The Pedigree Juggernaut: New World for Prescription Drug Wholesalers

By Dave Crawford, Project Manager, Tompkins Associates

Thirty states now have active pharmaceutical pedigree legislation initiatives either passed, in conference or tabled, and more states are expected to follow. Florida, California, Texas and Indiana are just a few. A clear trend is occurring in pedigree regulations, as states are focusing on very similar areas of information and process documentation requirements for tracking a full history of ownership, as well as a full history of physical distribution.

While most organizational concerns have centered on data collection, data storage and data availability to all supply chain parties, an equally pressing and often overlooked concern is the impact that the data collection and control requirements will have on distribution operations at the process level.

A good understanding of the pedigree requirements common to most state initiatives is key, and this paper provides a high-level review of pedigree requirements common to most state initiatives. It’s time to adequately answer the question, “How will pedigree regulations impact the core processes associated with physical distribution?” Changes are expected to be substantive for all wholesalers, resellers and redistributors of pharmaceuticals.

Pedigree Overview

Due to the enormous paper trail required for pedigrees, there is an increasing emphasis on using information technology to enable the implementation of pedigree requirements. Areas of pedigree compliance benefiting from an electronic approach are:

Standardization of Shipping Documentation

Ninety percent of US prescription drug distribution is by three wholesalers; AmeriSource-Bergen, McKesson, and Cardinal Health. They are setting the stage for the industry as a whole. Current industry initiatives include:

• Manufacturers are required to utilize the SSCC UCC-128 barcodes on all inbound cases of prescription drugs.
  
• SSCC UCC 128 barcodes are Serial Shipping Container Code (SSCC), and when coupled with the 856 EDI (a.k.a. Advance Ship Notice – ASN), they provide the beginning electronic trail necessary to meet pedigree requirements.
  
• Each case will have a unique identifying reference number—
  a boon to establishing ownership and physical distribution history for each case.

Unique Identifiers Key to Traceability

All regulations call for each wholesaler in the supply chain to attach a unique identifier to cases of a given SKU/lot numbered container. The container could be a pallet of a single SKU/lot number, or if it is to be sold as a case, then the case needs the unique SKU/lot number identifier. The identifier can be a PO number, the shipping number, or the invoice number. Product shipped from the wholesaler’s distribution center (DC) must always be traceable to the SKU/lot number/unique identifier level.

Standardized Product Labels

The Health Distribution Management Association (HDMA) has recommended a standardized product label for full cases of prescription drugs. It will ensure a standard presentation of NDC, lot, expiration date, and case pack configuration—all necessary for meeting pedigree requirements. It is expected that requirements imposed by the Big Three wholesalers on manufacturers will speed the implementation of this important improvement.

Electronic Authentication

Each receipt of a case of prescription drugs must be authenticated. This means affirmatively verifying, before any distribution of a prescription drug occurs, that each transaction listed on the pedigree has actually occurred. This can be accomplished by a variety of means, including a phone call to the seller. A more efficient method is the use of subscription-based Web enabled authentication services. By scanning 856 EDI transaction sets and a proper SSCC UCC 128 label, it is now possible to complete the authentication requirements as well as update a database with the wholesaler’s pedigree information.

Validation pedigree data matches physical product received

At the time of physical receiving, a process must be in place to confirm that the physical product being received in fact has a matching pedigree. The person performing the receiving function must attach his or her signature to the receiving documents. If the product cannot be validated at the time of receiving, it should be rejected or quarantined until the validation requirements are met.

Signature of all recipients required as part of pedigree

Requirements state that holders or owners of the drug will need the ability to verify the pedigree, including the signature proof. This may be accomplished via a paper document or may be recorded more efficiently by means of a validated electronic signature process. If the electronic signature approach is used, the wholesaler will need to have very strict protocols and processes in place. The FDA has stringent guidelines for validating electronic signatures, which provide a basis for developing and validating procedures (Title Code 21Code of Federal Regulations (CFR) Part 11; Electronic Records, Electronic Signatures).

Distribution Operations – What Changes?

While the regulations taken individually seem straightforward enough, it is becoming clear that distribution systems will become significantly more complicated. Many companies are looking to use outside services for online authentication and data warehousing. Other wholesalers will look for in-house capabilities that are Web enabled. Either way, the regulatory requirements require a substantial investment in developing the concise capability to meet regulations. Moreover, there will be a significant impact on operational activities within the prescription drug distribution supply channel. The diagram below provides an overview of how drug distribution supply chains will be impacted.

The single biggest operational wrinkle arising from pedigree requirements is the required linkage between the:

1. SKU Number (representing the NDC number, dosage, etc.)
   
2. Lot Number
   
3. Unique Identifier (invoice number, shipping number, or purchase order number).

It is the combination of these three elements that creates the foundation for the establishment of an unmistakable chain of custody from the manufacturer to the wholesaler(s) and on to the final point of distribution such as a clinic, pharmacy, or hospital. Keeping in mind that all regulations call for a complete ownership history as well as a complete physical distribution history, what new issues will be faced by wholesaler operations?

