Enforcement Litigation and

Compliance

Washington, DC

December 9-10, 2015

DQSA Track and Trace Initiatives and Enforcement

Kathleen Dooley, Partner, McGuireWoods LLP

Jacqueline Berman, Associate, Morgan, Lewis & Bockius LLP

Anne Marie Polak, Senior Director, Leavitt Partners, LLC

Moderated by Carolina Wirth, Counsel, Kilpatrick Townsend & Stockton LLP

DQSA track and trace initiatives and enforcement

Kathleen Dooley, Partner, McGuireWoods LLPJacqueline Berman, Associate, Morgan, Lewis & Bockius LLP

Anne Marie Polak, Senior Director, Leavitt Partners, LLCModerated by Carolina Wirth, Counsel, Kilpatrick Townsend & Stockton LLP

Drug Supply Chain Security Act: Historical ContextKathleen Dooley, Partner, McGuireWoods LLP

Drug Supply Chain Security Act of 2013

• Title II of the Drug Quality Security Act• Outlines critical, time-staged steps to build an

electronic interoperable system to identify and trace prescription drugs as they are distributed throughout the United States.

• Within 10 years of enactment, system will facilitate the exchange of information at the individual package level about where a drug has been in the supply chain.

Drug Supply Chain Security Act of 2013

• The New System will:– Enable verification of the legitimacy of the

drug product identifier down to the package level.

– Enhance detection and notification of illegitimate products in the supply chain.

– Facilitate more efficient recalls of drug products.

What Led to Enactment?

• Pharmaceutical Diversion– Abuse of distribution system – pharmaceutical

products intended for specific markets were diverted, i.e., sold to alternative, unauthorized markets in violation of the parties’ stated intent through unauthorized channels.

– Secondary markets facilitated movement of counterfeit products.

– No traceability.

Effect of Diversion

• Single biggest factor contributing to counterfeit drugs in the supply chain – see FDA Counterfeit Drug Task Force Report 2/9/06

• “Corrupt” distributors in the supply chain are responsible for supplying counterfeit drugs to retail pharmacies – Roberts Brice, Ann – Life Science Leader – March 2009 – Quoting Katherine Eban, author of “Dangerous Doses”

• http://www.lifescienceleader.com/index.php?option=com_jambozine&layout=article&view=page&aid=3790&Itemid=68

Pharmaceutical Manufacturers

Primary Wholesalers

Pharmacies

Destruction SitesForeign Countries

Diverters

Internet

Pharmacies

Counterfeiters

Importers

Repackagers

All Consumers

Green = Legitimate Yellow = Stolen/Diverted/Counterfeit Red = Counterfeit

Discounted Groups

Secondary

Wholesalers/Repackag

ers

Stol

en/U

-Boa

t/D

onati

ons

Exporter

Expire

d/Short-

dated

Counterfeit Drugs

• Counterfeit pharmaceuticals are a current danger to the community

• Prior to the DSCSA, a web of state laws impacted the tracking mechanisms in place

• The DSCSA creates continuity and closes a loophole in black market pharmaceuticals

• Both the FDA and federal authorities have tried to address counterfeit drug distribution

Online Pharmacies

• Numerous unregulated online pharmacies offer for sale substances alleged to be FDA-regulated pharmaceuticals – The sources of the substances are not known– The chemical composition of these substances is not

certain– The FDA has taken the lead in identifying these

distributors

• VIPPS online pharmacies: http://www.nabp.net/programs/accreditation/vipps/find-a-vipps-online-pharmacy

Online Pharmacies: FDA Warning Letters

• Since 2013, the FDA has issued 10 warning letters to online entities selling substances alleged to be pharmaceuticals but are in fact counterfeits

• The FDA, to date, has not issued a close out letter for any of these online pharmacies

