The current pharmacy supply chain does not support a patient-centered model of care because drug distribution is fragmented. A system that integrates all distribution channels, incorporates patient health data, and facilitates communication among and clinical decision-making by health care providers is needed.

Drug shortages disrupt the pharmacy supply chain, leading to further fragmentation of care, price gouging, and trafficking in counterfeit and diverted drug products of questionable quality through gray-market distributors, which ultimately result in adverse patient outcomes and increased health care costs. Strategies, such as appropriate legislation tied to stiff penalties, are needed to deter these activities.

Stakeholders in the pharmacy supply chain should use a proactive approach and work through professional organizations and their congressional representatives to develop legislation designed to reduce the frequency and duration of drug shortages and the impact of shortages on patient care and outcomes.

Proper training of personnel and adherence to quality-control policies are needed to ensure product integrity and patient safety. Oversight of repackaging is also needed.

Introduction and background

A reliable pharmacy supply chain—the sequence of events beginning with obtaining the active pharmaceutical ingredient needed for a prescription medication; manufacturing the product; distributing it to hospitals, community pharmacies, outpatient clinics and offices, or other end users; and ending with administering the medication to patients—is vital to the U.S. health care system. Disruption of any part of this sequence can compromise patient safety, quality of care, and patient outcomes and increase costs. Fragmentation of supply-chain drug distribution (particularly the use of restricted drug distribution systems); risk evaluation and mitigation strategies (REMSs); gray-market activity; drug counterfeiting, diversion, and shortages; and recent health-system pharmacy practice changes threaten the delivery of quality health care.

Pharmacy supply-chain problems are likely to continue and worsen in the future unless coordinated efforts are taken to address these problems. On August 20, 2012, a group of stakeholders convened in Bethesda, Maryland, to discuss trends in the current pharmacy supply-chain model and pose critical questions and possible solutions to address challenges associated with the pharmacy supply chain. These stakeholders included health-system pharmacy administrators and representatives from various organizations of health care practitioners, wholesale drug distributors, pharmaceutical manufacturers, and others involved in the pharmacy supply chain ( appendix). This report summarizes the group discussion at this executive session. Possible solutions to critical threats to the pharmacy supply chain suggested during the discussion are listed in Table 1.

Table 1

Possible Solutions to Critical Threats to the Pharmacy Supply Chaina

Critical ThreatPossible Solutions
Fragmentation of drug distribution processes and use of restricted drug distribution systems
  • Design pharmacy supply-chain systems to support a patient-centered model of health care delivery (integrate all drug distribution channels, implement electronic medical record technologies that support data exchange with multiple provider functional profiles [e.g., pharmacist–pharmacy provider electronic health record]).

  • Integrate clinical decision-making and patient care into pharmacy supply-chain processes and improve reimbursement mechanisms for patient care.

  • Discuss needs for and concerns about restricted drug distribution systems with payers, pharmaceutical manufacturers, and FDA.

  • Educate health-system pharmacists and other stakeholders in the pharmacy supply chain about the relationship among payers, manufacturers, and FDA as they relate to the pharmacy supply chain.

Challenge of REMS requirements
  • Standardize communication (eligibility for receipt of drugs with restricted distribution, file format for reports).

  • Carve out acute care medications with REMSs and restricted distribution requirements to allow prompt access in emergent situations than cannot be predicted.

  • Compile and present convenient at-a-glance information about REMS requirements for various drugs and drug classes.

  • Explore the creation of a central repository for REMS information for various drugs.

  • Encourage health care practitioners, FDA, and manufacturers to improve the balance between managing risk and providing access to medications.

Gray-market activity, counterfeiting, and diversion of drugs
  • Resolve drug shortages.

  • Develop federal legislation and establish stiff penalties to discourage price gouging, counterfeiting, and diversion.

  • Encourage state boards of pharmacy to establish more-stringent requirements for licensing wholesale distributors.

  • Develop a national standard for tracking and tracing medications that includes pricing information to deter price gouging.

  • Design track-and-trace systems with a “one up, one back” capability for tracing drug products to the immediate prior and immediate subsequent users in the supply chain.

  • Support legislation to establish an effective drug identification and tracking system.

  • Invest in track-and-trace infrastructure and technology.

Drug shortages
  • Develop contractual arrangements between health systems and multiple suppliers of selected essential products to avoid relying on a sole source.

  • Encourage FDA to increase inspections of foreign pharmaceutical manufacturers and suppliers of active pharmaceutical ingredients.

  • Establish financial incentives to promote investment in modern pharmaceutical manufacturing facilities in the United States to reduce reliance on foreign sources and provide the capacity to increase production to meet unanticipated increases in demand.

  • Advocate for FDA authority over drug recalls and sharing of information on strategies for resolving problems associated with recalled drugs.

  • Support legislation to establish an abbreviated FDA approval process for drugs marketed prior to 1938 with well-established safety and efficacy.

  • Encourage greater manufacturer transparency and communication about the anticipated duration of shortages to allow practitioners to make plans to address the shortage.

  • Collaborate with FDA to develop guidelines for importing drugs in short supply.

  • Encourage FDA to compile and maintain a list of approved foreign sources of drugs in short supply in the United States.

  • Improve just-in-time and other inventory management practices.

  • Develop a fair, equitable, and transparent method for filling back orders once a drug shortage is resolved.

