In Part 2 of this series I explained exactly what the “special privileges” are in the Drug Supply Chain Security Act (DSCSA) for wholesale distributors who purchase directly from the manufacturer, the exclusive distributor of the manufacturer, or a repackager who buys directly from the manufacturer (see “DSCSA: Special Privileges For The “Big-3″ Wholesale Distributors, Part 1”, and “DSCSA: Special Privileges For The “Big-3″ Wholesale Distributors, Part 2”). In this third part, I will explain why all of this matters to drug manufacturers and how, in some situations, the “Big-3” wholesale distributors may not want to handle your product after the end of this year.
IT’S GOOD TO BE THE FIRST WHOLESALE DISTRIBUTOR
As I already pointed out in the two previous essays, it is really good to be the first wholesale distributor, because they don’t have to keep track of which units were bought from which supplier on which date and what the lot numbers are, etc. The construction of the DSCSA Transaction Information (TI) and Transaction History (TH) become much easier for them. Wholesale distributors who are NOT the first have a lot more work to do. So is it any surprise that the “Big-3” will not want to be the second, or third, or anything other than the first wholesale distributor?
BUT THIS COULD BE A PROBLEM FOR SOME PHARMA MANUFACTURERS
This is a problem whenever a drug is made by one company, and marketed by another company, because that second company might be viewed as the first wholesale distributor, thus making the “Big-3” each a second wholesale distributor. Oops. This extra entity (the marketing company) results in “shifting” of the supply chain by one level.
Last year I published an essay called “Working With CMOs Under California ePedigree” in which I looked at a few situations where companies may have thought they were considered the “manufacturer”, but the California pedigree law may have viewed them as a wholesale distributor, repackager or a contract manufacturer. Of course, if you re-read that essay, keep in mind that it was looking at the language contained in the California law, which is now obsolete. But something similar happens when you look at the DSCSA.
However, unlike the authors of the California law, those who wrote the DSCSA attempted to provide several ways to allow these companies to be treated as something other than the first wholesale distributor. Here is a drawing from the CMO essay, modified to reflect the DSCSA situation:
In this situation, if manufacturer A is the NDA- or ANDA-holder, then “manufacturer” B would have looked like a wholesale distributor under the California law. But the DSCSA allows “manufacturer” B to be treated as an “exclusive distributor” for this drug, as long as manufacturer A does not sell that packaged drug to anyone else. In the DSCSA, purchases of drugs by a wholesale distributor from a manufacturer’s exclusive distributor are treated as if they were bought directly from the manufacturer. That is, the exclusive distributor has a special status in the DSCSA. It is not considered a “manufacturer”, but its existence does not result in the kind of “shifting” of the supply chain as it would in the case of the old California law. Therefore the first wholesale distributors are the companies who buy from the DSCSA exclusive distributor, because, by the nature of the contract between A and B, they cannot buy the drug directly from the NDA- or ANDA-holder. The path of drugs between manufacturer A and “manufacturer” B—the DSCSA exclusive distributor—is not in question.
Does manufacturer A need to provide TI, TH and TS to their DSCSA “exclusive distributor”? Surprisingly, that isn’t resolved clearly in the text of the law, but since the DSCSA exclusive distributor is clearly NOT considered a “manufacturer” by the DSCSA, then I assume TI, TH and TS are required. The DSCSA “exclusive distributor” should also plan to provide TI, TH and TS to their customers. The only apparent effect of the DSCSA “exclusive distributor” role is that it eliminates the “shifting” so that the wholesale distributors who buy from it may be treated as the first wholesale distributor and not the second, and therefore their DSCSA chore is greatly reduced.
Does the DSCSA “exclusive distributor” enjoy the same reduction in their chore? The DSCSA doesn’t say.
If manufacturer B in the drawing above is the NDA- or ANDA-holder, then “manufacturer” A is simply acting as a contract manufacturer/packager (CMO/CPO). The DSCSA does not refer to CMO/CPOs but it introduces the concept of a “co-licensed partner” (CLP). That is, the contract between A and B ensures that “manufacturer” A will supply this drug only to manufacturer B, leaving no doubt about the path of supply. In this case, the DSCSA will view both companies as a “manufacturer” of this drug, and so companies who buy from manufacturer B will be viewed as the first wholesale distributor instead of the second.
Does “manufacturer” A need to provide TI, TH and TS to manufacturer B? Apparently not, since both fall into the category of DSCSA “manufacturer”.
YOUR GOAL: FIT INTO EITHER THE CLP ROLE OR THE EXCLUSIVE DISTRIBUTOR ROLE
So, if you want your drugs to be distributed by the “Big-3” after this year, your goal must be to make sure those companies remain the first wholesale distributors of your products. If you find yourself in one of the situations above, but you are unable to declare that you are either the CLP or the exclusive distributor, it probably means that the “Big-3” will not be the first wholesale distributor and that means they will have to go through a lot more work just to distribute your product. Unless your drug is the latest, cutting-edge, cure-all drug that cannot be acquired any other way, the “Big-3” wholesale distributors in the U.S. will probably not be willing to go through the extra trouble to distribute it. Their extra costs may not justify their return.
The “Big-3” put a lot of effort into getting the special privileges built into the DSCSA, and for good reason. Your job is to make sure they are able to take advantage of them while distributing your product.
There are even more interesting consequences stemming from the way these special privileges were implemented in the DSCSA. I’ll have more to say about them in a future essay.
One thought on “DSCSA: Special Privileges For The “Big-3″ Wholesale Distributors, Part 3”
This is a good article for the manufacturer’s. There is so much confusion as to in which scenarios the manufacturer needs to send TH. This article helps to clarify.
Am I correct in stating that only if the manufacturer is not the exclusive distributor of the product, then they have to provide TH to downstream partners?
KMAT Consulting Inc.
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