Overview of the Drug Supply Chain Security Act. GPhA Fall Technical Conference Bethesda, MD October 28, 2014
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1 Overview of the Drug Supply Chain Security Act GPhA Fall Technical Conference Bethesda, MD October 28, 2014
2 Disclaimer This presentation contains a summary of the opinion and perspective from GPhA member industry representatives on the topic of Overview of the Drug Supply Chain Security Act. This presentation does not necessarily represent the opinion of the presenter nor its employers.
3 Eric Marshall is a Senior Director at Leavitt Partners and an advisor to the Pharmaceutical Distribution Security Alliance (PDSA). Eric advises complex health care coalitions on health policy and provides consulting services to drug and device companies. His practice focuses on health policy issues from the legislative, regulatory, and operational perspectives. Eric has deep experience in the areas of supply chain security, drug and device regulation, and health care compliance. Leavitt Partners is a health care intelligence business. We deliver collaborative, high-value intelligence that helps clients transition to new models of care. Through our member-based collaboration called Health Intelligence Partners and direct services to clients, our consulting firm provides the best available window to the future of American health care. Eric M. Marshall, J.D. Senior Director, Leavitt Partners (202) Eric.Marshall@LeavittPartners.com LEAVITT PARTNERS 3
4 2014 LEAVITT PARTNERS 4
5 Agenda Background and Policy DSCSA Overview Scope Tracing and Serialization Licensing Standards Preemption Penalties Agency Guidance Suspect and Illegitimate Product Preemption Initial Information Exchange Standards Implementation Status and Challenges The Next Year 2014 LEAVITT PARTNERS 5
6 Background and Policy
7 Background and Policy Rationale for Change Some threats to security and patient safety: Some documented history of counterfeit product at the distributor and pharmacy level. Some history of product stolen from manufacturer warehouses or trucks. Some grey market risks, especially around shortage products. Potential benefit of serialization to improve effectiveness of standard recalls. Policy Conclusion While the frequency of observed events has traditionally been low, the risk to patients was too high for policy makers to ignore LEAVITT PARTNERS 7
8 Background and Policy Rationale for Change (cont d) A mixed, inefficient response from the states: Some states had only limited protections in place. Conflicts among state requirements presented confusion, complexity, and burden. A robust California Pedigree system was not proving implementable. Policy Conclusions A 50-state state-by-state system risked leaving weak links, conflicting rules, or unnecessary burdens when the system relies on one or more state requirements. There was a need for a single, uniform, national, robust response LEAVITT PARTNERS 8
9 Background and Policy Key TH S = Transaction history (shipped) RTH = Transaction history (received) PI = Product information California Pedigree S = Statement of accuracy/certification Data Data Package/Records TH S1 PI S 1 R1TH S 1 TH S2 PI S 2 R1TH S 1 R2TH S 2 TH S 3 PI S 3 R1TH S 1 R2TH R3TH S 2 S 3 PI Trading Partner Manufacturer Wholesaler Secondary Wholesaler Dispenser Trading partners pass product information and all prior transaction history upon each change of ownership LEAVITT PARTNERS 9
10 Background and Policy Key TH S = Transaction history (shipped) RTH = Transaction history (received) RTH S PI = Transaction history (received & shipped) = Product information (Conceptual Some Variations in DSCSA) Each trading partner maintains (or ensures someone maintains on their behalf) product information and transaction history that identifies the immediate previous source and subsequent recipient of a prescription drug. S = Statement of accuracy/certification = A trading partner s database Data Package/Records TH S1 PI S R1TH S2 PI S R2TH S3 PI S R3TH TI PI S Trading Partner Manufacturer Wholesaler Secondary Wholesaler Dispenser 2014 LEAVITT PARTNERS 10
11 DSCSA Overview
12 DSCSA Overview Key DSCSA References H.R was signed into law by the President on November 27, 2013, and became P.L (127 Stat. 587). P.L contains two separate titles: Title I of the DQSA addresses drug compounding and is known as the Compounding Quality Act. Title II of the DQSA addresses the Pharmaceutical Distribution Supply Chain and is also known as the Drug Supply Chain Security Act (DSCSA). Much of DSCSA is codified now as Subchapter H of Chapter V of the Federal Food, Drug, and Cosmetic Act, at 21 U.S.C. 360eee, et seq LEAVITT PARTNERS 12
13 DSCSA Overview Scope Who is covered? Manufacturers Holder of the NDA or ANDA. Co-licensed partner. Affiliate of the NDA/ANDA holder or co-licensed partner. Repackagers Wholesale Distributors Third-Party Logistics Providers Subject to licensure provisions only. Dispensers Pharmacies and providers. Individual HCPs are excluded for most purposes. Note: An individual entity can operate in more than one capacity LEAVITT PARTNERS 13
