Building a Case for Making Pedigree a Reality

Government officials face a difficult hurdle as they grapple with the enforcement of standards aimed at improving the safety and security of the healthcare industry supply chain.

By Kevin R. Davis

Since the 1987 passage of the Prescription Drug Marketing Act (PDMA), the FDA has been tasked with establishing an enforceable set of rules for pedigree (a record of the chain of custody of the product moving through the supply chain from the manufacturer to the pharmacy). While stakeholders (including pharmaceutical companies, distributors, and pharmacies) share incentives to work together with industry regulators to improve the safety and security of America's healthcare industry supply chain, a recent lawsuit by 10 wholesalers seeks to block enforcement of pedigree rules.

In December, 2006, Judge Seybert of the Eastern District of New York preserved the 20 year status quo by enjoining enforcement of the pedigree rules. No new pedigree rules for wholesalers will be enforceable until the underlying litigation is resolved on the merits or settled by the parties. Facially, the 10 pharmaceutical wholesaler plaintiffs lack incentives to alter their position. Their Equal Protection and Due Process violation claims are based upon the exemption of the three largest distributors (AmerisourceBergen, Cardinal Health, and McKesson) from the core rule. Each of them, as ADRs, receives their products directly from manufacturers and distributes their products to dispensing pharmacies or other retailers. Not incidentally, AmerisourceBergen, Cardinal Health, and McKesson are also among the earliest adopters of RFID pharmaceutical pedigree solutions. The litigation serves as an expedient way of leveling the playing field for plaintiffs.

In the interim, the cloud hanging over the enforcement of pedigree rules could slow adoption of RFID, as it is a key enabling technology for electronic pedigree. For the sake of discussion, let's assume that it will take several years to favorably resolve the litigation. If the promotion of industry deployment of electronic pedigree serves a worthy social good, then it is fair to ask policy makers to craft a deal that resolves this litigation and brings the industry stakeholders together in (immediate) support of an enforceable pedigree policy.

Indeed, in view of a number of positive statements supporting the adoption of electronic pedigree, it would be disappointing if the government fails to take steps expediting the resolution of this dispute.

For example, the 2004 FDA Counterfeit Drug Task Force Report stated that:

• feasible, widely adopted electronic track-and-trace technology helping secure the integrity of the pharmaceutical supply chain would be feasible by 2007;
• this electronic track-and-trace technology would provide accurate drug pedigree; and
• RFID is a promising technology to achieve e-pedigree.

In November, 2004, the FDA also issued its "Compliance Policy Guidelines - RFID Feasibility Studies and Pilot Programs for Drugs" wherein it projected that track-and-trace technology deployment within the pharmaceutical supply chain would be "widespread" by 2007. At the time, the FDA deferred establishing a hard deadline for the pharmaceutical industry to implement electronic pedigree procedures. Despite the positive rhetoric, it was not until June, 2006, that the FDA Counterfeit Drug Task Force actually made the key recommendation to lift the "stay" on implementing pedigree rules in December, 2006. The actual date for implementing pedigree may be several years later, given the ongoing litigation.

This timing is unfortunate. Recently, in January, 2007, one of the industry's leading standards organizations, EPCglobal, announced its new global standard enabling electronic pedigree for secure tracking of the authenticity and chain of custody of objects, including pharmaceuticals, within the supply chain. This standard meets the requirements of both the national pedigree established under the PDMA and the current state requirements for pharmaceutical pedigrees. While EPCglobal's establishment of a common standard is a significant accomplishment, it seems unlikely that market forces alone will substantially move stakeholders in the direction of widespread adoption of electronic pedigree.

Ironically, while adoption of RFID technology is oft-cast as a "no brainer" for the sector over the long haul, early adoption efforts, such as those by Purdue Pharmaceutical and H.D. Smith, represent the exception to the rule. Most stakeholders are following a far more prescribed, risk-based approach toward implementation, rationalizing tagging decisions based upon sales, price, volume, demand, ease of counterfeiting, etc., notwithstanding the fact that the 2006 FDA Counterfeit Drug Task Force expressed its belief that RFID is "the most promising technology" for implementing electronic track-and-trace in the pharmaceutical supply chain, and Associate Commissioner Lutter indicated, "Stakeholders should move quickly to implement this [RFID] technology."

The healthcare sector is certainly not an "open wallets" environment these days. One should expect that stakeholders will demand sufficient clarity on the ROI in their technology investments. One should also expect that these stakeholders will not move aggressively toward acceptance of pedigree (or adoption of electronic pedigree-facilitating technologies such as RFID) until the pending pedigree litigation is resolved definitively.

Kevin R. Davis is a corporate attorney in Washington, D.C. He is the General Counsel of several emerging technology firms, including Adaptive RFID Inc., a nationally recognized provider of turnkey RFID compliance solutions, and Aginity, LLC, a business intelligence firm. Davis is an Articles Contributor to the RFID Law Journal. You can contact him at kdavis@adaptiverfid.com. Visit www.rfidlawjournal.com.