Prediction Eight of our Supply Chain Matters 2012 Predictions for Global Supply Chains noted stepped-up efforts in 2012 to mitigate supply chain unscrupulous activities. Many industries will be impacted not the least of which has been the pharmaceutical industry which is currently reeling from a number of significant supply chain related supply and enforcement issues.

Today The Wall Street Journal featured a Marketplace headline article, Pharmacies Swept into Drug Wars. (paid subscription or free metered view)  The article reports a looming legal showdown as U.S. governmental regulators go after major drug distributors and larger corporations to fight rampart prescription drug abuse.  Recent specific incidents involving four pharmacies located in the Sanford Florida area suspected of selling “staggering” volumes of the controlled drug oxycodone lead to strong suspicions of a huge black market in this specific area.  The U.S. Drug Enforcement Administration (DEA) has taken the unusual step of targeting the supplier to these pharmacies, Cardinal Health Inc., the second largest U.S. wholesale pharmaceutical distributor, by seeking to block distribution of controlled substances from Cardinal’s distribution facility located in Lakeland Florida. The DEA alleges that Cardinal has failed to follow agreed-to procedures to monitor misuse of controlled substances such as oxycodone.

The WSJ article notes: “Cardinal last year shipped enough oxycodone to Sanford (area pharmacies) to give 59 of the pills to every man, woman, and child there, the DEA says.” The DEA has also targeted CVS Caremark Corp. which operates two of the suspect pharmacies, and the WSJ notes that this has been the most aggressive DEA effort to date to combat all of the sources of prescription drug abuse. Both companies have denied any wrongdoing and have noted their individual efforts to target specific pharmacy abusers. Cardinal for its part, states that it wants clearer guidance from the DEA.

In essence, the U.S. government is now arguing that besides individual doctors and patients, major players in the drug supply chain have responsibility to monitor signs of major abuse or unusual consumption. If the current DEA allegations hold up in legal proceedings, it would indicate that major drug supply chain players can no longer turn a blind eye to what is happening at the point of consumption. The WSJ rightfully notes that besides Cardinal, McKesson Corp and AmerisourceBergen Corp. who together control most all U.S. distribution could feel the effects of increased enforcement of suspected abuse. While lawyers for all the players involved will no doubt thrash out the implications of these latest enforcement efforts, a couple of observations are worth consideration by readers.

The DEA states that three million pills of controlled substances were shipped to just two CVS pharmacies in Sanford Florida, 50 times the normal volume of the average Florida pharmacy, and further alleges that obvious ‘red flags” are being ignored. In our view, any of today’s available demand planning and forecasting software applications would surely flag extraordinary or peak product demand coming from a single geographic distribution center. Florida is also a well-known hotbed for sources of prescription drug abuse which is a piece of unstructured information that is easily inserted into an explanation of unusually high demand from a single distribution point.

We and other supply chain influencers have been monitoring overall industry efforts to postpone legislative directives directed at prescription drug item level tagging and control initiatives directed to flag areas of suspected fraudulent or grey market drugs. These efforts, in essence, were initiated to protect both patients from unsafe drug supplies, and drug companies from fraudulent players in the supply chain. This new twist involves an enhanced effort to stop the unscrupulous prescription dispensers and drug abusers who game the system while supply chain players turn a blind eye.

Now more than ever is the time for all healthcare industry players to align on common stakeholder interests. No longer can the problem of overt drug abuse, fraudulent or grey market supply penetration be passed along to the next level of the supply chain. In the end, patients end-up feeling all of the effects of an unaligned industry.

What is your view? Is the collective pharmaceutical and healthcare supply chain aligned to common interests?  Are there other measures needed?

Bob Ferrari

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