I know that I promised to take a blogging break, but I just can’t help myself.
Here is today's editorial: Time To Protect The Pharmaceutical Supply Chain.
Note this paragraph, which is clearly a rebuke to critics (like me) who argue that a national standard would be better:
“Other e-pedigree opponents have argued that
“Within the
and
“The federal government can and should take the lead in establishing a single federal standard for electronic pedigree.”
(You can read his full statement here.)
He’s absolutely correct. Complying with a grab bag of state laws does little more than add unnecessary costs without an equivalent increase in safety. Inconsistent state laws ignore the fact that today’s pharmaceutical supply chain is a national business for drug makers, large wholesalers, and multi-state pharmacy chains. Read my op-ed Securing the Supply Chain for more.
At the same time, pharmacists are mounting an effort to slow down or stop the movement to a national e-pedigree standard due in part to the implementation costs associated with track-and-trace. (See Pharmacists Haggle over Pedigree Costs.)
On Monday, I’ll look at the new NACDS/NCPA study that estimates first year track-and-trace costs to be $110,000 per pharmacy. Get ready for an industry-wide debate over a timely and heretofore unanswered question: How much supply chain security are we willing to pay for?
I hope you are still paying attention to the
Yes, we all know that the CA Board of Pharmacy extended the e-pedigree implementation deadline to January 1, 2011. But SB1307, which was introduced by CA State Senator Ridley-Thomas in February, proposes the following new e-pedigree implementation timelines:
The manufacturers have a phased in serialization schedule under SB1307 because “the process of implementing serialized electronic pedigree for all prescription drugs in the entire chain of distribution is a complicated technological and logistical undertaking for manufacturers, wholesalers, pharmacies, and other supply chain participants. The Legislature seeks to ensure continued availability of prescription drugs in
Here is the proposed schedule by which a manufacturer must (1) designate the particular drugs that will be serialized, and (2) actually comply with the serialized electronic pedigree requirements:
I’m encouraged that
Where's Doc Brown when you need him?
READER OF THE WEEK
The Texas Startup Blog recently interviewed Jon Cameron, founder and President of Pop Technology. According to the article: “When Jon isn’t inventing cool gadgets for the retail industry he can be found reading Drug Channels…”
Gosh, your friendly neighborhood blogger is now someone’s hobby!
Thanks for the shout-out, Jon.
COMMENTS, WE GOT COMMENTS
There are many interesting comments on yesterday's analysis of the latest AMP study. Read them below the original post. Perhaps you'll even add you own $0.02?
Last week, three major associations representing retail pharmacy – NACDS, NCPA, and FMI – came out with a joint statement opposing H.R. 5839 Safeguarding America’s Pharmaceuticals Act of 2008, a bill that would establish national standards for the pharmacy supply chain. I praised this bill last month in National Standards: It’s About Time.
Pay attention to this debate because it signals the inevitable divergence of interests as we get closer to actually paying for a system to track finished drugs in the pharmaceutical supply chain. I’ve been predicting this split almost since Drug Channels launched in 2006, so here are some thoughts on what’s really behind the phamacists’ opposition – and how much it might cost you.
CLOSING THE
Pharmacists are complaining that H.R. 5839 would “mandate an unproven, disruptive and costly ‘electronic pedigree/track and trace’ requirement that would severely interfere with pharmacies’ ability to effectively provide vital prescription medicines and health care products and services.”
Sure, anyone who understands the pharmacy supply chain will agree that authentication creates costs for retail pharmacies. (See Do Pharmacists want Pedigree?). Kevin Nicholson, VP of Pharmacy Regulatory Affairs at NACDS, highlighted the operation and administrative burdens of pedigree for pharmacies in his May 1 testimony to the House Committee on Energy and Commerce.
But unless I’m missing something, these costs will be even higher for a pharmacy forced to work with the hodgepodge of potentially incompatible state-level track-and-trace systems sprouting up all over the country. Wouldn’t NACDS and FMI members such as Walgreen (
According to this Drug Topics article, “pharmacy groups are split over federal e-pedigree legislation.” NCPA reportedly supports the “intent” of H.R. 5839 while NACDS opposes any bill.
Why the split? You may recall from my summary of the bill that it contains grants for technology upgrades to “small pharmacies,” which is effectively defined to be “anyone except large member companies from NACDS or FMI.”
