Drug Channels News Roundup: April 2013

Baseball season is finally here! Oil up your glove, put on your cleats, and let's run the bases around this month's news stories. Remember: Sometimes you win, sometimes you lose, and sometimes it rains.

In this issue:

• Home Run: How Express Scripts and Medco won antirust approval
• Green Monster: MHA's billion-dollar price tag highlights GPO valuations
• Free Agents: Consumers are price-shopping for prescriptions
• Batter Up: A look at the latest national track & trace legislation

Plus, just in time for baseball season, The Onion profiles an electrifying new entrant into the Philadelphia Sports Hall of Fame. Go Phillies!

Drug Channels News Roundup: January 2013

Baltimore vs. San Francisco! Brother vs. Brother! Buffalo wings vs. Nachos! Yup, it’s time for a weekend of blow-out commercials, occasionally interrupted by a football game. Hope you’ve been training all season to gorge at the Super Bowl-party level. But before you indulge, check out this month’s notable news stories from around the Drug Channels universe.

• Trick play: Walmart will offer primary care…or not?
• Sacking the bad guys: How Pfizer pfights pfakes
• Ask Manti Te’o: Are generics really the same as brands?

Plus, the White House responds to a Death Star petition, while an anti-preferred pharmacy network petition flops.

Drug Channels News Roundup: November 2012

Here's a pre-Thanksgiving news roundup, to stretch your mind before stretching your stomach later this week. In this issue:

• Debunking ACOs: A must-read article
• Attacking ASP: Blaming shortages on reimbursement economics
• Fearing the DEA: Now attacking shipping companies. Seriously!?!
• Reviewing Track & Trace: A holiday wish for a national system

Plus, the bizarre-but-true story of how former Kinray owner Stewart Rahr just got banned from upscale sushi chain Nobu. Absolutely hilarious!

New Senate Report IDs Gray Market Players, Including Some Surprising Names

On Wednesday, the Senate Committee on Commerce, Science and Transportation held an eye-opening hearing titled Short-Supply Prescription Drugs: Shining a Light on the Gray Market. 

The Committee simultaneously released a report documenting gray market activity by some well-known companies. Briefly:

• Most drugs enter the gray market through pharmacies.
• These pharmacies usually buy drugs from legitimate Authorized Distributors of Record (ADR), including AmerisourceBergen, Cardinal Health, McKesson, and H.D. Smith.
• While some buyers are “fake pharmacies,” others appear to be legitimate purchasers, such as Walgreens Infusion Services and a Medicine Shoppe franchisee.
• Multiple secondary wholesalers handle gray market products, adding huge mark-ups along the supply chain.

Check out the diversion maps below for a peek at how these companies participate—perhaps inadvertently—in the gray market. There was conflicting witness testimony about who should be blamed. (Links below.) I’ll let you make up your own mind on those competing arguments.

Gray Market Drug Recycling for Fraud and Profit

Remember the hubbub about the gray market and drug shortages? Well, the gray market is even worse than we thought.

Last week, the Manhattan U.S. Attorney unveiled a massive $500 million (alleged) fraud involving Medicaid patients who sold their prescription drugs to aggregators and resellers, who subsequently resold the drugs to pharmacies via “Corrupt Distribution Companies.” (Read the press release)

Kudos to the Department of Justice for catching the crooks, but … Yikes! Anyone interested in pharmaceutical supply chain security should check out the DOJ’s diversion map (reproduced below).

Alas, we once again observe diverted products finding their way back into the legitimate supply chain, when a pharmacy purchases from a shady vendor. Perhaps you won’t be surprised to find out that New York is one of many states without pedigree requirements.

Fake Pharmacies and Drug Shortages

Last October, Congress began investigating where secondary wholesalers got access to products in short supply. See Congress Asks Where Gray Market Drugs Come From.

Yesterday, we learned one possible explanation—at least three small wholesalers set up fake pharmacies to purchase drugs, and then resold the heavily marked-up drugs as a gray market vendor. Yikes!

While we don’t have all the facts, I wonder: were the state boards of pharmacy asleep at the wheel? Read on for more on this latest diversion scandal by shady secondary wholesalers.

Greedy Physicians Invite Fake Avastin Into the Supply Chain

Here’s some very scary news. Counterfeit versions of Genentech’s Avastin (bevacizumab) were discovered at 19 physician practices. See the FDA’s notice and Roche’s official statement.

The real crime? This situation was completely avoidable.

From what we know so far, these 19 medical practices knowingly purchased the fake product from a non-authorized distributor. By looking for a "good deal" outside of the legitimate channel, the physicians in charge of these practices were foolish, irresponsible, and unethical. Patiens caveo. (Patients Beware.)

