Independent Pharmacy Accounting, Pharmacy Growth

The Drug Supply Chain Security Act & Its Implications For Pharmacies

In this episode of The Bottom Line Pharmacy Podcast, join us as we sit down with Joshua Potter from PRS Consulting to discuss the Drug Supply Chain Security Act and its implications for independent pharmacies.

Uncover the critical aspects of the DSCSA and its impact on pharmacies in this eye-opening video. Gain insights into the regulatory requirements, traceability standards, and technology solutions that pharmacies are adopting to comply with this transformative legislation.

The Bottom Line Pharmacy Podcast is your regular dose of pharmacy CPA advice to fuel your bottom line, featuring pharmacists, key vendors, and other innovators.

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If you prefer to read this content, the video transcript is below.

Scotty: Welcome, everybody, to the Sykes Bottom Line, Pharmacy Podcast. Another great episode, hopefully, today. We got Joshua Potter excuse me, Josh. With PRS Consulting. And today we have the very exciting topic of compliance and DSCSA, everybody’s favorite topic, I’m sure. Who doesn’t love compliance, right Josh?

Josh: I know it’s been great so far.

Scotty: I know you love it, which is why you’re here today, because you are one of the individuals out there who know this area upside down and all around. So why don’t you tell us a little bit about the Drug Supply Act here and what it means for pharmacies and let’s dive into it.

Josh: Okay. Yeah. So thank you for having me on today. So DSCSA was passed in 2013 for pharmacies. It really started to go into effect in 2016. So it’s a little I don’t want to say surprising, because it hasn’t been something that has been overtly enforced in the pharmacy world since then, but the vast majority of DSCSA has been in place since 2016 or so with a couple of little things happening in 2018 and 2020. And really, when we look at I’ll kind of go back there when we look at what’s happening in 2023, it’s just little tweaks to stuff that pharmacies, for the most part should have been doing already.

Scotty: So it’s going into, you should have already been doing this, but now you have to be doing it.

Josh: Yes, we’re kind of going into the last phase here, which is a small part of overall DSCSA, but it’s actually very complicated for the simple fact is we’re going to this interoperable, electronic, standardized format. So when a pharmacy receives their products in the morning today, that should be accompanied with a set of transaction data. We call it the transaction information, transaction statement, and transaction history. The transaction information is really data about the product, who’s the buyer, who’s the seller, what is the product, NDC number, drug name, strength, form, package size. The transaction statement just being one of those boilerplate government statements we’re required to put on certain documents that says all this stuff on this document is true because it means something. And then the transaction history, which is basically the path that the drug took to get to the pharmacy. So in most cases, a pharmacy will see a manufacturer to a wholesaler, and then to them, the pharmacy. In other cases, yes?

Kendell: Oh, I’m sorry. Go ahead.

Josh: And then in other cases, they’ll see it might go from a manufacturer to a wholesaler, to a wholesaler, to a wholesaler, and then to the pharmacy. So right now, those three pieces of information that transact, Ti, Th, and TS can really be sent in any format. It can be in a PDF. It could be a GIF; it could really be anything. It can even technically be on a napkin. But with 11/27/2023, that needs to be in a basically an electronic, secure, and interoperable format. So electronic needs to be some sort of computer file. Interoperable means computers need to be able to read it.

Scotty: Okay, so you have all this data that’s now got to be captured and so forth. How many pharmacies are this should have been in place for quite a while, you’re saying?

Josh: Yes, everything but the electronic side of it. Yes.

Scotty: Are a lot of pharmacies out there caught off guard here? Is it a scramble to get these things in place or what do pharmacies need to do to prepare for this? If they’re not prepared.

Josh: The first thing I would look at is what are the existing requirements of today? So validating their suppliers, so validating that they’re a wholesaler if they’re ordering from manufacturers, ordering from anybody else, that they’re actually licensed entities. So if we look at a wholesaler, every wholesaler is going to be licensed in their state and in the states they’re shipping to. So it’s a pharmacy’s responsibility to make sure that wholesaler is actually licensed. We can look back at some high profile cases over the past couple of years with just, say, HIV and hepatitis medication. That aspect of actually identifying those wholesalers that were shipping products to pharmacies would have been the first step that pharmacies really could have taken to identify that. Something’s a little off here. Looking beyond even the cost of the goods, you know, if you get a great offer of, you know, some medication that’s thousands of dollars cheaper, that should be ultimately your first red flag that something’s going on here.

