Three states — Vermont, Florida, and Colorado — recently passed laws that legalize the importation of prescription drugs. Other states are considering similar legislation. Legislators in those states believe that drugs can be safely sourced from Canada at costs lower than U.S. prices.
These new state laws conflict with and undermine our country’s in-progress national legislative and regulatory system for tracking and tracing drugs. This system was established six years ago to stop counterfeit drugs from entering the U.S. supply chain. We estimate that manufacturers, wholesalers, and pharmacies will ultimately spend billions to build this system, which is scheduled to be fully operational by 2023.
The U.S. track-and-trace system is designed to prevent the very problems that misguided state importation laws will create. It’s curious that Florida wants to bypass this system, given its notorious and troubled history with counterfeit and diverted drugs.
As experts in drug distribution, we believe that politicians are abdicating their responsibilities and endangering public health by opening up diversion doorways for criminals. Rather than saving money, these laws will open up new pathways for counterfeit drugs to enter the closed U.S. system. Importation will save little yet cost a lot.
Why the U.S. is building a track-and-trace system
Fifteen years ago, the U.S. drug supply chain was overrun with diverted drugs. Thousands of small wholesalers bought and sold drugs in a virtually unregulated secondary market. This allowed criminals to introduce undetected counterfeit or mishandled products into the U.S. drug distribution system.
Individual states were forced to establish rules to stop this activity. Florida passed a law that took effect in 2006 requiring wholesalers to provide a paper document showing the purchasing history for each drug. Other states followed with their own systems, creating a disparate patchwork of inconsistent regulations for tracing pharmaceuticals in the U.S. supply chain.
Florida’s rules were prompted in part by a 2003 grand jury report that documented the introduction of counterfeit drugs via drug trading by criminals acting as lightly regulated, licensed wholesalers. “Dangerous Doses,” the best-selling book by Katherine Eban, charted how counterfeits entered U.S. drug channels when Florida criminals exploited buyers in a then-vibrant secondary market.
These and other well-documented problems led to the Drug Quality and Security Act (DQSA), which President Obama signed into law in 2013. Title II of the act, the Drug Supply Chain Security Act (DSCSA), outlines steps for building an electronic, interoperable system to identify and trace prescription drugs as they are distributed in the United States. The Food and Drug Administration is overseeing the implementation of this law.
The DSCSA’s passage in 2013 began the 10-year process of building a single, unified, secure national system for tracing products through the drug distribution system. The law superseded all state and federal regulations. It also replaced the outdated pedigree regulations of the Prescription Drug Marketing Act, which had last been updated in 1987.
How track-and-trace works
The DSCSA mandates numerous technical standards designed to prevent counterfeit drugs from penetrating the U.S. supply chain. For instance, since last year, drug makers and repackagers have been required to add DSCSA-specified product identifiers to their packages. These identifiers must include a unique standardized numerical identifier on each package and case.
By November 2019, U.S. drug wholesalers must deal only in products labeled with the DSCSA product identifiers. By November 2020, pharmacies can buy only those products that are encoded with DSCSA-mandated product identifiers. By 2023, all drugs entering the U.S. drug channel must be traceable using a unique product identifier. All members of the supply chain, including pharmacies and wholesalers, must be fully compliant with all requirements of this electronic, package-level traceability system.
A standardized numerical identifier comprises two elements: the FDA-registered National Drug Code of the drug package and a unique serial number. Standardized numerical identifiers enable the tracking and tracing of drugs. Under the DSCSA, every drug must have a complete transaction history from the first sale by the original manufacturer or by a repackager that purchased directly from the original manufacturer. Every subsequent seller must provide the buyer with DSCSA-specific information, including the complete transaction history and a statement asserting compliance with various DSCSA requirements.
Importation undermines the track-and-trace system
The DSCSA has crucial implications that cannot be waived to support state importation laws.
Fundamental operational obligations of the DSCSA mean that imported drugs could not be tracked and traced throughout the supply chain. The requirement for unique standardized numerical identifiers means there is no legal or operational way of transforming a drug packaged for the Canadian market into a drug that meets the U.S. requirements of the DSCSA’s track-and-trace system.
