Achievement Unlocked! Senate Passes Drug Quality and Security Act for a Safer, More Secure Pharmaceutical Supply Chain

DrugsIn a time when internecine conflicts within the Congress and between the legislative and executive branch stymie so much important work, the easy passage of the bipartisan Drug Quality and Security Act (DQSA) (H.R. 3204) is cause for celebration.  Having passed the House of Representatives in September on a voice vote, the Senate overwhelmingly voted to pass the DQSA today.  The bill now proceeds to President Obama, who is expected to sign it.

The DQSA amends the federal Food, Drug and Cosmetic Act (FDC Act) to accomplish two goals that have long bedeviled the Food and Drug Administration (FDA) and the pharmaceutical supply chain.  Title 1, Drug Compounding, expands and clarifies FDA’s oversight of compounding pharmacies to address concerns that arose from the fungal meningitis outbreak last year which was traced to contaminated drugs compounded at New England Compounding Center.

Supply ChainTitle 2, Drug Supply Chain Security, establishes a national, interoperable, electronic system to track and trace prescription drugs in the supply chain (“track” generally refers to where a product is in the supply chain; “trace” to where it’s been).  Unlike Title 1, which arose out of crisis, Title 2 is the achievement of many years of steady work by pharmaceutical supply chain stakeholders, FDA and dedicated congressional staff.  The DQSA represents a significant advancement toward greater supply chain security.  Below, we summarize Title 2, the “track and trace” part of this milestone law.

Preemption of State “Track and Trace” Laws

One significant motivation for the passage of the DQSA is the patchwork of varying State laws enacted to require the serialization and tracking of pharmaceuticals moving within a single State’s borders.  The DQSA sets out a phased-in approach that will eventually lead to the creation of a national, interoperable electronic system for the tracking and tracing of prescription drugs throughout the supply chain, from manufacturer, through wholesale distributor, to the dispensing site.  The federal system will preempt and replace State and local drug product track and trace requirements.

Unit-Level Serialization in an Interoperable System

Within four years of enactment of the DQSA, product manufacturers must affix or imprint a product identifier to each package and homogenous case of product.  A homogeneous case is a sealed case containing only product that has a single National Drug Code (NDC) number belonging to a single lot.  A product identifier is a standardized graphic that includes, in both human- and machine-readable form, the product’s lot number, expiration date, and standardized numerical identifier (“SNI” – which is a set of characters that uniquely identifies each package or homogenous case and includes the NDC number and a unique alphanumeric identifier of up to 20 characters).

A Phased-in Approach

            1.         Pre-Serialization – Beginning January 1, 2015

The DQSA arguably takes “the long view,” with implementation beginning on January 1, 2015.  The first, interim, step contemplates that a manufacturer must provide a subsequent product owner with a single document (in electronic or paper format) that includes certain information about the transaction:

  • Transaction Information (e.g., name, strength, and dosage form of the product, NDC number, container size, number of containers, lot number, date of transaction/ shipment, name and address of seller and buyer, etc.);
  • Transaction History (i.e., the “pedigree” – all transaction information for each prior transaction going back to the first sale from the manufacturer); and
  • Transaction Statement (e.g., assurances of compliance with the law).

Also as of January 1, 2015, a wholesale distributor must receive a transaction history, transaction information, and a transaction statement for each product it purchases.  What a wholesale distributor must pass on to its downstream customer depends upon whether the distributor purchased the product via non-direct purchase or directly from a manufacturer, the manufacturer’s exclusive distributor, or a repackager that purchased directly from a manufacturer.  If the wholesale distributor made a direct purchase, it must, in turn, provide the following information to a subsequent purchaser:

  • Transaction Statement that the wholesale distributor purchased the product directly from the manufacturer, exclusive distributor of the manufacturer, or repackager that purchased the product directly from the manufacturer; and
  • Transaction History (unlike the requirements on manufacturers, though, the wholesale distributor is not required to include the lot number of the product, the initial transaction date, or the initial shipment date from the manufacturer).

If product is sold to a dispenser, this information must be on a single document in a paper or electronic format.  If sold to another wholesale distributor, this information may be any combination of self-generated paper, electronic data, or manufacturer-provided information on the product package.

If the wholesale distributor obtained the product through a non-direct purchase, it must provide the product’s full transaction history, transaction statement and transaction information to subsequent purchasers.

By July 1, 2015, dispensers must be able to receive the transaction statement, history and information from suppliers.

