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Bitter Medicine

New anti-counterfeiting laws are costing drug companies a fortune.
Lori Calabro, CFO Magazine
November 1, 2007

In an effort to curtail drug counterfeiting, some 21 states have passed "pedigree" legislation — laws that require the documentation of how drugs pass through the supply chain to the retailer. Much to the dismay of manufacturers, wholesalers, and retailers alike, California lawmakers will up the ante in January 2009 when one of the most stringent E-pedigree laws goes into effect.

According to Carol Rozwell, a vice president with consultancy Gartner Inc., the law's stipulation of an "interoperable" trail means systems must be able to exchange electronic records. And unlike some other states, which require tracking efforts to begin with wholesalers, California's law begins with the manufacturer and requires a unique identifier on the smallest package.

While some players in the pharmaceutical supply chain are pushing back due to the expense of the implementation and lingering questions about the readiness of the technology, the California Board of Pharmacy, having postponed the deadline once, is so far not backing down from the new date.

Federal legislation signed in September may advance the E-pedigree movement even further, since the Department of Health and Human Services now has 30 months to develop its own standard numerical identifiers.

It isn't just the electronic angle that frustrates companies, however. In Florida, which also has a stringent pedigree law (albeit one that calls for paper trails), a lack of formal guidelines coupled with differing interpretations among inspectors has proved costly. At PSS World Medical Inc., for example, CFO David Bronson says that changes had to be made to the company's warehousing and procurement systems so the paper trail could "be produced within five minutes." The compliance effort forced PSS to record a charge of $2.7 million in the first quarter to cover possible fines, legal expenses, and expected inventory losses.




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