The Basics: FDA DSCSA and the U.S. Pharmaceutical Supply Chain

The DSCSA final deadline is looming: Is your pharma business ready?

Countries across the world have expressed their concern for patients by taking action to prevent counterfeit drugs and safeguard the prescription drug supply. Brazil, China, India, and the EU have all introduced this type of protective legislation in their respective countries.

With the rampant supply of counterfeit prescription drugs on the market today, it had become necessary to make it easier to detect forgeries as well as to expedite drug product recalls. We live in a fast-paced world in which technology is now in everyday use. By pairing a simplified, data-driven methodology with serialization used by trading partners across the pharma supply chain, vital, accurate information can be transmitted more readily, saving time and lives.

While the transition to item level traceability has proven to be challenging, by November 27, 2023 patients will be able to have confidence that the drug supply chain security measures are working for their comfort and safety.

Q & A on the Basics of DSCSA

What is DSCSA?

Passed by the United States in 2013, the Drug Supply Chain Security Act (DSCSA), Title II of the Drug Quality and Security Act, provides the steps needed to construct an electronic, interoperable system that can identify and trace certain prescription drugs across the pharma supply chain as they are distributed in the U.S.

The purpose of DSCSA is to help safeguard consumers from counterfeit, stolen, contaminated and otherwise harmful medicines.

This important legislation directs the U.S. Food and Drug Administration (FDA) to establish national licensure standards for third party logistics providers and wholesale distributors and to ensure that licensure and other required information is reported to the FDA annually. The regulations require track and trace of prescription drug products down to the individual saleable unit in 2023 and facilitate tracking throughout the pharmaceutical supply chain.

What Does DSCSA Mean?

The anachronism DSCSA stands for the Drug Supply Chain Security Act. The name signifies its purpose, to strengthen the security of the drug distribution supply chain by requiring such controls as unique product

identifiers (serialization) and a national pharmaceutical track and trace system to help ensure the safety of the prescription drug supply.

Why is DSCSA Important?

DQSA builds on the foundation of authority granted to the FDA by the Federal Food, Drug and Cosmetic Act and increases its power to regulate and monitor the manufacturing of compounded drugs. Title I of DQSA was developed as a response to the 2012 New England Compounding Center meningitis outbreak which killed 64 people and infected 750 with fungal meningitis. Title II of DQSA, DSCSA provided the requirements for the tracing of prescription drug products throughout the pharmaceutical supply distribution chain.

This law gives the FDA the power and authority to regulate four types of supply chain partners: manufacturers or repackagers; wholesalers, third party logistics providers (3PLs) and dispensers/pharmacies. Each of these types of supply chain entities is required to have a valid registration with the FDA or be legally licensed under state law under consideration as an “authorized trading partner” in compliance with DSCSA. When a trading partner receives a shipment of prescription drug products, they are required to verify that the shipper is registered.

What is DSCSA Serialization?

DSCSA requires that the manufacturers and repackagers of affected prescription medicines place a unique product identifier, a serial number, on each package of the human prescription drug product that is intended to be introduced into commerce. In other words, each saleable unit of a human prescription drug product must be serialized. Previously, human prescription drugs were not serialized down to the individual product level.

Does DSCSA Apply to OTC Drugs?

No, DSCSA regulations only pertain to prescription drugs.

The following are excluded from DSCSA regulations:

Blood or blood components intended for transfusion
Compounded drugs
Imaging drugs
Medical gases

Radioactive drugs/radiopharmaceuticals
OTC drugs
Veterinary medicines
Intravenous products used for electrolyte replenishment

DSCSA and the Pharmaceutical Supply Chain

Manufacturers, distributors, repackagers and pharmacies/dispensers are the primary elements of the drug supply chain in the United States and are included in the Drug Supply Chain Security Act legislation.

Two critical processes will be most impacted by the implementation of unit level serialization across the pharmaceutical supply chain, the inbound receipt process, and the outbound shipment process. These processes will not only affect the turnaround time but also the operating cost as well.

The Role of 3PLs under DSCSA

The Difference between Wholesale Distributors and 3PLs

Third party logistics providers provide distribution services to pharmaceutical manufacturers. 3PLs store the excess production of goods during the time between the manufacturing process and the time the products are needed by customers. Drug manufacturers make the prescription drugs in batches or lots and build in a product buffer to avert out-of-stock conditions and backorders. Prescription medicines are often stored in distribution centers owned by the manufacturers following production and orders are fulfilled from this inventory. These distribution centers typically ship drug products to wholesale distributors as well as to larger pharmacy chains, and at times, to hospitals, clinics, government agencies and some smaller entities.

