DQSA: Will U.S. Pharma Distributors Mandate Aggregation Data In Phase 1?

worker with stacker at warehouseI attended the Healthcare Distribution Management Association (HDMA) Track and Trace Seminar held in Crystal City, VA on November 11-13, 2013.  I was particularly interested in the session called “Distributor Case Studies and Updates”, as were a lot of other people.  The speakers were:

Each speaker gave a brief presentation about their current serialization and pedigree programs before taking questions as a panel.  As you would expect, all of the preparation these companies have done up to this point has been aimed squarely at the California pedigree law which would have gone into effect for wholesalers in California in mid-2016.  But, as I explained in my last essay, all speakers at that event—including these three—spoke from the perspective that the DQSA would be passed soon.  Anderson, Tadevich and Zenk all acknowledged that the passage of Federal Drug Quality and Security Act of 2013 (DQSA) would have an impact on the direction of their projects.

U.S. wholesale distributors have had to deal with the “patchwork” of state pedigree laws more than any other segment because all of those laws were aimed directly at their business model.  Most national-scope wholesale distributors have a system in place to meet the Florida-type of pedigree law and given the significant difference with the California law (serialization), they were all also working on different systems to meet that law.  With the passage of the DQSA of 2013 all of those pedigree laws became inoperative.  These companies can now stop what they were doing, take a step back and re-evaluate all of the functionality of these existing systems to figure out what parts might be reclaimed for use to meet the new nationwide DQSA requirements, and which parts can be happily shut down and discarded.

Chances are, systems based on the GS1 Drug Pedigree Messaging Standard (DPMS) will fall into that last category.  The designers of the DQSA intentionally avoided the type of requirements that were included in the Florida and California pedigree laws and which dictated the design of DPMS.  I don’t think it was as easy to do that as some might have thought, but they were successful, and DPMS can now be retired.

Or not.  In theory, DPMS could be considered a viable way to format the initial lot-based electronic transX (transaction information, transaction history and transaction statement) by January 1, 2015 since most wholesale distributors and some chain pharmacies and some manufacturers already have DPMS-based systems.  But given the distaste for DPMS I suspect companies will want to ditch those solutions at the first opportunity.  We’ll just have to see what is officially proposed to the FDA by supply chain companies and then by the FDA.


Normally I always recommend that manufacturers listen to their customers when it comes to their serialization and AIDC requirements, but when I heard all three of the wholesale distributor representatives at the HDMA Track & Trace Seminar say they were going to ask manufacturers to provide aggregation data during the first phase of the DQSA deployment I changed my mind—at least on that note.  Don’t listen to them…unless they tell you that in your next Distribution Services Agreement (DSA) negotiation with them.

The McKesson representative was the first to say it, and when he did a cheer literally went up from a group of solution providers in the room.  The representatives from both Cardinal Health and AmerisourceBergen then agreed with him, but keep in mind, these folks were still working on projects designed to meet the California requirements.  Their minds were still filled with day-to-day testing of aggregation data collected and provided to them by their suppliers.  I’m sure they had been hoping that the DQSA would pass, but until it did—one week after the HDMA event—they were heads-down focused on California requirements, which indirectly dictated the need for wholesalers to receive that kind of data.

But the DQSA does not require manufacturers to supply aggregation data—directly or indirectly—until late 2023.  Does it make sense for wholesalers to receive that data before they begin testing their serialization compliance systems sometime in 2020 at the earliest?  No.

In fact, when it comes to the point where a manufacturer could actually provide them with aggregation data I predict these same wholesale distributors will not even be willing to accept it, let alone ask for it, until the time they begin preparing their systems for late 2023 when aggregation data will finally be a necessity.

Very soon now, U.S. wholesalers will be so immersed in problems related to the pressing new regulatory requirements that they won’t even be able to remember what aggregation is, and that’s because serial numbers are not needed in any transX data until phase 2 in 10 years.  If serial numbers are not required in transX documents you can bet they won’t be there, and in that case, there is no value to wholesalers in dealing with aggregation data.  It is a waste of time and resources that no wholesaler can justify.  I predict that wholesaler talk of aggregation data will stop as soon as those in financial control of their projects better understand the differences between the old (California) and new (Federal) requirements.


