Letter

Pew Comments to Senate HELP Committee on Drug Distribution Security

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Comments of The Pew Charitable Trusts
To the Senate HELP Committee
On a Draft Proposal to Improve Drug Distribution Security

April 26, 2013

Dear Chairman Harkin, Ranking Member Alexander, Senator Bennet, and Senator Burr,

Thank you for the opportunity to comment on this draft proposal to secure drug distribution in the United States. We commend your continued bipartisan efforts on this important issue.

Counterfeiting and drug diversion, while thankfully far less common in the U.S. than in other parts of the world, remain matters of serious concern. The United States lacks strong baseline standards for licensure of pharmaceutical wholesalers, and we lack a standard system for companies to keep track of our pharmaceuticals during distribution. There is currently no way to check whether an individual vial or bottle is authentic or counterfeit. Despite the strength of laws in states such as California, multiple state requirements on drug traceability are not ideal either for companies or for consumers. The United States lags behind other countries that have already put in place serialization and verification requirements.Pharmaceutical manufacturers are already making investments in drug serialization technology. To justify the expense – and the preemption of strong state laws – it is essential that any federal law achieve the following within a reasonable time frame:

  • Participation of all members of the supply chain
  • Traceability of drugs at the package level, and
  • Routine checking of drug serial numbers.
We recognize that this draft is the product of a sustained effort to address a complex system and balance sometimes competing imperatives; however, we continue to have areas of significant concern as outlined below. We also recommend several clarifications and technical corrections. On balance, however, we support this approach to establishing a meaningful path forward to a national system that will improve drug distribution security and protect patients.

Major Comments and Recommendations on This Draft

It is important to note that the lot-level system established in phase I of this draft is not, on its own, sufficient to protect patients. A lot may contain thousands of individual bottles or packs of vials. Each unit may be sold separately, and tracking by lot does not allow industry or regulators to know who bought and sold a given drug throughout distribution. Maintaining data about lots would fail to catch unsafe drugs in many scenarios.

The statutory requirement for an electronic unit-level traceability system at a date certain is critically important, and must not be weakened. Our support of this legislation is contingent upon this provision. We also support FDA work on guidance to define system parameters well in advance. While 10 years is longer than ideal to achieve a unit-level system, and we would prefer a timeline closer to the 4 years under California's statute, we do support the timelines in this draft. Longer delays would have deleterious effects on the current momentum in the manufacturing sector to implement serialization and data capacity for traceability. It is imperative that this timeline not be further extended. Statutory clarity on unit-level traceability will ensure better patient protection and reduce the challenging regulatory uncertainty now faced by many companies. In addition:
  • All supply chain trading partners, not just regulators, must be able to use the system to ensure a drug's transaction history is legitimate. Under the unit-level electronic traceability system, transaction history requirements are replaced with an expectation that systems will facilitate gathering the information necessary to produce a set of transaction statements for the manufacturer in response to a regulator request. This is a critical tool, and Congress should ensure that companies can use the system to validate a drug's transaction history. This validation step could be conducted in an automated fashion by the system itself, without revealing full information to the requestor. Specifications for the unit-level system should include automated transaction history validation by each trading partner.
  • Preemption of state pedigree laws should not occur until transaction history requirements go into effect. The draft requires full preemption of state laws upon enactment, but does not put new transaction history requirements into place until 270 days later. This creates a 270-day window during which there would be no pedigree protections in place in the United States at all.
  • A strong system would also capture the physical movement of a drug. It is important to note that the risks to drug distribution relate not only to ownership – as envisioned in this draft – but to a drug's physical location. For example, a company with multiple distribution centers might retrospectively identify a cold-chain problem in just one location, but would have no way of knowing which units of drug had been affected. Similarly, the physical possession of a drug during transport might create opportunities for diversion that are independent of ownership. A robust electronic unit-level tracking system would capture changes in physical possession as well as ownership.
The FDA must be able to establish enhanced product verification once an electronic system is established. This draft contains some initial requirements for verification of drug packages after manufacturers have applied serial numbers. Members of the supply chain would have to check package identifiers when investigating suspect products, and when receiving saleable returns. This is an acceptable first step, but this draft contains no explicit requirements for enhanced verification at future dates. This lack of clarity is a concern. Serialization should not be simply a tool for investigation; it should support proactive routine checking to identify products that need to be investigated. Without proactive verification steps a criminal could sell recycled or counterfeit bottles of HIV medicine, and unless the product appeared suspect for some other reason, no one would detect it because no one would be required to check it. Patients were put at risk – and the New York NY Medicaid program defrauded – through just such a large-scale diversion scheme last year. Congress should clarify that FDA has the scope to specify enhanced verification expectations under the unit-level electronic system established by this draft.
 
