Drug Channels delivers timely analysis and provocative opinions from Adam J. Fein, Ph.D., the country's foremost expert on pharmaceutical economics and the drug distribution system. Drug Channels reaches an engaged, loyal and growing audience of nearly 100,000 subscribers and followers. Learn more...

Monday, September 29, 2008

Cardinal Goes to China

Let’s take a break from bailout talk and look at China, which is not just a source for counterfeit drugs. It’s also one of the fastest growing markets for (legitimate) pharmaceuticals and is projected to be the fifth largest market within a few years.

Way back in a January 2007 post, I pointed out the growth opportunity for U.S. drug wholesalers in China. So I was especially intrigued by Pharmaceutical distribution at the heart of Cardinal Health’s China Strategy, a just-published interview with Jason Chen, head of Cardinal Health’s (CAH) Asian operations.

According to the article, Cardinal is rapidly growing its Chinese drug distribution business, while expanding manufacturing in India (but not China). This strategy is especially interesting given Cardinal’s anticipated separation of its supply chain division from clinical & medical products.

Just consider what’s been going on in China, where the number of drug distributors in China has been dropping rapidly since the Chinese government began opening up the market in 2003. A few notable foreign investors:

  • Swiss-based Zuellig Pharma has long been a major player in Asia and established a Chinese presence before distribution industry was open to direct foreign investment.
  • Global wholesaler Alliance Boots entered in January 2007 by buying a 50 percent stake in Guangzhou Pharmaceuticals Corp., the third-largest pharmaceutical wholesaler in China.
  • US-based BMP Sunstone (BJGP) has been actively acquiring Chinese drug wholesalers. (BMP is also linked to Alliance Boots via the Guangzhou investment.)

The era of global wholesalers is coming, with or without a U.S. importation law. Perhaps it's time to start considering how it will alter manufacturer-wholesaler relationships.


And to those readers for whom it is relevant: L'Shanah Tovah!

Friday, September 26, 2008

Don't Bet Against Medco or CVS, either

As a follow-up to Tuesday’s post about Express Scripts (ESRX), both Medco Health Solutions (MHS) and CVS Caremark (CVS) have now been added to the "no short sale" list. The Wall Street Journal headline sarcastically asks: New To The Financial Sector: Medco, CVS And IBM? So, do you think it's too late for me to start a failing investment bank and get a bailout?

The comments on my original post speculated that a small (less than 10%) ownership stake by New York Life Insurance put ESRX on the list. But even Express Scripts was not initially sure how it ended up on the list. See Not All Cos Guarded By Short-Sales Rule Strictly Financial from Tuesday, which says:

If you're wondering why drug-plan administrator Express Scripts Inc. (ESRX) was added to the (do not) short list of financial stocks, so is Express Scripts…"We have no financial services business. The list came out, and our name was on the list," he said.

Express Scripts has since stated that it got on the list because of a small insurance subsidiary associated with administration of Medicare Part D. The subsidiary is "very tiny, highly specialized," involving a few thousand of the company's tens of millions of clients. (Source)

Not be outdone, Medco clamored to get on the list, supposedly because it too has a small insurance plan. Per the WSJ article:

“They were asking why Express appeared on the list and we did not. To us, it's an issue of fairness as well as an issue of relief from excessive” market turmoil, said Medco Health spokeswoman Ann Smith.

Apparently, one-seventh of all stocks are now on the list. Glad to see that the SEC is being so stringent. As my daughter would say:



In related economic news, I prefer The Onion’s suggestion for an economic stimulus over the new bailout bill. See Recession-Plagued Nation Demands New Bubble To Invest In, which notes:.

According to investment experts, now that the option of making millions of dollars in a short time with imaginary profits from bad real-estate deals has disappeared, the need for another spontaneous make-believe source of wealth has never been more urgent.

The manner of bubble isn't important—just as long as it creates a hugely overvalued market based on nothing more than whimsical fantasy and saddled with the potential for a long-term accrual of debts that will never be paid back, thereby unleashing a ripple effect that will take nearly a decade to correct.

