Presentation by
Jon Borschow
Chairman of the Board
Healthcare Distribution Management Association
At the FDA Anti-Counterfeit Drug Initiative Public Meeting
October 15, 2003

Good morning and thank you for allowing me this opportunity to speak. I am Jon Borschow, President of Borschow Hospital and Medical Supplies, Inc. I'm here today, however, speaking as Chairman of the Healthcare Distribution Management Association. HDMA is a national trade association representing 89 distributors of pharmaceutical and healthcare products. These distributors constitute nearly 100% of the pharmaceutical wholesale distribution market, totaling more than $140 billion in annual sales. HDMA members are responsible for ensuring that billions of units of medication safely make their way to tens of thousands of retail pharmacies, hospitals, nursing homes, clinics, and other provider sites across the United States.

HDMA's mission is to secure the safe and effective distribution of healthcare products, to create and exchange industry knowledge affecting the future of distribution management, and to influence standards and business processes that produce efficient healthcare commerce.

With that mission in mind, I am delighted to have this opportunity to highlight HDMA's perspectives on FDA's Interim Anti-Counterfeit report, and to tell you about HDMA's groundbreaking work to help fight the public health threat of counterfeit drugs.

HDMA is very pleased to see that the FDA is concerned about state licensure. There is a high degree of variability among the states regarding the type and intensity of oversight they carry out both in issuing a license, and in following up after a license is issued. Some states also are too lax when it comes to penalties for counterfeiters. It is essential that all regulatory bodies be cognizant of their responsibility to enforce the law and to protect against the entry of adulterated product in the pharmaceutical supply chain.

Some states have thorough and effective programs for examining the credentials and qualifications of those who wish to become wholesale distributors, and for inspecting distribution facilities. Yet other states have licensed hundreds of wholesalers to distribute pharmaceuticals, although HDMA's 89 members constitute nearly 100% of the wholesale distribution business. That said, it is clear that stronger licensure and inspection programs are critical to the success of any anti-counterfeit initiative.

HDMA is also pleased that the FDA recognizes that there is no single "magic bullet" solution to the counterfeit problem, and that a multi-pronged, total supply-chain strategy is needed to protect the safety of the U.S. pharmaceutical supply. HDMA has closely studied this problem, and we are in full agreement that this effort cannot be accomplished by one part of the industry alone. Federal regulators enforce anti-counterfeit laws; states serve as the licensing entities that initially approve, inspect, and regulate the firms doing business; and manufacturers control the packaging or other anti-counterfeit characteristics of the drugs they provide. Counterfeit drugs are a supply chain issue, and we are all invested in solutions.
We wholeheartedly agree with the FDA that safeguards are needed in all of the transactions processed in the supply chain.
With this in mind, our members have developed a set of voluntary best practices that we call our "Recommended Guidelines for Pharmaceutical Distribution System Integrity."

Pharmaceutical wholesalers have been following similar business practices for a number of years. But recognizing our unique position in handling pharmaceutical products, we decided it was time to come together, pool our combined knowledge and experience, and raise the bar even further regarding our own due diligence.

Aside from our guidelines, HDMA does support covert, overt, and forensic packaging features, as well as industry adoption of track and trace technology that uniquely identifies the product units wholesalers ship to providers, as part of a complete and effective security strategy.

With this in mind, HDMA's Product Safety Task Force, a broad-based coalition of pharmaceutical supply chain stakeholders, is examining the business requirements needed for the implementation of track and trace technology.
Track and trace technology supports the unique identification of each individual product unit, allowing distributors to easily identify and locate specific items in the supply chain.

The technology HDMA believes holds the most promise is radio frequency identification (RFID). Using RFID technology, a tiny radio frequency chip containing essential data in the form of an electronic product code will allow supply chain stakeholders to track every unit of medication in the country on an individual basis. By tying each product unit to a unique ID, any item can be tracked through the entire supply chain with an unalterable electronic pedigree. The EPC chip, which can be thought of as a product's DNA, will be equipped with high technology security protection that will make it impossible to duplicate or steal the identity of an authentic unit.

Even if criminals developed the technology required to create an exact replica of the EPC, the technology's ability to track product movement from manufacturer to patient would detect duplicate drugs in an incorrect location within the system.
In addition, EPC has other patient safety features built in. EPC has the capability to constantly monitor the temperature conditions of each unit of medication as it travels through the system to ensure proper storage and handling. The technology also can track product expiration dates, simplify the process of product recalls, and reduce the number of medication errors by uniquely matching a specific product to a specific patient.

Further, because the technology represents an opportunity to improve efficiencies, EPC is far more cost effective than other pedigree solutions.

The technology for case level implementation of track and trace, as Wal-Mart has mandated, could be accomplished in as soon as six months. Such implementation would allow the industry to perfect the application of the technology and lay the groundwork for expanding track and trace to encompass the individual product units wholesalers ship to providers.

Perhaps most importantly, a track and trace technology would take the burden of having to authenticate products off the providers. Providers would merely purchase product through an authenticating distributor with the complete assurance of product safety.

HDMA is working closely with standards bodies to further the awareness, adoption, and implementation of EPC in healthcare distribution, and we recommend that this technology and others that improve patient safety be implemented in the shortest possible timeframe. In the case of EPC, we are encouraging our manufacturing partners to put this technology in their product packaging, and to commit to early adoption.

We also have approached other industry trade groups to create broad-based support for our efforts. HDMA members dedicated to this issue have started work with pharmaceutical manufacturers, packaging suppliers, technology providers, wholesalers, and health care providers, to provide a compendium of strategic and tactical information on EPC. HDMA also plans to craft an industry-wide position statement in support of EPC in an effort to continue the momentum behind a safe and efficient supply chain.