Wholesaler Confusion Over DSCSA Aggregation Explained

iStock_000028920134XSmallWhile listening to a monthly Drug Supply Chain Security Act (DSCSA) call hosted by one of the Big-3 wholesale distributors I heard a comment that snapped me out of my conference call-induced stupor.  Unfortunately I was in a location where I could not take notes so I don’t remember the exact comments that were made, but I remember what it was that brought me back to full consciousness.

The comment made me realize in a jolt why the Big-3—or at least the one running this monthly call—may be unwilling to give up on their claims that they will need aggregation data to accompany shipments of prescription drugs from manufacturers as early as November 2019.  It may have to do with a mis-interpretation of their handling of saleable returned product within the DSCSA.  Let me explain.

First, I have discussed aggregation as it relates to the DSCSA in quite a few previous essays and I usually focus on how the wholesale distributors are mistaken in their apparent thoughts that they will need it in 2019.  See the following set of older essays for the full background.

Date Published Title/link
March 26th, 2012 Pharma Aggregation: How Companies Are Achieving Perfection Today
November 22nd, 2013 DQSA: Will U.S. Pharma Distributors Mandate Aggregation Data In Phase 1?
February 10th, 2014 Does The DQSA Require Manufacturers To Provide Aggregation Data? Survey Says…
June 9th, 2014 The Aggregation Hoax and PIA
February 23, 2015 When Will The DSCSA Ever Require Investments In Aggregation?

The basic claim by these companies is that they will probably need the serial number-based packaging hierarchy, or “aggregation data” from manufacturers beginning on November 27, 2019 so that they are able to meet the new requirements that will go into effect for them on that day.  What they are apparently referring to is the DSCSA provisions on saleable returned drugs.  There are several DSCSA sections that touch on this topic.  Here they are (for a full explanation of the DSCSA, including these sections, see “The ‘DSCSA Explained’”):

Section 582(c)(B)(i) applies to wholesale distributors and it reads:

“(i) SALEABLE RETURNS.—Notwithstanding subparagraph (A)(i), the following shall apply:

“(I) REQUIREMENTS.—Until the date that is 6 years after the date of enactment of the Drug Supply Chain Security Act (except as provided pursuant to subsection (a)(5)), a wholesale distributor may accept returned product from a dispenser or repackager pursuant to the terms and conditions of any agreement between the parties, and, notwithstanding subparagraph (A)(ii), may distribute such returned product without providing the transaction history. For transactions subsequent to the return, the transaction history of such product shall begin with the wholesale distributor that accepted the returned product, consistent with the requirements of this subsection.

“(II) ENHANCED REQUIREMENTS.—Beginning 6 years after the date of enactment of the Drug Supply Chain Security Act (except as provided pursuant to subsection (a)(5)), a wholesale distributor may accept returned product from a dispenser or repackager only if the wholesale distributor can associate returned product with the transaction information and transaction statement associated with that product. For all transactions after such date, the transaction history, as applicable, of such product shall begin with the wholesale distributor that accepted and verified the returned product. For purposes of this subparagraph, the transaction information and transaction history, as applicable, need not include transaction dates if it is not reasonably practicable to obtain such dates.”

Section 582(c)(4)(D) reads:

“(D) VERIFICATION OF SALEABLE RETURNED PRODUCT.—Beginning 6 years after the date of enactment of the Drug Supply Chain Security Act, upon receipt of a returned product that the wholesale distributor intends to further distribute, before further distributing such product, the wholesale distributor shall verify the product identifier, including the standardized numerical identifier, for each sealed homogeneous case of such product or, if such product is not in a sealed homogeneous case, verify the product identifier, including the standardized numerical identifier, on each package.”

To help you calculate the effective dates, the DSCSA was enacted on November 27, 2013.

Prior to the DSCSA, wholesale distributors generally would take back saleable product as long as they had previously sold at least some of that same product to the returnee in the recent past.  For larger or long term, trustworthy customers—and where there are no laws against it—they would usually even take “back” drugs that they probably did not sell originally.  This long-standing practice was done for the purpose of providing maximum service to these important customers.