So, how much will it take to get the support of NACDS members? Mr. Nicholson started the bidding at $30,000 per pharmacy in his May 1 testimony (see page 7). That’s about $180 million each to
True, such a figure may be a mere gratuity in the world of
We all know that the “business value” of track-and-trace for the manufacturer can only be fully realized when pharmacies authenticate at the point of dispensing. So, who wants to step up and fund pharmacy-level implementation and data transmission?
To paraphrase a quote often attributed to Winston Churchill: We have established what’s going on. Now we’re just haggling over the price.
Pharmalot, the Newark Star-Ledger’s outstanding online pharmaceutical industry news site, has just published my op-ed arguing that America’s approach to tracking finished drugs in the pharmaceutical supply chain needs a radical overhaul. You can read it here:
Securing America's Pharmaceutical Supply Chain
Unlike the blog, this article is written for a general audience. Same great Drug Channels taste, but now with 82 percent less jargon!
I’d love to hear what you think, especially since the style is intentionally more accessible.
The Heparin contamination has pushed the security of
Yesterday, the House Committee on Energy and Commerce accused the FDA of failing to protect Americans from contaminated Heparin. Rep. John Dingell said: "Our citizens can no longer trust that their food, drugs or medical devices are safe when the FDA says they are." (See Lawmakers Fault FDA on Heparin.)
This Thursday, the House Committee will hold additional hearings on the Food and Drug Administration Globalization Act, a draft bill that proposes new fees and increases FDA resources directed to the safety of food, drugs, devices, and cosmetics. (The FDA Law Blog has a good summary.) Fans of Congressional hearings (hey, who isn’t?) can catch the play-by-play video webcast on this page.
The newfound attention to supply chain safety is also bringing some new players to the game. Last week, New York Senator Chuck Schumer announced plans for seemingly redundant legislation for a “track -and-trace system for prescription drugs to prevent contamination.” (Read his subtle and self-effacing press release.)
Roger Bate of the American Enterprise Institute wrote a good editorial cautioning against the knee-jerk protectionist inclinations of many politicians in China's Drug Dilemma (from The Wall Street Journal Asia.) He argues that Chinese government officials are trying to solve the quality problems, but face an uphill climb:
“
The movement to make the pharmacy supply chain safer just took a huge step forward with Friday’s introduction of H.R. 5839 Safeguarding America’s Pharmaceuticals Act of 2008. The bill is co-sponsored by Representatives Steve Buyer (R-IN), Gene Green (D-TX), Jim Matheson (D-UT), and Mike Rogers (R-MI).
I enthusiastically support this bill, which finally offers Federal preemption of the multiple disorganized, uncoordinated, and underfunded state-level mandates. Ultimately, patients will be the biggest beneficiaries of a more secure supply chain.
KEY POINTS
Federal Preemption with Uniform National Standards – “no State or political subdivision of a State may establish or continue in effect any requirement with respect to statements of distribution history, manufacturer packing lists, unique standardized numerical identifiers, or drug identification and tracking systems for prescription drugs that is different from, or in addition to, any requirement under this subsection.’’ Got that, States? The bill also establishes new Federal minimum standards for wholesale licensing.
Phased Implementation – The Bill sensibly requires earlier compliance for “High-Risk Drugs.” The precise timing will depend on when the bill becomes law, but it looks like High-Risk Drugs would not have to serialized until mid-2011. (I touted a risk-based approach last July.) There are many places in the bill where the speed of implementation will be based on sensible factors such as “operational and technical feasibility.”
Support for “Independents” – A truly closed-loop, interoperable track-and-trace system based on serialization will require a massive infrastructure upgrade at the 150,000+ points of pharmacy dispensing in the U.S. The bill permits grants for technology upgrades to a “small pharmacy,” which is defined as “a pharmacy which is not owned (or operated) by a publicly traded company.” Of course, some privately-held pharmacies can be quite large (um, Duane Reade?), so this language will need to be cleaned up.
And the pedigree starts with… The bill also clears up a major area of disagreement between various state and federal definitions of pedigree: Where does pedigree begin? According to H.R. 5839, it begins with the Authorized Distributor of Record (ADR) that purchased directly from the manufacturer, a.k.a. “Direct Purchase Pedigree.”
OBSERVATIONS
H.R. 5839 Safeguarding America’s Pharmaceuticals Act of 2008 is only a bill, just sitting there on Capitol Hill. Nonetheless, here are a few implications if this bill becomes a law.