Online Pharmacies: Common Warning Letter Themes

• The FDA warning letters had common themes:– The substances were not named the proper

generic name– The substances did not contain black box

warnings– The substances did not have an approved

distribution or tracking mechanism– Some substances were not approved in the

US

Counterfeit Drug Case Study- Avastin

Black Market Distribution

• Federal authorities have identified black markets in the last several years that were distributing drugs outside regulated channels

• These involved the distribution of legitimate drugs acquired from indigent patients who would receive pennies on the dollar for their monthly medications

Black Market Distribution: Department of Justice (DOJ)

In 2013, the DOJ indicted three people for conspiring to obtain prescription pharmaceuticals from “street collectors” in New York and Miami, and to selling those prescription drugs to independent pharmacies as though they were obtained from legitimate wholesale distribution companies

Mechanics of the Distribution• Street diversion: Diverters repurchased medications that have been

dispensed to patients, removed the patient labels, and reintroduced them into the wholesale market

• The defendants repackaged and distributed the drugs to independent pharmacies alleging that the diverted drugs were obtained from a licensed wholesale distributor

• The defendants directed their employees to remove the packaging to conceal the source and to create false pedigrees and false entries– They used lighter fluid to remove patient labels and replaced damaged

manufacturer labels with counterfeits prior to selling the drugs to licensed distributors

• The defendants audaciously submitted to a federal grand jury 21 false pedigree documents stating that the drugs were acquired legitimately

Drug Supply Chain Security Act: Requirements,

Questions, and Consequences

Jacqueline Berman, Associate, Morgan, Lewis & Bockius LLP

DSCSA: Basic Requirements

• Transfer of transaction history, transaction information, and transaction statement

• Product identifiers• Business only with authorized trading

partners• Returns• Suspect and illegitimate product

quarantine, investigation, and notifications

DSCSA: Applicability• Application-Manufacturers, repackagers, distributors, dispensers• Exemptions (by example)

– Over-the-counter products– Intracompany distributions– Emergency medical situations– Samples– Minimal quantities by a licensed retail pharmacy to practitioner for in-

office use– Pharmacy/wholesale distributor mergers/acquisitions– Certain combination products not subject to 505 approval or licensure

• Questions Raised– Who is covered?-Contract manufactures?

DSCSA: Transaction Documents

• Must be provided to and received from trading partners– Transaction History– Transaction Information– Transaction Statement-statement that the entity transferring ownership is authorized;

received the product from a person that is authorized; received transaction information and a transaction statement from the prior owner; did not knowingly ship a suspect or illegitimate product; had systems and processes in place to comply with verification requirements; did not knowingly provide false transaction information; and did not knowingly alter the transaction history

• Questions Raised– What does it mean to act knowingly?—actual knowledge, imputed

knowledge?– What are the consequences of a false certification?

• FDA prohibited act to fail to comply with Section 582• Other potential liability-e.g., False Claims Act

DSCSA: Product Identifier

• Standardized graphic that includes, in both human-readable form and on a machine-readable internationally recognized data carrier, the standardized numerical identifier, lot number, and expiration date of the product

• Must be affixed to each package and homogenous case• May not engage in transactions concerning a specific

product unless product is encoded with a product identifier

• Questions Raised– How to develop technology that will keep up with technological

advancements during the product shelf life and that will stay ahead of potential illegitimate streams of commerce?

DSCSA: Authorized Trading Partners

• Must verify that trading partners are authorized trading partners– Manufacturers/repackagers must be registered with FDA– Wholesale distributors/3PLs must have a valid state or federal

issued license and must comply with reporting requirements– Dispensers must have valid state license

• Questions Raised– What diligence efforts are trading partners required to undertake?

• Contractual representations• Copies of registrations/licensure and required reports• Verification on public databases• Certified verification by the registration/licensing authority• How often must authorization be verified?

