Regulatory Beat: McClellan Moves to Block Counterfeits and Require Bar Codes Before Leaving FDA

FDA is proposing a multifaceted approach to halt the spread of counterfeit drugs and biologics in the United States. The agency supports establishing an electronic tracking system, but its voluntary nature has raised complaints of inadequacy. Meanwhile, FDA is requiring drug and biologics manufacturers to add linear bar codes to containers and packages destined for hospitals (see "FDA Requires Bar Codes on Hospital Drugs"). It remains to be seen if an e-tracking plan that can identify legitimate products can also remove obstacles to broader importation of pharmaceuticals.

The task of implementing these policies will fall to others at FDA, following the shift of Commissioner Mark McClellan to administrator of the Centers for Medicare and Medicaid Services (CMS) at Health and Human Resources (HHS). Naming a credible and knowledgeable individual to implement the Medicare prescription drug benefit and quell complaints from seniors before the November elections is a top priority for the Bush administration. A physician and economist, McClellan knows a lot about drug pricing and reimbursement and their impact on biomedical innovation. He analyzed health policy for the White House as a member of the Council of Economic Advisors before coming to FDA in late 2002, and he advised the administration on provisions of the Medicare bill.

In reassigning McClellan to CMS, the administration calculated that FDA could weather the change. Deputy commissioner Lester Crawford served as acting commissioner before McClellan's arrival, a period that witnessed the launch of FDA initiatives to modernize good manufacturing practices (GMPs) and to consolidate regulation of biotech therapies with drugs. Recently he has been heading up food and animal safety and antibioterrorism initiatives, prime HHS concerns.

Last fall, McClellan moved Janet Woodcock, director of CDER, to the Office of the Commissioner (OC) to help implement many of his risk management and strategic plan initiatives. Now Crawford has asked Woodcock to remain as one of three acting deputies instead of returning to CDER in April as planned. Woodcock will be deputy for operations, Murray Lumpkin deputy for special programs, and Amit Sachdev deputy for policy.

Woodcock says she can extend her OC stay because CDER is in good hands under acting director Steven Galson. Galson's main priorities are to continue integrating biologics staffers into CDER and to plan for the Center's move to new offices next year. Woodcock remains in charge of GMP modernization, developing guidance on protein characterization, and crafting a policy for generic, or follow-on, biologics, which is expected this spring.

No Magic Anticounterfeit Bullet

The centerpiece of FDA's report on "Combating Counterfeit Drugs" is encouraging manufacturers, distributors, and pharmacists to adopt a new "track and trace" system for drugs and biologics. This involves inserting radiofrequency identification (RFID) chips into drug packages and labels that will track product movements from plant to pharmacist and ultimately to the patient. In addition to thwarting illegal operators, the e-tracking system could improve inventory control programs for all parties and help recall products with safety problems.

FDA side-stepped some of the more controversial issues that arose at its October 2003 open meeting on anticounterfeiting. The agency is not requiring manufacturers to put finished dosages in unit-of-use packaging because such a change would be costly and would not control counterfeiting significantly. For now, FDA is encouraging manufacturers to analyze the costs and benefits of unit-of-use packaging, starting with newly approved drugs, injectables, and products most likely to be counterfeited.

Similarly, FDA is not mandating use of any specific antitampering packaging or product authentication systems, such as holograms, colored labels, or chemical markers. Such approaches may help prevent counterfeiting, but FDA believes there is no one "magic bullet" to foil illegal operators. Moreover, recommending any one authentication technology might alert counterfeiters to industry practices and also stifle further innovation. Manufacturers, instead, should explore the range of anticounterfeiting technologies and determine which fit best with specific products and dosage forms as well as company capabilities. Meanwhile, FDA will develop guidance on how companies can adopt anticounterfeit packaging and labeling for approved products without obtaining prior approval for these changes.

Chips, Not Paper

The prospect of establishing a national e-tracking system in four years is prompting FDA to postpone implementation of the paper pedigree system required by the Prescription Drug Marketing Act of 1987. After several delays due to high costs and technical difficulties, FDA was scheduled to launch the paper pedigree system this month, but the agency decided that doing so now would be confusing and a waste of resources. FDA will reassess in 2006 whether industry is progressing sufficiently to keep paper pedigrees on hold.

Manufacturers and wholesalers have begun feasibility studies of RFID systems, such as a pilot test by wholesaler McKesson for Wal-Mart. FDA expects that next year manufacturers will begin applying RFID chips to pallets, cases, and packages of pharmaceuticals most likely to be counterfeited and that wholesalers, drugstore chains, and some hospitals will begin acquiring and installing information systems to read and use this tracking information. An FDA timeline calls for extending these actions to more products, pharmacists, and hospitals in 2006 in order to have a full RFID tracking system in place in 2007.

During this process, FDA will examine whether rules for labeling, electronic records, and adherence to GMPs need revision to accommodate new technologies. Researchers are conducting stability tests on drugs with labels or containers with embedded chips to see if frequency emissions from the chips can affect sensitive biotech products.

Sticks and Carrots

In addition to encouraging technological innovation, FDA is proposing further policy changes to deter production and distribution of counterfeit products:

• Stiffer criminal penalties. FDA is asking the US Sentencing Commission to increase jail terms for drug counterfeiters. Under current rules, making a counterfeit drug brings only a three-year maximum sentence, compared to up to ten years for counterfeiting a drug label.
• Stronger state wholesaler regulation. The National Association of Boards of Pharmacy (NABP) has issued revised model rules for wholesalers that FDA would like states to adopt. The model calls for more stringent licensing and disclosure requirements and more frequent inspections.
• Broader input on counterfeit activity.A Counterfeit Alert Network will collect reports on counterfeit incidents from national health organizations, consumer groups, and industry and disseminate alerts to members.
• Identifying likely counterfeit targets. FDA supports a national list of drugs most likely to be counterfeited, compiled by NABP and other stakeholders, to avoid redundancies and to help the public identify suspect products.
• Heightened security. FDA expects to develop guidance for industry on securing facilities and production sites and advises firms to name a high-level individual or team to coordinate anticounterfeiting activities and to check the legitimacy of suppliers and other business partners.
• International cooperation. FDA is supporting the World Health Organization's efforts to identify counterfeiters and establish tracking systems. The United States will work more closely with the Permanent Forum on International Pharmaceutical Crime and the Interpol Intellectual Property Crimes Action Group to implement worldwide anticounterfeiting strategies.

FDA Requires Bar Codes on Hospital Drugs

A few days after unveiling its anticounterfeiting plan, FDA published a final rule requiring manufacturers to print linear bar codes on most therapies dispensed in hospitals. The final rule gives manufacturers two years to add bar codes to most drugs, vaccines, blood products, and some over-the-counter drugs used in hospitals, as opposed to three years in its March 2003 draft proposal. The bar codes must contain a National Drug Code (NDC) number, but expiration date and lot release numbers are voluntary. The rule does not require unit-of-use packaging, although demand from hospitals and other purchasers is prompting manufacturers to move in that direction. FDA officials acknowledge that RFID chips may make bar codes obsolete over the next decade, but HHS secretary Tommy Thompson did not want to wait until then to establish an electronic health information system. The envisioned network would track drugs through the distribution system, identify outliers and counterfeit products, facilitate recalls, detect prescribing errors, and help ensure the safe and appropriate use of prescription drugs.