As every manufacturer, distributor, and wholesaler is no doubt aware, the U.S. Food and Drug Administration (FDA) announced a December 1, 2006, effective date for the rules promulgated under the Prescription Drug Marketing Act of 1987 (PDMA) regarding the provision of drug product pedigrees. While most of the rules under PDMA have gone into effect, industry and regulating bodies still struggle with the supply chain pedigree requirement. With the U.S. Department of Health and Human Services (HHS) embroiled in a federal court case regarding the issue of whether the PDMA pedigree rules inequitably affect secondary wholesalers, and as FDA labors to fairly enforce the remaining pedigree rules, states have been considering and adopting their own pedigree requirements, including, in the case of California, the mandatory use of electronic pedigrees.

The Drug Pedigree Requirement

The PDMA requires, among other things, that certain wholesalers — commonly referred to as “secondary wholesalers” — provide a statement of origin prior to each wholesale distribution of prescription drugs. This statement of origin is known as a drug pedigree. As currently written, the regulations require drug shipments distributed by a wholesale distributor to include the product pedigree, or a record of each transaction along the supply chain, if the wholesale distributor is not an “authorized distributor of record” (ADR). The pedigree requirements do not apply to ADRs, which means that an ADR is not required to pass a pedigree with product that it distributes.

A wholesaler may only receive an ADR designation by establishing a written agreement for specific drugs with the product’s manufacturer. FDA announced in June 2006 that it would begin implementing these highly anticipated pharmaceutical pedigree requirements starting on December 1, 2006. In announcing the implementation of the pedigree requirements, FDA noted its disappointment with the pace of radio frequency identification (RFID) adoption by industry. FDA continues to believe that RFID and mass serialization are important elements in preventing drug counterfeiting, but stated it could not justify further delaying implementation of the pedigree requirements to wait for industry action.

RxUSA and the Pedigree Requirements

In September 2006, a group of wholesale drug companies (collectively referred to as “RxUSA”) filed suit against HHS in the U.S. District Court for the Eastern District of New York to block implementation of FDA’s drug pedigree requirements. In the suit, nine wholesale distribution companies, affiliated with the National Coalition of Pharmaceutical Distributors (NCPD), claimed the rule would force small wholesale companies out of business, and alleged violations of equal protection and due process. These secondary wholesale distributors contend they cannot comply with the rule because they purchase their products from the ADR, the primary wholesale distributor, rather than the manufacturer, and ADRs are not required to maintain pedigrees or to provide them to the smaller wholesalers. The secondary wholesaler companies complain they will suffer irreparable harm under the rule because they will not be able to sell the inventory they have already purchased.

In November, the secondary wholesalers filed a motion to stay implementation of the drug pedigree rule. On December 5, 2006 — five days after the official implementation date — a federal district court judge officially granted the motion to delay implementation. The court’s rationale for staying the rule included that: (1) RxUSA had shown a likelihood of success in the case because the purpose of the statute, protecting American consumers from tainted drugs by showing where wholesalers get their products, would not be satisfied if secondary wholesalers go out of business and drugs are provided only by ADRs, who are exempt from the pedigree requirements; and (2) the stay serves the public interest because it maintains the status quo and alleviates the potential risk of putting 4,000 non-ADRs out of business, which could lead to underserved markets and increased drug prices.

In an Agency Backgrounder, FDA briefly explains the court’s ruling to stay implementation, stating that the court’s order does not erase the fundamental pedigree requirement in PDMA or implicate any other PDMA provisions, including what qualifies as an “ongoing relationship,” which serves to define who qualifies as an authorized distributor. Rather, states FDA, the injunction affects only the regulation that specifies the type of information the pedigrees must contain and how far back in the distribution chain drugs must be traced. According to the court order, pedigrees passed by non-ADRs need only trace back to the manufacturer or the last ADR that handled the drugs. As specified in PDMA, all pedigrees must include the dates of the listed transactions and the names and addresses of all parties to those transactions.