The DSCSA will put a stop to this practice in 2019, if not before.  That is probably a good thing.  Accepting “returns” from customers who did not buy those specific units from you, and then re-distributing them to other pharmacies, seems like a bit of a hole in the supply chain that could be exploited by criminals.  I think closing this hole is the only affect Congress intended section 582(c)(i)(II) ENHANSED REQUIREMENTS to have on the supply chain, although, I will admit, it isn’t entirely clear.

Some of the wholesale distributors cling to the claim that they will need aggregation data when these provisions go into effect so they are able to fulfill these requirements.  I still disagree and I think the problem stems from the unusual definition of the term “verify” in the DSCSA.  I warned RxTrace readers back in early 2014 that you cannot properly understand the DSCSA unless you read and fully understand the definition of terms (see “Don’t Skip The DQSA Definition of Terms Section”).  The term “verification or verify” are the terms that I was most worried about at that time.  These terms are defined in Section 581(28).  That definition is:

“(28) VERIFICATION OR VERIFY.—
The term ‘verification’ or ‘verify’ means 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, as applicable in accordance with section 582.”

By using this definition in the wholesale distributor’s section on saleable returns, Section 582(c)(4)(D), you can see that, when wholesale distributors receive saleable returns after November 27, 2019, they will need to “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”.

HOW WILL THEY DO THAT?

Right now I think these wholesale distributors may be thinking the only way to do that will be if they receive the aggregation data from the manufacturer for every unit they receive.  That would be a lot of data.  But then later, when they receive some potentially saleable returns from one of their customers, they could search through all of the aggregation data they previously received from that manufacturer for the specific case- or unit-level serial numbers found in the set of returns.  If they find those serial numbers in the aggregation data they can be confident that the manufacturer did assign those numbers to that product.  That way, they have fulfilled the “verification” requirement of Section 582(c)(4)(D).  And I agree, that would be one way to do it.

But that would be a mis-read of the DSCSA manufacturer provisions.  Are the wholesale distributors reading the manufacturer’s DSCSA requirements?  Maybe not as closely as they should.  Perhaps they missed the manufacturer’s DSCSA Section 582(b)(4)(C) REQUESTS FOR VERIFICATION:

“(C) REQUESTS FOR VERIFICATION.—Beginning 4 years after the date of enactment of the Drug Supply Chain Security Act, upon receiving a request for verification from an authorized repackager, wholesale distributor, or dispenser that is in possession or control of a product such person believes to be manufactured by such manufacturer, a manufacturer shall, not later than 24 hours after receiving the request for verification or in other such reasonable time as determined by the Secretary, based on the circumstances of the request, notify the person making the request whether the product identifier, including the standardized numerical identifier, that is the subject of the request corresponds to the product identifier affixed or imprinted by the manufacturer. If a manufacturer responding to a request for verification identifies a product identifier that does not correspond to that affixed or imprinted by the manufacturer, the manufacturer shall treat such product as suspect product and conduct an investigation as described in subparagraph (A). If the manufacturer has reason to believe the product is an illegitimate product, the manufacturer shall advise the person making the request of such belief at the time such manufacturer responds to the request for verification.”

That is, starting in November 2017, manufacturers are required to respond to request for “verification” by wholesale distributors (and others).  They are to “…notify the person making the request whether the product identifier, including the standardized numerical identifier, that is the subject of the request corresponds to the product identifier affixed or imprinted by the manufacturer.

Rather than necessitating drug manufacturers to go through all of the expense and effort to provide wholesale distributors with aggregation data for all of their incoming shipments, just so they can properly process their saleable returns, Congress clearly intended those wholesale distributors to simply submit a “request for verification” to the manufacturer or repackager just for those returned units.  That will be a lot easier for everyone, and a lot less costly for the manufacturers.

Remember, the DSCSA does not even mention aggregation until the “Enhanced Drug Distribution Security” (EDDS) phase that starts in November 2023, and everything else in the law results in a gradual escalation of technologies through a series of “plateaus”, as I call them (see “Plateaus of Pharma Supply Chain Security”).  Why would Congress expect manufacturers to leap to one of the most costly technologies as early as 2019 without even mentioning it, and all just so wholesale distributors can meet a returns requirement for a handful of units each day?  They wouldn’t!

