Regulatory Focus™ > News Articles > CBO: Private Sector will Pick up Bulk of Tab for Compounding, Track and Trace Legislation

CBO: Private Sector will Pick up Bulk of Tab for Compounding, Track and Trace Legislation

Posted 17 July 2013 | By Alexander Gaffney, RAC

A new report published by the Congressional Budget Office provides new cost estimates for a piece of Senate legislation that would enact both new compounding regulations as well as track and trace measures. The conclusion: While the legislation would be cheap for the government, the private sector will pick up the bulk of the tab for the efforts.

Background

Both the Senate and House of Representatives have been focusing on compounding and supply chain security measures in recent months.

In the case of compounding, interest in the issue followed a massive outbreak of fungal meningitis caused by contaminated products manufactured by a Massachusetts-based compounding pharmacy. In the aftermath of the outbreak, outraged legislators demanded to know why the US Food and Drug Administration (FDA) was unable to protect consumers, to which the agency responded that its authority was unclear and its resources too small to appropriately confront the issue.

Similar problems have led to a renewed push for track and trace legislation, so-called because it would permit drug products to be tracked throughout the pharmaceutical supply chain, and traced back to their point of origin. The measure was spurred largely by the notable supply chain intrusion of counterfeit Avastin in 2012. While some legislators pushed for track and trace measures to be included in the 2012 Food and Drug Administration Safety and Innovation Act (FDASIA), it was ultimately dropped due to a lack of accord on several key issues, among them the cost, tracking level (unit or lot), and the specifications of the system (real-time or periodic updates).

Cost Estimates

Among the biggest questions affecting both has been cost: How much will S. 959, The Pharmaceutical Quality, Security, and Accountability Act, cost US taxpayers, and how much will it cost various pharmaceutical industry segments?

While speculation has been rampant, solid guesswork has been relatively sparse. Until now, that is.

The Congressional Budget Office (CBO), Congress' budget forecasting department, is out with new estimates for both segments of the legislation.

The compounding segment of S. 959, for example, would collect an estimated $79 million from the compounding industry in 2015-18, or approximately $20 million per year. CBO noted that another segment of the legislation requiring compliance with current good manufacturing regulations could prove costly to implement as well, as some pharmacies would need to renovate facilities or purchase new equipment. An exact cost associated with these upgrades was not available.

Meanwhile, CBO said it expects that FDA will set licensing fees for track and trace, which are expected to bring in $35 million from wholesalers and other third parties during the 2015-18 period.

In addition, FDA itself would spend an estimated $39 million to develop standards to protect prescription drugs, a pilot project, host at least three public meetings, and promulgate regulations.

What about Drug Manufacturers?

The CBO estimate notably does not include any information about regulatory costs to pharmaceutical manufacturers.

While it extensively notes the costs to pharmacies, which are expected to endure costs in excess of $150 million in at least one of the first five years of the program, pharmaceutical manufacturers are only briefly mentioned as being affected by the legislation.

Based on the costs to pharmacies, however, industry can likely expect the implementation costs of track and trace to be considerable. As noted by CBO, companies will need to maintain records of drug transaction histories for all drug products for six years, will need to affix a unique drug identifier to each product and generate an initial transaction history, identify all suspect of illegitimate drug products and notify FDA of any potential lapses, maintain records of illegitimate drug products, and pay fees to cover licensing costs.


CBO Cost Estimate


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