not delay again.
From contacts that I have spoken with I see some shifts towards being ready but I also feel that some are still waiting to see if there will be another delay announced – the gamble approach. The sad thing is that this is something that from a pure ethical POV should be embraced, plus I do not believe that some of these companies realize what it takes to introduce serialization on some of the “older” manufacturing lines.
Does anyone know who is will own and maintain the computer tracking system?
The California law doesn’t specify the technology to be used for ePedigree formatting or exchange. It leaves that up to the industry to figure out. Currently the GS1 Drug Pedigree Messaging Standard (DPMS) is known to be usable for compliance but check with your trading partners. It appears that some companies are thinking about using GS1’s Electronic Product Code Information Services (EPCIS) standard alone for ePedigree compliance. As far as I know, no one has checked with the California Board of Pharmacy to confirm that they will accept it for ePedigree compliance. Most vendors are offering solutions that make use of both standards, which is probably the best approach.
But either way, the “computer tracking system” that you refer to will be owned and maintained by each individual company in the supply chain. That is, you will own and maintain the part of the system that holds your data.
Hi there, Dirk! I hope to see you Monday at HDMA!
Regarding the language in the table above pertaining to compliance of manufacturers: “Serialize and ePedigree 50% of their prescription drug packages…” I have understood this to mean 50% of the product lines. I suppose if a company has one line, it could mean 50% of the actual packages, but man would that be a mess!
Please keep my 3PL perspective in mind here!
No, the percentage of your production (or packaging) lines is not one of the ways the board allows a company to calculate the 50% for serialization and ePedigree purposes. According to the law itself, the determination of what makes up 50% of your drugs is partly left up to you. It can be 50% of your total production volume, it can be 50% of your SKU’s, or it can be, 50% of the drug-product-families that you produce—whichever benefits you.
The exact language is here:
Be aware that the California Board of Pharmacy expects all manufacturers to notify them of how they intend to measure their 50% before the end of December, 2014.
Unfortunately I won’t be able to attend the HDMA Track & Trace Technology Seminar next week due to a long-scheduled vacation.
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