Monday, March 23, 2009

New FDA Chief's Surprising Link to Drug Wholesaling

President Obama has nominated Dr. Margaret Hamburg to be Commissioner of the Food and Drug Administration (FDA). However, you may not know that Dr. Hamburg’s first-hand knowledge of the drug distribution business because she’s on the board of directors of a major healthcare wholesale distributor. If she is confirmed, I expect that the FDA will move forward more quickly on a national strategy for the drug distribution system.

As I point out in Federal Pedigree Sand Trap, the FDA has struggled to implement a coherent national strategy for pedigree, leading some states to introduce new pedigree legislation. The topic will heat up even further given proposed importation legislation (Surprise! New Importation Bill Introduced) and the FDA’s obligation to establish technology standards for the pharmaceutical supply chain by 2010 (Dear FDA: Eight is (Not) Enough).

However, we could soon have someone running the FDA who actually understands distribution and supply chain issues. Imagine that!

Since 2003, Dr. Hamburg has been on the Board of Directors of Henry Schein, one of the largest wholesale distributors of dental, veterinary, and medical products to office-based physicians, dentists, and veterinarians. The company was recently named the “world’s most admired” health care wholesaler by Fortune magazine. See Henry Schein at a Glance for the official overview of their business.

Although pharmaceuticals are a minority of its overall business, Henry Schein is an Authorized Distributor of Record (ADR) for most leading drug makers. Thus, the company has had to sweat the details of state-level pedigree requirements, including varying pedigree standards for human versus animal health products. Notably, Schein was the first wholesale drug distributor in the nation to have its entire distribution system accredited through the NABP’s Verified-Accredited Wholesale Distributors® (VAWD®) designation in 2006. The company generates about one-third of its revenues from international markets, so drug importation could be another hot topic for the company.

Dr. Hamburg’s affiliation with Henry Schein has also been personally profitable for her. Her shares are worth more than $2.3 million and she received director’s fees of about $250,000 (in 2007). Naturally, she will resign from the Board and sell her shares once confirmed.

Roy Poses, who blogs at Health Care Renewal, is skeptical about Dr. Hamburg’s objectivity, writing:

Given that Dr Hamburg has spent over five years living with the obligation for unyielding loyalty to the interests of Henry Schein, and has become what many people would consider rich in the process, how easy will it be for her to turn to becoming a strict regulator of the products her former company used to sell?

I’m not as cynical as Dr. Poses and believe that Dr. Hamburg can still be effective. Nevertheless, I am curious to see how her personal experience at a distribution company (versus a manufacturer, pharmacy, or health care provider) will influence the FDA’s approach to pedigree, serialization, counterfeiting, diversion, secondary wholesalers, importation, etc.

5 comments:

  1. Very interesting. I have not read about this relationship anywhere else. Once again, I learn more about the industry from your blog than any other new source.

    Do you think she will be easier on pedigree regulation because of this?

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  2. I have read today that the FDA might be split into two parts: one part for drugs/devices and one for food. Hamburg would run food and Sharfstein would run drugs. Maybe she would have input about pedigree from the food side. I was surprised to read your post because I didn't know about the connection, but I doubt she learned much on the board of a distributor because pedigree and serialization are pretty operational and not very strategic.

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  3. The preceding comment is referring to this Associated Press story, which I did not see when I wrote my post this weekend: Drug industry advocates join chorus to split FDA.

    The article states:
    Drug industry advocates are quietly allying with some of their longtime critics pushing to split the Food and Drug Administration into two agencies, one for food safety and one for medical products. President Barack Obama bolstered hopes for a breakup last Saturday when he named two public health specialists to the agency's top positions and appointed an advisory group to reassess the nation's decades-old food safety laws.

    I have no idea whether this idea will get political traction. However, I'm still intrigued by Dr. Hamburg's background in distribution. In contrast to the previous comment, I do believe that supply chain security issues made it to the Board level at Henry Schein. Dr. Hamburg would have been the natural point person on the issue for the same safety/security reasons that led President Obama to appoint her.

    Adam

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  4. I know lots of Board members that have little to no understanding of the day-to-day operations of the companies they serve. Do we know that Hamburg is involved in Operations at Henry Schein? She's also on other boards, including one of a private middle school and the Central Intelligence Agency’s Intelligence Science Board, but I doubt she's a teacher/spy in her spare time. Schein may require only a limited advisory role.

    As to FDA dividing into 2 agencies, they've been talking about that for 50 years. As long as food inspection is so woefully underfunded, I doubt it matters except a division would divert limited money and resources to new letterhead and office signs.

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