Amateur hour will be officially over. Today’s crazy patchwork of pedigree regulations creates uncertainty for everyone involved in the pharmacy supply chain. These decisions need to be made in a structured, logical, and public manner. Supply chain security regulations are too important to be left to the personal whims of a few volunteers at an underfunded state agency. Yes, I’m thinking about you, California State Board of Pharmacy!
Serialization will not be optional. The momentum for serialization is now inescapable, which is one reason that I joined the Advisory Board of Secure Symbology. Track-and-trace at the unit level only becomes possible with serialization, which is complex and must begin with the manufacturer/packager. At a minimum, serialization with pedigree requires: affixing a unique number during the packaging process; capturing and managing petabytes of data; adding pedigree information as the product moves down the supply chain; and then making these data easily (but securely) accessible. It also requires substantial lead time since serialization must happen during the drug packaging process, which can be months (or longer) from the time that the product is dispensed to a patient.
The pharmacy lobby will oppose national standards. I warned in December that pharmacists do not want pedigree. State Boards of Pharmacy – composed mainly of independent pharmacists – don’t want to lose local control (read: influence, power) and want to avoid any additional burdens on pharmacy operations. In fact, before the text of H.R. 5839 was even posted online, Steve Anderson of NACDS leapt into action with this statement asking Congress to “refrain from mandating serialization, e-pedigrees or track and trace requirements, since they are still experimental and will prove extraordinarily costly for pharmacies and other supply chain operators.” Unfortunately, pharmacies must close the loop if we are all to benefit from complete track-and-trace and ensure that pharmacy purchasing is not the weak link in the supply chain. Plus, wouldn't a single national standard lower compliance costs for NACDS members such as CVS Caremark or Walgreens (WAG)?
--
All in all, a very promising start for reducing counterfeits in the legitimate supply chain. Now, we just need to convince consumers to stop buying from shady online pharmacies.
BONUS FUN FACT: Did you know that "PEDIGREE" is a registered trademark of Mars, Inc., the makers of M&Ms? Woof!
As predicted, the California Board of Pharmacy today announced its decision to extend the deadline for implementation of e-pedigree laws to 2011.
The timing was unexpected but not the outcome. Apparently, my sarcastic mocking on the Drug Channels blog was just too much for them to bear. Plus, the Board now avoids the embarrassment of having a legislative or legal solution imposed on them.
Let's hope that the Board members can put aside their pharma-bashing and get on with the hard work needed over the next 33 months.
ADDENDUM
Here is the official announcement: DECISION OF THE CALIFORNIA STATE BOARD OF PHARMACY PURSUANT TO BUSINESS & PROFESSIONS CODE SECTION 4163.5
Welcome back, my friends, to the enforcement debate that never ends!
The California Board of Pharmacy (CA BoP) is meeting today to consider the January 1, 2009, implementation deadline for e-pedigree along with the new CA pedigree legislation. (Read the agenda.) Similar to my prediction prior to the last meeting in CA Pedigree: Going to '11?, I think the Board will pontificate about “the industry as a whole” and once again avoid a vote on delaying implementation until 2011.
However, I have a new theory for you about why the Board will not be able to implement e-pedigree even if they decline to adjust the deadline. I also have a few connect-the-dots ideas suggesting that the Board is not even planning to enforce anything.
If you attend the meeting, drop me a line and I’ll post a synthesis of perspectives. As always, your anonymity is guaranteed.
IS PEDIGREE AN UNDERGROUND REGULATION?
As you may know, pedigree is covered in sections 4034 and 4163 of the California Business and Professions Code.
According to California’s Office of Administrative Law, all state agencies are required to adopt regulations following the procedures established in the Administrative Procedure Act (APA). If a state agency issues, enforces, or attempts to enforce a rule without following the APA, the rule is called an “underground regulation.” State agencies are prohibited from enforcing underground regulations.
I’m no lawyer, but California’s pedigree laws still seem “susceptible to interpretation,” a key test for APA procedures. (See What is a Regulation?) The CA Board of Pharmacy is using a great of judgmental discretion in carrying out its duties, as I point out in Pedigree and Obscenity.
Bryan Liang went further last week in his editorial “Protection against counterfeit drugs too important to rush” when he wrote: “Those participating in the supply chain — from pharmaceutical companies to community clinics to mom-and-pop drugstores — are greatly concerned about implementing a law that won’t work because of the unanswered questions of what an e-pedigree would entail — including what standard is right for the entire chain, what technology to use, what frequencies are mandated, how pill containers versus injectables would be treated, how to weather the costs of pedigree readers and writers, and, critically, who would be the owner, guardian and steward of the information.”