Read on and see if you agree.

Congress Asks Where Gray Market Drugs Come From

Rep. Elijah E. Cummings of Maryland, the ranking Democrat on the House Oversight and Government Reform Committee, just launched an investigation into the gray market with a “document request” to five distributors regarding five drugs. See Cummings Investigates “Drug Speculation” and “Gray Market” Sales of Drugs in Critically Short Supply, complete with anonymous Tip Line.

In Drug Shortages and Gray Market Profiteering, I wondered: “How do these mysterious vendors get access to drugs in short supply?” This led to some very entertaining back-and-forth in the comments below my article with (anonymous) secondary distributors. I hope Rep. Cummings learns something more useful from his official inquiries.

Drug Shortages and Gray Market Profiteering

Premier Healthcare Alliance just released Buyer beware: Drug shortages and the gray market, a fascinating but disheartening report on the secondary market for drugs facing shortage.

The report gathers innovative data about the financial underbelly of the gray market. The results aren’t pretty, with mark-ups on key generic oncology and critical care drugs averaging 650%.

It’s really depressing to see the illegitimate secondary market thriving. Someone out there must be buying drugs with questionable heritages and sky-high price tags. Otherwise, the gray market would vanish.

Fans of irony will appreciate the FDA’s July 14 decision to back away from full pedigree information due in part to a lawsuit by secondary wholesalers. Really?!?

Read on for some reflections on this crisis.

Drug Theft + Diversion Gets Bigger :(

Drug distribution muckraker Katherine Eban, author of Dangerous Doses, is back with another must-read piece of investigative journalism in Fortune magazine: Drug Theft Goes Big.

The article highlights the increasingly-sophisticated criminal gangs who are targeting pharmaceutical products. Ms. Eban also tells the fascinating and scary story of how stolen Novo Norvisk products were dispensed by Kroger (NYSE:KR), which allegedly bought product with a forged pedigree from a secondary wholesaler. Yikes!

Alas, Ms. Eban falls short when it comes to solutions, falling into the standard journalist’s trope of blaming manufacturers for not tagging more products. A noble sentiment, but e-pedigree and track-and-trace technologies only work if pharmacy buyers agree to authenticate (scan) an electronic tag. Note that chain pharmacies still officially oppose national track-and-trace legislation—as recently as March 17, 2011!

As you can imagine, "Don't ask, don't tell" is the mantra of people who buy diverted products from unsavory secondary resellers. If the price is too good to be true, then pharmacy buyer beware.

Read on for more details.

Drug Channels News Roundup: November 2010

Time to get ready for Thanksgiving with these noteworthy news stories from the Drug Channels universe. In this edition:

• Say what?!? Kinray sells to Cardinal Health
  
• The Perils of Discount Generics: Big Brother can’t watch!
• Pedigree Referee: Will wholesalers control your pedigree strategy?
• Waiting for Pigs to Fly: A plea for rational debate about health care policy
• Dirty Deeds: The Onion examines GSK’s manufacturing problems

Enjoy!

Gray Market: I'm Not Dead Yet

Secondary market appears to be alive and well. Whether or not patients remain alive and well is a whole different question.

Check out Profiteers peddling flu vaccine from newspapah-of-recahd The Cape Cod Times, which notes:

The seasonal flu vaccine is in short supply, but licensed pharmacists and medical professionals can purchase it on a so-called "gray market" — for as much as eight times the manufacturers' original price.

Unfortunately, the illegitimate secondary market will exist as long as there are willing buyers for products with questionable heritage.

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.

Big Loophole in New EU Serialization Proposal

The European Commission released its “pharmaceutical package” yesterday. As I mentioned in Monday’s post, a strict ban on repackaging of parallel traded drugs was not included in the final proposal. However, the Third Legislative Proposal, which deals with counterfeit drugs, proposes “security devices” with traceability for pharmaceuticals. Yup, that means serialization (actually, serialisation), but nothing like the Californian vision of serialized e-pedigree that’s due to take effect in only 2,212 days.

The Financial Times emphasized the anti-counterfeit nature of the proposal in European Drugs To Carry Barcodes, but I see some significant concessions to parallel traders in the proposed legislation. The proposal puts some limits on the extent of repackaging but seems to contain a major loophole (described below) that could negate any benefits from serialization.

Three links for your reading pleasure:

• Pharmaceutical Package (main page)
• Press release (with a statement from Vice President Günter Verheugen)
• Text of Third Legislative Proposal

Be forewarned – the proposal is written in the international language of “bureaucratese” and perhaps should be read only by true fans of supply chain security. Here are a few items for your consideration:

A serialized track-and-trace foundation. Product must have “safety features making it possible to ascertain identification, authenticity and traceability of medicinal products.” In other words, the proposal lays the groundwork for a full track-and-trace system, but does not require it.

