INSIGHT: Drug Supply Chain Security Act Projects Create Opportunities, Pose Questions

The FDA recently posted 20 pilot projects pursuant to requirements under the Drug Supply Chain Security Act.

Congress enacted the DSCSA in 2013. The act was crafted in response to the danger to patient safety of counterfeit drugs entering the U.S. prescription drug supply chain. Congress designed the law to require drug supply chain stakeholders to trace prescription drugs, in a secure manner, from the manufacturer down to the dispenser of the drug.

When fully implemented, the law will require drug supply chain stakeholders to securely exchange transactional data regarding prescription drugs through an electronic interoperable data exchange.

The pilot projects are designed to test concepts for purposes of developing the 2023 electronic interoperable data exchange under the DSCSA. While there is no guarantee that any particular project will dictate the future, if we channel our inner Carnac the Magnificent, we will see several serialization challenges facing industry moving forward, as well as a strong industry-driven theme of blockchain leading toward 2023.

Data Exchange Errors Inevitable

Starting with an industry obstacle, one of the listed projects involving data errors and exceptions highlights a looming problem for the industry as the supply chain moves toward drug product serialization. Data exchange errors will be inevitable in a post-serialization world, especially one in which aggregation and inference are a dominant feature. Moreover, in a high volume world of aggregated data, even if error rates are small, the magnitude of errors will still be large.

Examples of likely data errors include data that may be unusable or unreadable, situations where the transactional data may not match the data embedded on the physical product, or in the case of aggregation, the parent label may not match the data imbedded on the child units.

The industry must develop a means for handling those errors and those methods will likely be developed through business-to-business relationships among authorized trading partners and their vendors. As stakeholders face the data error problem head-on, they must assess how they are going to address errors, particularly against the backdrop of statutory mandates on handling suspect and illegitimate products.

Ultimately, all authorized trading partners are responsible for ensuring that they transact in drug product where the serialized information matches the transactional data. Trading partners must figure out how to comply with the DSCSA mandates in the face of inevitable data errors.

Barcode Diffficulties

Turning to another challenge facing the drug supply chain industry, a project addressing barcodes highlights a subject of recent consternation, difficulties associated with scanning, capturing, and uploading serialized barcode data. Scanning barcodes, and capturing and uploading barcode data only works if the barcode is useable and readable.

However, there has been a history of barcode problems across the industry, including barcodes that have been smudged, truncated, stacked, placed too close on packaging next to other barcodes, and new barcodes that have been introduced without advance notice and preparation. The end result is unusable or unreadable barcodes that slow the supply chain to a crawl. Given these barcode difficulties, trading partners must work with each other in their business-to-business negotiations and contracting to anticipate and address the issue.

Beyond industry challenges, the pilot projects may also predict the future direction of industry technology as we approach 2023. At least six of the 20 pilot projects, including projects with major industry stakeholders, involve blockchain technology. This starting point demonstrates that blockchain may be the technological direction in which many DSCSA stakeholders are heading for 2023.

With that perspective in mind, stakeholders who remain undecided on which technology to use for interoperable data exchange, must begin to focus more on that issue. Moreover, if the movement toward blockchain reaches a certain tipping point across the industry, trading partners may need to think more specifically about how to make their portion of the supply chain work for blockchain.

Blockchain Has Weaknesses Too

Trading partners will need to reassess their contracts with vendors and trading partners to incorporate blockchain, identify any compliance risks associated with the move toward blockchain, and identify issues involving data ownership, data security, and data transparency associated with the use of blockchain. Blockchain is not a panacea; it has weaknesses. For all DSCSA trading partners and vendors, now is the time to assess the future of blockchain or any other interoperability technology.

Blockchain is not the only extra-statutory concept encompassed within the pilot projects. For example, one proposal incorporates real-time responses to suspect and illegitimate product determinations. The DSCSA never expressly requires real-time responses and some in the industry have pushed back against real-time responses. Another project is exploring RFID as an alternative to the statutorily required 2D barcode. RFID is sure to be controversial given the history of RFID in the drug tracing world over the past 15 to 20 years.

Collectively, trading partners must monitor these developments involving extra-statutory track and trace concepts. Just because a concept is not required by statute, does not mean that industry, as whole, will not adopt the idea, nor does it mean that FDA will not eventually embrace the concept. Trading partners need to be prepared to respond to industry-driven or regulatory changes and to comply with such changes. The FDA pilot projects serve as canaries in the coal mine for movement beyond the four corners of the DSCSA

On a final note, from a process perspective, one project is piloting a DSCSA governance process. The idea behind this project is that many stakeholders believe that a governing body is necessary to ensure that the 2023 system is truly interoperable and all trading partners can use the system. To that end, assuming a governing body is created, trading partners should be monitoring the development of such a governing body, as there will likely be funding issues, governing body membership issues, and other compliance issues that will need to be addressed to participate within the governing body and to use the system to be governed.

Reviewing the list of FDA-approved DSCSA pilot projects, there are more questions than answers about the future and what trading partners need to know and what actions they need to take. Nonetheless, the overarching message from the list of pilot projects is that trading partners must remain vigilant, assess their current operations and business relationships in light of pending and future DSCSA driven changes, and be ready to address any compliance risks that may arise as the entire industry moves toward 2023.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Christopher R. Smith is a senior counsel in the Health Care & Life Sciences and Litigation & Business Disputes practices in the Washington, D.C., office of Epstein Becker Green. His practice focuses on pharmacy law, drug distribution, and reimbursement issues.