Similarly, David Fong, Pharm.D., senior VP of pharmacy & family care at Safeway, echoed these comments in a recent Drug Topics article: “We don’t believe that on January 1, 2009, the supply chain will be ready to comply with the rule.”
So has the CA Board of Pharmacy followed APA? If there are reasonable grounds to suspect that the Board has not followed APA, then a simple legal challenge will prevent the Board from enforcing pedigree laws on January 1, 2009. (Fair warning: This is not legal advice. See disclaimer below. Your mileage may vary.)
GETTING READY FOR … NOTHING?
Through my work with Secure Symbology, I have seen first-hand that an integrated serialization/e-pedigree solution can be implemented on a high-speed packaging line using 2-D bar codes. However, many (most?) manufacturers, wholesalers, and pharmacies will not be ready by the arbitrary deadline of 1/1/09. While counterfeit drugs remain an ongoing threat, there seems to be little logical or fact-based rationale for rushing ahead with a law that is still susceptible to interpretation.
So, does the Board (privately) expect a delay?
Clue #1: The Board of Pharmacy’s budget will increase by only 2.5 percent and they will add no new positions in the fiscal year during which it implements e-pedigree. (See Pedigree and Obscenity.) Huh?
Clue #2: Judith Nurse, Supervising Inspector at the CA Board of Pharmacy, spoke by telephone at the SecurePharma conference in February. I wrote down the following quote: “We do not want to be the pedigree police.” Does this statement mean that the Board plans not to enforce the pedigree law?
Clue #3: I asked Ms. Nurse the following question at SecurePharma: “It seems likely that many manufacturers and wholesalers will not be able to comply with the pedigree laws by January 1, 2009. What contingency plans has the Board of Pharmacy prepared to handle such a situation?” Ms. Nurse replied: “We have not developed any contingency plans.” If this is supposed to make consumers feel safer, then I’m really worried!
DO AS I SAY…
According to its own assessment, the CA BoP’s staffing is “insufficient to perform mandated duties at desired levels.” Perhaps that explains why the CA Board of Pharmacy has not yet bothered to post the minutes from January’s Public Board Meeting on the Board and Committee Meetings section of its own website (as of March 24).
Guess they need more time to comply.
Today, the Food and Drug Administration (FDA) began soliciting comments and information about technologies behind pharmacy supply chain security. Here are the links for your commenting and informing pleasure:
Standards for Standardized Numerical Identifier, Validation, Track and Trace, and Authentication for Prescription Drugs (Request for Comments)
Technologies for Prescription Drug Identification, Validation, Track and Trace, or Authentication (Request for Information)
In an interesting coincidence of timing, the European Commission (EC) recently made a similar request regarding closely related issues. See the EC’s just-issued Public Consultation In Preparation Of A Legal Proposal To Combat Counterfeit Medicines For Human Use.
These requests provide a good opportunity to educate regulators about the progress being made in our industry along with the real-world implementation hurdles. So far, the clarity and professionalism of the questions posed by the EC and FDA offer an interesting contrast with a certain Board of Pharmacy’s approach to information gathering and assessment.
What’s Going On?
In the U.S., states currently have the greatest influence over the wholesale and retail distribution of drugs, presenting some practical hurdles for any manufacturer, wholesaler, or pharmacy that operates in multiple states. Say hello to 50 different pedigree requirements!
Last September's Food and Drug Administration Amendments Act of 2007 (or FDAAAAAAAAAAA) empowered the FDA to take a stronger hand in these matters with Section 913, entitled “Assuring Pharmaceutical Safety.” Download this handy-dandy 2-page extract to read this section for yourself. I first discussed the importance of this Act in PDUFA & Supply-Chain Security.
In plain English, Section 913 requires the FDA to “develop standards and identify and validate effective technologies for the purpose of securing the drug supply chain against counterfeit, diverted, subpotent, substandard, adulterated, misbranded, or expired drugs.” The deadline is March 2010. The most notable requirements include:
Today’s lesson: If at first you don’t succeed, change the rules!
Two bills were introduced last week that would modify California’s pedigree legislation.
Just to be crystal clear: Don’t stop planning for January 1, 2009. Obviously, there can be no guarantee that either the proposed legislation will pass or that the Board of Pharmacy will vote for a delay to 2011. Nevertheless, the likelihood of a delay or phased implementation just went up again.
