Sunday, May 28, 2006

Closing down the secondary market

In my most recent post on the Florida pedigree situation, I pointed out that HDMA makes a very reasonable point regarding the ease of forging paper pedigrees.

As if on cue, a drug diverter pled guilty to five counts of conspiracy for selling stolen drugs and admitted that " sell the prescription drugs, he created fraudulent pedigree documents..." The press release from the U.S. DOJ has all the sordid details.

I believe that the introduction of Inventory Management Agreements (IMAs) and Fee-for-Service agreements have dramatically reduced this type of activity. Drug makers now literally pay for greater product security by compensating U.S. wholesalers not to stockpile drugs. The more sophisticated companies also pay wholesalers for data to enable real-time analyses of orders, inventories, and product movement. Enterprise-class software is being used by manufacturers such as Bristol-Myers Squibb to gain never-before-available insights into the location of inventory.

IMO, the practical effect of these manufacturer investments has been to limit product leakage into the grey market, closing a significant entry point for counterfeitors. The large wholesalers and retailers have all vowed to stop purchases from the secondary market, but it is comforting to know that manufacturers can validate these pledges from their channel.

Nevertheless, the secondary market exists as long as there are willing buyers exist for products with questionable pedigrees. See The Ghost in the Machine, a recent overview of secondary wholesalers from Pharmaceutical Commerce magazine. Scary stuff to consider the next time you get a prescription filled.

(While I'm thinking of it, I recommend that you check out Pharmaceutical Commerce, an excellent publication focusing on the business aspects of drug channels. Full disclosure: I am on the editorial board.)

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