If your wholesale distributor tries to claim they need aggregation data so they can meet their 2019 DSCSA returns requirement, ask them to explain why.  And then send them a link to this essay.

Dirk.

13 thoughts on “Wholesaler Confusion Over DSCSA Aggregation Explained”

  1. This seems to be two phased. First there is the regulatory requirement and then a business requirement.

    There is also the issue of how data will be transmitted among trading partners. Will this be direct passing of information between trading partners, will it be a semi centralized database, or will it be a centralized database (then how would information be accessed).

    There is also the grandfathering provision to consider throughout all of this that adds complexity. Given product will be returned with and without a SNI, having had lot information provided to the customer versus not having been provided, etc – for a time, trading partners will have multiple variations of these processes in-flight which can create additional process and systems complexity.

    So the first priority for the wholesaler is to confirm that received product is genuine – is the proposition that for each proposed salable return, that the wholesaler must first contact the manufacturer to ensure that the product is genuine? What will then be the expected mode of this request and confirmation.

    This would need to be done for each case and each unit. If the case has been opened, each individual unit will be required to be scanned to collect the data. Next this information request will need to be sent to the manufacturer confirm that the product is genuine.

    Are the manufacturers prepared for this potential influx of contact and the research required to verify this product within the required time-frame?

    This also becomes a business question, as this will be potentially a very time consuming process followed by then a 24 hour wait for the manufacturer to confirm this product is indeed genuine.

    This product will need to be quarantined in the mean-time, as it can not be but away until it can be confirmed that it is genuine product.

    The next question then becomes, is the manufacturer required to confirm that they sold this product in question to the wholesaler that is making this request? This can be done by lot, but product from the same lot will commonly be shipped to multiple customers. Will the manufacturer then be able to confirm that the product was sold to this specific customer, without aggregation?

    1. Ryan,
      I think you are reading in a whole lot more into the DSCSA than is there. Verification is pretty straightforward if you just read the DSCSA definition. You should not let your normal understanding of that word interfere with what it required. Companies are certainly welcome, and perhaps encouraged, to go beyond the simple definition, but they are not required to. All they need to do is look up the serial number, lot number and NDC to confirm that it matches one that they actually made. That’s it. The DSCSA requires all manufacturers to have that verification capability by November of 2017.

      In 2023 the requirements get a lot more complex and foggy. Companies are welcome to jump out ahead into that fog if they have a lot of money sitting around and don’t know what else to do with it. Maybe you and I can help them with that!

      One clarification about what will happen in November 2019, returns coming in to wholesale distributors will get a little easier in one way. Product that does not have serial numbers on them cannot be accepted as “saleable returns” because the DSCSA bars wholesale distributors from dealing in non-serialized product from that point on. Prior to that date they can accept non-serialized saleable returns, but they are also not under the requirement to verify those products during that time.

      Dirk.

  2. So there are regulatory requirements, but as we have seen, the wholesalers may also choose to introduce additional requirements that support their business operations. So the wholesalers aren’t accepting paper documentation, they are requiring the TI, TH, and TS be sent electronically. So while this isn’t a regulatory requirement, it is a requirement to do business. So regulatory requirements are key, but for the wholesalers, ensuring that this doesn’t impact productivity, will be critical.

    On your first part I agree, but from the wholesaler perspective, if the product comes back to the wholesaler and this information does not already reside within wholesaler master data, they will then need to contact the manufacturer to track each serialized unit. This would be a time consuming process. So the manufacturer will have to be prepared to indicate that they made these units and/or cases.

    On the last part, there are the regulatory requirements but this would seem to create an unintended consequence. There could be product in the market space, with sound dating, that has no issues with efficacy, but now would become unsaleable or unable to transact against because it isn’t serialized, and this would be a larger issue that the FDA is going to need to look at. So how will the grandfathering provisions need to be addressed here.

