How DSCSA Changes the Licensing Landscape

Even though the Drug Supply Chain Security Act (DSCSA) was passed in November 2013, it will continue to be a buzzword in the pharma industry until the implementation completes in 2023. The DSCSA-an act which describes creating an electronic, interoperable system that stores transaction information and history of a drug from the time of manufacture to when it is dispensed to a patient-will change the landscape of licensing for years to come.

Manufacturers are still wrestling with the effects of these changes, constantly updating their processes to meet the new regulations without causing product delays. There are two changes in particular that have major implications for manufacturers: serialization and the redefining of Third-Party Logistics (3PL) companies.

The impact of serialization

In late 2017, the DSCSA serialization regulations were implemented, requiring manufacturers to add serial numbers to their products that can be read, identified, and tracked by the FDA. This extra step means manufacturers will have to adjust timelines. Leave serialization too late and you’ll have to delay your product launch to backtrack and meet the regulation-an expensive mistake.

Serialization also comes with other additional costs. For example, manufacturers must now factor in data fees they didn’t otherwise plan for. Every notch along the supply chain will charge something extra for handling product with serialized data. There are also new vendors for manufacturers to consider that will help streamline the serialization process, but that comes at a price. 

The bottom line: All manufacturers will need to take a second look at their timelines and budgets before serialization becomes officially enforced in November 2018.

The impact of new 3PL licensing

The big license aftershock following the DSCSA earthquake came when the FDA redefined the parameters of 3PL companies. Before the passage of DSCSA, 3PL companies could be licensed as a wholesaler. Now, that’s no longer the case.

What does this mean for manufacturers?

A manufacturer that uses a 3PL may “piggyback” on its 3PL’s licenses in certain states and be in the clear. However, if your 3PL is unaware of a state’s change in license obligations and haven’t updated to meet regulations, they’re shipping product without a license. Which means the manufacturer is shipping product without a license and may face legal consequences for doing so.

If a manufacturer chooses a 3PL that is not appropriately licensed, the manufacturer may be forced to enter into a Consent Order, a settlement agreement with the government. This agreement basically means the manufacturer admits to shipping unlicensed product and agrees to allow the government to supervise their operations for the next few years. It also comes with a hefty fine, and more importantly, the pharma company may be required to stop shipments until a valid license is issued. You’ll then be required to disclose this Consent Order to all other governmental agencies that you hold licenses with.

Currently, of the 51 state licensing boards (including Washington D.C.) there are 21 states that have established a specific license for a 3PL. However, this number will continue to increase as states replace their current 3PL licensure process. Many licensing boards are in the process of implementing new rules or are waiting for legislators to enact laws that define 3PL as its own separate entity so that they may create a new 3PL license type.

Manufacturers must understand the new licensing regulations as they apply to manufacturers and their 3PL partners, and thoroughly research their potential 3PL partners’ compliance with these ever-changing requirements.

For both the licensing changes and serialization, manufacturers should either work with a licensing agency that has a full-time regulatory analyst on staff (someone who spends all day, every day surveying the space for changes) or dedicate a significant amount of time to researching changes and building relationships with key industry members to stay up-to-date.

Until its full implementation in 2023, the DSCSA will continue to change the landscape of licensing for pharmaceutical distribution as key decisions are made on both a state and federal level.

Heather Goodman is General Counsel of Two Labs.