Medicine Distributors Take Up Tools to Fight Fraud
June 28, 2006

Jun. 26--Rancho Cucamonga drug maker Amphastar Pharmaceuticals Inc. will "go live" July 1 with a system designed to track products' paths to hospitals and other end customers.

The system consists of software, shipping documents and barcodes that provide specific product information to verify that products originated from Amphastar.

Amphastar will fax pedigrees to distributors that cannot receive electronic pedigree information, said Stephen Campbell, the company's senior vice president for regulatory affairs.

Amphastar, a generic and injectible drug maker, invested in the system "because it's the law," Campbell said.

"We have the easy part of it. Once we send it to the first receiving facility, we're out of the loop. They will take the information we provide and add their information, depending on the system they're in, and forward it," he said.

He declined to reveal the number of distributors with which Amphastar contracts, or the amount the company invested in its pedigree system. According to a document filed April 3 with the U.S. Securities and Exchange Commission, wholesale distributors AmeriSource Bergen Corp., Cardinal Health Inc. and McKesson Corp. were key net revenue producers in Amphastar's past three fiscal years.

Manufacturers and distributors are investing in technology to thwart criminals who make fake drugs and to comply with federal and state rules, including new regulations that take effect this year and next.

Counterfeit, fake or copycat medicines may be contaminated, contain the wrong active ingredients, or no active ingredients at all. They are wrapped in phony packaging, according to the U.S. Food and Drug Administration in Rockville, Md.

While counterfeit drugs rarely enter the U.S. supply stream and make their way into consumers' medicine cabinets, the activity has increased in recent years, the regulatory agency reported on its Web site.

The agency does not have data on the scope of counterfeiting in the United States, said Ilisa Bernstein, the administration's director of pharmacy affairs.

The World Health Organization estimates that 5 percent to 10 percent of the world's pharmaceutical products are counterfeit and that about 25 percent of drugs in Third World countries are fake, according to a report from the California Board of Pharmacy.

Over the years the threat inspired the formation of task forces and high-tech pilot drug-tracing projects.

Some distributors and manufacturers have invested hundreds of thousands of dollars in electronic "pedigree" systems and radio frequency identification technology. Pedigrees are "chain of custody" documents and data sent by computer or fax through the distribution process to hospitals, drug stores and other customers. The documents list sales of drugs, transaction dates, names and addresses of all parties involved.

"A pedigree is a chain of custody document that tells you who has the product and enables you to trace it back if there is a problem," Bernstein said.

There have been instances in which counterfeiters have forged pedigrees, which is among the reasons the agency advocates the use of RFID technology, she said.

Radio frequency identification, or RFID, uses tags attached to products. The tags contain silicon chips and antennas that enable them to send and receive data on a radio frequency from an RFID transceiver. The Food and Drug Administration announced June 9 it will lift a stay defining which distributors are required to implement pedigree systems following the expiration of a moratorium on Dec. 1. Pedigrees, whether electronic or paper, have been required since enactment of the Prescription Drug Marketing Act of 1987.

The act requires non-authorized drug distributors to use pedigrees.

Authorized distributors are those companies that have ongoing relationships and written agreements with drug manufacturers, Bernstein said.

The agency will issue a draft compliance policy guide that will tell distributors the types of drugs the agency wants tracked, including those that have a high sales volume or price in the United States, according to the release.

The action is a result of the agency's "Counterfeit Drug Task Force Report" released June 9.

The agency published final pedigree rules in 1999, but withheld implementation several times after secondary wholesalers complained their business would be harmed.

"The FDA had expected this technology to be in widespread use in the drug supply chain by 2007, but it now appears that these expectations will not be met," the FDA said in a release.

The administration's report, "Combating Counterfeit Drugs," recommends that RFID technology be in widespread use by 2007.

The administration's office of criminal investigations looks into possible counterfeiting operations.

The U.S. Attorney's Los Angeles office announced June 12 the arrest of a Gardena man charged with allegedly selling phony Viagra, Cialis and Levitra purchased from counterfeiters in China. The arrest followed a Food and Drug Administration investigation, said a release from the U.S. Attorney's Los Angeles office.

Masaru Yamasato was charged with trafficking and selling counterfeit goods. The charges carry a potential maximum federal prison sentence of 13 years.

The agency warned in July 2004 that American travelers were bringing counterfeit versions of Zocor and Carisoprodol from Mexico. Carisoprodol is used to treat painful musculoskeletal conditions.

California enacted a law that will take effect Jan. 1 requiring manufacturers and distributors use electronic pedigrees in the sale of prescription drugs.

The pedigrees must originate with the manufacturer and document drug information, transaction dates, ownership data and certification.

An Indiana law takes effect July 1 and Florida distributors face a July 1 deadline.

However a bill approved by the Florida legislature will " water down the legislation," said Patrick Schmidt, chief executive officer of drug supplier FFF Enterprises Inc. in Temecula.

FFF Enterprises supplies hospitals and other health care providers around the country with plasma proteins, immune globulins and flu vaccines.

In June 2004, the company launched its verified electronic pedigree system.

The company posts a pedigree on its Web site for customers to verify the manufacturer name, drug purchase date and other information. FFF is working with Boston software firm Supply Scape to create a pedigree that can be sent to customers.

FFF Enterprises invested "more than the median price of a house in Southern California," in its electronic pedigree system, Schmidt said.

The company was established in 1988.

In 1990, it invested about $275,000 in a tracking system that records the lot numbers, date received and date shipped of every package or vial of drugs.

"I didn't know it wasn't a requirement. I was astonished," Schmidt said.

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