    1. Ryan,
      Fortunately the volume of saleable returned product is small enough that a maximum 24 hour verification delay should not be a showstopper for anyone. Wholesale distributors will need to balance their demands of manufacturers with reason. Demanding electronic TI/TH/TS makes complete sense. Demanding aggregation data to make processing of saleable returns does not.

      Regarding grandfathering, I think this will be a good lesson for drug manufacturers. They will need to do some projections against the 2017, 2019 and 2020 (for dispensers handling only serialized product), to ensure that no segment ends up holding drugs that they cannot sell after their deadline. This isn’t impossible, but as you imply, it will take some thought. Worst case, manufacturers will get some product back in 2019 and maybe 2020 because it can no longer be sold due to these DSCSA requirements. Analysis and planning should keep the volumes to a minimum. Shipping products with the DSCSA product identifier on them before the 2017 deadline is one strategy that will help with certain products.

      Dirk.

      1. Dirk, I agree 100% aggregation is one solution and there certainly are others out there. Some more costly for the wholesaler, some more costly for the manufacturer, and some add incremental costs to both.

        Until we as an industry quantify those options in terms of efficiency, sustainability, and cost, for each potential method for executing verification for sale-able returns, the conversation becomes an emotional one and not one based on facts and dollars.

        We as an industry, through industry trade associations, are starting the scoping of Pilots to help quantify each option, and use the results of those pilots to communicate to all in the supply chain the “cost” of implementing each option.

        I also caution on making broad assumptions about volume. Some wholesale distributors may have 50 returns a day, others have upwards of 10000 (per DC). Are wholesalers prepared to call or use a portal for 100k per day? Are manufacturers prepared to answer handle the volume of requests per day?

        We as an industry will be learning a lot over the next year and hopefully we can start having conversations based off facts and dollars and less on emotion and qualitative guesses.

        1. Anonymous,
          I concur with the need for the industry to work these things out. I’m glad to hear that they are beginning that process. But let’s be a little more honest and less emotional about the number of returns a given DC might receive in a single day. Does the number 10,000 you cite include both saleable and non-saleable units? Does that number represent the typical daily average, or a rare situation? When the numbers do approach 10,000 in a single day, what percentage of those are still unopened in their homogeneous cases? The DSCSA allows wholesale distributors to perform the verification process in 2019 through 2023 using the homogeneous case serial number as long as it is clearly unopened. I certainly would not dispute the number 10,000, but I suspect the true impact of the DSCSA on processing saleable returns for this “worst-case” DC is considerably less than you imply. So let’s see the actual numbers. Then let’s work it out as an industry.

          Dirk.

          1. Agree with the commenter above and I think that will be the issue, just volume and 10k may be special case occurrences. Most sites won’t have an issue, but at times, there could be a return of significant volume or special case returns where the product is salable. This often occurs when a large customer makes an error in ordering and a truck or large portion of an order is returned to a hub dc, or to many of the spoke dc’s.

            This won’t typically be 10k cases at a site, though it could across the network, but wholesalers are breaking down pallets and cases, so the e aches present the time challenging piece here. Often times this gets compounded because amongst returns might be a mix of product that is dis-organized. Typically returns that cannot be resold will be sent to a third party, so I don’t expect that piece will be as serious an issue.

            Being that the homogeneous case can be used – wouldn’t the manufacturer already have and know, what bottles were aggregated to the case? The previous pilots for CA Pedigree, most I cam across already had this in place. The packaging line systems are going to need to be built for aggregation, from a project management perspective, It wouldn’t make sense to take a line down for 4, 6, or 8 weeks and then have to do it again in a few years, then comes all the testing associated with managing systems, data, and interfaces.

            While not a typical occurrence from my experience, there will be these kinds of volume swings, so this could force more supplier-customer relationships to have more rigid service level agreements in this area. This is where both manufacturers and wholesalers I expect, are also going to need a capability similar to how they manage a recall, for managing phone, email or requests through other means.

            Hopefully the pilots here flush out a lot of these scenarios based on data that they can share, from specific sites and their network. I expect we may see some changes around requiring the SNI for returns, especially for product with shelf life at three years and over, and where there may be a market need.