Health-system pharmacy practice changes
  • Provide proper training of personnel and ensure adherence to quality-control policies and procedures for compounding sterile products and repackaging bulk medication supplies in all settings.

  • Conduct research to generate sterile product stability data.

  • Educate personnel about how to comply with FDA and USP requirements for sterile compounding and repackaging of bulk supplies.

Critical ThreatPossible Solutions
Fragmentation of drug distribution processes and use of restricted drug distribution systems
  • Design pharmacy supply-chain systems to support a patient-centered model of health care delivery (integrate all drug distribution channels, implement electronic medical record technologies that support data exchange with multiple provider functional profiles [e.g., pharmacist–pharmacy provider electronic health record]).

  • Integrate clinical decision-making and patient care into pharmacy supply-chain processes and improve reimbursement mechanisms for patient care.

  • Discuss needs for and concerns about restricted drug distribution systems with payers, pharmaceutical manufacturers, and FDA.

  • Educate health-system pharmacists and other stakeholders in the pharmacy supply chain about the relationship among payers, manufacturers, and FDA as they relate to the pharmacy supply chain.

Challenge of REMS requirements
  • Standardize communication (eligibility for receipt of drugs with restricted distribution, file format for reports).

  • Carve out acute care medications with REMSs and restricted distribution requirements to allow prompt access in emergent situations than cannot be predicted.

  • Compile and present convenient at-a-glance information about REMS requirements for various drugs and drug classes.

  • Explore the creation of a central repository for REMS information for various drugs.

  • Encourage health care practitioners, FDA, and manufacturers to improve the balance between managing risk and providing access to medications.

Gray-market activity, counterfeiting, and diversion of drugs
  • Resolve drug shortages.

  • Develop federal legislation and establish stiff penalties to discourage price gouging, counterfeiting, and diversion.

  • Encourage state boards of pharmacy to establish more-stringent requirements for licensing wholesale distributors.

  • Develop a national standard for tracking and tracing medications that includes pricing information to deter price gouging.

  • Design track-and-trace systems with a “one up, one back” capability for tracing drug products to the immediate prior and immediate subsequent users in the supply chain.

  • Support legislation to establish an effective drug identification and tracking system.

  • Invest in track-and-trace infrastructure and technology.

Drug shortages
  • Develop contractual arrangements between health systems and multiple suppliers of selected essential products to avoid relying on a sole source.

  • Encourage FDA to increase inspections of foreign pharmaceutical manufacturers and suppliers of active pharmaceutical ingredients.

  • Establish financial incentives to promote investment in modern pharmaceutical manufacturing facilities in the United States to reduce reliance on foreign sources and provide the capacity to increase production to meet unanticipated increases in demand.

  • Advocate for FDA authority over drug recalls and sharing of information on strategies for resolving problems associated with recalled drugs.

  • Support legislation to establish an abbreviated FDA approval process for drugs marketed prior to 1938 with well-established safety and efficacy.

  • Encourage greater manufacturer transparency and communication about the anticipated duration of shortages to allow practitioners to make plans to address the shortage.

  • Collaborate with FDA to develop guidelines for importing drugs in short supply.

  • Encourage FDA to compile and maintain a list of approved foreign sources of drugs in short supply in the United States.

  • Improve just-in-time and other inventory management practices.

  • Develop a fair, equitable, and transparent method for filling back orders once a drug shortage is resolved.

Health-system pharmacy practice changes
  • Provide proper training of personnel and ensure adherence to quality-control policies and procedures for compounding sterile products and repackaging bulk medication supplies in all settings.

  • Conduct research to generate sterile product stability data.

  • Educate personnel about how to comply with FDA and USP requirements for sterile compounding and repackaging of bulk supplies.

a

FDA = Food and Drug Administration, REMS = risk evaluation and mitigation strategy, USP = United States Pharmacopeia.

Table 1

Possible Solutions to Critical Threats to the Pharmacy Supply Chaina

Critical ThreatPossible Solutions
Fragmentation of drug distribution processes and use of restricted drug distribution systems
  • Design pharmacy supply-chain systems to support a patient-centered model of health care delivery (integrate all drug distribution channels, implement electronic medical record technologies that support data exchange with multiple provider functional profiles [e.g., pharmacist–pharmacy provider electronic health record]).

  • Integrate clinical decision-making and patient care into pharmacy supply-chain processes and improve reimbursement mechanisms for patient care.

  • Discuss needs for and concerns about restricted drug distribution systems with payers, pharmaceutical manufacturers, and FDA.

  • Educate health-system pharmacists and other stakeholders in the pharmacy supply chain about the relationship among payers, manufacturers, and FDA as they relate to the pharmacy supply chain.

Challenge of REMS requirements
  • Standardize communication (eligibility for receipt of drugs with restricted distribution, file format for reports).

  • Carve out acute care medications with REMSs and restricted distribution requirements to allow prompt access in emergent situations than cannot be predicted.

  • Compile and present convenient at-a-glance information about REMS requirements for various drugs and drug classes.

  • Explore the creation of a central repository for REMS information for various drugs.

  • Encourage health care practitioners, FDA, and manufacturers to improve the balance between managing risk and providing access to medications.

Gray-market activity, counterfeiting, and diversion of drugs
  • Resolve drug shortages.

  • Develop federal legislation and establish stiff penalties to discourage price gouging, counterfeiting, and diversion.