Canada does not require that drugs sold there be serialized. A manufacturer selling a drug packaged for the Canadian market applies a Drug Identification Number instead of a DSCSA-compliant identifier with an FDA-registered National Drug Code. Drug Identification Numbers are assigned to all prescription and over-the-counter drugs by Health Canada, the government agency responsible for the country’s public health. Canada’s drug numbers are comparable to, but distinct from, FDA-assigned drug numbers.
Products sold for the Canadian market lack a DSCSA-compliant standardized numerical identifier. This would irreparably break the necessary DSCSA tracking history, making the products permanently unsellable in the U.S.
What’s more, these products can’t be repackaged for sale in the U.S. Each package’s unique standardized numerical identifier must be applied by the original manufacturer. An importer that bought drugs in Canada and repackaged them for distribution in the U.S. would have no way of generating or applying a manufacturer-applied standardized numerical identifier. It also means that a wholesaler can’t purchase drugs in Canada and repackage them for sale in the U.S.
Manufacturers can’t apply identifiers from multiple countries to each package. A track-and-trace system is secure only when a pharmacist knows precisely which code to scan, not when they face multiple, conflicting packaging. That’s why the FDA doesn’t allow drugs with foreign markings on the packages to enter the U.S. supply chain. Canada Health will rightly reject U.S. track-and-trace labelling on products designated for the Canadian market. The risk of confusion is too great.
Importation enables counterfeits
To overcome the legal and operational barriers to importation, proponents of importation want the federal government to waive track-and-trace requirements. Doing so would open up new diversion gateways by which criminals and foreign powers could introduce counterfeit and unsafe drugs into the closed U.S. supply chain.
Diversion is the sale of a drug outside of the distribution channels for which it was originally intended. Government-sanctioned drug importation is nothing more than government-sanctioned diversion — products made to be sold in Canada but diverted to the U.S.
While diverted products are not always counterfeits, all counterfeits enter via diversion. In the U.S., drug diversion has been the weak point in the supply chain for every FDA investigation into counterfeit drugs entering legitimate pharmacies.
The problem with importation is not that all drugs from Canada are counterfeit. Instead, the problem is that some products could be counterfeit. If the DSCSA requirements are relaxed, we will have no way of separating legitimate drugs from illicit drugs, because imported products could not be tracked back to the original manufacturers.
What’s more, Canadian pharmacies serve a population that is one-tenth as big as the U.S. population. There are not enough products in Canada to service even a small fraction of U.S. prescription demand. Smart criminals and foreign enemies of the U.S. will penetrate the Canadian supply chain, thereby enabling illegitimate products to reach U.S. consumers.
The FDA doesn’t regulate foreign pharmacies and can’t mandate compliance with the U.S. track-and trace laws. Our national track-and-trace system is the only way to stop rogue products from reaching U.S. patients.
Forgetting the lessons
Importation laws undermine the country’s progress in building a modern technology infrastructure to track and trace prescription drugs. Making exceptions to the in-progress track-and-trace system would ignore the many instances of drug diversion and counterfeiting that led to the creation and passage of the law in 2013.
Florida’s law envisions the creation of an as-yet-unspecified vendor that “shall ensure compliance” with the DSCSA. Meanwhile, Colorado, Vermont, and other states are busy creating their own parallel but incompatible systems for importation. State legislators seem dangerously ill-informed about their states’ troubled history of counterfeit drugs. They are also recreating the chaos that preceded the passage of a national track-and-trace system.
There is simply no way to alter the DSCSA to enable importation without undermining its purpose and value. Either we have a secure drug supply chain or we don’t. Any trading activity outside of the federal in-progress national track-and-trace system will create the potential for counterfeit and mishandled products to enter our pharmacies. It makes no sense to reopen a complex law that is still being implemented. Going backward will make the system less safe.
It’s a shame that the public perception of pharmaceutical manufacturers is so low that few of our elected officials recognize the predictable dangers of cross-border importation.