14 DSCSA Overview Scope What is covered? The traceability requirements generally apply to each transaction of a product. Product: prescription drugs in finished dosage form intended for human use. Does not include devices, animal product, API, OTC. The following are excluded from product definition: Blood or blood components for transfusion Radioactive drugs or biologics Imaging drugs Intravenous product for hydration and replenishment Medical gas Homeopathic drugs Compounded drugs Transaction: The transfer of product between persons in which a change of ownership occurs. Must be intended for domestic distribution in interstate commerce. A transaction does not include: Intra-company or intra-health-system transfers Dispensing Product sample transfers Sale, purchase, or trade to or from charitable organizations Other product types and activities 2014 LEAVITT PARTNERS 14
15 DSCSA Overview Scope What is exchanged? Transaction Information (TI): Includes: the proprietary or established name or names of the product; the strength and dosage form of the product; the National Drug Code number of the product; the container size; the number of containers; the lot number of the product; the date of the transaction; the date of the shipment, if more than 24 hours after the date of the transaction; the business name and address of the person from whom ownership is being transferred; and the business name and address of the person to whom ownership is being transferred LEAVITT PARTNERS 15
16 DSCSA Overview Scope What is Exchanged? (cont d) Transaction History (TH): A statement in paper or electronic form, including the transaction information for each prior transaction going back to the Manufacturer of the product. Transaction Statement (TS): A statement, in paper or electronic form, that the entity transferring ownership in a transaction: is authorized as required under the DSCSA; received the product from a person that is authorized as required under the DSCSA; received TI and a TS from the prior owner of the product, as required by the DSCSA; did not knowingly ship a suspect or illegitimate product; had systems and processes in place to comply with verification requirements of the DSCSA; did not knowingly provide false TI; and did not knowingly alter the TH LEAVITT PARTNERS 16
17 DSCSA Overview Tracing and Serialization Enactment (November 27, 2013) The DSCSA immediately locked in the existing federal pedigree requirements under PDMA LEAVITT PARTNERS 17
18 DSCSA Overview Tracing and Serialization January 1, Entities must work only with authorized trading partners. Manufacturer or Repackager registered with the FDA. Wholesale distributor or 3PL licensed per the DSCSA. Dispenser licensed under state law. ATPs and ADRs are not the same thing. 2. Entities must pass, capture, and maintain certain information with respect to each product transaction. Must pass TH, TS, and TI. Must capture TH, TS, and TI. Must maintain TH, TS, and TI for 6 years. Wholesalers, Dispensers, and Repackagers may not accept ownership unless the TH/TS/TI is provided prior to, or at the time of, the transaction. TI is not required to be passed for product that enters the supply chain before January 1, 2015; instead, the TH begins with the owner as of January 1, This requirement does not apply to Dispensers until July 1, LEAVITT PARTNERS 18
19 DSCSA Overview Tracing and Serialization January 1, 2015 (cont d) 3. Entities must provide TH/TS/TI to the Secretary and other state and federal officials upon request. Must be provided within one business day but not more than 48 hours. Dispensers must respond within two business days. 4. Entities must have systems and processes to investigate, verify, and respond to suspect and illegitimate products LEAVITT PARTNERS 19
20 DSCSA Overview Tracing and Serialization Investigate, verify, and respond (cont d) Suspect product: A product for which there is reason to believe the product: is potentially counterfeit, diverted, or stolen; is potentially intentionally adulterated such that the product would result in serious adverse health consequences or death to humans; is potentially the subject of a fraudulent transaction; or appears otherwise unfit for distribution such that the product would result in serious adverse health consequences or death to humans. Illegitimate product: A product for which credible evidence shows the product is actually one of the above. An entity may identify a suspect or illegitimate product itself or may be notified by a trading partner or the Secretary LEAVITT PARTNERS 20
21 DSCSA Overview Tracing and Serialization Investigate, verify, and respond (cont d) Entities must have systems and processes to do the following: Quarantine the product until it is cleared or dispositioned. May be physical segregation or an electronic hold. Investigate the suspect product in coordination with trading partners. The investigation must include validation of the applicable TH and TI. Investigation records must be maintained for at least six years. If the product is determined not to be illegitimate, the entity must notify the Secretary of that determination (if the Secretary had determined the product was suspect). If the product is determined to be illegitimate: Within 24 hours, notify the Secretary and all immediate trading partners there is reason to believe may have received the product. Disposition the product and assist trading partners in dispositioning the product. Retain a sample of the product, if requested by the Secretary or other appropriate government official. Entities may use a secure electronic database developed or operated by another entity to satisfy these obligations LEAVITT PARTNERS 21
