DEA E-Commerce Rule Will Allow Decentralized Controlled Drug Distribution

The Drug Enforcement Administration's upcoming proposed rule on electronic ordering of Schedule I and II controlled substances is likely to spur wholesalers to shift toward centralized order processing with decentralized distribution.

The draft reg, which outlines performance standards for an Electronic Controlled Substance Ordering System (CSOS) alternative to the current paper-based system, would support centralized order processing and decentralized distribution, DEA's Andy McFaul said during a Healthcare Distribution Management Association conference in Orlando, Fla. June 10. McFaul is chief of the regulatory drafting unit in the Office of Diversion Control's Liaison & Policy Section.

A centralized processing/decentralized fill approach is difficult under the current system because a purchaser may file a single order for 10 different drugs that a supplier houses at different distribution centers.

The current program presents a "physical limitation" to filling the order because "that piece of paper has to reside somewhere to back up the distribution. Therefore, only one location" can complete the request, McFaul said. Under the proposed reg, "we can take an order, split it up...and farm it out to a number of different distribution centers within a company."

The proposed reg has been cleared by the Office of Management & Budget and is expected to be published in the Federal Register within the next two weeks.

"Probably the major issue, and what we have urged most people to do when taking a look at this, is to try to think out of the box in terms of what type of implementation initiatives and new policies can be developed" in conjunction with the reg, McFaul said.

"One of the bigger ones that we've encountered thus far was the issue of centralized order processing/decentral fill, which is a radical departure from what we currently experience with paper. That's the area where I think we're going to see the biggest issues coming up" in creating new policies, he said.

The proposal would allow purchasers and suppliers to replace the current, paper-based Form 222 ordering system with an electronic process, thereby automating ordering procedures while significantly reducing costs.

Under DEA's economic benefit analysis, purchasers and suppliers collectively spend $209.3 mil. annually to complete, mail and process paper order forms. In contrast, the agency estimates initial annual compliance costs of $31.4 mil. for establishing an electronic system. Post-start-up compliance costs are estimated at $28.4 mil. annually.

While costs of the paper-based system would exceed $2 bil. over 10 years, an electronic system would cost industry $316.8 mil. over the same time period, resulting in a savings of $1.69 bil., McFaul said.

The concept of an electronic ordering system has been under discussion by DEA and industry since 1999. Heightened national attention on terrorism has added to the initiative's importance; in 2001, HDMA CEO Ron Streck noted that if mail service is disrupted again as it was during that year's anthrax attacks, paper forms could become unavailable, leaving wholesalers and drugstores unable to order certain scheduled drugs (¹ (Also see "Rx Wholesalers Propose Bioterrorism Inventory, Labeling Database To HHS" - Pink Sheet, 19 Nov, 2001.), p. 24).

DEA is partnering with HDMA, the National Association of Chain Drug Stores and PEC Solutions to conduct an electronic ordering pilot program ("The Pink Sheet" Jan. 14, 2002, p. 16).

DEA's proposal calls for purchasers to obtain a digital identification through a CSOS certification authority run by the agency. The purchaser would use that digital identification to electronically sign orders for scheduled drugs, PEC Director of Secure Network Systems Steven Bruck said.

The supplier would then contact the CSOS certification authority, as well as a DEA e-commerce certification authority, to verify the status of the purchaser's digital signature. The system would also allow practitioners to electronically order scheduled drugs from suppliers. DEA is developing a separate reg that would allow electronic prescriptions for controlled substances.

The CSOS system is being designed with an eye toward applications beyond controlled substances, Bruck suggested. Digital certificate technology eventually could prove useful to practitioners in filing Medicare and Medicaid submissions or Social Security disability determinations, all of which "also are heavily reliant on paper," he observed.