On Feb. 7, 2019, the U.S. Food and Drug Administration (FDA) published a press release and on the following day published an accompanying notice in the Federal Register announcing a Pilot Project Program Under the Drug Supply Chain Security Act (DSCSA Pilot Project Program). According to the press release, the FDA "is invested in exploring new ways to improve traceability, in some cases using the same technologies that can enhance drug supply chain security, like the use of blockchain." As stated by the FDA's notice in the Federal Register:

The DSCSA Pilot Project Program is intended to assist FDA and members of the pharmaceutical distribution supply chain in the development of the electronic, interoperable system that will identify and trace certain prescription drugs as they are distributed within the United States. Under this program, FDA will work with stakeholders to establish one or more pilot projects to explore and evaluate methods to enhance the safety and security of the pharmaceutical distribution supply chain.

The DSCSA is codified in Title II of the Drug Quality and Security Act, which was enacted by Congress on Nov. 27, 2013. The DSCSA will be phased in over 10 years, beginning in 2019, and calls for an electronic system to track and trace certain prescription drugs in the U.S. as they move from manufacturers to distributors, healthcare providers, retailers and patients. Key provisions of the DSCSA include requirements related to product identification, product tracing, product verification, detection and response, notification, wholesaler licensing, and third-party logistics provider licensing.

There appears to be a growing consensus that a blockchain-based technology platform may be the optimal approach to achieving compliance with the DSCSA. In 2018, several technology firms launched blockchain-based pilots for DSCSA compliance, including SAP, MediLedger and Adents, among others. In an apparent acknowledgment of the potential for blockchain solutions, the FDA press release notes the agency's recent recruitment of Frank Yiannas, who until recently was Walmart's VP of Food Safety and spearheaded Walmart's groundbreaking work with the IBM Food Trust, which is considered one of the most successful live implementations of a blockchain-based supply chain tracking system to date.

According to the press release, the DSCSA Pilot Project Program "will inform the development of the enhanced electronic, interoperable track-and-trace system for industry set to go into effect in 2023 as part of the Drug Supply Chain Security Act ... The new system will be aimed at reducing diversion of drugs distributed domestically and will help keep counterfeit drugs from entering the supply chain, and ultimately, reaching patients." Other goals of the DSCSA's proposed electronic tracking system include the following:

  • Ensure fully secure electronic product tracing, which provides a step-by-step account of where a drug product has been located and who has handled it.
  • Establish a more robust product verification to ensure that a drug product is legitimate and unaltered.
  • Make sure that any party involved in handling drugs in the supply chain has the ability to spot and quarantine and investigate any suspect drug.

Participation in the DSCSA Pilot Project Program is voluntary and is open to pharmaceutical distribution supply chain participants from all industry sectors, including large and small entities. The FDA will be accepting applications for participation in the DSCSA Pilot Project Program through March 11, 2019.

At BakerHostetler, our Blockchain Technologies and Digital Currencies team has deep experience with blockchain as both a technology and an emerging market that has given rise to unique business and legal issues. Our cross-disciplinary team offers a "legal roadmap" for blockchain enterprise consortia that is targeted at ensuring smooth transitions as blockchain solutions evolve from a pilot project to a "micro-consortium" and finally to a fully live technology platform co-hosted by a cross section of industry participants (including competitor firms). Our goal is to ensure that the complex legal issues surrounding blockchain don't prevent or delay realizing the full benefits of this exciting technology.

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