To reduce costs, many drug manufacturers outsource warehousing and logistics to 3PLs. The 3PL owns the warehouse, DC, and other elements of the logistics operation. In some cases, drug manufacturers choose to handle simple distribution operations or those on a smaller scale but outsource those which have some type of operational complexity such as cold chain requirements, controlled substances, etc.

The 3PL handles the receipt of finished goods from the pharmaceutical manufacturer, warehouses the goods and fulfills customer orders as a contractual service to the client without purchasing the inventory from the manufacturer. Service pricing is pre-negotiated.

Wholesale distributors, however, always purchase and assume ownership of the products that they distribute, usually directly from the drug manufacturer. Wholesale distributors do not ever buy drugs directly from a third party logistics provider (as the 3PL does not own the inventory). In some cases, the drug manufacturer leverages a 3PL to distribute its products and is instructed to ship products to the wholesale distributor to fulfill orders. In that instance, the distributor pays the drug manufacturer’s invoice for the goods.

As a value-added service, the 3PL may create and transmit the invoice for the goods to the distributor and payment may be made to the 3PL on the manufacturer’s behalf. Third party logistics providers bill and collect for these financial services provided to the drug manufacturer.

Why is the Distinction between Wholesale Distributors and 3PL Important under DSCSA?

3PLs are included in the DSCSA definition of “Trading Partners”. One of the key provisions of DSCSA involves the documentation of change of ownership of prescription medicines. As 3PLs do not own the drug products but rather only provide services to drug manufacturers, they are not required to generate, transmit or receive transaction documents.

3PLs can provide Transaction Information (TI), Transaction History (TH) and Transaction Statement (TS) services, the DSCSA transaction documentation required, but cannot assume the legal responsibility that the manufacturer, repackager or wholesale distributor has per the regulation to generate, provide, store, and retrieve the DSCSA transaction documentation. To help ensure that 3PLs provide accurate documentation needed for DSCSA compliance, pharma manufacturers can include legal provisions that create liability.

Pharmaceutical manufacturers typically ship goods to larger chain pharmacies and wholesale distributors as well as government agencies, clinic, hospitals, and some smaller entities. Often pharma manufacturers prefer not to deal with complex business models, and instead turn to third party logistics providers. This is a common occurrence with cold chain and/or controlled substances.

The 3PL receives the finished goods from the drug manufacturer, stores them in a warehouse and fulfills customer orders on behalf of its client. In contrast to distributors which assume ownership of the prescription medicines that they purchase directly from the manufacturer, 3PLs do not own the inventory. The pharmaceutical manufacturer may direct their 3PL to ship their products to a distributor to fill orders and will subsequently pay the drug manufacturer’s invoice for the product. This means that the product ownership only changed one time, even though the 3PL shipped product from the manufacturer to the wholesale drug distributor. This is a frequent occurrence. 3PLs often produce and transmit invoices to wholesale drug distributors and even receive payment on behalf of the manufacturer.

DSCSA mandates that all changes of ownership be documented, however because 3PLs do not assume ownership, they are not part of this requirement. Transaction Information (TI), Transaction History (TH) and a Transaction Statement (TS) must document change in ownership from the seller to the buyer. 3PLs, however, can provide TI, TH and TS documentation as a service to their clients but cannot absorb the legal responsibility of the manufacturer, repackager or wholesale distributor has in generating, providing, storing, and retrieving DSCSA documentation. In that instance, the 3PL handles the technical part of the documentation and is responsible for its accuracy via contractual language, not due to a provision of DSCSA.

Conclusion

President Obama signed DSCSA into law in 2013, two years after the EU Falsified Medicines Directive was enacted to enhance the security of the manufacturing and delivery of medicines across Europe. The EU

Falsified Medicines Directive (FMD), much like DSCSA helps to prevent counterfeit medicines from entering the pharmaceutical supply chain, protecting patients. Over the past nine years, the pharmaceutical industry has collaborated with the FDA to help ensure that implementation of DSCSA would be realistic in its goals and lead to industry wide DSCSA compliance.

Along with fulfillment of DSCSA requirements, launching the electronic, interoperable system to identify and trace medicines along drug distribution channels will help keep patients safe and suspect drugs from entering the pharma supply chain.