I'M JUST A BILL
You can read the text of the proposed bills at these links:
SB 1307 (introduced by CA State Senator Ridley-Thomas)
SB 1270 (introduced by CA State Senator Cedillo)
SB1270 is more interesting of the two because it potentially changes the January 1, 2009, implementation date. The text looks like a placeholder to me:
“This bill would instead impose the pedigree requirement and the prohibition against selling, trading, transferring, or acquiring a dangerous drug without a pedigree on an unspecified date, authorize the board to extend the compliance date to an unspecified date in those specified circumstances, and make conforming changes.” (emphasis added)
Right now, the CA Board of Pharmacy only has the ability to delay implementation of e-pedigree requirements until 2011 if the board determines that “manufacturers or wholesalers require additional time to implement electronic technology to track the distribution of drugs within the state.” (See CA Pedigree: Going to '11?) Unfortunately, the Board’s decision making process regarding the 2009 deadline seems dysfunctional and unnecessarily opaque, as I describe in Pedigree and Obscenity.
I’ve been told that additional legislation may be on the way, especially with regard to phased implementation such as a risk-based approach to serialization. You can read more about California’s legislative process here.
AND SPEAKING OF SERIALIZATION...
I will be attending SecurePharma2008 on Tuesday morning. If you'll be there, please stop by and see me at the Secure Symbology booth at 10:30 AM on Tuesday. I’m always looking for good story ideas and tips for Drug Channels.
I'll be at the booth with other members of Secure Symbology’s Advisory Board of Directors. But please don’t call us booth babes!
Over the past few weeks, pharmaceutical wholesalers and healthcare products distributors have been reporting quarterly financial results for Q4 of 2007. At least three companies (so far) have reported costs of complying with supply chain security regulations that had a material impact on earnings per share.
As I see it, these examples are leading indicators for a troubling trend. No agency is taking a holistic, national view of the system or working to create an efficient, effective regulatory regime.
Instead, various agencies (Federal and State) are establishing diverse new reporting and regulatory requirements for pharmaceuticals.
Hopefully, all of these conflicting systems will make the pharmaceutical supply chain safer. In the meantime, manufacturers, wholesalers, and pharmacies are being forced to operate in a complex and mercurial enforcement environment, which could raise costs far beyond any purported safety benefits.
THE COSTS OF SAFETY
Today, it’s a few wholesalers under the microscope. Tomorrow, it could be the rest of us. So consider these examples to be potential early warning signs.
#1) The DEA suspended Cardinal Health’s (CAH) license to distribute controlled substances at facilities in Washington, Florida, and New Jersey despite the company’s December 2006 agreement to monitor pharmacies more carefully.
In last week’s release, Cardinal disclosed that efforts to fix the problems “may cost more than $30 million.” President and CEO Kerry Clark stated on the earnings conference call that “more than half” of the $30 million impact are expenses to control diversion, so I presume that the balance is a combination of fines, lost business from selling to diverters, and the “distraction” caused to the organization.
#2) McKesson (MCK) apparently has similar issues, although the DEA has not suspended any licenses as far as I know. On McKesson’s conference call last Friday, Chairman, President, and CEO John Hammergren disclosed a one-time non-tax deductible legal reserve related to diversion, stating:
“We are in discussions with the Drug Enforcement Administration and the U.S Attorney Offices to resolve claims around certain customer orders for selected controlled substances. We have been implementing improvements to our comprehensive controls and reporting procedures to avoid future claims of this type. And we've recorded a legal reserve of $13 million during the quarter within our Distribution Solutions segment and believe this reserve is adequate for the claims.”
#3) PSS World Medical Inc. (PSSI), a large med-surgical product distributors based in Florida, announced additional costs for pedigree in its fiscal third quarter release. The company has now “resolved outstanding issues with the Florida Department of Health regarding compliance with new state pharmaceutical pedigree regulations.”
From April through December of 2007, PSS incurred total costs of $6.2 million “associated with pedigree law compliance and settlement with the Florida Department of Health.” (I discussed PSS initial disclosure last June in Pedigree and Profits.) On a conference call, the company noted that it spent $800K in the fourth calendar quarter to ship product to its Florida customers from out of state locations.
WHAT ME, WORRY?
Each of these situations was triggered by the specific behavior of a single company. Yet I see a few reasons for manufacturers, wholesalers, and pharmacies to keep a close eye on these developments.