Oh yeah!!

Thursday, September 25, 2008

WMT + CAT: Pharmacy's Future?

Yesterday, Wal-Mart Stores (WMT) announced an innovative new program with Caterpillar (CAT) that provides $0 co-pays on 2,500 generic drugs for 70,000 beneficiaries (employees, retirees, spouses, dependents). See Caterpillar in prescription drug trial with Wal-Mart.
Well, I can’t resist pointing out that my January post Wal-Mart's PBM Game Plan predicted Wal-Mart’s strategy. Give the post another read because the economic logic is still generally accurate, plus there is a good discussion in the comments below the post.

Tuesday, September 23, 2008

You Can't Bet Against Express Scripts

Strange times lead to unusual circumstances. Here’s an odd example from the Drug Channels universe.

As of yesterday, you are temporarily banned from profiting if the stock of Express Scripts (ESRX) goes down, but are free to profit from a decline in the stock price of Medco Health Solutions (MHS).

Confused? Never fear. Here’s a quick primer on what I think is happening.

In case you haven’t been paying attention, the SEC halted short selling in the stocks of 799 financial institutions last Friday. (See SEC press release 2008-211.)

Yesterday, the SEC asked stock market exchanges to add companies to this initial list (per press release 2008-218), stating: “The Commission expects these lists to cover banks, savings associations, broker-dealers, investment advisers, and insurance companies, whether domestic or foreign, and the owners of any of these entities.”

In response, the New York Stock Exchange (NYSE) and NASDAQ added more than 130 stocks to the temporary ban on short-selling. (See SEC short ban list now covers more than 900 firms.)

Here’s the funky part. Express Scripts (ESRX) is on the expanded list, but Medco Health Solutions (MHS) is not.

As far as I can tell, this happened because the stocks are traded on different exchanges. Express Scripts is traded on the NASDAQ, while Medco trades on the NYSE. According to this MarketWatch story, the NYSE apparently asked its member companies to “self-certify” in order to be added to the list. I’m not sure how NASDAQ generated their list, but they (vaguely) describe their criteria here.

I’ll leave it to the Wall Street boffins to figure out what this asymmetric ban means, but I do note the divergent change in stock prices during yesterday’s down stock market. MHS was down -2.32%, while ESRX was down only -0.23%. Meanwhile, the SEC is already revising the rules, so the situation could change.

P.S. Yesterday’s Wall Street Journal has the contrarian POV that Short Sellers Keep the Market Honest.

Monday, September 22, 2008

Getting a Clue on Importation

The credit markets may be going crazy, but at least our Presidential candidates are starting to make sense over importation.

According to Reuters, McCain, Obama rethink drug reimportation. From the article:

  • "Both candidates were in favor of reimportation and sort of subsequent to the heparin incident (there's) a lot less enthusiasm," said Dora Hughes, a health policy adviser to Democratic candidate Obama.
  • "We now realize the challenges for doing that are greater than before," Douglas Holtz-Eakin, a senior policy adviser to Republican candidate McCain, told reporters at the conference.

I’m glad that these advisers spent some time in their thinking chairs. Their conclusions should be no surprise to readers of Drug Channels given my posts on importation over the past few years. As I noted in April, the Heparin contamination has pushed the security of America’s pharmaceutical supply chain to the forefront of the news. I won’t even quibble that the dangers of importation are different from the (alleged) tainting of Heparin ingredients.

On a related note, check out this comment on the Reuters story from a new blog called PharmaComa. I’ll be keeping an eye on this blog because it’s written by Tim Marsh, Senior Manager of Global Packaging Technology at Pfizer – an actual pharmaceutical executive! Tim is also the co-chair of the GS1 Global Healthcare User Group and co-chair of the Global Traceability for Healthcare Working Group, so I’m looking forward to some good insights. Let’s see how long Pfizer lets him speak his mind.

