New Track-and-Trace Legislation: The Real Deal or Another False Start?

October 25, 2012

By John A. Gilbert & William T. Koustas

Pharmaceutical companies, wholesale distributors, FDA, and many other stakeholders have long sought a uniform national prescription “drug pedigree,” track-and-trace, and distributor licensing regime.  While the Prescription Drug Marketing Act (“PDMA”) and the implementing regulations have included a requirement for a drug pedigree, (see 21 U.S.C. § 353(e), 21 C.F.R. § 203.50), the implementation of these requirements has been controversial and challenged in well publicized litigation (see RxUSA Wholesale, Inc. v. Dep’t of HHS, 467 F.Supp.2d 285 (E.D.N.Y. 2006)).  In the interim, there have been a number of false starts to create a national standard, the most recent of which was an attempt to include track-and-trace legislation in the Food and Drug Administration Safety and Innovation Act (“FDASIA”) which was signed into law this past June.  Now Congress appears to be gearing up to try it again.  According to news reports, Senators Richard Burr and Michael Bennet and Representatives Brian Bilbray and Jim Matheson are leading the charge on proposed track-and-trace legislation.  These reports indicate that Congress may even take up the proposed legislation in early 2013. 
The PDMA and FDA regulations provide a floor with respect to drug pedigree and distributor licensing requirements.  However, states retain the authority to impose their own requirements and many have done so or have pending legislation to do so.  For example, Florida was one of the first states to implement a detailed drug pedigree requirement.  More recently, California has proposed a pedigree/track-and-trace requirement which could have a significant impact on the drug distribution industry when it becomes effective in 2015.  Thus, there is currently a patchwork of drug pedigree and licensing requirements between the Federal government and states that must be navigated by drug manufacturers and distributors.  It appears that the proposed legislation seeks to end this patchwork and create a single national standard. 

While not in its final form, the proposed legislation essentially creates a national standard for drug pedigree, track-and-trace, and drug distributor licensing requirements.  The draft legislation creates a national “transaction history,” (aka pedigree) requirement for drug manufacturers, wholesalers, third-party logistics providers (“3PLs”), repackagers, and dispensers (to the extent they distribute drugs to entities other than patients with a valid prescription).  Within 6 months to a year after the bill is enacted, such entities would be prohibited from accepting drugs without a pedigree, required to supply a pedigree with any drugs they distribute, implement a system to authenticate pedigrees, and maintain pedigree records for up to 10 years.  Manufacturers would also be required to add a product identifier to each package and “homogenous case” of drug products “intended to be introduced in a transaction in commerce.”  Dispensers could elect to contract with a third party to maintain pedigrees.
The proposed legislation also looks to implement an interoperable electronic track-and-trace system with a product identifier, likely similar to what will be required by California beginning in 2015.  FDA would be required to publish a final rule on this requirement at least 2 years before its effective date, presumably to allow the stakeholders ample time to prepare.  The legislation would also call on FDA to establish one or more pilot projects in coordination with various stakeholders to evaluate the use of such interoperable systems, possibly within 4 years of the legislation going into effect.  It also provides FDA with authority to implement additional regulations to prevent drug counterfeiting, theft, or diversion as it deems necessary.
In addition to a national pedigree requirement, the proposed legislation would also create a national licensing requirement for drug distributors.  The proposed bill specifies that drug wholesaler and 3PL establishments must either be licensed by the state in which they are located or by FDA if that state does not license such establishments.  Currently, more than 48 states require some type of in-state and non-resident licensing of drug manufacturers or distributors.  The proposed legislation would also create a federal requirement that drug wholesalers and 3PL establishments obtain out-of-state licenses from states they distribute drugs into (assuming the relevant state has such a licensing requirement).  In addition to licensing, wholesalers and 3PLs would be required to list their establishments with FDA on an annual basis (for a fee to be determined by FDA). 
The vast majority of states currently require drug distributors to operate within certain standards in handling prescription drugs (see generally, 21 C.F.R. Part 205).  These regulations set minimum requirements that states must impose on drug distributors with respect to, among other things, establishment security, drug storage, recordkeeping, and the handling of suspected counterfeit drugs.  The proposed legislation would seek to standardize those operating requirements nationally by either codifying Part 205, requiring FDA to promulgate new regulations, or essentially adopting California’s drug distributor licensing and operating requirements.  
This proposed bill appears to have the support of many stakeholders, including the Pharmaceutical Distribution Security Alliance, which includes the Pharmaceutical Research and Manufacturers of America and the Generic Pharmaceutical Association.  However, many of the same challenges that have made a national drug pedigree system elusive in the past still exist, e.g., technological challenges and addressing state authority and differing standards.  It will be interesting to see if the current proposal can succeed where others have failed.