  • Encourage state boards of pharmacy to establish more-stringent requirements for licensing wholesale distributors.

  • Develop a national standard for tracking and tracing medications that includes pricing information to deter price gouging.

  • Design track-and-trace systems with a “one up, one back” capability for tracing drug products to the immediate prior and immediate subsequent users in the supply chain.

  • Support legislation to establish an effective drug identification and tracking system.

  • Invest in track-and-trace infrastructure and technology.

Drug shortages
  • Develop contractual arrangements between health systems and multiple suppliers of selected essential products to avoid relying on a sole source.

  • Encourage FDA to increase inspections of foreign pharmaceutical manufacturers and suppliers of active pharmaceutical ingredients.

  • Establish financial incentives to promote investment in modern pharmaceutical manufacturing facilities in the United States to reduce reliance on foreign sources and provide the capacity to increase production to meet unanticipated increases in demand.

  • Advocate for FDA authority over drug recalls and sharing of information on strategies for resolving problems associated with recalled drugs.

  • Support legislation to establish an abbreviated FDA approval process for drugs marketed prior to 1938 with well-established safety and efficacy.

  • Encourage greater manufacturer transparency and communication about the anticipated duration of shortages to allow practitioners to make plans to address the shortage.

  • Collaborate with FDA to develop guidelines for importing drugs in short supply.

  • Encourage FDA to compile and maintain a list of approved foreign sources of drugs in short supply in the United States.

  • Improve just-in-time and other inventory management practices.

  • Develop a fair, equitable, and transparent method for filling back orders once a drug shortage is resolved.

Health-system pharmacy practice changes
  • Provide proper training of personnel and ensure adherence to quality-control policies and procedures for compounding sterile products and repackaging bulk medication supplies in all settings.

  • Conduct research to generate sterile product stability data.

  • Educate personnel about how to comply with FDA and USP requirements for sterile compounding and repackaging of bulk supplies.

Critical ThreatPossible Solutions
Fragmentation of drug distribution processes and use of restricted drug distribution systems
  • Design pharmacy supply-chain systems to support a patient-centered model of health care delivery (integrate all drug distribution channels, implement electronic medical record technologies that support data exchange with multiple provider functional profiles [e.g., pharmacist–pharmacy provider electronic health record]).

  • Integrate clinical decision-making and patient care into pharmacy supply-chain processes and improve reimbursement mechanisms for patient care.

  • Discuss needs for and concerns about restricted drug distribution systems with payers, pharmaceutical manufacturers, and FDA.

  • Educate health-system pharmacists and other stakeholders in the pharmacy supply chain about the relationship among payers, manufacturers, and FDA as they relate to the pharmacy supply chain.

Challenge of REMS requirements
  • Standardize communication (eligibility for receipt of drugs with restricted distribution, file format for reports).

  • Carve out acute care medications with REMSs and restricted distribution requirements to allow prompt access in emergent situations than cannot be predicted.

  • Compile and present convenient at-a-glance information about REMS requirements for various drugs and drug classes.

  • Explore the creation of a central repository for REMS information for various drugs.

  • Encourage health care practitioners, FDA, and manufacturers to improve the balance between managing risk and providing access to medications.

Gray-market activity, counterfeiting, and diversion of drugs
  • Resolve drug shortages.

  • Develop federal legislation and establish stiff penalties to discourage price gouging, counterfeiting, and diversion.

  • Encourage state boards of pharmacy to establish more-stringent requirements for licensing wholesale distributors.

  • Develop a national standard for tracking and tracing medications that includes pricing information to deter price gouging.

  • Design track-and-trace systems with a “one up, one back” capability for tracing drug products to the immediate prior and immediate subsequent users in the supply chain.

  • Support legislation to establish an effective drug identification and tracking system.

  • Invest in track-and-trace infrastructure and technology.

Drug shortages
  • Develop contractual arrangements between health systems and multiple suppliers of selected essential products to avoid relying on a sole source.

  • Encourage FDA to increase inspections of foreign pharmaceutical manufacturers and suppliers of active pharmaceutical ingredients.

  • Establish financial incentives to promote investment in modern pharmaceutical manufacturing facilities in the United States to reduce reliance on foreign sources and provide the capacity to increase production to meet unanticipated increases in demand.

  • Advocate for FDA authority over drug recalls and sharing of information on strategies for resolving problems associated with recalled drugs.

  • Support legislation to establish an abbreviated FDA approval process for drugs marketed prior to 1938 with well-established safety and efficacy.

  • Encourage greater manufacturer transparency and communication about the anticipated duration of shortages to allow practitioners to make plans to address the shortage.

  • Collaborate with FDA to develop guidelines for importing drugs in short supply.

  • Encourage FDA to compile and maintain a list of approved foreign sources of drugs in short supply in the United States.

  • Improve just-in-time and other inventory management practices.

  • Develop a fair, equitable, and transparent method for filling back orders once a drug shortage is resolved.

Health-system pharmacy practice changes
  • Provide proper training of personnel and ensure adherence to quality-control policies and procedures for compounding sterile products and repackaging bulk medication supplies in all settings.

  • Conduct research to generate sterile product stability data.

  • Educate personnel about how to comply with FDA and USP requirements for sterile compounding and repackaging of bulk supplies.

a

FDA = Food and Drug Administration, REMS = risk evaluation and mitigation strategy, USP = United States Pharmacopeia.