On-package security will grow. These safety features must allow wholesale distributors and pharmacists to: “(a) verify authenticity by assessing overt, covert, or forensic devices; (b) identify individual packs; (c) verify whether the outer packaging has been tampered with.” Note that point (b) also supports serialization.

Multiple serial numbers? The proposal states that the safety features can not be removed or covered-up. However, there is an exception (loophole?) that allows the repackager to remain compliant even when "replacing the safety feature with a safety feature that is equivalent as regards the possibility to ascertain identification, authenticity and uninterrupted traceability of the medicinal product" Replacing?!?

The last point sure makes it sound like the manufacturer’s original serial number could be covered up by a repackager’s number. Presumably, there would have to be some sort of mapping between the two numbers. In practice, I wonder if replacement could end up negating the benefits of serialization by creating multiple sets of numbers on packages from the same production lot.

Nonetheless, I suspect that most pharmaceutical manufacturers in Europe will take the first step and ramp up serialization efforts in anticipation of this proposal being formally adopted. Keep in mind that all proposals still need to be approved by the member countries.

As always, just my €0.02.

----

P.S. Check out the latest Health Wonk Review at the e-CareManagement blog.

Why California (Still) Matters - my podcast!

Paul Thomas from Pharmaceutical Manufacturing interviewed me in early September about pedigree and serialization. You can now listen to a 13 minute excerpt in the optimistically named podcast Why California (Still) Matters.

It provides a quick overview of key issues regarding supply chain security, compliance costs, state versus federal legislation, and data ownership issues.

Be forewarned -- you will hear “serious Adam,” i.e., no goofy Terminator or Spinal Tap jokes. As compensation, read about how California doesn't want anything else in their state going to 11 in this hilarious letter to the DMV -- pay attention to legal Exhibit 1. (Thanks to Will Murchison at NACDS for pointing me to this important story!)

My podcast is included in PM’s latest e-newsletter, which has many interesting stories including a recent webcast with Virginia Herold from the California Board of Pharmacy. Good stuff.

Still can’t get enough? Then check out the latest Health Wonk Review, the latest collection of punditry from around the web.

CA E-Pedigree: Hasta La Vista, 2011

Judgment day was September 30, 2008.

As expected, Governor Schwarzenegger finally signed SB1307, the California bill extending the implementation deadline for the state's serialized e-pedigree law. See CA E-Pedigree: Going to ... 2015 for background and implications.

On a related note, check out Pharmaceutical Commerce's Serialization Survey, which shows that most manufacturers plan to continue with serialization initiatives (based on responses from 82 pharma/bio manufacturers). At the time of the survey, about one-quarter are currently serializing product or conducting a production pilot, while 35 manufacturers (43%) were planning to get started within 12 months.

As I noted in September, “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.

In contrast, I expect to be writing much less about pedigree in Drug Channels over the next 12 months.

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.

And 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.

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.

Ridley-Thomas Editorial on E-pedigree

I know that I promised to take a blogging break, but I just can’t help myself.

Today’s Capitol Weekly, the “newspaper of California government and politics,” has an editorial by state Senator Mark Ridley-Thomas, sponsor of SB1307. As e-pedigree fans (?) know, this bill proposes a new phased-in timeline for California’s e-pedigree requirement. See CA E-Pedigree Timeline in Flux for details, although the bill has changed slightly since my last write-up.

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 California should defer to the federal government since drugs are manufactured, shipped and sold across the county. However, it has taken the federal government 20 years to adopt regulations required to implement the federal Prescription Drug Marketing Act (PDMA), which was passed to protect consumers from counterfeit or adulterated drugs. California did not wait for the federal government to act on environmental issues - why should we wait for them to act on this?”

Senator Ridley-Thomas’ editorial also represents a response to the Schwarzenegger’s Administration new legislative proposal for California pedigree regarding an “accredited distribution chain,” which is similar to the “Normal Channel of Distribution” rules implemented in many states. (Read the first draft proposal here.)

I presume that Senator Ridley-Thomas is also not a fan of H.R. 5839 Safeguarding America’s Pharmaceuticals Act of 2008.

California’s current legislative session ends in August, so any action on SB1307 will happen over the summer.

JNJ: We Want Federal E-Pedigree Standards

Mike Rose, VP of Supply Chain Technology at Johnson and Johnson (JNJ), testified at Tuesday’s Senate Hearing called Protecting Consumers by Protecting Intellectual Property. He was refreshingly unambiguous on JNJ’s position regarding e-pedigree, saying:

“Within the US, a federal standard is required for electronic pedigree.”

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?