Thursday, September 18, 2008

Longs to Walgreens: Walk On By

As I told you on Monday, the Longs Drug Stores (LDG) deal will be entertaining!

As today's Wall Street Journal headline states, Longs Drug Rebuffs Walgreen Bid to Acquire Chain. Pershing Square Capital Management, which claims a 26% economic interest in Longs, should have some choice words about this development given their opposition to the CVS deal.

Click here to read the latest SEC filing from Longs. A few interesting tidbits:

  • Walgreens (WAG) initial offer (in April 2008) was $62 to 65 per share and was subsequently increased to $70.
  • The main sticking point was the regulatory risk associated with antitrust review, noting “a material risk that the FTC, the Attorney General of California and possibly the Attorneys General of Hawaii and Nevada would insist on significant divestitures.”
  • May and June were consumed with due diligence regarding an LDG-WAG transaction, with an apparent focus on the regulatory risk.
  • Walgreens walked away on July 11 and a deal with CVS Caremark (CVS) was approved on August 12.

The filing also includes a letter from Warren Bryant, Chairman, President and Chief Executive Officer, which states in part: "[O]ur Board of Directors has determined not to furnish information to, nor have discussions and negotiations with, Walgreens.

What’s Walgreens strategy? Do they really want Longs as much as CVS Caremark, or do they just want to block CVS Caremark from getting it?


Check out the latest Health Wonk Review, which has an especially witty and timely “political convention style” this time around. Your friendly neighborhood blogger is represented with my post on generic drug profits.

Wednesday, September 17, 2008

The Subprime Primer: A Brief Diversion

Given the turmoil in the financial markets, I feel compelled to pass along my all-time favorite explanation the key issues behind the subprime mortgage crisis -- as told in the form of a cartoon slide show! Click here or on the cartoon below.

Yes, I know this blog usually focuses on commercial issues in the pharmaceutical industry, but this cartoon is accurate and quite funny. I'm not sure who created it, but I've cleaned it up to remove the profanity in the original. You can find a link to the R-rated version on Greg Mankiw’s blog, which is where I found it.

We now return to our regularly scheduled blogging...

Tuesday, September 16, 2008

Wholesaler Impact of a Longs Drug Deal

As a quick follow to yesterday’s post about the fate of Longs Drug Stores (LDG), I thought it would be fun (!) to look at the potential impact on the company’s wholesaler.

Right now, Longs buys more than 90% of its pharmaceuticals from AmerisourceBergen (ABC) under a long-term contract, which includes a minimum purchase requirement over the contract term. Don’t worry, I’m not spilling any secrets here – you can read about it yourself in Long’s most recent 10-K filing.

Based on the public data, I estimate that Long’s represents less than 3% of ABC’s total drug distribution revenues.

Nonetheless, the post-contract outcome for ABC will probably be negative regardless of whether the buyer is CVS Caremark (CVS) or Walgreens (WAG). The eventual buyer will presumably want to consolidate purchasing volumes for brand drugs with its primary wholesaler while shifting generic purchases to direct relationships with manufacturers. See CVS' Channel Power for a case study of supplier consolidation when CVS and Caremark came together.

Here’s a quick rundown on current wholesaler relationships for brand supply at CVS and WAG:

  • CVS Caremark is now the single largest customer of both McKesson (primarily Caremark/Pharmacare mail) and Cardinal Health (primarily CVS retail). CVS Caremark will decide its brand purchasing strategy no later than mid-2009.
  • Walgreens is the second largest customer of Cardinal Health. The companies signed a three year contract renewal in January 2008 that will shift an estimated $2 billion in business from ABC to CAH.

No matter how you slice it, the sale of Longs Drug Stores will be one more step in the ongoing consolidation of the pharmacy supply chain.

Monday, September 15, 2008

The Battle for Longs

Just before the weekend, Walgreens (WAG) announced that it would top CVS Caremark’s (CVS) bid for Longs Drug Stores (LDG). See Walgreen Jumps In With Rival Bid for Longs Drug.