Implications of fragmentation

In the past, the pharmacy supply chain was relatively straightforward, which limited the opportunity for problems. Manufacturer-derived restricted drug distribution systems associated with REMSs, growth in the specialty pharmacy sector, the prevalence of mandatory mail-order pharmacy benefits, reimbursement policy changes, and other factors have led to increased fragmentation in the pharmacy supply chain, with multiple channels now available for the distribution of medications. The complexity of these multiple channels presents a challenge for health-system pharmacists and other health care professionals who seek to provide effective, safe, and cost-effective drug therapy to their patients.

Growth in the distribution of medications through restricted drug distribution systems has led to concerns about diminished access to medications, product integrity, continuity of patient care, institutional liability, and increased costs to patients and the health care system.1 The inability to access a product distributed through a restricted drug distribution system is a common problem for health care practitioners outside these distribution systems. Patient access to high-cost medications may be limited by some third-party payers who carve out a separate tier for these products and shift them from the medical benefit to the pharmacy benefit in their prescription plans.2 This shift may be an attempt to control costs of the medication for the payer but may also shift costs to the patient.

Health care practitioners in specialty pharmacies and other restricted drug distribution models may have limited access to patients’ medical histories and other patient-specific information. Communication among health care practitioners in inpatient settings and other health care settings may be minimal, which could adversely affect the continuity of care.3

Historically, specialty pharmacies have been used by payers and manufacturers to reduce the risks associated with drugs with a high risk, high cost, or limited patient population. More recently, payers have increasingly required the use of specialty pharmacies to dispense and monitor medications to a patient, a hospital pharmacy, a physician’s office, or an ambulatory care clinic for preparation and administration—a practice designed to reduce costs for the payer known as “white bagging.” Some manufacturers’ patient assistance programs require use of specialty pharmacies and white bagging or “brown bagging” (i.e., delivery of medications to the patient’s home). The patient subsequently brings the brown-bagged medication to an outpatient clinic or hospital for administration. Payers often promote brown bagging to ensure that patients have access to medications and to minimize costs to the payer. Product integrity, continuity of patient care, and institutional liability and costs are concerns with both practices.

Fragmentation of the pharmacy supply chain may make it difficult to meet Joint Commission requirements for medication reconciliation and to ensure continuity of care consistent with the patient-centered approach used in accountable care organizations.4,5

A key problem with restricted drug distribution systems is that they focus on specific drugs, not patients who receive multiple medications. Pharmacy supply-chain systems need to be designed to focus on patients, incorporate comprehensive patient health data, and accommodate all drug distribution channels (i.e., silos for community, hospital, mail-order, and home care pharmacies).

Clinical decision-making should also be incorporated into pharmacy supply-chain processes. Electronic health records are potentially powerful tools for analyzing clinical problems. Some institutions have devised their own systems for analyzing clinical data from the electronic health record, but standardized systems for managing such data in multiple institutions and treatment settings are needed to yield useful information about individuals seeking care from multiple practitioners in multiple settings.

Currently, pharmacy supply-chain processes and clinical decision-making are influenced by payers, manufacturers, and the Food and Drug Administration (FDA). Recent increases in white and brown bagging have been attributed to payer requirements and restrictions. Manufacturers have implemented restricted drug distribution systems to ensure the safety of medications without causing undue delay in the approval of potentially beneficial or lifesaving drug products.6 The use of restricted drug distribution systems provides benefits to manufacturers, including information useful for planning production volumes and control over product inventory and distribution. Manufacturers seek data for use in assessing patient adherence and outcomes, safety problems (i.e., as early-warning systems), and market share, and these data often are available through the use of restricted drug distribution systems. Health-system pharmacists and other stakeholders in the pharmacy supply chain need to be educated about the relationships among payers, manufacturers, and FDA as they relate to the pharmacy supply chain.

Management of REMSs

The requirements associated with REMSs can be onerous for health-system pharmacists, wholesale distributors, and others in the pharmacy supply chain, though FDA has acknowledged and sought to reduce this burden.7 For example, the number of drugs with REMS requirements, including those requiring elements to ensure safe use, was reduced, and a classwide REMS for the long-acting opioids was instituted. The large number of drug products with a REMS and the variable nature of REMS requirements for different drugs and drug classes (e.g., medication guide, patient package inserts, communication plans, restricted drug distribution systems) make it challenging for health-system pharmacists and care providers to stay abreast of and comply with REMS requirements.8 The delay between meeting REMS requirements and obtaining the drug itself through restricted drug distribution systems can pose a problem in acute care settings, where the need for the product is emergent and difficult to predict. Some clinicians may choose alternative therapies or not use an appropriate drug to circumvent the need to comply with REMS requirements. Such actions can adversely affect patient outcomes because of lower efficacy rates or errors due to a lack of clinician familiarity with the alternative product. The perception among clinicians of the degree of risk associated with the use of a product with a REMS may be exaggerated.

Systems to ensure safe medication use have been established in hospitals, and REMS requirements are not necessarily consistent with these safety systems. Integrating the unique requirements of the REMS for each drug and drug class into these safety systems can be challenging.

To reduce the burden of REMSs for health-system pharmacists and wholesale distributors, communication needs to be standardized to the extent possible. REMSs originate from manufacturers, and incentive is lacking for manufacturers to standardize their procedures and paperwork (e.g., report format) if they have only a few products with REMSs.