Receiving, Putaway, Storage Management

If there is any possibility that a given SKU/lot combination with different unique identifiers can enter a wholesaler’s distribution facility, then there is a regulatory requirement for having processes and procedures in place to keep the products segregated—physically as well as within any warehouse management system (WMS) used. If a manufacturer applies SSCC labels which contain unique case label identifiers, then the WMS could associate the unique Identifier with the unique SSCC label number. If SSCC labels are not available, then the wholesaler must apply case level license plate numbers (LPNs) that are associated to the unique Identifier used at the time of receiving. In either situation, WMS and process changes will be required. So, at the time of receiving, the WMS needs to recognize the need for segregation and direct activities appropriately, or all putaway rules and storage management processes must be validated to ensure the segregation of all receiving of a particular SKU.

The requirement that the pedigree of a product received must match the physical product received will require changes to most host and WMS systems, including interfacing with Web hosted pedigree service providers. Included in these requirements is the need for recording the signature of the person responsible for verifying the pedigree match. Validation requirements for using electronic signatures mean that DC operational processes and procedures will need to be more narrowly defined. Rules such as sign on and off of radio frequency (RF) devices with passwords, no sharing of devices, etc., will need increased attention. And the tolerance for people varying from proscribed procedures will be significantly reduced.

Order Management and Picking

Many host Order Management Systems (OMS) will allocate specific case lot numbers to an order. While there are many benefits to doing this, it is clear that an OMS will need to recognize the unique identifier as an additional attribute, and thus restrict orders to the more stringent criteria. While appearing to be a straightforward solution, it will create a significant set of constraints for a WMS, as well as for DC operations.

Orders cannot contain the same SKU/case lot with dissimilar unique Identifiers; if this were permitted, it would be impossible to differentiate the SKU’s in an order. Labor saving picking strategies such as batch picking will become problematic for the same reason. Picking will need to be discrete order picking—one order at a time. Furthermore, the labor efficiencies associated with batch picking will be lost.

As one thinks of “work arounds” to the problem of keeping items segregated at the SKU/lot/unique identifiers level, it quickly becomes clear that processes and procedures will grow stricter and less forgiving to human error. The alternative is to invest in material handling solutions that efficiently handle single orders; an example would be advanced pick-to-light systems capable of systemically achieving the required product segregation requirements as well as efficiently processing orders.

Pick-to-light systems cannot achieve the segregation requirements if the OMS is pre-allocating product at the SKU/case lot/unique Identifier level. This approach will require the WMS to keep items in an order separate and then upload the transactions to the OMS/host system—a significant change in applications architecture for many wholesalers. In addition to the expense for upgrading equipment and systems, there is the additional effort and expense required to validate the new processes. All in all, it translates into an expensive and time- consuming set of initiatives.

Shipping

Pedigree regulations call for the recipient of an order to have the ability to confirm the validity of the pedigree for items being received. For the wholesaler, it means that an exact history of the order processing and the SKU/case lot/unique identifiers is sent with each order. For most operations, this will entail enhancements to the WMS and the OMS. Another change required is the use of separate packaging for items in an order with the same SKU/case lot but different unique identifiers. This could mean creating separate shipments or using master carton shipments that contain multiple cartons within, and each of those being uniquely identified on each inner pack as well as being described on any enclosed paperwork. Whatever the final path followed, the regulations plainly speak to the necessity for keeping all this information in a database that can be used for authentication for customers or regulators.

Distribution Operations – What Is the Impact?

The cost of ongoing operations will increase due to procedural changes made necessary by the regulations. It is estimated that a 10% overall increase in labor costs in DCs is realistic, and this figure could be higher if requirements are met using “work arounds” instead of implementing robust systems solutions to the regulatory requirements. In some operations, the most cost-effective solutions may involve substantial capital investment in advanced automation for picking and shipping processes. And in all instances, there will be a requirement to develop solid Standard Operating Procedures (SOPs) to ensure that regulatory requirements can be met; and for many, there will also be a validation requirement.

As for corporate governance issues, pedigree regulations generally provide for substantial criminal penalties, both corporate as well as personal, for failure to meet standards. But the real issue here is that companies failing to meet the regulations will face losing customer confidence and sales and experience lower stock valuations for shareholders.

Summary

The number of states requiring full pedigree documentation on all prescription drugs will continue to increase. The pedigree regulations are far-ranging and thorough, and when fully implemented, states and the country will be assured of having a safe and reliable supply chain for all prescription drugs.

Drug wholesalers are being called upon to conform to the regulations, and for the most part, the systems and information requirements will see the most attention during the initial stages of implementation. Wholesalers taking a broader view will find that the regulations will cause major changes in their distribution processes and procedures. There is no denying that the pedigree regulations on DC operations, shipping, and costs will be substantial. Understanding these impacts at the outset is a solid step towards ensuring compliance with all regulations, as well as developing initiatives to keep costs as low as possible.

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