22 DSCSA Overview Tracing and Serialization Investigate, verify, and respond (cont d) High risk of illegitimacy notifications If a manufacturer determines, or is notified by the Secretary, that there is a high risk that an illegitimate product manufactured by, or purported to be manufactured by, the manufacturer will enter the supply chain, it must: Notify the Secretary within 24 hours. Notify all immediate trading partners that the manufacturer has reason to believe may have the product in its possession within 24 hours. A high risk may include a specific high risk that could increase the likelihood that illegitimate product will enter the pharmaceutical distribution supply chain and other high risks determined by the Secretary in guidance LEAVITT PARTNERS 22
23 DSCSA Overview Tracing and Serialization Four years after enactment (November 27, 2017) Manufacturers must begin passing TH/TS/TI in electronic form. Manufacturers must begin serializing product by affixing a product identifier to each package and homogenous case of product. Manufacturers must maintain the identifier for 6 years. Manufacturers must have systems and processes to verify the product identifier and SNI of suspect products upon request by a trading partner. Repackagers (5 years), Wholesalers (6 years), and Dispensers (7 years) must incrementally have such systems and processes also. Manufacturers must verify the product identifier and SNI of all saleable returns received. Six years after enactment, Wholesalers must associate saleable returns with the related TI and TS LEAVITT PARTNERS 23
24 DSCSA Overview Tracing and Serialization Product Identifier: A GS-1-compliant standardized graphic that includes, in both human-readable form and on a machine-readable data carrier: The standardized numerical identifier, Lot number, and Expiration date of the product. (21 U.S.C. 360eee(14)) Standardized Numerical Identifier (SNI): A set of numbers or characters used to uniquely identify each package or homogenous case that is composed of the National Drug Code that corresponds to the specific product (including the particular package configuration) combined with a unique alphanumeric serial number of up to 20 characters. (21 U.S.C. 360eee(20)) Package: The smallest individual saleable unit of product for distribution by a Manufacturer or Repackager that is intended by the Manufacturer for ultimate sale to the Dispenser of such product. (21 U.S.C. 360eee(11)) 2014 LEAVITT PARTNERS 24
25 DSCSA Overview Tracing and Serialization Four years after enactment (cont d) Grandfathering FDA must issue final guidance by November 27, 2015 specifying the circumstances in which product in the supply chain as of November 27, 2017 is exempt from the product identifier requirements. FDA will establish a process by November 27, 2015 through which Manufacturers and Repackagers may request an exception from the product identifier requirement if the product container is too small or otherwise unable to accommodate a product identifier LEAVITT PARTNERS 25
26 DSCSA Overview Tracing and Serialization Ten years after enactment (Phase II) Phase II is self-effectuating, but the FDA is required to publish regulations and guidance clarifying the requirements. Product identifiers will be utilized to electronically pass the required information. Information passed will allow product to be traced at the package level, not just lot. Transaction history is replaced with a one up, one back data packet. Requires systems and processes for package-level verification. Not intended to require authentication of each package. May require use of aggregation and inference. Entities must associate TI and TS for saleable returns LEAVITT PARTNERS 26
27 DSCSA Overview Tracing and Serialization Waivers and Exemptions FDA must establish a process through which an entity may request a waiver from the tracing and serialization requirements on the basis of: Undue economic hardship. Emergency medical reasons. Declaration of a public health emergency. FDA must establish a process for establishing additional product or transaction exemptions. Both processes must be established through guidance by November 27, LEAVITT PARTNERS 27
28 DSCSA Overview Licensure Standards The DSCSA establishes uniform national licensing standards for Wholesale Distributors and 3PLs. States will continue to have the authority to license Wholesalers and 3PLs but must use federal standards in doing so. The DSCSA sets out seven broad categories of licensing standards (a) for Wholesale Distributors and (b) for 3PLs, to be established by the Secretary. The Secretary must publish both sets of standards by November 27, LEAVITT PARTNERS 28