Scotty: And so this is all meant to identify the right supply chain for where these drugs are coming from.

Bonnie: So Josh, is the responsibility to provide, I guess, that those documentations would be from the wholesaler line, and then it’s the pharmacy that is verifying when they get that information that it falls in the realms of what it’s supposed to be. Is that the way this works?

Josh: Yeah, I would say it’s actually responsible for every link in the supply chain. So manufacturers need to validate when they send it to a wholesaler that that wholesaler is licensed. And then when a wholesaler ships to a pharmacy, that wholesaler needs to validate that that pharmacy is a legitimate pharmacy. So go do a primary source verification, get a copy of their license and document that process. And the pharmacy is kind of that in reverse. Make sure that our wholesalers are licensed in my state that my pharmacy is in, and then actually do a verification with the actual state board of Pharmacy or whoever in that state actually license drug wholesalers. And the reason why they actually do the primary source verification is in today’s world, I’m sure just about all of us on here today could actually go create a fake license and make it look really good. It’s not that difficult. So actually doing that primary source verification with the state to actually validate that that wholesaler is who they say they are.

Bonnie: And so we’re not pharmacists. So help us understand what that looks like. Is that an extensive process to do? Is that a phone call? Is it something you look up online?

Josh: No. For the primary source verification, you can actually, they’re all public. You can just go to the State Board of Pharmacy website, in most cases, do a license verification check which will usually be at the top somewhere, or the left or the right. There’ll be a link to verification there.

Bonnie: Okay, so an online portal sort of thing.

Scotty: Or maybe you just call Josh and say, ‘Hey, help me out’.

Josh: Yeah, you can call me and I’ll give you the website.

Bonnie: These pharmacies, every time they receive things, if it’s a manufacturer or a wholesaler that they haven’t checked on recently, they would need to do that. That’s part of this process.

Josh: And typically what we recommend or what I would do in my pharmacy is I’d have a spreadsheet, I’d have a list of all my suppliers, their expiration date for their license. If they’re VAWD, I would do the same thing with that is put whatever that VAWD is, some of the insurances do require VAWD to be out there, the national drug distributor, whatever they call it. Now they do require that be in place for their patients. So putting all those dates on that spreadsheet and then you can track it and sort it and do whatever you need to do with the spreadsheet. So you’ll know when something is near an expiration and obviously there’s also software out there that’ll do that for you, but in the end it’s still just an Excel spreadsheet that is doing that. So I would only do a verification annually once I did that initial verification before I actually started ordering products from them. And then obviously when it’s near expiration, I’m going to reach out to that wholesaler and make sure that they’re actually in the process of getting that license. In my state, for the big three, big four, it’s relatively simple and easy. But when you get to some of the smaller wholesalers.

Bonnie: Secondaries and things like that, yeah.

Scotty: That’s what I’m thinking. Like a pharmacy owner out there is going to just assume that their secondaries and their primaries are all taken care of. What’s the risk for those pharmacies that are going to sit there and assume that their secondaries and who they’re buying from is covered under all this?

Josh: So it really comes down to who is going to be looking at the pharmacy. So obviously only the FDA to last year DSCSA is an FDA law, but ultimately state boards of pharmacies, you’re going to get audited by your state boards of pharmacies during your normal every two-year audit or whatnot? They may request that information and I think as DSCSA starts to actually fully go into effect, we’ll start to see more of that happening. Right now, we’re kind of seeing some of that in the southeastern states. In Arizona, for whatever reason, has their state board of pharmacies have actually been going into pharmacies asking for DSCSA information. And obviously, the repressions for that is going to be a fine or maybe some sort of licensing issue in that state. The next one is always going to be PBMs. PBMs are going to find a way to use this to shrink their network, if you will. Right now, I don’t see a real possibility on the claim side, at least for the PBMs to claw back the data unless they can actually prove that you ordered product from an unlicensed wholesaler and then gave that to one of their patients. And the one thing about DSCSA to kind of jump on the board here is it stops at the pharmacy’s door. So once the pharmacy receives it, the pharmacy is not required to then attach that to a prescription or anything like that. It’s really just once it gets into the pharmacy, DSCSA kind of dies. And I say kind of because you might sell back to the wholesaler, you might sell it to a pharmacy that you co-own, or you might sell it to another pharmacy that needs…

Scotty: So what does that look like? Let’s just say you’re transferring inventory from one of your stores to the other, or returning some merchandise to some drugs to the wholesaler. What does that look like? Are you as the pharmacist having to prepare this documentation? Or is it just what does that look like?