Expect this battle to continue as Longs shareholders angle for a better price now that an outright bidding war has started.

Longs is a ripe target for a strategic buyer such as CVS or WAG. It has many good West Coast locations and is one of the last remaining large chains. Longs also owns a top 25 Pharmacy Benefit Manager (PBM), RxAmerica, which could fit with either company.

I suspect there are many operational improvements possible, too. Pharmacy sales are less than 50 percent of total revenues, which is far below the average at other chains. A recent Consumer Reports study highlighted customer service problems at Longs, noting that 42% of Longs customers complained that prescriptions weren't ready when promised or that there was a long wait at the counter.

Meanwhile, the deal dynamics will make it fun to watch this transaction develop. Longs just settled shareholder lawsuits related to its real estate assets and in the process “conceded that its board never sought a third-party appraisal to value the company's real estate before approving the merger” (per Longs Settlement Includes Disclosure Of CVS Decision). Whoops!

So last Thursday, Pershing Square Capital Management sent a letter to the LDG board, stating: “We believe that the value of Longs to CVS and other interested parties substantially exceeds the announced deal price.” Pershing claims to have an “economic exposure” of almost 26 percent to Longs’ outstanding common stock.

It's worth watching Bill Ackman from Pershing explain why he thinks a $90 to 95 per share valuation makes sense. (WAG just offered $75 per share.)

Friday, September 12, 2008

Drug Importation and Global Wholesale

Last year, I speculated that drug importation legislation may be inevitable. Does the rise of global wholesalers make it more likely?

A Tuesday article in The Hill reminded me that both Barack Obama and John McCain favor importation. McCain even took a shot at drug companies in his acceptance speech, which is consistent with his comments during the primary. (See my January post Crazy Talk from John McCain.)

In addition to our old friend S.242, Senators Kennedy (D-MA) and Grassley (R-IA) just introduced S.3409 The Drug and Device Accountability Act. Section 122 of the new bill touches on drug importation safety "standards" and could be seen as foundational legislation.

Of course, importation won’t actually save very much money for consumers because most of the price differential will be absorbed by the channel. For example, wholesalers, importers and exporters are the big winners from importation because they absorb 80% or more of the price differences between European countries. (See my op-ed from last year Importation Illusions.)

That’s why I’m keeping my eye on cross-border wholesaler transactions. European wholesaler-retailer Alliance Boots entered the Brazilian market in July. (See Alliance Boots to enter Brazil.) Alliance Boots already has a strategic alliance with Cardinal Health (CAH) and entered the Chinese market last year. Meanwhile, both McKesson (MCK) and AmerisourceBergen (ABC) have significant market positions in Canada.

The Healthcare Distribution Management Association, which represents the drug wholesalers, has an official position against importation, stating: “HDMA is opposed to permitting the importation of pharmaceuticals. Importation, whether restricted to just Canada or not, significantly increases the likelihood of counterfeit or adulterated drugs entering the U.S. market and reaching our medicine cabinets.

I happen to agree with HDMA on the dangers, but I wonder if their position will change if (when?) importation is legalized under a new administration. Or am I too convinced that an importation bill will actually pass?

Tuesday, September 09, 2008

Generic Drug Profits: Too High or Appropriate Incentive?

A new OIG report highlights supposed “excess” payments by Medicare’s cost-plus drug reimbursement model, giving us a peek at the time path of generic margins in the Part B program. However, OIG overstates their case by ignoring the powerful incentives for rapid generic substitution that are created by higher profits early in the generic life cycle.

Pay attention to this report because it illustrates the generic drug profit dynamics that exist elsewhere in healthcare – retail pharmacies, providers, wholesalers, and PBM mail order. And as generic utilization rates will move toward 75 percent over the next few years, I expect that pharmacy channel margins on generic drugs will be increasingly seen as a mechanism by which payors can manage their drug trend.

