Henry Schein 2013 Annual Report Download - page 20

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The Drug Quality and Security Act preempts state pedigree laws and requires certain entities in the
pharmaceutical supply chain, including prescription drug wholesalers, to provide a paper or electronic pedigree
beginning by January 1, 2015. In addition, this law mandates that an interoperable electronic pedigree system be
implemented within ten years of the law’ s enactment. The FDA is required to issue guidance and hold public
meetings regarding the implementation of the pedigree requirements over the course of the next few years.
Until the pedigree provisions of the Drug Quality and Security Act begin to take effect in January 2015, current
federal law in this area continues to be effective and preempts state law. The FDC Act currently requires certain
wholesalers to provide a drug pedigree for each wholesale distribution of prescription drugs, which pedigree must
include an identifying statement that records the chain of ownership of a prescription drug. Currently, the FDA, in
the exercise of its enforcement discretion, requires these wholesalers to maintain drug pedigrees that include
transaction dates, names and addresses regarding transactions going back to either the manufacturer or the last
authorized distributor of record that handled the drugs.
The FDC Act also requires the FDA to establish standards and identify and validate effective technologies for
the purpose of securing the pharmaceutical supply chain against counterfeit drugs. These standards include any
track and trace or authentication technologies, such as radio frequency identification, or RFID, and other
technologies. The FDA has continued to develop its policies in this area, such as issuing a Final Guidance in 2010
regarding standardized numerical identification for prescription drug packages, and issuing a final rule in
September 2013 for a unique medical device identification system to be phased in over seven years, that will
require most medical devices distributed in the United States to carry a unique device identifier. The newly enacted
Drug Quality and Security Act and its forthcoming implementing regulations may affect previously issued FDA
guidance regarding standardized numerical identifiers.
Over the last several years, many states have implemented or proposed laws and regulations that are intended to
protect the integrity of the pharmaceutical supply chain. This created a patchwork of state wholesale distributor
licensing and drug pedigree (i.e., track and trace) requirements. Bills have been proposed in Congress that more
comprehensively address the security of the drug supply chain, including track and trace systems. Title II of The
Drug Quality and Security Act, known as the Drug Supply Chain Security Act, will be phased in by the FDA over
10 years, and is intended to build a national electronic, interoperable system to identify and trace certain
prescription drugs as they are distributed in the United States. The Drug Supply Chain Security Act provides
specific track and trace requirements for manufacturers, wholesalers, repackagers, and dispensers (e.g., pharmacies)
of prescription drugs and requires manufacturers and wholesale distributors, by January 1, 2015, to have in place a
system by which they can identify a product in their possession or control that is a “suspect product,” and to meet
product tracing requirements.
The law also sets requirements for the licensing and operation of wholesalers and third party logistics (“3PL”)
providers, and includes the creation of national wholesaler and 3PL licenses in cases where states do not license
such entities. Wholesalers and 3PLs would also be required to submit annual reports to the FDA beginning on
January 1, 2015, which would include information regarding each state where the wholesaler or 3PL is licensed, the
name and address of each facility, and contact information.
Significantly, the Drug Supply Chain Security Act, beginning on its enactment date, also preempts similar state
laws, thus apparently rendering unenforceable, in whole or in part, state drug pedigree laws that have already been
implemented. It also requires that prescription drug wholesalers and 3PLs distribute drugs in accordance with
certain standards regarding the recordkeeping, storage and handling of prescription drugs. While the Drug Supply
Chain Security Act preempts state requirements in this area, the extent to which it preempts state requirements is
unclear. The FDA is expected to issue additional guidance and regulations to clarify these requirements. In recent
years, some states have passed or proposed laws and regulations that are intended to protect the integrity of the
medical supply channel. For example, Florida and certain other states have implemented or are implementing drug
pedigree requirements that require that prescription drugs be distributed with records or information documenting
the prior distribution of the drug, from distributors and potentially back to the manufacturers. California enacted a
law requiring the implementation of an electronic drug pedigree system that provides track and trace chain of
custody technologies, such as RFID technologies. The California law was to take effect on a staggered basis,
commencing on January 1, 2015 for pharmaceutical manufacturers, and July 1, 2016 for pharmaceutical
wholesalers and repackagers. We are in the process of analyzing the impact of the Drug Supply Chain Security Act
on our business.