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The Cost of Drug Security

A recent report spotlights the high cost of implementing drug pedigrees, but there is a way forward.
By Mark Roberti
Aug 01, 2008Accenture has published an informative report on the cost of complying with possible U.S. federal drug pedigree requirements, which aim to ensure that all drugs sold through pharmacies are legitimate. The global consulting and services company's report is valuable because it points out that the cost of complying with a mandate involving several technologies could be onerous to pharmacies of all sizes. (It doesn't address costs to manufacturers and distributors, but the same concerns would apply to distributors that break down large shipments from manufacturers into smaller shipments to pharmacies.)

Sponsored by the Coalition for Community Pharmacy Action (CCPA), an alliance of the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA), the study was undertaken in response to the proposed Safeguarding America's Pharmaceuticals Act of 2008 (H.R. 5839), introduced in April. If enacted, the bill would require the U.S. Food and Drug Administration to create a unified track-and-trace pedigree standard for pharmaceutical drugs.

The aim of the bill is laudable—to protect the public from counterfeit drugs—but there are better ways to achieve that goal.
The study found that it would cost $84,000 to $110,000 per pharmacy for the hardware, software, infrastructure, labor and resources to implement a track-and-trace system that uses 2-D bar codes and both high-frequency and ultrahigh-frequency RFID tags, the three technologies the industry is currently exploring. This amounts to more than $1.3 billion in total cumulative costs for a large chain with 14 distribution centers and 4,000 pharmacies, $46 million for a medium-size chain with one distribution facility and 100 pharmacies, and almost $4 million for a small chain with no distribution facilities and 15 pharmacies.

Charlie Sewell, senior VP of government affairs for the NCPA and co-president and founder of the CCPA, says these costs would be prohibitive for most pharmacies and could bankrupt smaller ones. "This could be the straw that breaks the camel's back," he says. "It would really make the economic viability of community pharmacies come into serious question, and it would definitely have an impact on chain pharmacies."

The aim of the bill is laudable, and shared by every company in the pharmaceutical industry: to protect the public from counterfeit drugs by establishing a means to track drugs through the supply chain and ensure their authenticity. But there are better ways to achieve that goal than forcing all manufacturers, wholesalers, distributors and pharmacies to adopt three costly systems—or to adopt the even less attractive possible alternative, which is to comply with 50 different drug pedigree requirements enacted by the individual states.

So how can the industry meet federal and state goals to secure the drug supply chain without bankrupting small pharmacies and imposing a heavy financial burden on larger pharmacies and distributors? The answer is to agree on which technologies to adopt and then to take a phased approach, deploying the technology first in the areas where the threat is greatest.

Drug manufacturers, wholesalers and distributors need to agree on a serialized bar-code standard and an RFID standard—either HF or UHF, but not both. The industry needs to work with federal regulators and a coalition of state regulators to determine what information must be collected, where and when. And the industry and government should agree on a phased approach that targets the problem. The goal would be to shift from 2-D bar codes, which cost little for the manufacturers to apply, to RFID—and to transition from focusing on the most at-risk drug shipments to all drug shipments.
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