As we enter 2015, all signs point to an enhanced looking glass across pharmaceutical and drug industry supply chains. The most prominent issues fueling industry supply chain scrutiny right now are media-driven headlines focused on price inflation related to the increasing cost of generic drugs. However, other issues related to electronic tracking and tracing of drug items will also come to light.
In the latter part of 2014, business and social media headlines buzzed with stories related to the exploding costs of generic drugs, which were supposed to be the more cost-affordable alternative to branded, proprietary drugs. Governmental driven health initiates such as the Affordable Health Care Act were legislated to control the spiraling cost of drugs and healthcare.
Price inflation among generic drugs was not a new phenomenon in 2014. This author reviewed a BloombergBusinessWeek article published in December 2013 that had already outlined the problem with certain drug prices skyrocketing overnight even then. That article cited one industry observer as indicating that prices for more than a dozen generics had sourced ten-fold in 2013, and included generic drugs for treating breast cancer, heart and other diseases. A likely culprit reported by Bloomberg was a frenzy of merger and acquisition activities that led to three companies controlling 44 percent of global generics revenues. That was in 2013, and the trend continued throughout 2014.
The largest processor of prescriptions in the United States is Express Scripts Holdings. Last week, this provider published an advisory: The Reality Behind Generic Drug Inflation. The advisory indicates that: “… since 2008, the average price of brand drugs has almost doubled while the average price of generic drugs has been cut roughly in half.”
It further states: “Just four medications have accounted for the most significant generic price increases in 2014: digoxin for congestive hear failure, ursodiol for gallstones, hydrocortisone acetate for inflammation and clobetasol propionate for eczema and psoriasis. Digoxin had the largest 2014 price increase- 1127%- because for a while only, two manufacturers were producing this widely used medication.”
While all the above statements attempt to provide clarity, they are not going to appease the hundreds and thousands of patients who are enduring such price steep increases, beyond the capabilities of reimbursement from health plans. Once more, legislators are once again being compelled to get involved through a series of Congressional hearings. Again, all eyes will turn towards the supply and demand dynamics of lack thereof across individual drug supply chains.
Supply Chain Wide Track and Trace
The other important issue involves new supply-chain-wide track and trace capabilities that go into effect within the United States during 2015 as a result of the Drug Supply Chain Security Act. As of January 1, manufacturers, repackagers and wholesale distributors of pharmaceutical drugs must provide lot-level product tracing information, and by July 1, pharmacies themselves, both community and hospital focused, must be able to provide lot-level transactional tracing and history for 6 years. Also on January 1, pharmacies must have established processes and systems for verification and handling of any suspect fraudulent products. These are to include quarantine and investigative procedures of suspected fraudulent drugs with notification to the U.S. FDA and primary trading partner if a suspected fraudulent drug is found. A recent posting on PharmacyToday outlines these requirements and their potential impact for pharmacy operators. It notes that conformance to these new requirements has a strong dependence on electronic information transfer and that smaller, independent pharmacies may find themselves at a disadvantage because of the need to move current paper based transactions to electronic record keeping and portal access.
The largest wholesale distributors of pharmaceuticals will obviously play a very large role in helping to track and disseminate such information. Meanwhile, the National Community Pharmacists Association is calling for various supply chain industry partners to work together in coming up with cohesive electronic information gathering strategies.
For our part, throughout the coming weeks, Supply Chain Matters will provide added focus and commentary related to both the supply and demand dynamics affecting inflated pricing of generic drugs as well as implementation of the new track and trace requirements.
The looking glass up and down the pharmaceutical supply chain is indeed becoming an important headline and motivation for learning in the coming year.
Bob Ferrari