Acute care medications with REMSs and restricted distribution requirements should be carved out (i.e., an exception should be made) to allow for prompt access to the medication in emergent situations that cannot be anticipated. Safety concerns need to be weighed against the need for prompt access to these drug products.

The creation of a database with information about REMS requirements for various drugs that is analogous to the ASHP Drug Shortages Resource Center (www.ashp.org/shortages) would be helpful.

Health care practitioners and FDA need to improve the balance between managing medication-related risks and providing access to medications. Input is needed from manufacturers. A global perspective is needed in weighing the needs to manage such risks and provide access to medications. The European Union sometimes is at the forefront in addressing such issues, and stakeholders in the U.S. pharmacy supply chain might be wise to monitor actions by the European Union to address the need to improve the management of medication-related risks.

Gray-market activity, counterfeiting, and diversion

Drug shortages have increased markedly over the past decade in the United States, leading to the emergence of a gray market in which drugs that are in short supply are obtained and aggressively marketed to hospitals and health systems, usually at inflated prices.9,10 Resolving the problems that lead to drug shortages to the extent possible is the best way to stem gray-market activity because it removes financial incentives.

Some gray-market distributors claim to fill an unmet need, but many of these distributors operate in large metropolitan areas that are well served by reputable, licensed wholesale distributors. Most areas of the United States are served by reputable, licensed wholesale distributors that facilitate the provision of services in broad geographic areas extending across state lines.

Price gouging reflects high societal demand for a limited supply of drugs or other commodities. In a July 25, 2012, hearing, West Virginia Senator Jay Rockefeller reported the results of a price-gouging investigation, revealing that nearly 70% of drugs enter the gray market through pharmacies.11 Many of these pharmacies are “shells” established solely for the purpose of profiting from buying and selling to intermediaries other than physicians and patients. State boards of pharmacy regulate pharmacy licenses, but some lack the resources needed to conduct site visits to inspect and detect unethical pharmacy operations.

Limiting the number of times a drug product can be resold is a potential solution to gray-market profiteering. However, there may be legitimate reasons for reselling medications (e.g., unanticipated overstock situations).

The opportunity for large profits has increased the likelihood that counterfeit and diverted drug products of questionable quality will enter the pharmacy supply chain. Counterfeit drugs are defined as drugs sold under a product name without proper authorization, where the identity of the source of the drug is knowingly and intentionally mislabeled in a way that suggests that it is the authentic FDA-approved product.12 Diverted medications (e.g., those obtained through cargo or warehouse theft) may be stored under improper conditions before they reenter the pharmacy supply chain, raising concerns about product integrity.13,14

Federal legislation with stiff penalties for price gouging, counterfeiting, and diversion is needed to deter these activities. Some states have passed legislation to prevent price gouging for drugs in short supply, but other states have no such laws. Bipartisan legislation to establish stiff penalties for trafficking in counterfeit drugs was passed in the House of Representatives in 2012 but was never passed by the Senate.15,16

Wholesale drug distributors are licensed by the states (usually the state board of pharmacy or the department of health), and the requirements for licensing vary among states. Criminals seeking to enter the gray market migrate to states with minimal licensing requirements, where entry into the market is easy. The Safeguarding America’s Pharmaceuticals Act of 2011, legislation pending in the U.S. House of Representatives, expands requirements for the licensing of wholesale distributors to include mandatory background checks.17 States with minimal requirements for the licensure of wholesale distributors should be encouraged to adopt more-stringent requirements. Model standards for licensing wholesale distributors would be helpful. Accreditation of pharmaceutical wholesale distribution facilities is available through the National Association of Boards of Pharmacy at www.nabp.net/programs/accreditation/vawd. Site visits by representatives from the state board of pharmacy also might deter or detect fraudulent wholesale distribution activities.

To prevent the introduction of counterfeit or diverted drug products into the pharmacy supply chain, the Prescription Drug Marketing Act (PDMA) of 1987 contained a pedigree provision, requiring a statement of origin that identifies each prior sale, purchase, or trade of a drug, including the dates of those transactions and the names and addresses of all parties involved.18 Implementation of the PDMA pedigree requirement has been postponed for more than two decades because of challenges from secondary wholesalers and delays in the development of electronic track-and-trace technology (e.g., radio frequency identification chips) that could be used for an electronic pedigree.10,18 The state of California recently passed legislation requiring an electronic pedigree beginning in 2015.19 Information on each transaction resulting in a change of ownership of a prescription 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 drug, will be required. Designing a system to provide interoperability and feedback (i.e., traceability) throughout the supply chain will be a challenge. Public comment has been solicited, and plans for implementation are being developed.

