Drug Track-and-Trace Technology May Cost Pharmacies $110K-plus in Year One
Implementing track and trace technology - which will likely be mandated by the federal government -- can cost pharmacies as much as $110,000 per store in the first year alone, according to a study released yesterday by The Coalition for Community Pharmacy Action (CCPA), a group comprised of the National Community Pharmacists Association (NCPA) and the National Association of Chain Drug Stores (NACDS).
The report examined the safety of the US pharmaceutical supply chain and the impact of a federally mandated track and trace system on the retail pharmacy segment of U.S. prescription drug supply chain.
The study found that existing changes in supply chain security including changes in state laws regulating wholesaler licensure have deterred instances of counterfeit drugs in the U.S. drug distribution channel since 2005; track and trace technology is still years away from widespread deployment in the US supply chain.
"The decision makers now have evidence to substantiate two critical facts when it comes to the admirable goal of stopping counterfeit drugs from entering the marketplace," said Bruce T. Roberts, RPh, NCPA e.v.p. and c.e.o. "First, the problem is caused by internet drug operators, who are not legitimate health care providers that unfortunately are not targeted in the current legislative solutions being bandied about Congress. Second, the cost to fix this problem is an enormous unfunded mandate that would create a tremendous financial strain on community pharmacies. We hope that Congress realizes these facts and opposes the ill-conceived provisions that are contained in the bill addressing this issue-H.R. 5839."
The study further revealed that supply chain partners have taken voluntary and vigilant steps to help ensure a secure drug distribution system. "Since 2005, changes in the way that manufacturers, wholesalers, and pharmacies obtain and purchase prescription drugs may be responsible for the low number of reported counterfeit incidents in the United States," the report stated.
Additionally, the report found that the counterfeit problems that do exist largely are fueled by illicit Internet Web sites, with no instances of counterfeit drugs in the normal distribution channel since 2005.
CCPA has maintained that the substantial cost to retail pharmacy to implement a federally mandated track and trace program would be detrimental to the industry and other cost beneficial alternatives to enhance the security of the US drug distribution supply chain should be explored. CCPA also has noted track and trace is not ready to be implemented broadly.
In addition to a hefty price tag of the Track and Trace solution, other costs to achieve a 100 percent compliant implementation will be incurred by operational improvements to gain efficiencies, the need for a uniform data carrier standard, and the lack of a unified track and trace model among all industry segments and trading partners. Furthermore, the ability to move forward with implementation of a track and trace system on a large scale will not be in place for many years, according to the study.
The per-pharmacy first year cost estimate, the lowest of which exceeds $84,000, includes expenses for full implementation of hardware/software, infrastructure, implementation resource costs as well as additional labor costs for operating a track and trace system - notwithstanding other substantial costs for pharmacies to build and maintain data centers to manage the required information and investment costs for pharmacy distribution centers. The financial cost of implementing a track and trace system could reach upwards of two percent of total annual pharmacy sales in the first year, in an industry which only averages an annual net profit margin of 3 percent.
"This study provides important perspective for policymakers at the federal and state levels, as they consider policy options for safeguarding the drug supply," said NACDS president and c.e.o. Steven C. Anderson. "Seeing that patients receive legitimate, safe and effective products is a top priority for pharmacy, as is pursuing the right courses of action toward this goal."
The report examined the safety of the US pharmaceutical supply chain and the impact of a federally mandated track and trace system on the retail pharmacy segment of U.S. prescription drug supply chain.
The study found that existing changes in supply chain security including changes in state laws regulating wholesaler licensure have deterred instances of counterfeit drugs in the U.S. drug distribution channel since 2005; track and trace technology is still years away from widespread deployment in the US supply chain.
"The decision makers now have evidence to substantiate two critical facts when it comes to the admirable goal of stopping counterfeit drugs from entering the marketplace," said Bruce T. Roberts, RPh, NCPA e.v.p. and c.e.o. "First, the problem is caused by internet drug operators, who are not legitimate health care providers that unfortunately are not targeted in the current legislative solutions being bandied about Congress. Second, the cost to fix this problem is an enormous unfunded mandate that would create a tremendous financial strain on community pharmacies. We hope that Congress realizes these facts and opposes the ill-conceived provisions that are contained in the bill addressing this issue-H.R. 5839."
The study further revealed that supply chain partners have taken voluntary and vigilant steps to help ensure a secure drug distribution system. "Since 2005, changes in the way that manufacturers, wholesalers, and pharmacies obtain and purchase prescription drugs may be responsible for the low number of reported counterfeit incidents in the United States," the report stated.
Additionally, the report found that the counterfeit problems that do exist largely are fueled by illicit Internet Web sites, with no instances of counterfeit drugs in the normal distribution channel since 2005.
CCPA has maintained that the substantial cost to retail pharmacy to implement a federally mandated track and trace program would be detrimental to the industry and other cost beneficial alternatives to enhance the security of the US drug distribution supply chain should be explored. CCPA also has noted track and trace is not ready to be implemented broadly.
In addition to a hefty price tag of the Track and Trace solution, other costs to achieve a 100 percent compliant implementation will be incurred by operational improvements to gain efficiencies, the need for a uniform data carrier standard, and the lack of a unified track and trace model among all industry segments and trading partners. Furthermore, the ability to move forward with implementation of a track and trace system on a large scale will not be in place for many years, according to the study.
The per-pharmacy first year cost estimate, the lowest of which exceeds $84,000, includes expenses for full implementation of hardware/software, infrastructure, implementation resource costs as well as additional labor costs for operating a track and trace system - notwithstanding other substantial costs for pharmacies to build and maintain data centers to manage the required information and investment costs for pharmacy distribution centers. The financial cost of implementing a track and trace system could reach upwards of two percent of total annual pharmacy sales in the first year, in an industry which only averages an annual net profit margin of 3 percent.
"This study provides important perspective for policymakers at the federal and state levels, as they consider policy options for safeguarding the drug supply," said NACDS president and c.e.o. Steven C. Anderson. "Seeing that patients receive legitimate, safe and effective products is a top priority for pharmacy, as is pursuing the right courses of action toward this goal."