DSCSA: Suspect/Illegitimate Products• Quarantine• Conduct investigation in coordination with trading partners• FDA notification of cleared suspect products• Disposition of illegitimate products• FDA and trading partner illegitimate product notification• Request to FDA to terminate an illegitimate product notification• Questions Raised

– What steps need to be taken to detect suspect/illegitimate products?– What steps must be taken to investigate a suspect/illegitimate product?– How much evidence indicates illegitimacy?– If a product is an illegitimate product, who is primarily responsible for the

disposition/what kind of assistance must be provided to trading partners? – How is illegitimate product that is not in the hands of a trading partner

dispositioned?– How are patients/doctors notified of any potential risks?– What are the consequences of there being a high risk of illegitimacy?

DSCSA: Returns

• Manufacturer-Must verify product identifier before further distributing a returned product

• Wholesale Distributors-May accept returned product from dispenser or repackager only if can associate the product with the transaction information and statement; must verify product identifier before further distributing a returned product

• Repackagers-Must verify product identifier before further distributing a returned product

DSCSA: FDA GuidanceFrom FDA Website:

http://www.fda.gov/Drugs/DrugSafety/DrugIntegrityandSupplyChainSecurity/DrugSupplyChainSecurityAct/ucm424963.htm

Trading Partner Timeframe(based upon Nov. 27, 2013 enactment)

Manufacturers Distributors Dispensers Repackagers

Transaction Docs May 1, 2015 May 1, 2015 Jul. 1, 2015(Mar. 1, 2016 for receipt)

May 1, 2015

Electronic Transaction Docs Nov. 27, 2017 See Interoperable Tracing

See Interoperable Tracing

See Interoperable Tracing

Product Identifier Nov. 27, 2017 Nov. 27, 2019 Nov. 27, 2020 Nov. 27, 2018

Authorized Trading Partner Jan. 1, 2015 Jan. 1, 2015 Jan. 1, 2015 Jan. 1, 2015

Suspect/Illegitimate Product Jan 1. 2015(package level verification Nov. 27, 2017)

Jan. 1, 2015 (package level verification Nov. 27, 2019)

Jan. 1, 2015 (lot/package level verification Nov. 27, 2020)

Jan. 1, 2015 (package level verification Nov. 27, 2018)

Requests for Verification Nov. 27, 2017 NA NA Nov. 27, 2018

Returned Product Nov. 27, 2017 Enhanced requirements Nov. 27, 2019

NA Nov. 27, 2018

Interoperable Electronic Tracing at Package Level

Nov. 27, 2023 Nov. 27, 2023 Nov. 27, 2023 Nov. 27, 2023

DSCSA: Potential Broad Impact

• New contractual provisions• New commercial relationships for

outsourced functions• Consequences of false certifications• New systems/policies and procedures• Cost shifting• Allocation of responsibility for remedial

actions

Drug Supply Chain Security Act: Implementation

Anne Marie Polak, Senior Director, Leavitt Partners, LLC

Industry Compliance with DSCSA

Manufacturers, repackagers and

wholesale distributors

Jan. 1, 2015: authorized trading

partner (ATP) and verification of

suspect and illegitimate

products in effect

Enforcement discretion until

May 1, 2015 for product tracing

requirements (exchange of

TI/TH/TS)

Dispensers

July 1, 2015: ATP and

verification of suspect and

illegitimate products in effect

Enforcement discretion until

March 1, 2016 for product

tracing requirements

Forums for Collaboration

FDA

• Meetings with supply chain

participants and trade associations

• At least 5 public workshops, (e.g.,

May 2014 Standards for the

Interoperable Exchange of

Information)

Industry Conferences

(HDMA, Rx360)

Pharmaceutical Distribution

Security Alliance (PDSA)

• Industry Coalition that

responds to FDA

guidances and

proposes responses to

DSCSA “open

questions”

Open QuestionsDefinitions

Identifying Suspect and Illegitimate Products

Preemption

Grandfathering, Exceptions, Exemptions and Waivers

Licensing

Phase II Interoperability Requirement

Rx360 Whitepaper PDSA Migration Work Group Pilots (FDA, HDMA, Other)

Questions?