A national standard is needed for tracking and tracing medications using an electronic pedigree. The use of a single standard pedigree with pricing information for drug products could reduce price gouging by revealing excessive pricing changes in the supply chain. Possible elements of track-and-trace systems include what is referred to in a food-safety model as “one up, one back” capability, tracing products to the immediate prior and immediate subsequent users in the supply chain. Developing and implementing a national standard are difficult because of substantial systematic and financial requirements. Legislation has been introduced to establish an effective drug identification and tracking system to authenticate the wholesale distribution history of prescription drugs.17 This Safeguarding America’s Pharmaceuticals Act of 2011 establishes civil monetary penalties for violations (e.g., counterfeiting, diversion) and calls for inclusion of a National Drug Code number, container size, and lot number for the drug in the packing list or other documents. Serialization—use of a unique identifying number—for each container in a lot and each unit when the contents of a container are subdivided and repackaged, as is required by California legislation, would be preferable to some but not all stakeholders in the supply chain.20 The Pharmaceutical Distribution Security Alliance, a lobbying group, and GS1, an international association dedicated to improving supply-chain management, are among the groups working toward consensus on a global system for establishing identifying numbers and track-and-trace systems for medications.21,22

Establishing pedigree and track-and-trace requirements does not necessarily ensure proper storage and product integrity throughout the pharmacy supply chain. Failure to ensure proper storage of drug products can negate the benefits of track-and-trace systems by compromising product quality. Track-and-trace technology that provides for storage-temperature monitoring as well as tracking and tracing (e.g., radio frequency identification chip) would be ideal, but this technology is not yet available.

Investment in infrastructure and technology for cold storage as well as track-and-trace technology may be needed by all participants in the pharmacy supply chain to ensure that product quality is not compromised. The return on investment in cold storage may not justify the investment in small facilities, and alternative distribution models (e.g., direct drop shipments) may be more economical for certain products.

Drug shortages

Drug shortages can adversely affect patient outcomes and increase health care costs.23 Shortages may be the result of a limited supply or the poor quality of raw materials needed for manufacturing, manufacturing problems, regulatory or legislative issues, business or market factors, unanticipated increases in demand, natural disasters, or inventory control practices. Increases in the number of suppliers of pharmaceutical products and the active pharmaceutical ingredients used in their manufacture are needed to reduce reliance on sole sources and avert shortages. Health-system pharmacists may want to consider developing contractual arrangements with multiple suppliers of selected essential products to avoid relying on a sole source.

Globalization of the economy, pharmaceutical industry, and pharmacy supply chain has increased reliance on foreign sources of pharmaceuticals and raw materials with questionable quality.24 The number of foreign drug inspections by FDA has increased, but the percentage of foreign establishments inspected is substantially lower than the percentage of domestic establishments inspected.24 Language differences can pose a barrier to inspection of foreign manufacturers by FDA officials. A provision for FDA to expedite inspections to mitigate or prevent shortages was included in legislation that was signed into law in July 2012.25

Most drug shortages reported to FDA in 2010 involved injectable products.26 Nearly half of the injectable drug shortages that year were caused by manufacturing quality problems.26 Injectable and other sterile products are particularly vulnerable to shortages because the manufacturing process is complex, a long lead-time is needed to begin production, the number of manufacturers producing the product usually is limited, and the amounts manufactured typically are restricted to what meets current demand, with no excess production to accommodate an unanticipated increase in demand.27 Most manufacturers run production lines at full capacity and are unable to increase production to meet increases in demand.26

Some drug shortages are attributed to production interruptions because of the use of antiquated manufacturing equipment and failure to fully comply with current good manufacturing practices.26,28 An investment in modern manufacturing facilities is needed in the United States to increase the reliability of the U.S. drug supply and reduce reliance on foreign suppliers.

Product recalls are common causes of drug shortages, and the number of drug recalls increased sharply in 2009.29 Recalls are voluntary because FDA lacks the authority to require recalls. Recalls typically are the result of minor problems in the manufacture of a single-source product.23 Practitioners often have difficulty obtaining information about recalls and resolving problems associated with shortages of recalled drugs (e.g., the use of filters to remove particulates that prompted the recall of an injectable product). Health-system pharmacists should advocate for FDA authority over drug recalls and the sharing of information on strategies for resolving problems associated with recalled drugs.

Generic injectable products have been disproportionately affected by shortages due to poor quality and other manufacturing issues (among other problems), though shortages due to manufacturing problems are not limited to generic products and can involve brand-name products.9,30 The incentives to avoid or resolve shortages differ for generic drug manufacturers and brand-name-drug manufacturers, because every day of lost production for the latter represents one less day of patent protection.

Some shortages of generic injectable drugs involve drugs marketed before 1938 (e.g., electrolytes used for parenteral nutrition). The low profit margin and high cost and complexity of conducting the clinical research needed to submit a new drug application for some products are disincentives for entering or remaining in the market.26 Legislation is needed to establish an abbreviated FDA approval process for drugs marketed before 1938 with well-established safety and efficacy.26

Review by FDA of abbreviated new drug applications and supplemental applications is needed when a change in the manufacturer, manufacturing site, or source for active pharmaceutical ingredients is made for FDA-approved products.26 This review process is lengthy, which deters entry of generic manufacturers into the market. It also makes it difficult for manufacturers to plan production schedules, contributing to drug shortages.26 A provision for FDA to expedite the review of certain applications to mitigate or prevent shortages was included in recently approved legislation.25

A lack of advanced warning from the manufacturer or FDA for practitioners about an impending drug shortage is among the most common complaints of health care practitioners.31 Lack of communication from manufacturers about the cause of the shortages and a realistic estimate of the duration of the shortage is another common complaint.31 Manufacturers occasionally provide unreliable information about the anticipated duration of the shortage or information based on a best-case scenario, though anticipating a worst-case scenario might be more helpful for planning purposes. Complete transparency about the anticipated duration of the shortage may not be realistic, since most pharmaceutical manufacturers are publicly held corporations, and releasing information about shortages could adversely affect stock prices. Nevertheless, greater manufacturer transparency about the anticipated duration of the shortage is needed to allow practitioners to make plans to address the shortage (e.g., seeking alternative sources if the duration will be short, modifying the institutional formulary and treatment algorithms to substitute an alternative therapy if the duration will be long).