2.         Interim traceability – Four to Seven Years After Enactment

Beginning no later than four years after enactment of the DQSA, manufacturers must provide for each product transaction, the transaction information, transaction history, and transaction statement in electronic format.

Manufacturers, wholesale distributors, and dispensers must also develop verification and notification procedures for suspect and illegitimate product and the ability to retain samples of suspect product upon request.

3.         An Interoperable System – Ten Years After Enactment

Ten years after enactment, an interoperable, electronic tracing of product at the package level goes into effect.  Transaction information and transaction statements will be exchanged in a secure, interoperable, electronic manner.  Systems and processes should allow for prompt provision of the transaction information and the transaction statement for a product in the event of a recall or in an investigation.  With the interoperable system in place, the requirement to provide the transaction history sunsets.

Other Important Provisions

            1.         Returns

The DQSA addresses returns of product.  For up to six years post enactment of the DQSA, wholesale distributors may accept saleable returns under the terms and conditions of their existing sales agreements and may redistribute the returned product without providing a transaction history for the product.  Thereafter, the wholesale distributor cannot accept a return unless the previous owner provides the transaction history, transaction information, and a transaction statement for the product.

Four years post enactment of the DQSA, a manufacturer that intends to further distribute returned product must verify the product identifier, including the product’s SNI.

Once the interoperable system is in place, an entity may only accept a saleable return if it can associate the product with the transaction information and transaction statement associated with that product.

            2.         Wholesale Distributors and Third-Party Logistics Provider Licensure

The DQSA includes new standards for wholesale distributors.  Wholesale distributors must be licensed by the State from which the drug is distributed, or be licensed by FDA if the State has not established a licensure requirement.  Beginning January 1, 2015:

  • Wholesale distributors must report annually to FDA each State in which they are licensed, and the name, address, and contact information of each facility.
  • Any significant disciplinary actions must be reported to FDA in a reasonable time and manner.
  • FDA must establish a database identifying authorized wholesale distributors.

Within two years of enactment of the DQSA, FDA must establish standards by regulation for the licensing of wholesale distributors, including standards for the revocation, reissuance, and renewal of a license.  Standards should include, among others:

  • the storage and handling of drugs, including facility requirements;
  • recordkeeping;
  • bonding;
  • background checks and fingerprinting of facility managers or designated representatives;
  • qualifications for key personnel; and
  • facility inspections.

The DQSA also includes licensure standards for Third-Party Logistics Providers.

3.         FDA Guidance

FDA is required to (in some instances very swiftly), engage in outreach and public meetings, solicit comment, and issue guidances and regulations implementing the DQSA.  FDA must, among other things:

  • Hold not less than five public meetings to enhance the safety and security of the supply chain, the first of which not to be held not earlier than one year after enactment of the DQSA.
  • Issue a draft guidance document on the standards for the interoperable exchange of information within one year after the date of enactment of the DQSA, after providing at least 60 days for interested parties to comment.
  • Conduct a public meeting and then finalize the draft interoperable electronic system guidance within eighteen months.
  • Incorporate into guidances the use of aggregation and inference as appropriate.
  • Finalize a guidance on standards for waivers, exceptions, and exemptions not later than two years after enactment of the DQSA.
  • Finalize a guidance for grandfathering non-compliant product not later than two years after the date of enactment.
  • Finalize guidance on unit level tracing not later than eighteen months after a public meeting.
  • Issue a guidance document to aid in the identification of suspect product and related required notifications not later than 180 days after enactment of the DQSA.
  • Establish one or more pilot projects with manufacturers, repackagers, wholesale distributors, and dispensers, to explore and evaluate methods to enhance the safety and security of the pharmaceutical distribution supply chain.
  • No later than seven years after enactment of the DQSA, retain a private, independent consulting firm to conduct a technology and software study on the feasibility of small dispensers (twenty-five or fewer full-time employees) implementing interoperable, electronic tracing at the package level.

And so, a heartfelt congratulations to all who have been working so hard to accomplish this landmark legislation.  The DQSA is an enormous feat that demonstrates what can be achieved when regulators, legislators, and stakeholders work together.  The implementation challenges ahead are significant; the benefits will be enormous.  The coming months and years figure to be busy ones for FDA and industry as they move to the next step and implement a truly interoperable data exchange that will yield a safer, more secure, pharmaceutical supply chain.

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