FDA must be able to ensure meaningful pharmacy participation under an electronic system. Pharmacy requirements established by this draft are more limited than those applied to other sectors, and the draft contains no explicit requirements for more robust pharmacy participation at future dates. This system cannot meaningfully protect patients unless all members of the system participate; particularly pharmacies that are at the front lines of patient care. As with verification systems, the FDA must have the scope to ensure meaningful pharmacy participation under the unit-level electronic system established by this draft.
 

We strongly support the rule of construction stating that requirements for public meetings and pilot programs shall not be considered conditions or precedents for the self-effectuating unit-level electronic traceability system. A clear timeline for the unit-level system – critical to industry investment and patient safety – is essential.

Detailed Recommendations

Definitions
  • Package-level verification must be clarified to mean checking the standard numerical identifier. The current definition of verification is determining whether the product identifier corresponds to the standardized numerical identifier OR lot number and expiration date assigned to the product by the manufacturer. The draft includes a number of requirements for package-level verification, but it must be made clear that such package-level verification means checking a product's SNI, and not simply the lot number on a package. Without this clarification, the definition creates a loophole to unit-level verification. We propose adjusting the definition to clarify that subsequent references in the text to package-level verification mean checking the package SNI.
  • The definition of transaction contains a number of exemptions that should be struck or modified because they would undermine the effectiveness of the law. In addition, to ensure flexibility and maintain the effectiveness of the system in future the Secretary must have the authority to make additions or subtractions to the list of transaction exemptions:
    • Affiliated group exemption: The term affiliated group is broad. In its potential to encompass co-owned pharmacies and wholesalers it would undermine the intent of transaction history requirements.
    • Illegitimate and Suspect Product: The definition of illegitimate and suspect product includes an overly burdensome requirement to show public health harm. These definitions are contingent upon whether an adulterated or otherwise unfit product WOULD result in serious health consequences or death. However, a company is unlikely to know with absolute certainty that a serious harm will occur. A known risk of serious health consequences must be sufficient to trigger these categorizations, and the related activities driven by them. These definitions should encompass adulterated or otherwise unfit product that COULD result in serious health consequences or death.
General requirements
  • Waivers, where permitted, should only be for individual companies and should be annually reviewed. We support the creation of a waiver system, but are concerned that waivers for economic hardship could become a sweeping exemption for certain classes of supply chain partners, undermining the intent of legislation to increase standards to improve supply chain security. We do recognize that individual companies may need short-term waivers for reasons of economic hardship, but language should be clear that such waivers apply to individual entities that are structurally different from the rest of the sector to which they belong, and not to entire sectors of the distribution supply chain. Any such waivers should be subject to annual review and renewal. Once implementation of a serialization and traceability system begins, scale and efficiencies may rapidly reduce implementation costs. Therefore, a hardship exemption one year may no longer be necessary the next.
  • Temporarily recognizing a third-party logistics provider as licensed without any assessment introduces system risk. As written, this provision could have the deleterious effect of deeming a third-party logistics provider licensed even if a state recently found the company in violation of existing state law. It also creates a significant loophole that bad actors may abuse. At a minimum, State regulators must be able to assert a third-party logistics provider is non-compliant and prevent them from being licensed. Under the current draft, only the FDA may make such an assertion. States may have much greater familiarity with these companies than the FDA, and could more readily identify these abuses in the course of standard State oversight activities.
Notification of High Risk of Illegitimacy
  • If any entity within the supply chain knows of high risk of an illegitimate product elsewhere in the supply chain they should be required to notify the Secretary and trading partners. This requirement should not be tied to possession of the illegitimate product, as in the current construction.
  • The Secretary must be able to alert all sectors, not just manufacturers, to high risk of illegitimate product, and independently trigger relevant investigations and notifications. Currently only manufacturers must initiate investigations in response to an alert by the Secretary of a high risk of illegitimate product. A manufacturer can alert affected trading partners, and these companies can alert their trading partners. However, a pharmacy that received diverted drugs with a fake transaction history would not receive a notice as they would not be a known trading partner for that drug.
Wholesale Distributor Requirements
