California Pedigree Law: Historic Change to Commerce

 

Important Notice To Readers of This Essay On November 27, 2013, President Barack Obama signed the Drug Quality and Security Act of 2013 into law. That act has many provisions, but one is to pre-empt all existing and future state serialization and pedigree laws like those that previously existed in California and Florida. Some or all of the information contained in this essay is about some aspect of one or more of those state laws and so that information is now obsolete. It is left here only for historical purposes for those wishing to understand those old laws and the industry’s response to them.

“…[C]ommencing on July 1, 2016, a wholesaler or repackager may not sell, trade, or transfer a [prescription] drug at wholesale without providing a pedigree.

…[C]ommencing on July 1, 2016, a wholesaler or repackager may not acquire a [prescription] drug without receiving a pedigree.

…[C]ommencing on July 1, 2017, a pharmacy may not sell, trade, or transfer a [prescription] drug at wholesale without providing a pedigree.

…[C]ommencing on July 1, 2017, a pharmacy may not acquire a [prescription] drug without receiving a pedigree.”

With these words the State of California introduced a significant change to the way the pharmaceutical supply chain works (see section 4163 of the California Business and Professions Code) and has written a new page in the history of commerce.  It brings pharmaceutical commerce fully into the computer age.  Adam Smith would not recognize it.  Today, and up to the effective dates of these provisions, the value of a legitimate pharmaceutical in the legitimate U.S. supply chain is determined by the physical condition of the product and its package.  After July 1, 2016, the value of a legitimate pharmaceutical in the supply chain in California will be determined by the combination of the physical condition of the product and its package, and the sellers ability to provide the buyer with an electronic pedigree.

The intended effect of this new regulatory requirement is to place a significant roadblock in front of counterfeiters, diverters and others who would try to scam patients and the legitimate participants in the supply chain.  This is a noble cause.  By requiring sellers to provide buyers with a pedigree at each change in ownership in the supply chain, illegitimate parties will find it very hard to inject illegitimate drugs without exposing their actions and, at the same time, creating evidence that can be used against them in their own prosecution.  By providing a pedigree at each change in ownership, supply chain buyers will be able to check the authenticity of the full supply chain transaction history provided by the seller, maximizing the likelihood that any suspicious activity would be detected long before a patient would receive the drugs.

But I’m more interested today in exploring a surprising unintended effect of these requirements.  I’ve touched on this briefly in past essays but I’ve recently concluded that the implications of these requirements are much more significant than I realized before.  This may be the first time in the history of commerce that Continue reading California Pedigree Law: Historic Change to Commerce

Will The Pharma Supply Chain Be Able To Use Inference? Maybe Not!

In an essay published in April, I explained my theory that “RFID is DEAD…at Unit-level in Pharma”, which, if true, would mean that most drugs in the U.S. supply chain would be serialized by manufacturers with 2D barcodes by 2015 for California.  In my last essay, “Inference in the Pharmaceutical Supply Chain”, I carried that theory one step further by showing how the widespread reliance on 2D barcodes to serialize at the unit level would lead directly to the widespread use of the practice of inference in the supply chain.  This would be out of necessity since the unit-level serial numbers would not be readable without opening their containers, something that can’t happen because it is so inefficient that it would cripple the supply chain.  So let me say it this way, the widespread use of 2D barcodes for unit-level serialization will necessitate the widespread reliance on inference.  The former leads to the latter just like excessive sunshine leads to sunburn.

But the projections of widespread reliance on inference lead directly to a new concern.  Let me explain.  Successful use of inference for determining the contents of cases is totally dependent on the accuracy of the aggregation information established and provided by the manufacturer, or whoever packed them.  If a packer uses a casepacking process that is incapable of yielding highly accurate aggregation information, inference will not work well.

This is a problem.  A big problem, because Continue reading Will The Pharma Supply Chain Be Able To Use Inference? Maybe Not!

Inference in the Pharmaceutical Supply Chain

In my recent essay, “RFID is DEAD…at Unit-level in Pharma”, I used relative cost estimates to theorize that Radio Frequency IDentification (RFID) will not be the predominant carrier of serial numbers applied to drug packages for compliance with U.S. pedigree laws.  My theory is that there will actually be a mix of RFID and 2D barcodes, and that barcodes will be the predominant carrier technology.  As you might expect, that was a little controversial with the RFID industry (See RFID Journal’s blog post in response to my essay).  Hey, it’s just a theory.  I too, wish everything would be RFID, and for all of the reasons cited by RFID Journal.  It’s just that I don’t believe it’s going to turn out that way and that’s based on the logic I laid out in my essay.  (Also see FiercePharma Manufacturing’s more neutral post in response to my essay.)

BARCODES WILL PREDOMINATE.  LET’S MOVE ON…

In a mixed-but-predominantly-barcode-serialized U.S. pharmaceutical supply chain, companies will not be able to tell which unit serial numbers are inside of each sealed case at receiving or at shipping.  Because barcodes are a “line-of-sight” technology, the only way to tell with absolute certainty what the sealed-up unit serial numbers are will be to cut the tape seal, open the case, expose the barcodes, scan each unit and tape the case closed again.