But at the same time I am making that prediction I also predict that most manufacturers will want to generate aggregation data for their own internal purposes as soon as they begin shipping serialized product prior to December 2017.  That’s because they can then use inference when they ship cases and pallets of their own products to various customers, and in doing so they can know exactly which unit-level serial numbers are being shipped to each customer in every shipment.  That will help them know exactly what happened to a given unit when they later investigate a suspicious drug through a request from a trading partner or the FDA.

This still isn’t a regulatory requirement (before late 2023 anyway), but it will benefit the manufacturer by providing documentation that could help expedite investigations of potentially illegitimate activities.  These include serial number-based chargeback tracking and authorizations, returns verification, diversion monitoring, etc.  In short, most of the non-compliance benefits of serialization come to the manufacturer from knowing exactly which unit serial number went to which customer.  And that’s only going to work if the manufacturer captures the aggregation data for themselves.  If you must spend the money to put a unique serial number on every drug package, you might as well get the full benefits by spending the money to capture who received which of those serial numbers.

Disagree?  Leave a comment below.


13 thoughts on “DQSA: Will U.S. Pharma Distributors Mandate Aggregation Data In Phase 1?”

  1. Dirk, Thanks. Always learn something from your posts. Speaking as an attorney, and CEO of a high-tech company, I am wondering whether the worries over liability in tracebacks won’t keep DPMS-like systems (systems employing aggregation and serialization) on track for the more progressively minded companies. As you say, for the most part it will come down to decisions made by the “financial control” of existing projects as they better understand the differences between the old (California) and new (Federal) requirements. But there is a dollar value that may be budgeted for when it comes to risk management in traceback scenarios. Furthermore, and not unrelated, traceback standards are more and more driven on the international stage by the policies and regulations established outside of the U.S., right? The prescription and non-prescription drugs consumed by the U.S. populace are significantly, if not largely, manufactured outside of U.S. borders. Those manufacturers are beholden to not just FDA standards but EU standards, as well.

    1. Risk Management is definitely an overlooked factor by many. They are only focused on License to Operate and not on internal risk of being in a situation where they need to protect their brands. There are a good ISO standards for industries in how to work with brand protection but laws do not yet refereed to this standard. Perhaps in the future…..

    2. Steve,
      Just to be clear, the features that DPMS offers over other approaches–and the reasons some folks don’t like it–include digital signatures for certifications and the collection of all data elements without the use of supply chain master data. Aggregation and serialization are not unique to DPMS.

      Also, drugs are packaged differently for each target market, for the most part, regardless of where they are actually manufactured or packaged. That’s because of language and regulatory differences. Numeric identifiers like the NDC (U.S.), DIN (Canada) and PZN (Germany) are mandatory in their specific markets and they are not cross-applicable, even through the actual drug (the chemical) may be identical. Regulations for serialization, where it exists, and use of the serial numbers vary from country to country but all of these regulations are aimed only at the drugs that are marketed in that specific country. That’s a long, rambling way of my attempt to explain why manufacturers may view the risk management of each market differently and not as a single whole.

      All that said, I don’t know how to fully predict the affects that risk management might impose on drug manufacturers or wholesalers…or dispensers, for that matter…now that this is a federal law and not just a state law. Let’s all watch for those kind of affects.


  2. I’m positive that many of the large size global pharma manufactures and distributers will realize the benefits of controlling data even down to single salable unit from many obviously reasons. However many mid- and small size operations will find it difficult to justify heavy investments unless they have been hit hard by incidents where such systems could have helped out. I.e. recalls and forensic questioning in connection to Costumer Complaints or even Counterfeit. So I do predict that you will be right to some degree but also that many others will drag out as long as possible and cross fingers that the need for extra invests will never materialize.

    1. Lars,
      I agree. My observation is that U.S. wholesale distributors always meet, but generally do not exceed, regulatory requirements. In this case, the industry worked pretty hard not to be required to use unit-level serial numbers for the next 10 years so that’s why I predict that wholesalers will not accept aggregation data until they begin testing their systems in advance of that 10 year mark. On the other hand, it is altogether possible that the fight the industry waged was simply to not be held responsible for the high accuracy of aggregation data until they have long-term experience with generating and using it. In that case, perhaps we will see more use of it across the supply chain than my current prediction would include. We’ll have to see how it turns out.


  3. Dirk, it was pleasure meeting you in Sept at Logi Pharm session and find your view points always useful for the Industry.