As always, I encourage you to read the full report, available for download here: Medicare Payment For Irinotecan.

A Peek at Cost-Plus Reimbursement

The OIG looked at prices and reimbursement for Pfizer’s Camptosar (irinotecan hydrochloride) after the launch of nine competing generics on February 20, 2008. In the first month after generic launch (March 2008), the generics were priced at about one-third of the brand price and captured about 86 percent of sales.

Since Medicare pays for irinotecan through the Part B program, provider reimbursement is calculated using the Average Sales Price (ASP) plus five percent. I refer to the Part B approach as “cost plus” reimbursement in contrast to the “list minus” reimbursement models typically used for retail pharmacy. In a cost-plus model, the total margin dollars available to the drug channel are capped at a percentage of the manufacturer’s actual sales price.

Drug Channel Life Cycle Economics

The OIG report highlights the profit opportunity for providers and wholesalers created by the two-quarter time lag between the calculation of the cost-plus reimbursement benchmark and the actual acquisition cost.

Here’s a simple illustration using fictional data inspired by the OIG-reported figures: (Click to enlarge.)
In my example, average per-unit margin dollars between manufacturer and patient ultimately fall to $2.55, but not before spiking up from $6.25 to $80.25 (1200 percent). Since ASP is
a weighted average of brand and generic prices, my example actually understates the profit potential for a provider that immediately substitutes the generic version.

Why? The Medicare Part B payment amount does not include the generic versions in price calculations until the third quarter of 2008 (beginning July 1, 2008). Since the generic came out in the middle of Q1:2008, the full price impact does not get reflected until Q4:2008.

Cost-plus reimbursement models, such as the ASP-based approach used in Medicare Part B, use market prices to dictate the pace of decline. In contrast, retail pharmacy margins can get compressed earlier in the cycle through maximum allowable cost (MAC) limits set by payors.

Getting Incentives Right

As I see it, the superior profitability of generic drugs for the drug channel has dramatically accelerated generic substitution rates during the past ten years. Check out the page 10 of Medco’s most recent Drug Trend Report, which shows Ambien (zolpidem) gaining 97% share of mail scripts and 79% of retail scripts with seven days of launch.

While brand manufacturers may not like to see these figures, private payors recognize that rapid generic substitution is crucially important for lowering their drug trend. Pharmacies, providers, PBMs, and wholesalers are all racing the clock against the expected reimbursement decline for generics.

Alas, OIG seems to miss this essential point. If Medicare completely eliminated the profit opportunity from generics (under Part B or otherwise), costs would likely increase because generic substitution would slow down. On the other hand, the big profits in 2008:Q2 raise eyebrows.

Thus, the real question that OIG and Medicare should ask is more complex: At what level of drug channel profits could payors still encourage rapid generic substitution while not “overpaying” for generics? Understanding how payors will answer this question will help predict the future profit streams of pharmacies, wholesalers, and PBMs.

Friday, September 05, 2008

I Read the News Today

A number of readers have asked me to highlight interesting articles that I come across but don’t have time to comment on. Let me know what you think about this type of post. Perhaps I’ll make it a regular feature of the blog.

Pharmacists prefer McCain to Obama (Drug Topics) – Based on a July/August (pre-convention) survey of 903 pharmacists: 55% of pharmacists prefer McCain vs. 35% for Obama. In contrast, the pharmaceutical/health industry has given 2.5X more to Obama than to McCain. (Source: OpenSecrets.)

Wal-Mart, Your Friendly Drugstore (Business Week) – As I have been suggesting for more than two years on the blog, Wal-Mart (WMT) will radically reshape the pharmacy industry. (See Walgreens’ $4.33 Surrender to Wal-Mart for background.) Health and wellness products (including pharmacy sales) made up 9% of Wal-Mart's overall $374.5 billion in revenues in the 12 months ended Jan. 31, 2008. The article summarizes Wal-Mart’s aggressive ambitions and would make a great conversation starter at your next management get-together.