Josh: So in general, when a pharmacy can sell to another pharmacy they co own, there does not need to be any sort of transaction data exchanged between those two pharmacies. Obviously, you want to make sure you follow your state invoicing laws and things like that because the PBMs are going to come in also and they’re going to ask you ‘Where’d you get this drug at?’ So you need to do that. But there’s no requirement for the transaction data to be sent over to that pharmacy. The other time you’re allowed to sell it to a pharmacy is if it’s for a specific patient, so I can sell to someone else’s pharmacy if they need 30 pills to fill somebody’s prescription. In that case, I do not need to provide the transaction data either. As a receiving pharmacy, I would probably want to see it just for my own safety and my patient’s safety. Not that I don’t trust the pharmacy, but it’s just better to do it that way. But there’s no requirement for that to be sent. Now when it goes back to a wholesaler, as of right now, the wholesaler can accept that. The issue is going, not the issue, but that kind of changes in November on the 27th, when that movement back to the wholesaler needs to be accompanied with the original transaction data.

Scotty: You’re going to have to dig that up.

Josh: Exactly. And really what they’re going to be looking for is anything that’s sold after November 27. The wholesaler is actually going to look at that serial number on the bottle. And we haven’t mentioned this yet, but one of the things that’s on a modern stock bottle, manufacturer bottle is a serial number. We look at that serial number in that NDC, there are no other bottles in the US. Supply chain that have matching information. So we will be able to identify individual bottles in the US market. Technically, we can do it today, but there’s no database that has it. But in November, we’ll actually be able to track that data based on that serial number and NDC combination.

Scotty: When this gets put in place in November, pharmacies need to follow, make sure they have these. I guess this is going to be a new process for the pharmacy to workflow, if you will make sure they have that workflow in place. What’s kind of next? What’s the maintenance, I guess, looking like here? What are their annual compliance things you got to do? Or what does it look like for the pharmacy on an ongoing basis?

Josh: So on an ongoing basis, it’s really just verifying that your drugs that are coming in have the product identifier on it, that your transaction data after November has a serial number on it.

Scotty: So it’s just going through that process, just everything.

Josh: And it’s kind of the stuff they should be doing today. But that serial number is kind of what throws it off, because today we just need to look at the NDC number. We know it’s all good, but November when the serial number is actually on that data. Also there is the issue of how do I actually verify that serial number? Do I eyeball every line. That’s not going to be easy. It’s going to work, obviously, but it’s going to take more time. So a lot of pharmacies are looking into scanning technologies to actually scan that 2D barcode that is on every manufacturer bottle. Now encoded within that barcode, the 2D barcode, is the NDC or G ten serial number, a lot number, and expiration date. So a pharmacy should be able to scan that and depending on what software they’ve built, purchased, or if they’re using their wholesaler software should be able to actually go through the order and kind of check off. Yes, yes, those are the products that you said you were sending me, and those are the products that I actually received. And when I say products, it’s more of that’s the package you said you were going to send me, and that’s the package that I did actually receive. So we’re going beyond just little NDC searches. We’re actually going to the bottle search or bottle verification itself.

Kendell: Do a lot of pharmacies have the scanning technology already in place? To be able to do that? Or is there a specific type of scanner or thing that they’re going to have to invest in to be able to kind of implement that kind of review?

Josh: Most of the pharmacy software systems have been using 2D barcode scanners to date. The issue is going to be, does something need to be done to that barcode scanner? Is there a process that needs to be in place to switch it over from a 1D or a linear to a 2D barcode scanner? If we look at things like Zebra, I know they have some that are automatic. Then the next issue comes to with the scanning is if we look at some of these bottles, that 2D barcode and that 1D barcode are right on top of each other. So I know with some of the manufacturers, they were having issues in their warehouses of the drugs coming through in their scanner for whatever reason doing the 1D instead of the 2D because they were just too close together. And other manufacturers are working on kind of moving them apart. But for the pharmacy, that same issue is going to apply. So they may get a bunch of error, not errors, but exceptions when they check in their order if they are doing scanning and that might simply be their scanner read the 1D instead of the 2D. So that process of when the drug comes in, making sure the employee knows as they scan it, put their thumb over the you just need to put your thumb over part of it to allow the scanner to actually pick up that 2D barcode. But a lot of the pharmacy software systems have been using 2D scanners. Now if a pharmacy is not using the scanners, then typically the first place we recommend the pharmacy go is look for one that will work with their actual pharmacy software. Kind of get a two-for-one there. If the pharmacy software does not use scanning or they don’t want to use it for the prescription filling process, then typically go with, I don’t want to say the cheapest, but go with a brand they recognize and is a 2D barcode scanner. Again, Zebra or one of the other big ones out there.