I worry that the California Board of Pharmacy will not provide consistent regulatory and compliance guidance. January’s enforcement committee meeting did not inspire confidence as I note in Pedigree and Obscenity. Despite their meager budget, the BoP could levy plenty of “gotcha” fines on manufacturers and wholesalers. Something makes me think that they’ll continue to give pharmacies a free pass…
Since today is Super Tuesday, let’s also not forget that all three Presidential candidates from the Senate (Clinton, McCain, and Obama) are co-sponsors of the Senate’s importation bill (Pharmaceutical Market Access and Drug Safety Act of 2007 S.242). The bill allows importation by wholesalers, pharmacies, and individuals -- subject to even more government requirements, some of which would conflict or undermine with the California pedigree system.
I won’t rehash the arguments against this bill -- you can scan through my posts in the Importation category at your leisure or just read my comments about Senator McCain’s viewpoints in Crazy Talk from John McCain. But consider the fact that the proposed importation bill explicitly limits the way a manufacturer can structure its distribution agreements and may force a pharmaceutical manufacturer to do business with secondary wholesalers that are known diverters.
My bottom line: multiple agencies are chasing the metaphorical floating Coke bottle of supply chain security. Heaven help us if a Charlie Brown gets his hands on it.
P.S. I was rooting for Underdog.
If you’re like me, you probably don’t recognize Potter Stewart, the 92nd Associate Justice of the United States Supreme Court. But I bet you’ll recognize his famous test for obscenity: “I know it when I see it.”
Unfortunately, the California Board of Pharmacy has apparently adopted Justice Stewart’s highly subjective and now-obsolete test as it evaluates the industry’s progress. Therefore, I predict that you can look forward to a Drug Channels post later in 2008 about either: (a) a delay to 2011, or (b) an injunction against the Board of Pharmacy preventing implementation on January 1, 2009.
VENUS & MARS IN THE SUPPLY CHAIN
Although I didn’t attend the Board of Pharmacy meeting on Wednesday, I have heard from a number of the 400-500 (!) people who were there.
The Board members were adamant about the 2009 implementation date and seemed quite frustrated with the messy, real-world problems associated with putting an interoperable system in place.
Representatives from industry – manufacturers, pharmacies, wholesalers, and technology providers – highlighted their ongoing progress and challenges while trying to (politely) remind the Board that life is not as simple as a PowerPoint slide.
And as I predicted on Tuesday, the Board did not vote on delaying implementation until 2011. Perhaps the board members are enjoying their moment in the sun and want it to last a big longer.
QUESTIONS BUT NOT ANSWERS
On Tuesday night, the Board released Questions and Answers relating To the California Electronic Prescription Drug Pedigree Law(s), which claims that their template “outlines criteria the board will apply to any request for a delay in implementation.” (See question 41 on page 11.)
I’ve reread the template at least 10 times, but I still can’t find a list of the criteria that define “evidence.” The Board received at least 35 written responses (discussed in CA Pedigree: Going to '11?) addressing the questions on the template and providing “specific, articulated evidence” (per item 3). Yet at least one of the board members allegedly stated that “none” of the responses were evidence-based!
And how should we interpret the statement that the Board's decision about 2011 will be “an aggregate rather than an individual determination, pertaining to the industry as a whole rather than to the readiness of any individual industry participant.”
Which companies or individuals are included in the “industry as a whole?” How many of them need to talk personally with the Board of Pharmacy? Will the Board delay if 80% of the (undefined) “industry” is ready? What if only 51% are ready? Would you believe 48.7% and a troop of very angry girl scouts?
I guess they’ll know it when they see it. Yikes!
INJUNCTION TIME?
Here are some facts on the California Board of Pharmacy drawn from the Governator’s proposed budget for 2008-2009:
2007-2008 budget (estimated): $9.7 million; 50.5 positions
2008-2009 budget (proposed): $10.0 million, 50.5 positions
So let me get this straight – the Board of Pharmacy’s budget will increase by 2.5 percent and add no new positions in the fiscal year that it implements e-pedigree?!? (My advice: start selling tickets to the enforcement committee meetings!)
Regular readers will remember that two well-funded, fully staffed Federal agencies were stymied in their attempts to bring drastic change to the pharmaceutical supply chain.
In my opinion, a postponement of California’s e-pedigree requirements to 2011 is now inevitable since the Board of Pharmacy has recently received sufficient evidence to justify a delay.
The California Board of Pharmacy’s Enforcement Committee meets on Wednesday. While e-pedigree is not on the official agenda, the Board has recently received a wave of requests for delaying implementation until 2011. However, I suspect that the Board will postpone their decision until later in 2008 so as to keep the pressure on the industry.
