NACDS Anti-Counterfeit Proposal Would Use “One Forward/One Back” Model

FDA should require distributors to adopt a "one forward/one back" record keeping system for drug sales to prevent counterfeiting, the National Association of Chain Drug Stores recommended.

Each member of the supply chain should be required to maintain a purchase record from product acquisition and a sales record when product is moved downstream.

"In the short-term, a 'one forward/one back' approach to drug authentication would help assure accountability for each step in the supply chain," ¹ NACDS' report on counterfeiting states.

The record keeping system should be used for drugs at a high risk of being counterfeited, NACDS said. The requirement should "extend from the manufacturers to the pharmacy company but not to store level or patient purchaser." Repackagers would also be included in the requirement.

The procedure is "analogous to the system adopted by food distributors as part of Public Health Security & Bio-Terrorism Preparedness & Response Act of 2002," NACDS noted.

The report was compiled for NACDS by Accenture over two months. Working group members included 51 participants from "all supply chain segments," representing 24 NACDS Leadership Council companies. NACDS will provide the report to FDA, which plans to issue its final report on counterfeiting in January.

The chain drug association believes the system could be implemented within two years, although it would require modifications to the Prescription Drug Marketing Act. "Current legislation...has loopholes that allow diverted and/or counterfeit drugs to enter the system," NACDS maintained.

Under PDMA, "Authorized Distributors of Record" are "not required to obtain documentation from manufacturers, making comprehensive documentation impossible in this channel. ADR definition is also loosely defined, enabling the majority of wholesalers to attain an ADR status."

Manufacturers may begin taking unilateral steps to close that "loophole." Johnson & Johnson, for example, is attempting to set up a system to limit purchases of its products to an approved distributor list (² , p. 37).

NACDS acknowledged other obstacles to "one forward/one back." Returns would be "difficult under a 'one forward/one back approach' since retailers and wholesalers cannot confirm in all instances exact product source."

NACDS also believes the system will work only if it is focused on selected, high-risk products. FDA should create a "statistically driven, qualitatively refined anti-counterfeiting drug classification model and criteria," NACDS said. The classification model could be operational "by early 2004."

"Introducing an anti-counterfeiting product classification and implementing solutions that vary in degree by drug class will reduce the cost pressures to industry participants," NACDS said.

"Drug counterfeiters continuously adjust their practices to overcome known business practices and regulations; therefore it is important to have an evolving classification system that enables supply chain participants to focus their activities," NACDS noted.

FDA should "prevent counterfeiters from gaining access to the aggregate drug classification listing and ensure that the listing is not publicly available."

NACDS' position is that, in the long run, track and trace technology is a better solution to the counterfeit problem. FDA's classification of high risk products should therefore evolve as development of technology "drives the list towards obsolescence."

NACDS offered several recommendations on developing track and trace technology. First, there should be a cost benefit analysis before "implementation of the digital model at the 'unit level.'"

One factor to consider, NACDS said, is that "in instances where units of use are tagged, physical decommissioning of the tag must take place prior to consumer leaving the store."

In addition, the digital track and trace would need "a centralized technical infrastructure...that is maintained by a third-party," NACDS said.

Design of the system would have to "accurately estimate transaction volume to determine the required infrastructure to handle current and future volume," NACDS said. Any estimates will need to consider the impact of the Medicare prescription drug law.

FDA's interim report, released in October, suggests that while an electronic pedigree is being developed, counterfeiting can be curtailed by limiting the number of transactions and employing packaging changes (³ (Also see "FDA Counterfeit Report Seeks “Electronic Pedigree” To Aid Drug Tracking" - Pink Sheet, 6 Oct, 2003.), p. 3).

The Pharmaceutical Research & Manufacturers of America has suggested that an interim anti-counterfeiting step could be to use paper registries (⁴ (Also see "Anti-Counterfeiting Interim Step Should Be Paper Pedigree, PhRMA Says" - Pink Sheet, 20 Oct, 2003.), p. 21).

NACDS, however, believes that "paper pedigree documents are expensive and ineffective because they are costly and easier to counterfeit than the drugs themselves."

The association also does not see unit-of-use packaging as a particularly attractive anti-counterfeiting tool.

"While the FDA has identified unit-of-use packaging as a potential anti-counterfeiting solution, unit-of-use packaging costs tend to outweigh the benefits and the packaging tends to be more susceptible to counterfeiting than the drugs themselves," NACDS maintained.

The association did not dismiss unit-of-use packaging completely, however. "Manufacturers should consider, as part of product development, unit of use packaging as an extra line of defense for new drugs," NACDS said. Also, "FDA should monitor progress of unit-of-use standards in other countries to gain knowledge."

"Re-packaging practices in the U.S. may render manufacturing and other tagging efforts ineffective because packages are broken down to the pill or vial level and then repackaged."

FDA should "require minimum packaging standards that vary by drug class and apply to all supply chain members to ensure basic safety and integrity of products," NACDS said.

NACDS also wants to strengthen regulators' ability to oversee the supply chain. The association urged "creating a federal 'floor' for minimum standards and encouraging uniform state licensing standards."

The Pharmaceutical Distribution Association, which represents secondary wholesalers, has made tightening wholesale licensing requirements by FDA and states a focus of its recommendations on counterfeiting (⁵ (Also see "FDA Anti-Counterfeiting Focus Should Be Wholesaler Licensing, PDA Says" - Pink Sheet, 24 Nov, 2003.), p. 21).

NACDS argued that "federal and state penalties for prescription drug counterfeiting are insufficient" and should be strengthened.

"When criminal penalties are not applicable, [regulators should] consider non-monetary penalties for non-compliance with various regulations," including "temporary restriction on sale for certain products until infractions are remedied" and "temporary closure until infractions are remedied."

"FDA should create a centralized database that companies can refer to as part of their upfront and ongoing due diligence process (e.g. check the database/exclusions list for companies that have had licensing infringements)," NACDS suggested.

The report maintains that institutional pharmacies and Sec. 340(b) programs should be the focus of heightened scrutiny. Those purchasers should be required "to report all drug purchases and certify that none of the purchased drugs were sold or diverted," NACDS declared.

Also, regulators should "impose greater civil and criminal penalties for diversion and inaccurate reporting of bed numbers by institutional pharmacy suppliers."

New legislation should "give FDA the right to inspect institutional pharmacy records without notice." Legislation should also "authorize periodic and unannounced inspections of wholesalers' operations by federal and/or state agencies."

Congress should "give FDA more authority to investigate and prosecute foreign companies" and "grant agencies the proper authority for inspections of records, facilities and international mail," NACDS said.

Finally, "existing laws against importing prescription drugs should be firmly enforced to prevent counterfeiting," the report urges. PhRMA is also urging FDA to take a stronger stand on importation.