Scotty: It sounds like you’re going to have to get a 2D bar scanner if you don’t have one.

Josh: Yes, it’s much easier to do it that way. And the FDA, there’s been some expectations that the FDA may come out and say, oh, you only need to verify a certain percentage of your drugs that you order. To me, that doesn’t necessarily work with what the law is trying to do. If I scan 30% and someone else scans 30% and maybe one of the drugs I didn’t scan was right drug, just wrong serial number. And then that other pharmacy scans a drug coming in and again, it’s the right drug, wrong serial number, but they got the serial number. I should have got that’s going to lead to a phone call to the wholesaler saying, hey, I got the wrong package here. And then that wholesaler is going to start doing their investigation. Well, that should have went to this pharmacy and then they’re going to call me because I should have received it and I did receive the drug, just not the right package size. But I dispensed it’s gone. Now how can I prove that I dispensed the right drug and it wasn’t suspect in one way or another? So a lot of entities in the industry have been expecting something to come out by the FDA saying you only need to do a percentage. That doesn’t seem to work for me. It’s not the intent. I don’t want everybody to have to scan 200 bottles every morning. That would suck. But when we really look at it, that’s kind of what all this is leading to in the intention of the law itself is to do it like that. Like I said, we were expecting something, but I don’t think what they were expecting is ever going to come out. The FDA is going to say, just stick with this idea of you need to verify every drug that comes in, matches what is on the product data or the transaction data.

Scotty: It’s going to be fun.

Bonnie: Sounds just like something else to keep up with and comply with, it’s another piece.

Kendell: They said pharmacists work the hardest of any industry to make a dollar and to keep the dollar with the DIR fees and everything. And then this is like an extra layer adjudicating the claim receiving the claim. And that is like steps backwards before you even get the drug. Now you have a few steps to make sure you can get the drug in-house. And it’s the right thing you’ve got.

Scotty: You’re going to have to have a tech come in an hour earlier and start scanning everything.

Josh: And hopefully, that’s a relatively quick process and you can scan through and you’ll see all the exceptions when you’re done. But it is a new process for pharmacies. We’re not just putting a sticker on the bottle and throw it on the shelf anymore. We got to go through this secondary check to validate that it’s actually the right bottle. We can look at it also. What’s going to happen next? How are PBMs going to try to monetize this in one way or another? What are the chains going to do to, I don’t want to say monetize it but to kind of push independents out. So some chains have already said they’re looking into attaching that serial number to the actual prescription. So they’ll actually know what bottle went into the patient’s bottle. That’s kind of the next step. Now, DSCSA doesn’t go there, but as soon as the chains start to do it, the PBMs are going to find a way to make that a requirement. And they’ll do it by our own. Pharmacies do this, we expect all independents or all pharmacies to do it. If we look at a CVS, Caremark, or entity like that that has their own set of retail pharmacies, you know, they’re going to go with this. This is our standard practice. And it’s kind of hard to fight that. We should, but it’s kind of hard to fight that. When they say, this is the minimum level service we expect at our own locations, it kind of just becomes the base at that point. So that is probably my biggest concern when it does come with to DSCSA is how is that going to be used against us, not just what the FDA does. And the FDA to date has been pretty mild with pharmacies and auditing and things like that. But it’s really the PBMs that concern me. In the long run, they’re going to push this law a little bit further than what the intent was on the law itself.

Scotty: Ain’t that the truth?

Kendell: And the one question I have is what’s the pulse? I guess you would have a pulse on the level of concern from pharmacists right now. Are they aware of what’s coming around the pike? Are they preparing? Are they concerned? What are you hearing in the industry right now?

