Drug Shortages: Heading Off Corruption

Where shortages of critical products exist, the opportunity for corruption or poor business practices increases. So it is with drug shortages, which have raised concerns about counterfeiting and gray market practices.

“Price-gouging by secondary wholesalers is unacceptable,” says Pharmaceutical Research and Manufacturers of America (PhRMA) President and CEO John J. Castellani. “The ‘gray market’ presents serious concerns for patient safety, as it cannot be assured that the products obtained by providers in this manner have been handled in a way that maintains product integrity.”

“Counterfeiting is something we try to make sure we’re educating and cautioning our members about,” says Ron Hartmann, PharmD, senior vice president, pharmacy, MedAssets. “If someone is buying product directly from a manufacturer or one of that manufacturer’s authorized distributors, that’s generally a secure supply chain. The risk increases when somebody can’t buy product from one of those primary sources, and they seek a secondary source.”

The Drug Quality and Security Act, signed into law November 2013, outlines steps to build an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States. The development of the system will be phased in with new requirements over a 10-year period. Ten years after enactment, the system will facilitate the exchange of information at the individual package level about where a drug has been in the supply chain.

According to the FDA, the new system will:

  • Enable verification of the legitimacy of the drug product identifier down to the package level.
  • Enhance detection and notification of illegitimate products in the drug supply chain.
  • Facilitate more efficient recalls of drug products.

Among key provisions implemented over the next 10 years are requirements for:

  • Product identification. Manufacturers and repackagers will put a unique product identifier on certain prescription drug packages, for example, using a bar code that can be easily read electronically.
  • Product tracing. Manufacturers, wholesaler drug distributors, repackagers, and many dispensers (primarily pharmacies) in the drug supply chain will provide information about a drug and who handled it each time it is sold in the U.S. market.
  • Product verification. Those in the pharmaceutical supply chain will establish systems and processes to verify the product identifier on certain prescription drug packages.
  • Detection and response. The pharmaceutical supply chain will quarantine and promptly investigate a drug that has been identified as suspect, meaning that it may be counterfeit, unapproved, or potentially dangerous.
  • Notification. Pharmaceutical supply chain will establish systems and processes to notify FDA and other stakeholders if an illegitimate drug is found.
  • Wholesaler licensing. Wholesale drug distributors will report their licensing status and contact information to FDA, who will make this information in a public database.
  • Third-party logistics provider licensing. Third-party logistics providers, those who provide storage and logistical operations related to drug distribution, will obtain a state or federal license.

To read Title II of the Drug Quality and Security Act, go to