NONE MORE CLEAR
Under California law, the Board has the ability to delay implementation of e-pedigree requirements until 2011 if the board determines that “manufacturers or wholesalers require additional time to implement electronic technology to track the distribution of drugs within the state.” According to the December 5 Report of the Work Group on E-pedigree, a decision to delay must be “based on facts, not statements, and the data must demonstrate that a delay would be in the public interest.”
As a result, an Implementation Submission Statement Template was developed to collect information about e-pedigree progress. And guess what? The Board received 42 responses regarding the industry’s readiness to implement e-pedigree by January 1, 2009.
I found 35 responses online in Letters Regarding Readiness to Implement E-Pedigree (Part 1) and Letters Regarding Readiness to Implement E-Pedigree (Part 2). Warning: These are BIG files -- 282 pages totaling 55 MB.
Here’s a brief rundown of the 35 responses in these files:
Believe it or not, it’s time for my final post for 2007.
In the spirit of the season, I want to highlight the major themes of 2007 along with my good calls and near misses. I also want to give you some insights about the Drug Channels blog and its future.
There were 114 posts on Drug Channels in 2007, so this is a very long post. However, you will be rewarded with a hilarious video from now-bankrupt drug wholesaler FoxMeyer if you make it to the bottom.
Shining Light on Pharmacy Economics and the Pharmaceutical Supply Chain
My philosophy in writing this blog can be summed up with a quote from the late Senator Patrick Moniyhan: “Everyone is entitled to his own opinion, but not his own facts.” In my own way, I want to bring facts and balance to subjects that don't get sufficient or accurate coverage from traditional media outlets.
I was proud to break the story about CVS’ lawsuit with Prasco over generic pricing in CVS' Channel Power. Following coverage on Drug Channels, the story was picked up by Pharmalot, Drug Topics, The Pink Sheet, and a few Wall Street analysts. This was my big scoop of the year, even though information about the lawsuit was already in the public domain.
Retail pharmacy proved to be extremely effective at defining the legislative agenda and terms of debate, as I pointed out in Retail Pharmacy's New Power and correctly predicted in January's Lobbying for Pharmacy Profits. While an unprecedented number of pro-pharmacy bills were introduced in Congress, none of the major bills passed despite a Last Ditch Effort for the Senate’s AMP bill S.1951.
I also made some new enemies this year by analyzing how research results were misrepresented to score political points in A Misleading Study on Pharmacy Reimbursement and Hype vs. Research. See the comments beneath each post for a taste of the vitriol. I added insult to injury by pointing out how Part D is proving the value of consumer-directed healthcare.
Drug Channels was also one of the few places to read about the real economics and impact of Wal-Mart’s $4 generics program in Wal-Mart's Gain is not Walgreen's Pain and Wal-Mart adds some $4 generics (yawn).
I also tried to write about channel management from the manufacturer’s perspective. We should never forget there would be no pharmacy or pharmaceutical supply chain without the innovative therapeutics developed by pharmaceutical manufacturers. For example, I followed Pfizer’s new UK distribution model throughout 2007. Pfizer beat back the legal challenges, but then faced an investigation by the Office of Fair Trading (OFT). I overestimated the likelihood of an unfavorable OFT report in Pfizer's UK Plan in Trouble, but hopefully redeemed myself by going Behind the Scenes of Pfizer UK and then explaining what the OFT’s toothless report could mean for the U.S. marketplace.
Average Manufacturer Price (not)
Average Manufacturer Price (AMP) was one of the most popular topics on Drug Channels. We will undoubtedly be hearing much more about AMP, despite the recent injunction covered in No AMP for You!
I worked hard to give you an independent, non-partisan perspective on the impact of AMP. I provided my Comments on the AMP Final Rule just two (weekend) days after it was released and followed up a few days later by analyzing Reactions to AMP from the pharmacy industry. (They didn’t like it.) I explained Why AMP will not be Independents' day, calculated AMP's Impact on Pharmacy Profits, described why PBMs are not worried about AMP, and told you why AMP is Unloved and Unwanted (sniff) by manufacturers. I correctly predicted in May that CMS would exclude PBM rebates from the Final Rule (AMP will exclude PBM Rebates).
I also used Drug Channels to balance the doomsday visions put forth by certain pharmacy in Heretical Questions about the AMP War. Alas, this post did not win me friends at retail pharmacy trade associations, although the many comments from pharmacists indicate a grudging respect and even occasional agreement among actual pharmacists. The Illinois Pharmacist Association even conceded that Drug Channels is “thoughtful and in a lot of ways hard to argue with.”