Josh: So they are preparing, but what we’re really subservient to here is our wholesalers. They’re doing things on their part. They’re doing testing. So if you do have a software company that’s going to handle this data for you, they’re doing testing with those software companies to make sure the files are coming over properly. And we’ve used different software file formats previously, so the software companies can handle anything coming over. But when it comes to actually providing that serialized data, the transaction information with that serial number on it, that becomes a little bit more complicated. And we’re switching to the wholesalers are switching to a new and the manufacturers themselves also are switching to a new format. It’s not new to the world, it’s just new to pharmacy. They’re switching over to something called EPCIS or Epcis, which is a much better format than ASN format, or I believe it’s an 856 format, which doesn’t necessarily have all the fields necessary for DSCSA. So what happens on an ASN file is some fields are combined together into one field and that leads to mapping issues where the data that does come over has the drug name, the strength, and the package size, but it doesn’t have the form. It’s the right product again, but since the form is not on that transaction information, it’s technically an incorrect file. So the pharmacy has to go and verify that drug. The verification drug is usually pretty simple. They can check with the manufacturer to see what the label should look like. They probably know what the label should look like. They can reach go to DailyMed, which is the NIH organization which has a set of labels for just about every product in the US. Supply chain and then reaching out to their wholesaler to just get updated transaction information with the correct fields on there. And right now that’s a mapping issue. As they do switch over to EPCIS, all those fields have their own place. So with EPCIS, we should start to see some of the data start to clean up a little bit, but that may lead to additional issues that we did not foresee at that moment in time. But anyways, all the wholesalers or manufacturers are starting to test that now. Some of them are already done testing it, and it all looks good and they’re moving over and they’re starting to send that data over to the software companies or the pharmacies on the wholesaler portals and things like that. So the data is starting to populate there to ensure that the pharmacies are going to be ready. But the pharmacies have we’re the smallest out of all the groups that are part of this, and thankfully, we kind of have the least requirements on us. But just looking at some of the issues that the wholesalers and manufacturers are having, sometimes I’m a little surprised that we’re still gaming for November. At this point, I don’t expect to see a delay, but if you would have asked me that a couple of months ago, I would have said a delay is probably something that would not be unexpected. We still may see one, but I’m not sure if we will or not.

Kendell: Wow.

Josh: Even if there is a delay, 80, 90% of the law is already in place.

Bonnie: Yeah, that’s true.

Scotty: Well, delay or not it’s going to come eventually. To me, it sounds like the well, I’m going to go ahead and say the bottom line. My bottom line here, Joshua, we kind of wrap it up here and we say the bottom line, like summary takeaway, if you will. And my takeaway here is, it’s coming. And you need to go ahead and be prepared and start figuring out that workflow because we all know workflow is difficult in pharmacy. There’s already, payroll is sensitive in pharmacy. So get that workflow tied down, use technology.

Josh: Yes, definitely. Especially now with what else is happening at the end of the year, beginning of next year. With DIRs and everything else, pharmacies really need to start looking at their options there.

Kendell: For my bottom line, what I’m hearing is just everything being down to that individual package level and tracking it, I think that might not be the big deal, but once that information is there, there’s going to be a lot of creative thinking about what you can do with that information. So I think that might be this next step to something that’s industry changing. So I think once this is enforced, there’s going to be other changes kind of quickly coming afterwards. So I think pharmacists have to be ready. I don’t know what those changes are going to be. But I can just imagine once you have that data, somebody’s going to think of something.

Bonnie: And I would just say, just like we have said many times, it seems, with independent pharmacy within this industry, there’s always something. Every few months, there’s a new thing and every year there’s another big thing, and it’s just another thing that you guys have to stay on top of. Do some research, get some help from someone like Josh if you need it, to make sure you’re on top of it. Just move on to the next thing after that.

Josh: Yeah, no, I agree with everything you guys just said there. It is going to be something that is going to be a wake-up call. But so was HIPAA. Problem was HIPAA happened, and it’s been relatively quiet, and I think a lot of pharmacies have kind of fallen into this idea that the federal government is going to pass laws that they’re not going to enforce at the pharmacy level, so they kind of look the other way until something happens.

Scotty: Well, stay tuned for HIPAA part two on the next episode.

Bonnie: Yeah, or anything new that possibly pops up.

Scotty: Just kidding.

Kendell: Hopefully, we can follow up with you after everything’s implemented, see what kind of updates have come and what’s going on and see what pharmacists have to do to stay ready.

Scotty: Well, thank you, Joshua. We appreciate you hopping on with us today and updating our listeners on what’s ahead here. We’ll definitely have to circle back with you once these things get up and running and see where the pulse is. Again, we appreciate you being on today.

Bonnie: Absolutely. Thank you.



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