Tuesday, May 20, 2008

Pharmacists Haggle over Pedigree Costs

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.


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 (WAG), CVS Caremark (CVS), or Kroger (KR) benefit from national consistency instead of having to manage the expenses of multiple systems?


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 CVS Caremark (CVS) and Walgreen (WAG).

True, such a figure may be a mere gratuity in the world of Washington, but that’s still some serious moola. It's also a 50% increase from the $20,000 per pharmacy estimate that NACDS reportedly made in January to the California Board of Pharmacy (see p. 18). I guess gas is not the only thing getting more expensive this year.

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.


  1. AnonymousMay 20, 2008

    I wanted to write saying that I appreciated the coverage and analysis you’re providing with respect to ePedigree / Serialization in California as well as the pending federal legislation.

    In terms of ease of implementation as well as mitigation of risk, I don’t believe that there is any question that one set of standards and processes is better than 34. Much of the media coverage and legislative pressure has been on manufacturers and their efforts to comply, specifically with California’s law, however because of the way ePedigree works, entities closer to the dispensing pharmacy in the supply chain actually have more information. Because of this, they potentially will receive more attention from enforcement once this is completely implemented. From the manufacturing perspective, the entire process is a far-reaching one – needing integration to many parts of an IT and process infrastructure – as well as a costly one to serialize and manage.

  2. AnonymousMay 20, 2008

    It will be interesting to see where manufacturers fall out HR 5839. The bill does a nice job of remembering who pays the lobbyist's bill. Manufacturers are removed from the ePedigree process and likely, the liability associated with ePedigree. California, of course, made no such concession.

    However, when you break down the State requirements, there really aren't 40 different standards. Generally, there are four models which is a managable number.

    The bigger question is WHO has the capability to police the data. The FDA seems an unlikely, and unwilling, participant. So, if the Feds can't do the final follow-through, the States should be allowed to protect their citizens.

    Until HR 5839 is resolved, nothing will get done. Everyone is waiting to see what Washington will do.

  3. AnonymousMay 20, 2008

    here's something that I don't get: who owns all of this data? That's where the money is. I'm guessing that pharmacists want to keep the data from scanning a pedigree and get paid for it. Anyone know what CA was planning about data from the pharmacy?