FDA asserted it will apply this court ordered standard to those wholesalers operating outside the Eastern District of New York (where the case was brought) in order to avoid confusion among different wholesalers. The Agency will exercise enforcement discretion in a manner that is consistent with the court’s opinion. So long as the injunction remains in effect, FDA does not intend to initiate enforcement actions against any wholesalers solely for: (1) failing to include lot numbers, dosage, container size, or number of containers on a pedigree; or (2) failing to provide a pedigree that goes back to the manufacturer so long as the pedigree identifies the last ADR handling the drugs.

States Stepping In

Due in part to the delays experienced on the federal level and perceived voids in federal anti-counterfeiting measures, states have begun establishing or considering development of individual pedigree requirements. The Healthcare Distribution Management Association (HDMA) reports that, as of April 2007, 38 states have proposed or enacted state legislation or board regulations regarding the use of pedigrees. To date, 17 states have adopted pedigree requirements, while an additional 21 are still considering the matter. Most notably, California has adopted a requirement which requires pedigrees in electronic form, as described in more detail below.

In 2004, the California Board of Pharmacy sponsored Senate Bill 1307 to provide additional rules for wholesalers and manufacturers of “dangerous” (i.e. prescription) drugs and devices. The bill, which was passed and signed into law effective January 1, 2005, made several changes to the wholesaler requirements and distribution of dangerous drugs. The California pedigree rule introduced new requirements for pharmaceutical companies, medical device manufacturers, and their partners across the supply chain. Briefly, the law requires that: (1) pedigrees be electronic; (2) manufacturers initiate the pedigrees; and (3) pedigrees be serialized. Specifically, under the California law, a wholesaler or pharmacy may not sell, trade, or transfer a dangerous drug without providing a pedigree, and may not acquire a dangerous drug without receiving a pedigree.

A “pedigree” is defined as “a record, in electronic form, containing information regarding each transaction resulting in a change of ownership of a given dangerous drug, from sale by a manufacturer, through acquisition and sale by one or more wholesalers, manufacturers, or pharmacies, until final sale to a pharmacy or other person furnishing, administering, or dispensing the dangerous drug. The pedigree shall be created and maintained in an interoperable electronic system, ensuring compatibility throughout all stages of distribution.” To conform with the rule, a pedigree must include all of the following information: the source of the drug (i.e. the name, registration or license number, and principal address of the manufacturer); product and transaction identification (i.e. the trade or generic name of the drug, its quantity, dosage form and strength, the date of the transaction, sales invoice number, container size, number of containers, expiration dates, and lot numbers); identification of and contact information for each owner of the drug and the drug’s shipping information, including the identity of each owner certifying delivery or receipt of the product; and finally, a certification from a responsible party of the source of the drug that the information in the pedigree is true and accurate.

Originally, the California legislature established a January 1, 2007, implementation date for wholesale distributors and a January 1, 2008, implementation date for pharmacies, along with authorization to the Board of Pharmacy to extend the compliance date for both. Based on industry input, the California legislature passed a delay for enforcing state pedigree requirements, establishing a new deadline of January 1, 2009, in order to give companies more time to prepare for pedigree compliance. While the delay mimics the postponements FDA consistently authorized for PDMA implementation, California is not expected to allow additional time for compliance. Indeed, the Board of Pharmacy determined in March 2007 that it believes the newly minted GS1 EPCglobal Drug Pedigree Standard meets the requirements of the California pedigree law, calling ratification of the pedigree standard a significant milestone toward industry readiness for California’s January 2009 deadline.

To date, only California has mandated the use of electronic pedigrees and, as noted above, implementation of the electronic pedigree is currently delayed. Florida and several other states are in the process of developing regulations to permit the use of electronic pedigrees in place of paper documents. Given the current legal and regulatory climate, development of pedigree specifications and track-and-trace enforcement may become primarily the province of states. As such, it is important for all pharmaceutical manufacturer partners to understand and prepare for the likelihood of individual states adopting legislation and developing and implementing individual rules and regulations regarding drug product pedigrees and the potential conflicts that may arise among these disparate pedigree requirements.

Gary C. Messplay is a partner in the Washington, D.C. office of Hunton & Williams LLP, where he is head of the law firm’s Food and Drug Practice. He can be reached at gmessplay@hunton.com. Colleen Heisey is an attorney in the firm’s Food and Drug Practice.