  • Wholesalers that purchase directly from manufacturers should not be exempt from providing lot numbers to subsequent purchasers. This draft proposes an interim lot-level pedigree system where major players are not actually required to communicate lot numbers. Wholesalers that purchase drugs directly from the manufacturer are explicitly not required to include lot numbers in the transaction information they pass. Secondary wholesalers, who are required to include lot numbers in transaction histories, must then begin a transaction history ostensibly by reading the lot numbers off manufacturing packaging. This will be burdensome and may create an uneven playing field akin to the one that resulted in a stay of the Prescription Drug Marketing Act.
  • Transaction information, history, and statements must each be provided in a consolidated record. Allowing wholesalers to provide downstream trading partners with any random combination of paper, electronic data, or even manufacturer packaging places a large and unnecessary burden on downstream trading partners. At a minimum each of these items must be provided in a consolidated document, whether paper or electronic.
  • Saleable returned drugs must not be re-sold with a false attestation that they were purchased directly from the manufacturer. This draft allows wholesalers to re-sell returned product without providing a transaction history. However, the draft should make clear that these products may not be re-sold with an attestation or implication that they were purchased directly from the manufacturer. Returns have been identified as one of the major risk areas for the insertion of illegitimate product into the legitimate pharmaceutical supply system. Erasing a product's prior transaction history when it is returned and re-sold diminishes a purchaser's ability to determine that drug's provenance, and makes it easier for criminals to introduce counterfeit, diverted or stolen drugs.
  • The carve-out for drop shipments should be clarified. As currently written, the drop shipment provision broadly exempts any entity that does not take physical possession of the drug. However, requirements under this draft are generally based on ownership and not possession. This creates a large potential loophole. For example, if a wholesaler purchases a product and sells it to a pharmacy, but uses a separate company to ship the drugs from the manufacturer to the pharmacy, this wholesaler could be exempt from product tracing requirements. As a consequence, the information provided by the manufacturer upon change of ownership to the wholesaler would never make it to the pharmacy. Entities that take ownership of a product but not physical possession must still be involved in receipt and passage of transaction information, history, and statements. The drop shipment exemption should be constrained to entities that exclusively provide administrative services but do not take ownership.
Dispenser Requirements
  • Pharmacies should be held to a 6-year records-retention requirement, in parallel with requirements for other sectors. In the current draft, pharmacies are permitted to keep records of transaction information “as necessary, but not longer than 6 years.” (page 45, lines 21-24) This must be corrected to establish pharmacy record-keeping requirements with clear 6-year minimums, as for other sectors.
  • Dispensers must be ultimately responsible for meeting requirements, even if they have a third party managing their data. The current draft allows pharmacies to use a third party to maintain their transaction information and states that dispensers shall not be relieved of other obligations placed upon them. This implies that dispensers would no longer be accountable for meeting transaction information requirements. A pharmacy should not be absolved of its responsibility to meet the requirements set forth by this bill simply because it has a written agreement with another entity to help it comply. The pharmacy must still be responsible, just as a drug manufacturer is ultimately responsible for its products, even when they are made by contractors.
Enhanced Drug Distribution Security
  • Clarify that the unit-level system established 10 years post-enactment must allow supply chain trading partners to ensure the legitimacy of a drug's transaction history. Per this draft, the unit-level electronic traceability system must allow for the gathering of information necessary to produce a set of transaction statements back to the manufacturer only in response to a regulator request. Congress should not deprive supply chain stakeholders of this important tool. This validation step could be conducted in an automated fashion by the system itself without revealing full information to the requestor.
Uniform National Policy
  • Preemption of pedigree laws should not begin until new transaction history requirements take effect, currently 270 days following enactment. A federal law should not leave the country unprotected.
Penalties
  • Include civil monetary penalties as an enforcement tool. We support the additions made to the adulteration and misbranding provisions of the Act; however, these penalties are generally limited, apply more clearly to manufacturers, and have unclear deterrence potential for wholesalers and pharmacies. The FDA would have much better ability to enforce these requirements with a more flexible set of penalties such as administrative fines or civil monetary penalties (CMPs). The penalties under 21 USC 331 (t) include: prosecution for misdemeanor or felonies in case of fraud, seizure, and injunction. These penalties are cumbersome to administer, and therefore may not ensure compliance. It can take a U.S. Attorney a long time to bring a criminal case, and these cases have a high burden of proof. Unlike seizures, which are actions against the product rather than the firm, and injunctions, which govern future behavior rather than punishing violations, CMPs are a penalty for infractions that can be a powerful deterrent because they can be imposed administratively, based on a civil standard of proof, making them more efficient.

Thank you again for your commitment to crafting legislation that will protect patients from counterfeit, diverted, and potentially unsafe drugs. While we have identified areas of concern, we feel that this draft represents an important advance for patient safety.