            Many manufacturers as well may run large campaigns and put a lot of product to market in the fear that they have issues with serializing product. Knowing that the product then could not necessarily be returned, may alter this approach as well.

            As always, thanks for covering this.

  3. From across The Pond: Many thanks to the three contributors above. The lessons the US are learning about aggregation will be important to the EU market.

    A useful illustration of the difference in objectives between the DQSA and the EU-FMD is provided by the discussion of verification. The EU-FMD aims for full verification at the point of dispense; the DQSA aims for full track and traceability.

    The 24 hours to provide verification of returned product in the US system looks like luxury: The recently published draft of the EU-FMD delegated acts specifies that verification requests should be confirmed within 300 milliseconds…

    1. Chris,
      Well said. In fact, in the US, we are talking about only needing to verify “suspect drugs”, and any returned drug that is still saleable. If a drug is returned in a full, unopened homogenous case, only the case serial number needs to be verified with the manufacturer. In the EU, almost 100% of drugs will need to be authenticated at the point of dispense, so the volume of activity will be much higher there. The wide difference in the mandated response time is an indication of which technology each legislature intended for implementation. For the EU, 300 ms implies a very high performance internet-based automated service with a high-speed database behind it. In the US, a 24 hour response time is an indication that Congress expects that small (tiny?) manufacturers could implement the verification service with manual methods. However, medium to large manufacturers will still need to implement this service using an approach that is similar to the EU. Hopefully companies in the US will standardize the service and align behind a one or just a few service providers so that wholesale distributors can interact with a minimum number of interfaces–not one for every manufacturer.

      This is where the EU is years ahead of the US, and industry organizations in the US should pay close attention to the pioneering work that has been done on the European Stakeholder’s Model (ESM) and particularly the recent non-profit European Medicines Verification Organization (EMVO) (see SecuringIndustry http://www.securingindustry.com/pharmaceuticals/eu-consortium-names-providers-of-drug-verification-system/s40/a2379/#.VdSpnfm6fb0).

      The US industry has a lot of catching up to do. Why have we just been sitting around for the last 2 years? Perhaps it makes sense to tap the work that has been done for the ESM, or replicate its work here in the United States rather than reinventing the wheel.

      Dirk.

  4. Dirk,

    I am a bit disappointed by your lack of objectivity.

    I don’t think the issue of verification is as trivial as you make out. As the poster above pointed out the sheer volume of returns can and does approach 000’s of units a day in some operations. Capturing, sorting and sending this data and waiting for a response from the manufacturer will certainly impact the productivity of an already painful returned goods process.

    And having a returned goods processor going to a different manufacturer portal for each piece processed is really not practical and would place undue burden and costs on an already stressed supply chain.

    The ability to systematically submit verification requests to manufacturers and receive automatic responses could alleviate some of this but I am unaware of any work on a standardized “verification request” or “verification request response” document or transaction.

    Verification requests are not limited to returns either. With over 1,000 drug recalls in a year, and countless instances of suspect product (after all that is why DQSA was enacted) I expect verification requests will become fairly routine.

    You indicate that verification is only required for suspect product. I disagree.

    If you read the law more closely you will note that there are 6 subsections under the manufacturer’s responsibilities around verification:

    (A) Suspect product
    (B) Illegitimate product
    (C) Requests for verification
    (D) Electronic database
    (E) Saleable returned product
    (F) Nonsaleable returned product

    Please reread paragraph “C”. Essentially any authorized repackager, wholesale distributor, or dispenser can make a verification request and the manufacturer must respond within 24 hours – unless the FDA suggests a more “reasonable time”. This paragraph is separate from paragraph (A) which delineates a manufacturers responsibility for verifying suspect product.

