Costs of Proposed Pharmaceutical Track and Trace System Come into Focus for FDA, Industry

| 03 June 2013 | By Alexander Gaffney, RAC, 

House legislators have for months been pushing through a piece of legislation that would overhaul the security of the pharmaceutical supply chain, putting into place a series of provisions known more generally as "track and trace." And after being made aware of the legislation's language, the pharmaceutical industry and US Food and Drug Administration (FDA) are now getting a glimpse of something else: Its cost.

Pharmaceutical Industry: Cost Drivers

In an estimate released on 31 May 2013, the Congressional Budget Office (CBO)-a non-partisan congressional entity that tries to forecast the eventual costs of legislation-said the Safeguarding America's Pharmaceuticals Act (SAPA) of 2013 would cost the pharmaceutical industry at least $6 million per year, which would come from the assessment of fees on licenses.

But that's just the tip of the iceberg as far as costs go. CBO said the law's primary fiscal impacts on the pharmaceutical industry will come from four main drivers:

• maintaining transaction history records for all drugs for three years
• requirements to check all drug products before acceptance or release for a unique identifier (UID)
• notifying FDA of suspect or confirmed counterfeit products
• paying fees to FDA to cover licensure

All of these factors will come with associated compliance costs, as well as potential fines if entities fail to comply with the law, CBO said. Those costs were not explored in the document, but if the costs to FDA are any indication, they could be considerable.

The good news, as far as there is any, is that the federal requirements that SAPA would impose are similar to those being enacted in California. CBO said that in light of California's requirements, implementation costs would likely be less than they would be otherwise since many companies were already in the process of instituting compliance regimes to comply with the law.

FDA: New Fees, New Responsibilities

FDA, too, will be subject to new spending authority under the law. CBO notes that it will take in approximately $6 million in licensing fees each year, but will be expected to spend approximately $10-12 million more each year. Over the 2015-2018 period, that trend would result in FDA receiving $19 million in new revenues at a cost of $39 million, or a net loss of $20 million to the agency.

CBO notes that these costs would come from FDA needing to oversee the licensing program, establishing national standards for monitoring prescription drugs throughout the supply chain, enforcing requirements, creating information technology systems, holding public meetings, and implementing a pilot project to test track and trace. CBO said non-fee-related costs would be approximately $16 million.

CBO's Cost Estimate