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.