    “(C) Requests for verification
    Beginning 4 years after the date of enactment of the Drug Supply Chain Security Act , upon receiving a request for verification from an authorized repackager, wholesale distributor, or dispenser that is in possession or control of a product such person believes to be manufactured by such manufacturer, a manufacturer shall, not later than 24 hours after receiving the request for verification or in other such reasonable time as determined by the Secretary, based on the circumstances of the request, notify the person making the request whether the product identifier, including the standardized numerical identifier, that is the subject of the request corresponds to the product identifier affixed or imprinted by the manufacturer. If a manufacturer responding to a request for verification identifies a product identifier that does not correspond to that affixed or imprinted by the manufacturer, the manufacturer shall treat such product as suspect product and conduct an investigation as described in subparagraph (A). If the manufacturer has reason to believe the product is an illegitimate product, the manufacturer shall advise the person making the request of such belief at the time such manufacturer responds to the request for verification.”

    If I were operating a wholesale distribution business I would capture the serialized numeric identifier on receipt, during the pick/pack process, and match these against any data received. Any un-matched data, for whatever reason would be forwarded to the manufacturer for verification. If the manufacturer cannot verify the SNI it would be up to the manufacturer to initiate a suspect product investigation.

    1. SongWeiJue,
      Keep in mind, the verification within 24 hours is a requirement that is in the law, imposed on all manufacturers after November 27, 2017. My essay focused on use of the mandated verification service to solve the specific problem that wholesale distributors need to solve after November of 2019 when they receive saleable returns. The scope of my essay was fairly limited. Maybe you assumed I was trying to cover all uses of verification.

      But I agree that the industry is late in figuring out ways to standardize on the automated verification messaging and consolidation services that will be necessary. That effort should have been started before now. Can anyone tell us if HDMA, PhRMA, GS1 or anyone else is working on this specifically for meeting the DSCSA?

      Dirk.

  5. Dirk,

    At least I think we agree that there is a need for a systematic way for supply chain partners to submit a “request for verification” and to receive a “request for verification response” to/from the manufacturer/repackager.

    Whether or not you feel that returns are a valid reason for a wholesaler to require aggregated data, I feel we would be doing the industry a huge disservice by not pointing out the ramifications a manufacturer faces should they choose not to aggregate individual sales units to shipping cases.

    I would like to call to your attention the following from the wholesaler requirements section:

    “(4) Verification
    Beginning not later than January 1, 2015, a wholesale distributor shall have systems in place to enable the wholesale distributor to comply with the following requirements:

    (A) Suspect product

    (i) In general
    Upon making a determination that a product in the possession or control of a wholesale distributor is a suspect product, or upon receiving a request for verification from the Secretary that has made a determination that a product within the possession or control of a wholesale distributor is a suspect product, a wholesale distributor shall—

    (I) quarantine such product within the possession or control of the wholesale distributor from product intended for distribution until such product is cleared or dispositioned; and

    (II) promptly conduct an investigation in coordination with trading partners, as applicable, to determine whether the product is an illegitimate product, which shall include validating any applicable transaction history and transaction information in the possession of the wholesale distributor and otherwise investigating to determine whether the product is an illegitimate product, and, beginning 6 years after the date of enactment of the Drug Supply Chain Security Act (except as provided pursuant to subsection (a)(5)), verifying the product at the package level, including the standardized numerical identifier.”

    While I realize the FDA still owes us guidance around the use of inference, the law is clear that wholesalers will need the ability to verify product at the package level beginning in 2019. Presumably if the manufacturer aggregates the standardized numerical identifiers appearing on the individual sales units to the sealed homogeneous case, the wholesaler could infer the verification of the standardized numerical identifier on the sales unit by verifying the standardized numerical identifier appearing on the case. Without the aggregation data, the ability to infer is lost and the standardized numerical identifier on each individual sales unit must be verified.

    So let’s say a wholesaler receives notification from the FDA that product in their possession is believed to be suspect. Without the ability to verify standardized numerical identifiers on sales units through the use of inference, the wholesaler is left to opening each case and manually collecting the standardized numerical identifiers on each sales unit and sending them to the manufacturer for verification.

    Who is going to pay for that? Hint: I don’t think it is the wholesaler.

    1. SongWeiJue,
      Thanks for your comment. Wholesale distributors and manufacturers will need to work out how they interact to meet their respective requirements. But to suggest that wholesalers would not be willing to pay for their own compliance obligations simply implies that they would be forced out of business. I don’t think that’s going to happen.

      Dirk.

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