29 DSCSA Overview Preemption The DSCSA preempts two types of state requirements: State product tracing requirements. State licensing standards. The DSCSA immediately preempted all state and local requirements related to the tracing of products through the distribution system that are inconsistent with, more stringent than, or in addition to the DSCSA requirements. The DSCSA preempts all state standards, requirements, and regulations with respect to Wholesale Distributor or 3PL licensure that are inconsistent with, less stringent than, directly related to, or covered by the standards and requirements applicable under the DSCSA LEAVITT PARTNERS 29
30 DSCSA Overview Penalties The DSCSA establishes stiffer penalties for entities and individuals who fail to comply with the DSCSA requirements. Failure to comply with the traceability provisions or the licensure requirements under the DSCSA is a prohibited act under the FDCA. Failure to affix a product identifier as required by the DSCSA now constitutes misbranding, which is also punishable as a prohibited act. Penalties for a prohibited act include: Imprisonment for not more than one year and/or a fine of not more than $1,000. Imprisonment of not more than three years and/or a fine of not more than $10,000 for subsequent or intentional violations. Equitable remedies, such as restitution, disgorgement of profits, and product seizure. The Federal Criminal Code also authorizes a general fine of up to $250,000 for individuals and $500,000 for entities LEAVITT PARTNERS 30
31 Agency Guidance
32 Agency Guidance Suspect and Illegitimate Product Three topics addressed: 1. Scenarios that could significantly increase the risk of a suspect product entering the supply chain. Illustrative, not exhaustive, but based on FDA s experience (e.g., purchasing from a new source, products in shortage). Trading partners should exercise vigilance, maintain awareness about suspicious activity or potential threats to their supply chain, and devote attention and effort to detect suspect product. Trading partners should be particularly diligent when engaging in transactions identified in the guidance. 2. Recommendations on how to identify suspect product and determine whether product is suspect product. Provides opportunity to work with trading partners to resolve discrepancies and confusion before determining a product is suspect. 3. Notifications and termination of notifications of illegitimate product. Form 3911 for notification to FDA. Existing systems and processes for notification to trading partners LEAVITT PARTNERS 32
33 Agency Guidance Preemption Addresses three categories of preemption: Traceability Pretty straightforward preemption was immediate and complete. Wholesale Distributor Licensing Existing state licensing schemes generally remain in place for the interim. Confusion of the scope/standard for preemption. 3PL Licensing Confusion of the scope/standard for preemption. Does not acknowledge the deemed licensed status granted by the statute LEAVITT PARTNERS 33
34 Agency Guidance Initial Information Exchange Standards Statutory deadline of November 27, The scope of topics covered will be key. System neutrality will be important LEAVITT PARTNERS 34
35 Implementation Status and Challenges
36 Implementation Status Industry is working hard to be ready for the 1/1/15 deadlines. Testing is underway or nearly underway for many companies. Wholesalers are reporting silence or confusion from about a quarter of their trading partners. Many companies are dependent on vendors. Most are relying on modifications to existing systems and processes, such as ASNs. Many have moved forward based on good faith solutions to statutory ambiguities, and flexibility will be critical LEAVITT PARTNERS 36
37 Challenges and Ambiguities Information Exchange Definition of a manufacturer. Contract manufacturers. Co-licensed partners and affiliates. Identification of the transaction date. Abbreviated transaction statements LEAVITT PARTNERS 37
38 Challenges and Ambiguities Authorized Trading Partners Interim licensing requirements for wholesale distributors and 3PLs. Ability to rely on FDA database for verification of wholesale distributor and 3PL licensure. Trading partners not otherwise obligated to be licensed or registered (e.g., virtual manufacturers, military pharmacies). Suspect and Illegitimate Product Further definition of suspect and illegitimate. Further clarification of a high risk of illegitimacy. Possession or control of illegitimate product versus high-risk of illegitimacy. Unclear which parties must submit Form LEAVITT PARTNERS 38
39 The Next Year
40 The Next Year Current focus is on testing and meeting 1/1/15 deadlines. A period of troubleshooting and adjustments is expected. Attention will then turn to: Serialization and electronic exchange (2017). Electronic interoperable unit-level tracing (2023). Pilots. International Harmonization. Several guidances/regulations expected from FDA. Federal standards for licensure of wholesale distributors. Federal standards for licensure of third-party logistics providers. Guidance establishing processes for granting waivers, exceptions, and exemptions to the traceability requirements. Final guidance for grandfathering from the serialization requirements product already in the supply chain LEAVITT PARTNERS 40
41 A health care intelligence business LeavittPartners.com
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