DSCSA and Third Party Pharma Life Sciences Logistics Providers

DSCSA Requires License for Pharma Logistics Service Providers

How DSCSA Impacts 3PLs

In 2013, the Drug Supply Chain Security Act (DSCSA) was passed, ushering in an era of changes across the life sciences and pharmaceutical supply chain.  Designed to eventually create a digital, interoperable system capable of storing the transaction history and transaction information, DSCSA will help provide improved safeguards for consumers.  The safeguards will improve the capability of detecting and removing pharmaceutical products that may be potentially dangerous from entering or continuing along the pharma distribution supply chain.

As part of this new regulation, a change with respect to third party logistics licensing occurred.  Prior to 2013, the FDA determined that third party logistics providers could be licensed as a wholesaler because the business models are similar.  With the advent of the new regulation, however, this changed.

In contrast to wholesalers, 3PLs receive pharmaceutical products from manufacturers into their respective warehouses and distribute them to customers but never assume ownership of the inventory.  This is a distinct and extremely relevant difference.  Not owning the inventory puts third party logistics providers into a new category of DSCSA-specified “Trading Partners”.  It is the ownership of the life sciences inventory that separates 3PLs from wholesalers, requiring that they no longer be licensed as a wholesaler but instead, a separate license as a third party logistics provider.

Here is why separating wholesalers from third party logistics providers is significant.  DSCSA requires that all changes of ownership be documented from seller to buyer in three critical pieces of information, the TI, Transaction Information, TH, Transaction History and TS, Transaction Statement.  Because a 3PL does not own the inventory, they are not required to generate, transmit or receive the transaction documents.

Life Sciences and Pharma Logistics Supply Chain Solutions

Pharma logistics can be complicated.  Much of the pharma and life sciences supply chain industry operates on a Just-in-Time (JIT) basis. Here is how that works.  Dispensers including pharmacies, hospitals and other entities which dispense prescription drugs place orders to replenish their stock when the supply is low.  At the opposite end of the supply chain, pharma manufacturers often do not produce many of the drug products much in advance until orders are received.  Drug manufacturers produce pharmaceuticals in large batches (lots) and do not ship until required to do so by customers.

As with any kind of inventory, once produced the pharmaceutical goods are secured.  By their very nature, pharmaceuticals, are a special case of concern.  Manufacturers produce pharma products then hold the goods in inventory until an order is placed, commonly known as “buffer stock”.  Whether medications are produced as buffer stock or on a JIT basis, all must be secured.  Companies operating across the pharmaceutical supply chain have significant obligations to account for pharmaceutical goods.  The FDA DSCSA regulation imposes significant penalties if the whereabouts of drug products cannot be ascertained.

Pharmaceutical finished goods are stored in warehouses and distribution centers and released to the wholesale distributor once they are ordered.  Often manufacturers utilize third party logistics providers to handle the secure storage, order processing, shipping and logistics.  Orders are then placed on behalf of the pharma manufacturer which owns the goods, not the third party logistics provider.

3PLs that specialize in pharmaceutical logistics may offer a variety of services including:
  • Secured warehousing, including multi-zone for temperature controlled substances
  • Cold chain pharma logistics services
  • Track and trace to the required levels established by the manufacturer and respective regulations
  • Order fulfillment of life sciences goods
  • Shipping
  • Transportation and logistics including all required documentation of pharma life sciences goods
  • Annual FDA reporting and documentation of compliance
  • Facilitation of serialization compliance for manufacturers
  • TI, TH, TS document retention, generation and transmission services*
*The DSCSA regulation recognizes this critical distinction.  Within the DSCSA is the requirement that every change of ownership of the pharmaceutical goods be documented with a Transaction Information (TI), Transaction History (TH) and Transaction Statement (TS).  Typically pharma manufacturers contractually obligate 3PLs to be responsible for the accuracy of all transaction documentation and security of pharmaceutical goods in the possession of the 3PL.  The manufacturer cannot transfer its own responsibility for security.  In the absence of this, it can contractually obligate the 3PL to pay stiff penalties for lapses in security.

Conclusion:

From life sciences and pharmaceutical manufacturers to retail chains and consumers, pharma logistics is complicated.  Whether the pharma and life sciences inventory involves cold chain, temperature controlled or other supply chain solutions, compliance with DSCSA is required.  Pharma logistics service providers, 3PLs do not own the life sciences goods and are not required to generate, transmit or receive the transaction documents.  When pharmaceutical manufacturers hire 3PLs, however, the pharma logistics service providers are contractually obligated to be responsible for transaction document accuracy as well as for contract logistics security of life sciences goods they are handling, storing and shipping.

About the Author:

Laura Olson

Director of Sales and Marketing, Datex

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