The FDA Safety and Innovation Act (FDASIA) of 2012, legislation that enhances the agency’s authority to help prevent drug shortages, was signed into law on July 9, 2012.25 Before the passage of this legislation, FDA required notification by sole-source manufacturers of the discontinuation of certain drugs used to treat serious conditions. Notification by manufacturers of potential shortages of other products was voluntary. The new law requires all manufacturers to notify FDA of potential temporary or permanent discontinuation of all drug products, including biological products. Implementation of FDASIA should improve communication between manufacturers and FDA about potential shortages, though the methods by which this communication will occur are yet to be determined.

To address shortages of generic injectable medications, the Generic Pharmaceutical Association has proposed the Accelerated Recovery Initiative, with voluntary communication between an independent third party and stakeholders involved in the manufacturing and distribution of medications in short supply.32 Real-time supply and distribution information would be provided to stakeholders, including manufacturers, wholesale distributors, group purchasing organizations, and FDA. Pricing information would not be included. The Federal Trade Commission approved the Accelerated Recovery Initiative in September 2012.33

To address drug shortages of certain products, FDA temporarily has, in certain circumstances, allowed the importation of unapproved drug products into the United States.9 Importation is permitted only after evaluating the quality of the foreign manufacturer (e.g., manufacturing conditions) and product (i.e., ingredients and labeling) and establishing a U.S. distributor and strict controls over distribution.27,28 Health-system pharmacists and other stakeholders in the pharmacy supply chain need to collaborate with FDA to develop guidelines for importing drugs in short supply. When FDA announces a drug shortage in the United States, it would be helpful if the agency also provided a list of approved foreign sources that have available product.

The “just-in-time” approach to inventory management commonly used by manufacturers, distributors, and pharmacies minimizes the cost of inventory and maximizes cash flow but may not leave a “buffer” of additional products when a shortage occurs.23 Some manufacturers and distributors minimize inventories at certain times of year (e.g., end of the quarter or year) to meet quotas.23 Careful inventory management is needed to avoid drug shortages.

Increasing the stock of drugs that recently were in short supply is not necessarily considered hoarding. Fluctuations in drug use and demand in an institution can result in an unanticipated surplus. In theory, sharing excess supplies with other health care facilities could mitigate shortages, but it would break the chain of custody (i.e., interfere with the ability to track and trace the product). A provision of FDASIA permits hospitals to repackage drugs in short supply for use in hospitals within the same hospital system in response to the shortage without the onerous burden of registering with FDA as a manufacturer.25

Drug Enforcement Administration (DEA) quota requirements have contributed to shortages of controlled substances by delaying or prohibiting manufacturers from obtaining active pharmaceutical ingredients to increase the production of a substitute product when another manufacturer experiences a shortage or production issue.26 An increased quota could be requested by manufacturers at any time to address a shortage, but the process was cumbersome and time-consuming and could prolong the shortage.9 A provision of FDASIA allows FDA to notify DEA of a controlled substance shortage and request an increase in the quota to alleviate the shortage.25 This provision includes a 30-day deadline for responding to such requests.34

Delays sometimes arise between the time FDA announces that a drug shortage has resolved and when the product becomes available to practitioners. To avoid the problem, ASHP continues to list drugs in short supply in its Drug Shortages Resource Center even after FDA announces resolution of the shortage. Whether hoarding contributes to shortages that persist after the resolution of conditions that caused the shortage is unknown. Concerns have been raised about the need for a fair and equitable method for filling back orders by wholesale distributors once a drug shortage resolves. Delays in obtaining drugs can disrupt the continuity of patient care by causing patients to postpone treatment or seek care outside the health system, accountable care organization, or other setting where comprehensive patient-centered care is provided. Delaying access to noninvestigational drugs in short supply can disrupt clinical trials.

A proactive approach by FDA and other stakeholders in the pharmacy supply chain is needed to prevent or minimize the impact of drug shortages. Long-term strategies should be developed to prevent the recurrence of shortages rather than provide a one-time solution. Such strategies are likely to be costly. Financial incentives should be established to promote investment in long-term solutions to the drug shortages problem. Such strategies might address the need to increase manufacturer production capacity when demand rises unexpectedly.

ASHP has played an instrumental role in shaping legislation to address drug shortages and will continue to monitor and provide input into pending legislation related to drug shortages and the pharmacy supply chain. Occasional temporary drug shortages are inevitable, but ASHP hopes to minimize the duration and impact on patient care of shortages. The number of drug shortages reported to ASHP in 2012 (as of August 20, the date of the executive session of pharmacy supply-chain stakeholders) is fewer than at the same time in calendar year 2011 due in part to increased notification of FDA by manufacturers anticipating product discontinuations. The passage of FDASIA is expected to further reduce drug shortages in the United States. Health-system pharmacists should work through ASHP and their congressional representatives on other measures designed to reduce drug shortages (e.g., increasing FDA inspections of foreign pharmaceutical manufacturers and suppliers of active pharmaceutical ingredients).