Cardinal forging deal with DEA (Columbus Dispatch) – Cardinal Health’s (CAH) ongoing struggles with diversion by its pharmacy customers are finally ending. (See Cardinal Apologizes for background.) On the company’s August 7 earnings call, CEO George Barrett estimated that the DEA issues resulted in about $1 billion (!) in lost sales, which I estimate were lost primarily from independent pharmacy customers.

Tightening the Chain (Pharmaceutical Executive) – Here's a quick update on mass serialization efforts in Europe as a follow-up to Tuesday’s post. Sorry, RFID-lovers -- the technology of choice looks like it will be 2-D bar codes.

Health Wonk Review -- Check out the latest edition of this bi-weekly review of health policy blogging from around the web, hosted this time by InsureBlog.


Now if you'll excuse me, I have to go figure out how many holes it takes to fill the Albert Hall (pictured above). Oh boy.

Wednesday, September 03, 2008

Counterfeits at Medicine Shoppe Pharmacies?!?

This morning, I speculated that track-and-trace momentum could slow down unless there is a compelling trigger event, such as counterfeits discovered in a retail pharmacy.

A few alert readers pointed me to an FDA notice from August 8, 2008, regarding “expired and suspected counterfeit prescription drugs found at pharmacies.” Yikes! I wonder if the news will hinder Cardinal Health’s (CAH) efforts to sell its Medicine Shoppe franchise.

According to the FDA website:

”The U.S. Food and Drug Administration is warning consumers who filled prescriptions at The Medicine Shoppe pharmacies located at 8035A Liberty Road and 5900 Reisterstown Road in Baltimore that they may have received drugs that were either expired or suspected counterfeit. The FDA is particularly concerned because a number of the drugs are for serious diseases and could have an adverse effect on treatment.”

Read more at FDA Warns Consumers About Potential Problems at Two Baltimore Pharmacies

Federal Pedigree Sand Trap

As I pointed out yesterday, the California serialized e-pedigree law will likely be delayed until 2015. Unfortunately, the federal situation will not provide a quick solution, leaving us with the prospect of managing our crazy patchwork of inconsistent state laws for the next few years.

Key question: How will the FDA play the new California 2015 timeline (assuming Governor
Schwarzenegger signs the bill)? Will the FDA:
  1. Implement national serialized e-pedigree in sync with a new California timeline?
  2. Embark on a national effort that would preempt the California law prior to 2015?
  3. Do nothing and hope everything turns out OK?
My guess is at the bottom.

Pharmacists Keep Federal Track-And-Trace in the Clubhouse

Representatives Steve Buyer (R-IN), Gene Green (D-TX), Jim Matheson (D-UT), and Mike Rogers (R-MI) co-sponsored H.R. 5839 Safeguarding America’s Pharmaceuticals Act of 2008. I applauded this bill when it was introduced in April, although the bill has only garnered 11 co-sponsors and has no Senate counterpart.

H.R. 5839 was going to be incorporated into other related FDA legislation, but intense behind-the scenes lobbying against the bill has now killed that option. Paul Kelly, NACDS vice president of government affairs, recently boasted: “We remain very pleased that Chairman Dingell has decided not to include an electronic pedigree requirement, and more importantly the track-and-trace requirement, in that bill.” (source)

As you may recall, NACDS sponsored and promoted questionable calculations from sometimes track-and-trace advocates Accenture. Unfortunately, my dissection of Accenture’s study probably cost me the chance to have lunch with spokesgolfer Tiger Woods. Oh well.

In the meantime, Federal progress will likely be slow without (a) a new push by the FDA, and/or (b) a compelling trigger event, such as counterfeit drugs discovered in a retail pharmacy.

FDA Still not on Back Nine of PDMA

Meanwhile, the FDA remains stymied in its attempts to implement the pedigree regulations of the Prescription Drug Marketing Act (PDMA) following a December 2006 injunction.

