NACDS calls on California to delay implementation of electronic pedigree law

SACRAMENTO, Calif. Last week, Steve Perlowski, vice president of industry affairs for the National Association of Chain Drug Stores, spoke on behalf of the NACDS before the California Board of Pharmacy. Starting Jan. 1, 2009, the State of California will require that medications have an electronic pedigree. Early in 2007, the state affirmed that the drug pedigree standard from standards organization GS1 EPCglobal (Brussels, Belgium) meets the California pedigree requirements. It was ratified as an open standard by companies across the pharmaceutical supply chain in early 2007 and details the pedigree format, including the data fields and certification processes necessary to comply with existing drug pedigree laws in the United States.

Due to what NACDS calls “the extraordinary demands of meeting electronic pedigree requirements,” the organization is requesting that implementation be delayed two years for manufacturers and wholesalers, until Jan. 1, 2011, with an additional year for retail pharmacies and pharmacy distribution centers.

“Our fear is that as manufacturers attempt to manage their costs associated with applying a serialized number to each product, they will each, inevitably, come up with their own solution, leading to multiple solutions in the supply chain,” Perlowski said in his testimony. “Implementing just one solution will be difficult. Complying with multiple solutions is beyond the abilities of many if not all dispensing points—including retail pharmacy, hospitals, clinics, mail order facilities and physicians.”

In his testimony, Perlowski discussed chain pharmacy’s efforts to work with other partners in the pharmaceutical supply chain to develop viable pedigree solutions. He also requested that steps be taken to ease the transition to electronic pedigree, including the continued use of inference—assuming that a trusted manufacturer has shipped the correct drugs, based on shipping documents and a case coding— and the grandfathering of all medications in the supply chain for two years after the compliance date.

Addressing California’s mandate to track single bottles of medications, rather than their cases, Perlowski called for the continued use of inference. “If we are not able to infer based on shipping documents and a case coding, we would be required to open every case as we receive it from the delivery truck, pull out every bottle from each case, read the bar code on each bottle, then return the bottles back into the case to receive it into a distribution center,” he said. “One of my members conducted a study [and found a] 6000 percent increase in the amount of product that would be checked in at the time of receipt—based on receiving individual items rather than cases.”

“We believe that the use of inference is an individual company decision,” he said, “but the practice should be allowed as long as received products are “read” and recorded before moving to the next link in the supply chain.”

Perlowski’s arguments for grandfathering in medications for two years after the implementation date centered on both the volume of pharmaceuticals needed in stock at any given moment and on the irregularity in sales demand for various drugs. “According to our research, doctors in California will prescribe approximately 6 million prescriptions both the week before Jan. 1, 2009 and the week after Jan. 1, 2009. In order for pharmacies to meet this anticipated demand, we will need to have fully stocked shelves in order to serve the citizens of California.”

“Not all product sells on a fixed or regular demand pattern,” he continued. “If we are overstocked on a specific pharmaceutical product we are unable to run a promotion or sale to reduce our inventory as we can do with consumer products like toothpaste or toilet paper. Some pharmaceutical products are only manufactured once a year. If this product is not serialized during the lone 2008 production run, it will not be compliant when it is sold into the supply chain—rendering it unsaleable unless it is grandfathered.”

Perlowski concluded with a call for delay of implementation. The cost of implementation, he argued, combined with the possible proposed reduction in pharmacy reimbursement for Medicaid recipients under the Deficit Reduction Act and its Average Manufacturer Price, would not only be prohibitive to pharmacies, but it might be the final nail in the coffin for some. Perlowski said that NACDS expert “predicts that with just the AMP cuts, nearly 1 in 5 retail pharmacies will close.” He argued that the chances of the added costs associated with the electronic pedigree law would “more than likely” cause even more closings.

“This extension would allow pharmacies and pharmacy distribution centers to adopt and implement the necessary technologies and for the technology and business process changes to be resolved among manufacturers and wholesalers to avoid additional confusion at pharmacy distribution centers and pharmacies,” Perlowski said in his closing, adding that “the additional time would allow pharmacies to resolve economic issues related to compliance without negatively impacting pharmacy services, as we will not fully understand all of our challenges until we start receiving serialized products from manufacturers and distributors.”