Health-system pharmacy practice changes

Outsourcing of sterile compounding services by health systems has increased in recent years, partly because of the technical challenges and high cost of complying with United States Pharmacopeia (USP) chapter 797 requirements, though the availability of robotic technology for sterile compounding in health systems has offset these increases.35,37 Concerns about quality-control issues were realized in October 2012 when a national fungal meningitis outbreak occurred as a result of patients receiving contaminated preservative-free methylprednisolone acetate injections prepared by the New England Compounding Center.38 In light of the outbreak, pharmacy leaders should review their policies for outsourcing as well as internal production of compounded drugs.

The use of barcode-assisted medication administration (BCMA) systems to minimize dispensing and administration errors has increased in U.S. hospitals, prompting some pharmacy departments to contract with vendors to repackage bulk supplies of medications in unit-dose packages with barcoded labels.39 This outsourcing of repackaging has increased along with increases in the use of BCMA systems.35,36 In the past, wholesale distributors provided primarily warehousing and inventory management services, but over the past three decades the services provided by wholesale distributors have evolved to include drug repackaging and other specialty services.40 Errors in the repackaging and labeling of medications and failure to ensure proper environmental conditions and security during repackaging and delivery by vendors with inadequate quality-control procedures could compromise product integrity and patient safety.

Proper training and compliance of personnel in quality-control policies and procedures for compounding sterile products and repackaging bulk medications throughout the pharmacy supply chain are essential to ensure patient safety.41 Health-system pharmacists and others in the pharmacy supply chain involved in sterile compounding and repackaging of bulk supplies should be educated about FDA and USP requirements for these services.

Conclusion

A variety of critical threats to the pharmacy supply chain could compromise patient care and outcomes. Possible solutions involve pharmaceutical manufacturers, FDA, lawmakers, payers, wholesale distributors, pharmacy practitioners, and others in the pharmacy supply chain. Collaboration among all stakeholders involved in the pharmacy supply chain is needed to ensure a reliable pharmacy supply chain and protect public safety.

Appendix—Critical threats to the pharmaceutical supply chain: Executive session participants

Paul W. Abramowitz, Pharm.D., Sc.D. (Hon), FASHP

Chief Executive Officer

American Society of Health-System Pharmacists

Paula Bass

Senior Manager, Pharmacy Affairs

Amgen

David Chen, B.S.Pharm., M.B.A.

Director, Pharmacy Practice Sections and Section of Pharmacy Practice Managers

American Society of Health-System Pharmacists

Robert DeChristoforo, M.S., FASHP

Chief Pharmacist

National Institutes of Health Clinical Center Pharmacy

Ruth DeLuca

Manager, Science and Regulatory Affairs

Biotechnology Industry Organization

Marjorie D. DePuy, M.B.A.

Senior Director, Industry Relations and Alliance Development

Healthcare Distribution Management Association

Anita T. Ducca

Vice President, Regulatory Affairs

Healthcare Distribution Management Association

Ben A. Firschein, J.D., LL.M.

Director, Government Affairs and Policy

United States Pharmacopeial Convention

Peggi Guenter

Senior Director

American Society for Parenteral and Enteral Nutrition

Ron Hartmann, Pharm.D.

Senior Vice President, Pharmacy

MedAssets

Catherine N. Klein, B.S.Pharm.

Director, Education Development and Outcomes

American Society of Health-System Pharmacists

Scott Knoer, M.S., Pharm.D., FASHP

Chief Pharmacy Officer

Cleveland Clinic

John J. Lewin III, Pharm.D., M.B.A.

Johns Hopkins Medical Institutions

Society of Critical Care Medicine

Jay M. Mirtallo, M.S., BCNSP, FASHP

Immediate Past President

American Society for Parenteral and Enteral Nutrition

Lisa Pearlstein, J.D.

Pain Medicine and Regulatory Lobbyist

American Society of Anesthesiologists

Cynthia Reilly, B.S., Pharm.

Director, Practice Development Division

American Society of Health-System Pharmacists

Jeffrey M. Rosner, B.S.Pharm.

Senior Director, Pharmacy Sourcing and Purchasing

Cleveland Clinic

Wayne L. Russell, B.S.P., Pharm.D.

Senior Director

Premier, Inc.

Bruce Scott, B.S.Pharm., M.S.

Facilitator and Independent Consultant

Lisa Schwartz, Pharm.D.

Director, Management Affairs

National Community Pharmacists Association

Rowena Schwartz, Pharm.D., BCPS

Health Policy Committee, Drug Shortage Workgroup Leader

Hematology/Oncology Pharmacy Association

Matthew Van Hook, J.D.

Vice President and Assistant General Counsel

United States Pharmacopeial Convention

John VanEeckhout, Pharm.D.

Vice President, Clinical Services

Children’s Hospital Association

David R. Witmer, Pharm.D.

Senior Vice President and Chief Operating Officer

American Society of Health-System Pharmacists

Footnotes

Disclaimer: This document reflects a discussion of issues in the pharmacy supply chain, and the suggested actions or views expressed in this document in no way represent the official policies or positions of the organizations represented by participants in this discussion. No representations are made as to the accuracy, completeness, correctness, suitability, or validity of any information contained in this document, and the organizations represented by participants in the discussion of issues contained within this document will not be liable for any errors or omissions in connection with any information contained in this document, nor any losses, injuries, or damages arising from its display or use.

Based on an executive session that was sponsored by Amgen.

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Author notes

Bethesda, Maryland

August 20, 2012

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