The PDMA requires, among other things, that secondary wholesalers provide a pedigree prior to each wholesale distribution of prescription drugs. The requirement to pass a pedigree applies to those wholesalers who are not authorized distributors of record (ADRs) for the prescription drugs that they distribute.

In July, the U.S. District Court for the Eastern District of New York “affirmed” the preliminary injunction against the FDA in the case of RxUSA Wholesale, Inc. v. Department of Health and Human Services (HHS). See the FDA’s Backgrounder re: RxUSA Wholesalers, Inc. v. HHS for more. So, no PDMA pedigree, either.

FDA in the Rough

The Food and Drug Administration Amendments Act of 2007 requires the FDA to establish technology standards for the pharmaceutical supply chain by 2010. The FDA requested comments and information earlier this year – see the links in The FDA and EC Dive into Supply Chain Security.

Although the FDA has not decided on its next step, I presume that nothing will happen until after the Presidential election and a possible new FDA commissioner.

among the three options listed at the top of this post, I'm voting for Option 1 but fear we may end up with option 3.

Tuesday, September 02, 2008

CA E-Pedigree: Going to ... 2015

Sorry, Spinal Tap fans. Implementation of California’s e-pedigree law has (probably) been pushed back to 2015. Only 2,312 days to go!

Nevertheless, advocates of a secure supply chain should not feel stuck in a hell hole. The widespread industry support for the bill makes me believe that the 2015 date might actually stick. The more realistic timeline should encourage pharmaceutical manufacturers to get serious about mass serialization for their products – a necessary first step for California’s vision of serialized e-pedigree.

Thus, I expect that “mass serialization” will become increasingly important for supply chain security efforts at multinational drug makers, especially given the new serialization requirements in countries such as Belgium, Italy, and Turkey. However, it's still not clear whether global standards will lead us to “serialize” or “serialise.” (Full disclosure: I am on the Advisory Board of leading serialization vendor Secure Symbology.)

Tonight I’m Gonna Stop You Tonight

The new CA timeline comes from SB1307, a bill sponsored by CA state Senator Mark Ridley-Thomas and passed by the state assembly on August 19 by a vote of 58-1. Technically, the bill still needs to be signed by Governor Schwarzenegger to become law in California.

Here are the new deadlines for compliance:
  • Manufacturers: 50% of product lines serialized by January 1, 2015; 100% by January 1, 2016
  • Wholesalers: January 1, 2016
  • Pharmacies: January 1, 2017
In an ironic twist of fate, there was a recall of some PEDIGREE brand dog food in California during the same week as the vote. I guess some people on the West Coast really don’t like pedigrees

(Listen to the) Flower People

As many of us in the industry are aware, there was extensive lobbying from all sides throughout the summer as everyone raced to meet the end-of-session deadline. Senator Ridley-Thomas described the process in a press release (State Assembly Aproves Ridley-Thomas Measure to Protect Public from Bad Medicine), saying:

“All vested parties, including consumer protection advocates and pharmaceutical manufacturers and distributors have reached resolution and have identified a reasonable and workable solution that will allow additional time and flexibility to comply with current requirements.”

I suggest that you read the official Senate Floor analysis for a good summary of the bill’s evolution. When you get to the bottom, you will be rewarded with a list of the 13 associations and 22 companies that formally supported SB1307. Curiously, only 2 of the big 3 drug wholesalers are listed. Que pasa, AmerisourceBergen (ABC)?

Note that SB1307 clears the way for a Federal approach to serialized e-pedigree by setting strong federal pre-emption language. As you may know, I support a federal approach to the pharmaceutical supply chain – see my op-ed Securing America’s Pharmaceutical Supply Chain. I’ll have more to say on the Federal situation tomorrow.

Um, Adam, what's a Pedigree?

I recently attended the National Council for Prescription Drug Program's education work group for Pharmaceutical Pedigree and Traceability. The group is hosting a free "Pedigree 101" webcast. (I am not involved in the webcast.) Sign up here if you want to get up to speed on this complex subject.