    As US Pharma industry receives fair share of Generics manufactured in / outsourced from India, it is important how top Indian Pharmaceutical companies conduct their programs on Track and Trace Serialization programs is worth watching. DGFT (Director General of Foreign Trade) notifies every Exporter to comply with 2D Bar Code (GS-1 Data Matrix) system by July 2014. In view of the proposed Federal Law (DQSA 2013)where in Manufacturers are supposed to comply with serialization by 2017 and 2023 for the National Markets (USA), how does the Indian players prpare their programs in such a way to be compatable with future serialization requirements, so that there is a pefect synergy in what they are doing today to comply with DGFT and DQSA and all other countries at an early or later dates as applicable??

    Please through some light on the above and advise!

    VP-Supply Chain & STrategic Projects
    Aurobindo USA Inc.
    +1 908 812 8999

  4. Dirk, great article.

    But i do question your prediction on wholesalers. Wholesalers are required to have same verification systems at a unit level that manufacturers do, though by 2019. So if manufacturers dont start sending serialization/aggregation information at least 1-2 years before that, how will wholesalers be able to comply?

    Probably thats the reason why they are saying that they do expect this to come from manufacturers well before 2023.

    The law has given the chance to all parties to build lego blocks by staggering timelines. Its risky to build those blocks right at the deadline, unless they want to have a repeat of the whole CA experience.

    Just my 2 cents.

    Rajesh Singh
    Deloitte Consulting.

    1. Rajesh,
      Perhaps, but I suggest you review the definition of “verify, verification” within the bill itself. It only means that wholesalers will need to contact the manufacturer to confirm that they manufactured the lot or serial number, nothing more. No need to check the history of the drug, only that a drug with that particular lot or serial number was made. And they only need to do that with “suspicious drugs”. You don’t need aggregation to do that.


  5. Dirk, glad to see the DQSA discussion starting!

    As a member of that small-mid size contingent, I completely agree with Lars and recommend maybe changing your heading to “BUT, SOME MANUFACTURERS SHOULD STILL COLLECT AGGREGATION DATA”.

    I think it comes down to dollars, is there a NPV for the investment to do aggregation NOW vs. wait until it’s required?

    Anyone who has piloted serialization knows, that aggregation is disruptive to existing packaging & warehouse operations; that adds cost of inefficiency. Also, there’s the ever looming question of technical obsolescence. Will the serialization technology be better in 5-7 years, will it become commoditized, if manufacturers invest now, will we have to reinvest in the future?

    I think it’s going to be an independent decision for each company based off of achievable business value, some will do it, other will wait until someone (wholesalers, FDA) tell us we have to.

  6. Dirk – indeed let’s be realistic: aggregation is off the table now.

    Given the 2023 delay, it makes no sense to start investing in this technology at this moment. In the next 10 years, many new options will be available to support these processes much more efficient. Technology is changing so rapidly and whatever investment is made now, will be completely outdated. Even standards and further guidance needs to be redefined as documented in the DQSA.

    Meanwhile questions on the location of the serialized GTINs in the supply chain can be addressed in other ways: manufacturers will always know which SGTINS are commissioned and produced, enabling authentication as soon as the product leaves their packaging lines; manufacturers will also know when they don’t not have any SGTINS anymore for a suspected lot e.g. when all pallets for the lot are shipped; manufacturers will also know to which supply chain partners they have shipped their SGTINS for the lot; and finally manufacturers will also know if they still have specific SGTINS for a specific lot in their internal supply chain (as long as there is volume for a specific lot)

    However, without the aggregation, they will not know the exact location of a specific individual SGTIN (help: where is my SGTIN?): they will know whether or not they still have SGTINS, but they will not know which SGTINS. Is that a problem?

    When collection all the Transaction Histories for all shipments, supply chain partners can easily reconcile and confirm where the counterfeits have entered the supply chain. In case of confirmed problems (e.g suspect product), the lack of aggregation might seem a burden to wholesalers. In case they have not shipped all pallets of the specific lot, they will have to open all boxes for the suspect lot/batch, in an attempt to verify and find the SGTINs.

    But how often will this occur in the US supply chain? And even with aggregation implemented, all partners will first put lots in quarantine and then likely still open all boxes since a standard for inference and aggregation will not be FDA approved by 2023. Whom will want to trust the aggregation technology at that moment?

    I can’t find any reason so far to continue with aggregations. Any comments?