It is a ridiculous notion to believe that Continue reading Inference in the Pharmaceutical Supply Chain

The Modern Pharmaceutical Wholesaler and the Approaching Transformation

Photo by Rafael Vila

The modern pharmaceutical supply chain is an amazing thing.  No other supply chain handles the combination of volume, variety, value and complexity, and does it as efficiently and accurately as the U.S. pharmaceutical supply chain.  And it does it on an overnight order-to-delivery cycle from wholesaler to pharmacy.  Wholesalers are the key to the efficient operation of the pharmaceutical supply chain, and that’s why I am personally drawn to that segment.

The heart of the modern drug wholesale business—the thing that makes it live, kicking or screaming—is the modern pharmaceutical distribution center (DC).  That magical combination of people, processes, data and automation produces a dance every night across the country where individual drug packages are picked from cases and combined with other individual drug packages to fulfill the orders of pharmacies everywhere.  It is musical to watch and understand, and the crescendo occurs around 10:30pm every night local time at every pharma DC.  Today’s successful wholesalers have figured out how to deal with this specific complexity by organizing their people, processes, data and automation in a stabilizing way to make it all manageable, repeatable and very efficient, and thus making it possible to carve out a thin but well-earned and reliable profit.

Over the last 20 years only a few companies have found a way to surf this traditional complexity to profitability.  But faced with the supply chain transformation that will occur soon as the result of widespread serialization and pedigree requirements, the complexity these companies face seems likely to  Continue reading The Modern Pharmaceutical Wholesaler and the Approaching Transformation

Innovation and the “Authenticating Wholesaler” Idea

I have my own theory of innovation.  Almost everyone agrees that innovation is a key ingredient in growth and prosperity but in our current times, few companies are able to cause it to happen.  I think that’s because people misunderstand innovation, and particularly how to get it going.  With all the belt-tightening going on as the result of lean times, innovation could not be more essential, but at the same time, seemingly more out of reach.

In my view, there are three main stages to innovation:  experimentation, enlightenment and transformation.   Experimentation is the most assured pathway to innovation but it is also one of the first things to get cut when belt-tightening occurs.  It requires an organization to spend time on lots of things that eventually get discarded because they end up never taking root.  To an accountant, experimentation looks a lot like “play-time” activity that isn’t needed.  Innovation can occur without an experimentation stage, but reliance on “bolts-out-of-the-blue” to kick-start innovation will ensure that you will almost never actually get there.

Enlightenment is nothing more than an improved understanding of reality.  It occurs when a series of experiments from the experimentation stage are accepted by a group as having special significance because they reveal a part of reality that was previously hidden from view.  Enlightenment is the removal of blind-spots.  Once the blind-spots are removed, easier or more profitable paths become more obvious—or at least one of them becomes less foggy.

To actually benefit from enlightenment, and thus achieve the final stage of innovation, transformation, you need Continue reading Innovation and the “Authenticating Wholesaler” Idea

RFID is DEAD…at Unit-Level in Pharma

That’s right.  And it comes from an economic reality that was evident even six years ago.  That was when a small group of people with various pharmaceutical supply chain backgrounds had an informal discussion of the relative costs and impacts that each of the three primary business segments in the supply chain would face in a full deployment of Radio Frequency IDentification (RFID).  As I recall, this conversation may not have even been part of the official proceedings of the project we were assembled to work on at the time.  It may have actually occurred during one of the social hours after a day of meetings, but it stuck with me.  Ever since that time I kept meaning to get around to creating the graphs that we envisioned at that time but have never gotten around to it, until now. Continue reading RFID is DEAD…at Unit-Level in Pharma

FDA Aligns with GS1 SGTIN For SNDC

Last Friday, the FDA published the long awaited guidance on their Standardized Numeric Identifier (SNI) for prescription drug packages.  This was right on time since the FDA Amendments Act  of 2007 gave the agency 30 months to develop a standard for SNI and they published, almost to the day, 30 months later.  Well done.

The published guidance is not radically different from the draft guidance that the agency published under the same name in January of 2009.  In fact, in my view, the only really important difference is how the Continue reading FDA Aligns with GS1 SGTIN For SNDC

So a customer demands that you use GLN’s and GTIN’s. What next?

In the healthcare supply chain a significant number of hospital group purchasing organizations (GPO’s) have stipulated, to varying degrees, that their suppliers begin making use of GS1 Global Location Numbers (GLN’s) in all of their trade with their member hospitals by the end of 2010 (Sunrise 2010) and GS1 Global Trade Item Numbers (GTIN’s) by the end of 2012 (Sunrise 2012).  Here are the announcements from Novation, Premier, MedAssets and Amerinet.  From the wording of their announcements it appears that Continue reading So a customer demands that you use GLN’s and GTIN’s. What next?

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