FDA blind to the supply chain’s evolution

In a marvelous fluke of timing, the new FDA report on counterfeiting was released in the middle of last week’s Healthcare Distribution Management Association conference in Phoenix. The biggest news was the FDA’s decision lift the stay on the long-delayed PDMA, which is 172 days from implementation as of today.

I was at the HDMA meeting in Phoenix and talked with executives from the major drug makers and their wholesalers. The general consensus from my conversations is that the FDA made a good decision. (This post was almost called “HDMA OK with FDA Play on PDMA Stay.”)

I agree. The PDMA’s view of pedigree is much more sensible than the “all transactions, all the time, no matter what, or you’re in trouble, Buster” approach of Florida’s pedigree law. Hopefully, Gov. Bush will sign HB 371 before July 1 and inject some business reality into the Florida law. (BTW, the more I learn about HB 371, the more I like it.)

Nevertheless, I was extremely disappointed that the FDA did not acknowledge how much free market innovation has already improved the safety and security of the US drug distribution channel.

Page 25 of the original 2004 FDA report states: “For government efforts against counterfeit drugs to be successful, drug producers, distributors, and dispensers will have to take effective actions to secure their business practices.”

And guess what? The industry responded, driven as much by business concerns as by regulatory threats. Wholesalers such as AmerisourceBergen and Cardinal Health publicly renounced secondary market sourcing, the HDMA tightened its membership requirements, and major pharmacy chains such as CVS committed to secure sourcing.

In addition, manufacturers signed fee-for-service agreements with their wholesalers that limit product leakage into the grey market, closing a significant entry point for counterfeiters. Drug makers literally pay for greater product security by purchasing data from wholesalers to monitor orders, inventories, and product movement in real-time. Perhaps the FDA forgot to read my HBR article from last August or even the letter submitted by CVS.

But instead of encouraging further innovation in commercial practices, the FDA chooses to scold the industry for not meeting its unrealistic timeline behind track-and trace.

I laughed out loud when I read this zinger on page 11: “The technology vendors uniformly told us that their RFID and e-pedigree solutions and technologies are ready to go, but manufacturers, wholesalers, and retailers are slow to implement them.”

Don’t they recognize that a track-and-trace infrastructure can not be built without the solid foundation of secure business practices for the distribution channel? I guess it’s easier to blame companies for not spending enough money on premature solutions than to understand the real-world complexity of having 160,000 unique points of drug dispensing.

The U.S. drug distribution system has made enormous progress in reducing counterfeits by implementing new, more secure business practices. The FDA’s “disappointment” at RFID progress should have been tempered with acknowledgment of how far we have come in the past three years and a clear call for further innovation in channel management.

And if the FDA really cared about counterfeits, they would immediately prohibit all personal importation of drugs. Or did they already forget one of the conclusions reached by HHS’ Task Force on Drug Importation:

So-called “track and trace” technologies, such as radio-frequency identification (RFID) and sophisticated bar coding, can provide effective monitoring of a drug’s movement from the point of manufacture and through the U.S. distribution chain. Although these new and emerging technologies are promising, until they are fully adopted internationally they cannot be adequately relied upon to secure the safety, efficacy, and integrity of the global market to safely import prescription drugs into the U.S.

Should I start saving up for an at-home RFID scanner instead of a plasma TV?