The Future of Pharmaceutical Supply Chains (Or, Unpacking the Drug Quality and Security Act)
On November 27, 2012, President Obama signed into law the Drug Quality and Security Act (DQSA), HR 3204, legislation that will have broad-reaching effects on pharmaceutical supply chains. The DQSA was enacted to help protect consumers from contaminated, counterfeit, and stolen pharmaceutical products, and was enacted as a response to a meningitis outbreak in 2012, which killed 64 people and resulted in hundreds more infections. Indeed, the World Health Organization (WHO) recently reported that nearly 10 percent of pharmaceutical products may be contaminated, and that 2 percent of drugs manufactured in the US are consistently diverted or stolen.
The DQSA has provisions regarding drug traceability and serialization that apply to pharmaceutical manufacturers, wholesale distributors, repackagers, and dispensers. These provisions are set to take effect over the next decade, with some taking effect imminently.
Starting January 1, 2015, pharmaceutical manufacturers, wholesalers, repackagers, and dispensers have been required to keep a record of certain information about the pharmaceutical products that they handle. By November 2017, manufacturers will have to place unique product identifiers on their products. By November 2018, repackagers must also comply with this requirement. By November 2019, wholesalers must follow suit, and by November 2010, pharmaceutical dispensers must as well.
Third-party logistics providers (3PLs) are exempt from these traceability and serialization requirements because 3PL handling does not transfer ownership of pharmaceutical products (although we would not be surprised if 3PL customer contracts require 3PLs to collect and maintain this type of information).
The DQSA contains interesting new requirements for 3PLs, as a result of the federal government’s attempts to create national 3PL pharmaceutical licensing standards. Before the DQSA went into effect, 3PL pharmaceutical licensing was a patchwork of non-uniform state and local laws. To some degree, the DQSA preserves this diverse system by requiring 3PLs that handle pharmaceutical products to be licensed “in the state from which the drug is distributed,” and in some cases, in any states to which the pharmaceuticals are supplied.
By November 27, 2015, however, the FDA will be required to issue regulations establishing state licensing requirements, and state and local governments will not be permitted to enforce licensing requirements that are inconsistent with, less stringent than, or directly related to the new federal regulations. This means that, very soon, there will be new 3PL licensing requirements that likely will impact the entire industry. For instance, under the DQSA, states can no longer regulate 3PLs in the pharmaceutical industry as “wholesalers.” This is likely to cause changes in state laws, because states generally do regulate 3PLs, including their licensing requirements, as pharmaceutical wholesalers. Before the DQSA went into force, Florida was the only state that regulated pharmaceutical 3PLs separately.
For 3PL facilities operating in states that do not have licensing requirements, the FDA will establish a licensing scheme. Until the FDA regulations are issued in November 2015, 3PLs are “deemed to be licensed” unless the US Secretary of Health and Human Services “has made a finding that the third-party logistics provider does not utilize good handling and distribution practices and publishes notice thereof.”
As of November 2014, wherever and however 3PL facilities are licensed, all 3PLs have been required to report the status of their licenses annually to the Secretary of Health and Human Services.
The bottom line is that the laws governing the pharmaceutical industry are about to change, and changes impacting 3PLs will take place in just a few months. Now is a good time to ensure you are prepared to be in compliance with the new regulations!