Bolster Your Supply Chain’s Memory in Time for DQSA

Michael O'Brien and Jack TarkoffIn the movie Memento, the main character, Leonard Shelby, relies on tattoos and Polaroid pictures to retrace his past after amnesia wipes out his memory. He needs these details to faithfully reconstruct recent events and resolve the crime that upended his life.

While you don’t need tattoos to track pharmaceutical shipments, the passage of House bill H.R. 3204, the Drug Quality and Security Act (DQSA), means track-and-trace requirements for pharmaceuticals have become more precise than ever: Each detail of a drug’s journey matters, and distributors must be able to produce the report at a moment’s notice. Oversight has passed from the state level to the federal, which means pharmaceutical distributors must abide by a set of processes that apply to all shipments within the U.S.

Memento’s tactics for recalling details may be a little extreme, but you do need a fail-safe process in place to comply with federal regulations, should the Food and Drug Administration (FDA) come calling. There’s a lot of work to be done, and not much time to do it. The first deadline is just a few weeks away – January 1, 2015. It’s time to outline your foolproof track and trace strategy once and for all – and it’s going to take a whole lot more than a few Polaroid pictures.

Why the heat is turning up on DQSA
Both the state and federal laws are designed primarily to combat illegal drug counterfeiting, which poses a health risk around the globe. Counterfeiting thrives in weak regulatory enforcement systems. For example, some figures show that 40 percent of the drugs circulated in Latin America are counterfeit. In West Africa, the figure jumps to 70 percent, according to the World Health Organization (WHO)

Sometimes the drugs in question don’t contain any active ingredients; they are essentially worthless, except to unscrupulous manufacturers and distributors. Other counterfeit drugs contain an amount insufficient for the illnesses they are designed to combat. According to the WHO, they may do more harm than good by encouraging drug-resistant bacteria mutations. Some counterfeit drugs even contain ingredients that cause illness or death.

DQSA is designed to combat these illegal drugs by requiring that the medication’s entire history be traceable through the whole supply chain. Not just to the lot level, as is the case today, but down to the unit level.

More stringent requirements
In practical terms, that means every single bottle or package will eventually have an individual serial number, created and logged by the manufacturer. Every time a container changes hands, it will need to be noted and verified so it can be traced later. Each transaction will require a report comprising the transaction information, transaction history and transaction statement, which must be maintained for six years.

If a question arises about the legitimacy of a drug shipment during those six years, pharmaceutical distributors will need to be able to produce this complete history and reverse-engineer the distribution process to get it back. If they can’t, they’ll face severe consequences – from steep financial penalties to having their licenses revoked. The FDA is not shy about warning pharmaceutical distributors that cannot produce the basic information required currently. The risks will become much higher when more detailed records are mandated.

Pharmaceutical distributors will be under increased pressure to report suspicious orders, such as those with unusual payment or delivery methods, abnormal order sizes or extraordinary quantities. This is already required by DEA Form 22 under the Controlled Substances Act, but DSQA ups the ante. Distributors will have one business day or up to 48 hours to respond to a recall or an investigation related to suspect products.

Preparing for DSQA
Perhaps the most important thing a pharmaceutical distributor can do as the deadline approaches is examine its product management systems and processes to determine if they are capable of meeting more detailed track and trace requirements.

Those still using paper systems (or electronic applications such as spreadsheets) should consider moving to an Enterprise Resource Planning (ERP) system. A manual system may work if you ship small volumes; anything more than that requires an electronic system. By 2017 an electronic system will be required by law.

If you already have an ERP in place, determine whether it is a general ERP or one created specifically for the pharmaceutical industry. General ERP systems are designed for industries that don’t have to deal with the level of counterfeiting present in pharmaceuticals, nor the associated health risks. Therefore general ERPs don’t have sophisticated track-and-trace capabilities built into them.

The good news is ERPs designed specifically for the pharmaceutical industry allow distributors to meet the track-and-trace requirements automatically. Rather than creating new processes that will disrupt the organization, a pharmaceutical-specific ERP captures and stores the information as part of normal business and enables the level of reporting DQSA requires.

Because not all DQSA requirements have been defined yet, you’ll want an ERP flexible enough to adjust as-needed. That capability will also come in handy should the requirements change along the way.

Jump into the fire
Counterfeit drugs are not just a health risk. They also put an organization’s brand, reputation and even existence in jeopardy. Complying with more stringent track-and-trace laws can create issues on the front end, but they’re ultimately better for everyone.

With the right ERP system – one that is designed for the pharmaceutical industry’s specific requirements – you’ll have the protection you need to meet federal regulations. No tattoos required.


Michael O’Brien is the Vice President of Sales for IBS, a world leader in distribution resource management software, providing ERP and WMS business applications for the wholesale, distribution and manufacturer/distributor markets. For more information about IBS, or to contact Mr. O’Brien, email

Jack Tarkoff is the Vice President of Sales for rfXcel, a pioneer in creating real-time compliance and traceability systems.  For more information about rfXcel, or to contact Mr. Tarkoff, email

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