I even managed to slip in some AMP humor in Death by AMP – an especially popular post in 2007!
The post-AWP Future
Anyone interested in the future of pharmacy reimbursement had plenty to read on Drug Channels this year.
I reviewed the Judge’s original ruling in the Average Wholesale Price (AWP) litigation last June in Comments on the AWP Decision and then followed it up by looking at the damages ruling and Judge Saris’ comments on fictitious AWPs. In my opinion, these decisions will effectively end the consideration of alternate "list price" pharmacy reimbursement models as replacements for current AWP minus models.
As I noted in ASP History Lessons, the introduction of Average Sales Price (ASP) reimbursement for Medicare Part B did not signal disaster for community oncologists or their patients. In fact, The ASP Future is Here because private health plans are already using Medicare’s ASP data for reimbursement, making me think that AMP (if ever published) will become the new pricing benchmark for retail scripts.
On January 1, 2008, CMS will pay for most Part B outpatient drugs at ASP+5%, which is a 1 percentage point drop from the current ASP+6%. It’s one more reason for pharmacies and providers to be anxious about the post-AWP future.
Counterfeiting and Security
Supply chain security was another hot topic at Drug Channels.
California’s looming 2009 e-pedigree deadline has manufacturers, wholesalers, and pharmacies scrambling to comply while also lobbying for a full or partial extension. In one particularly well-clicked post, I highlighted Virginia Herold’s trial balloon regarding a CA e-pedigree delay to 2011. Of course, she quickly backtracked from these comments, but I think a two-year delay or a phased implementation (per California Dreamin') is still very likely.
I generated some controversy by exploring the facts and myths behind much-hyped RFID solutions in RFID Un-Hype and More RFID Un-Hype. Check out the comments to those posts for some intriguing back-and-forth with DC readers.
I also attempted to present a unique supply chain spin on a few big media stories. PDUFA & Supply-Chain Security was one of very few resources to highlight the serialization requirements buried inside the Food and Drug Administration Amendments Act of 2007 (FDAAA). I even wrote about Presidential candidate John Edwards’ surprising embrace of track-and-trace technology in John Edwards and ... Pedigree?
Importation and Diversion
I am convinced that importation (a.k.a. legalized diversion) is risky due to my knowledge and experience about pharmacy supply methods. Unfortunately, mainstream media coverage does a poor job of connecting pharmacy and consumer behaviors to the patient safety dangers posed by importation. That’s why I explained the channel impacts behind importation and the fact that importation won’t really save much money.
My snarky posts about Senator Byron Dorgan – especially Consistent Inconsistency – generated fan mail from Washington, DC. (Sorry, only via private e-mail.)
I rounded out my coverage by writing about the fallacy of safe Canadian sourcing (Canadian Dreamin' and Diversion from Canada via China), how and why internet pharmacies Import Chinese Counterfeits, and why you should not buy Fosamax from Tony Soprano. Hey, never say that I don’t provide real-world tips!
Unfortunately, two of the three big drug wholesalers (AmerisourceBergen (ABC) and Cardinal Health (CAH)) faced DEA suspensions for supplying controlled substances to diverting pharmacies. Cardinal has now had suspensions at facilities in Washington, Florida, and New Jersey despite its December 2006 agreement to monitor pharmacies more carefully. I’m sure we’ll learn much more about this story in 2008.
And now a word from your host
I make Drug Channels freely available as part of my mission to educate, inform, and challenge people. I feel fortunate to have been similarly educated in many private emails and conversations that were sparked by the blog. So please keep emailing me with topics, questions, or news articles. I respond personally to all emails.
I am also gratified that readership of Drug Channels soared in 2007. Each week, there are a few thousand visitors on the site compared to only a few hundred in January. Drug Channels is frequently cited by many bloggers and reporters.
Your Reward: FoxMeyer Nostalgia
Congratulations for making it to the bottom of my 2007 review!
Enjoy this jaw dropping clip of a “motivational” meeting led by the senior executives from once-mighty FoxMeyer, which was acquired by McKesson through bankruptcy court proceedings in 1996. The hilarity starts at 1:23. Ah yes, the glory days when top execs would lip sync and dance on stage. I particularly enjoyed “Tim Beauchamp, Distribution Man” at 4:03, although he was a bit pitchy.
Hat tip to On Pharma.
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I'll be back during the week of January 8. Until then, I wish you a healthly and happy new year!
All the best,
Adam