    Hans Vanderwegen

  7. Dirk,

    Thank you for the continued updates and interpretation. However, I question many of the predictions. California resulted in wholesalers and others across the supply chain to already have systems in place, some well tested and ready to receive unit level serialization and “aggregation”, since they had California looming. Our observations are that many manufacturers and packagers also forged ahead, including some 3PL providers and wholesale distributors. The work and efforts to handle serialization and aggregation exceeds the efforts to meet the pedigree reporting requirement, which raised an additional, and different set of challenges. I believe that the Federal change has introduced two (2) factors, confirmed by some of the manufacturers and others. First, there is more time now to plan and implement the necessary solutions, and second, that a uniform standard for the US was required and thankfully achieved to avoid state by state varying requirements. I believe it is too soon to predict any overall impact, let alone efforts needed in all segments of the supply chain that perhaps cannot wait. If the drug industry were to take a lesson from others, the foundation to comply with the requirements for the US, and the growing global requirements, may be more costly and also delay the ROI and benefits. We heard the same arguments about product identification and UPC, and those who embraced the capability had a competitive advantage for quite some time.

    Regarding comments about verification, I believe there is a mixing of the concept of pedigree along with it. While the requirements of an ePedigree and the history are not included, the ability to verify appears to imply much more than just a phone call. The definition itself points at the product or case, and may require unit level identification or inference the way it evolved in the California discussion. I would also suggest that the interpretation of “Verification or Verify” will be hotly debated. I disclaim any authority or legal standing on the regulation, but I would offer some opinion on interpretation. Verification is defined at the top of the bill, and it is subsequently applied throughout. The definition specifically states “determining whether the product identifier affixed to, or imprinted upon, a package or homogeneous case corresponds to the standardized numerical identifier or lot number and expiration date assigned to the product by the manufacturer or the repackager”. Furthermore, beginning no later than January 1, 2015, “A wholesale distributor shall not accept ownership of a product unless the previous owner prior to, or at the time of, the transaction provides the transaction history, transaction information, and a transaction statement for the product”. Therefore, reading onto the law that all that will be needed is to contact a manufacturer that the lot or serial number was made (and how they collect that from the product may still be debated, yet practically speaking some barcode that will facilitate the job better than human readable), seems a bit optimistic, if not farther from the intent of the regulation, or worse wrong, to the point of a false sense of compliance. I hope that others will share their interpretations and begin to work to agree within the industry and pilot solutions, the way some of the efforts in Europe came together.

    Looking forward to the discussions as this unfolds. Let’s hope we don’t see patient safety and the costs associated with losses of all kinds continue to grow without action being taken in a timely manner to better secure the supply chain with serialization and anti-counterfeiting technologies alike.


    1. Randy,
      Thanks for your thoughts. You may turn out to be right. We are all making predictions based on what we know and what we think we know, but, as I’ve said, the only interpretation of the law that has much significance is the one the FDA will make. One of the most important things I keep in mind when I make my predictions is that the language in this law was a negotiation primarily between different segments of the industry. That is, most of it was basically written by the industry. You could look at it as having gone through a kind of “unanimous consent” between the major segments that were represented within the Pharmaceutical Distribution Security Alliance (PDSA). If one segment would have balked at something, the language would have been adjusted until they accepted that part. If it hadn’t worked that way, the bill would never have been brought forward for Congress to consider.

      So, to understand how the industry intended the language of the bill to be interpreted, all you have to do is understand what each segment of the industry liked and didn’t like about the various existing pedigree laws, particularly California and Florida. The wholesalers liked Florida’s invoice statement for drugs that they buy directly from the manufacturer, so something like it is in the federal bill. Manufacturers recognized that adding a serial number to a package of drugs was inevitable so it was OK to leave that in, but aggregation at six sigma levels of accuracy is what they didn’t like so that’s not in the federal bill, at least for 10 years (there is no guarantee it will be necessary after 10 years either). Wholesalers and retailers don’t have a problem with serial numbers being on the product but don’t ask them to do anything with those numbers on a large-scale basis so the bill doesn’t have any use of the serial numbers for the first 10 years unless the drug is “suspicious”, a very tiny percentage of the drugs in the supply chain. I could go on, but that’s probably enough to make my point.

      Without being required to produce aggregation at six sigma levels it is possible–maybe even likely–that manufacturers will generate that data. I think it will be in their best interest to do so, as I pointed out in my essay, but I don’t think wholesalers will see any value in that data and that’s why I predict they will not accept it. But I could be wrong. We’ll see what happens in a few years.


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