Will The DSCSA Cause Drug Shortages After January 1?

FDALogoDr. Connie T. Jung, Acting Associate Director for Policy & Communications, Office of Drug Security, Integrity and Recalls, Office of Compliance, Center for Drug Evaluation and Research, U.S. Food and Drug Administration, spoke last week at the 2014 Healthcare Distribution Management Association (HDMA) Traceability Seminar in Arlington, VA.

The presentation was similar to those given in the past except she provided an update on the progress of the next draft guidance the Agency is expected to publish on standards for data exchange (see “DSCSA: Many Questions, Few Answers”).  The deadline imposed on the FDA by the Drug Supply Chain Security Act (DSCSA) is November 27, 2014 for that draft, but during the FDA DSCSA Workshop last spring (see “The 2014 FDA DSCSA Workshop”), Dr. Jung said that the Agency recognized the need to publish earlier than that.  Last week she indicated that they will probably not publish early.  That should not be a surprise to RxTrace readers.

The real surprise came during the Q&A part of the session when two of my former co-workers asked a set of vital questions regarding what the FDA recommends wholesale distributors do after January 1, 2015—the date drugs in the U.S. supply chain must be accompanied by Transaction Information (TI), Transaction History (TH) and Transaction Statements (TS).  The real problem is that, despite many attempts by wholesale distributors to contact their suppliers to find out their ability to provide that information on that date, no response has been received from a significant percentage of those suppliers.  No response at all.  Does that mean those suppliers are ready and just did not feel like responding?  Probably not.  No response probably means they are clueless and will therefore not be ready on time.

Hopefully these are not the biggest suppliers, so a “significant number” of may not translate into a “significant number” of drugs, but even if it turns out to be only one supplier of one drug that is only made by one company, that could quickly translate into a shortage.

Make no mistake, after January 1st it will be a violation of the DSCSA if drug wholesale distributors accept into regular saleable inventory any prescription drug that they did not receive valid TI, TH and TS from their supplier.  Each of these companies have modified their receiving processes to confirm that they have those documents for every product they receive.  No transaction data, no receipt, so those drugs will go straight to quarantine as the law requires.  And if a given manufacturer is not capable of providing TI, TH and TS to one wholesale distributor, odds are, they cannot provide it to any wholesale distributor, which means there will be an overnight nationwide halt to the distribution of those products.

The Big 3 wholesale distributors are publicly held companies and they will do everything they can to avoid being in violation of the law, so the only way they are going to accept and then sell a drug that does not have the newly required transaction data is if the FDA says it is ‘OK’.

To underscore that even some major manufacturers may not be ready by that date, I was seated directly in front of a group of folks from one of the ten largest generic drug manufacturers in the world, and they had just learned about the DSCSA a short time ago and were attending the seminar to learn more about it.  Since they only recently learned about the DSCSA, they told me they have done nothing to prepare yet.  If true, the odds they will be ready to provide the necessary documentation with their shipments in the United States in a mere 45 days are very slim.  (I tried to help by giving them all a discount coupon to my ebook, “The Drug Supply Chain Security Act Explained”.)

So that’s why the questions my former co-workers asked are so important.  After explaining about the significant number of non-responses they have received, one asked the question, (I’m paraphrasing here),

What does the FDA recommend wholesale distributors do if we receive vital drugs after January 1st that are not accompanied by the required documentation?  Should we quarantine those drugs and risk causing new drug shortages, or do we ship them to customers in violation of the DSCSA?

Tough questions.  Either they potentially produce an immediate drug shortage, or they violate the law.  One or the other.  Dr. Jung’s answer?  She said a lot of words, but did not really answer the questions.  A small part of her response included the statement,

“…FDA will be practical and reasonable and recognize product flow is important…”

but in the end, the response contained no real advice that wholesale distributors could use to plan what they will do in this situation.


I’m not surprised, because in my view, the FDA must not answer these questions until the day or so before the requirement goes into effect…like, December 31, 2014.  Of course the FDA will not allow drug shortages to be induced by wholesale distributor compliance with the DSCSA–particularly wholesalers who otherwise have done everything they can to prepare to meet the law but who–despite all of their preparations and notifications–receive non-compliant shipments from suppliers.

So, in the end, it will be absolutely necessary for the FDA to give those wholesale distributors a pass on the requirement to receive TI/TH/TS from at least some of the manufacturers who fail to provide them.  But in my view the FDA cannot say that until the last minute, or everyone would relax and maybe even stop preparing to comply.

And the FDA also cannot reward those who have done nothing to prepare, so, they must seek out which companies are not complying with the law and fine them just enough to compel them onto a path toward compliance as quickly as possible.  Not penalizing those who failed to prepare would actually itself be a penalty on those who put the time, effort and money into being prepared on time.

This is very similar to my old prediction for what the California Board of Pharmacy would have done when their (now obsolete) ePedigree law would have gone into effect (see “Will The California ePedigree Dates Slip Again?”).  Similar to that prediction, the FDA would need to partner with the wholesale distributors by collecting from them the company names and products that are non-compliant, and which would otherwise be quarantined or returned after the DSCSA TI/TH/TS effective date.  Once collected, the FDA will need to provide an exemption to the wholesale distributor, and all downstream trading partners, for selling those drugs.  TI, TH and TS would likely need to be passed from that point on, except certain assertions in the TS will need to be adjusted, since no TI or TS would have been received from the manufacturer, and indicating that a special exemption was given by the FDA.

If my prediction comes true, it might only occur for drugs that are susceptible to a shortage, or perhaps the FDA could use this technique for a wider array of drugs just to ensure there is not a general breakdown in the supply chain.

Investors beware.  Depending on how big this problem turns out to be, and without a special exemption, there could be some significant unanticipated costs experienced by wholesale distributors and the non-compliant manufacturers for handling these non-compliant and unsellable drugs.

What do you think will happen?  Leave a comment below.  At least we won’t have long to wait before we find out.


[UPDATE:  December 2, 2014, make sure you read the next step in this saga.  See “HDMA Expresses Concerns About Industry Readiness for DSCSA” –Dirk.]

2 thoughts on “Will The DSCSA Cause Drug Shortages After January 1?”

  1. Dirk,
    You have stated well the conundrum that Wholesaler Distributors face in the new year even when they are prepared for the new law. This situation may be compounded, in a negative way, by the timing of the requirement on the FDA to publish the Standards for TI / TH / and TS.

    Best Regards,

  2. I wonder how a manufacturer could develop a single data exchange system for all trading partners. Installing a third party software for the trading partners is not a solution. If this is then the wholesalers would end up with many such systems and this a complete CHAOS. Can anyone explain how this is possible with just 20 odd days to go.How can anyone

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