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E-pedigree models and the U.S. drug supply chain

The debate over pedigree regulatory models in the U.S. pharmaceutical supply chain often centers on how much data for each package of drugs needs to be moved between trading partners as those drugs physically move through the supply chain.

The ideal model would minimize the amount of data moved yet always allow each member of the supply chain to check the prior history—the pedigree—of the drugs they are about to buy.

At a superficial level, this appears to be all you need to do, but when you take a closer look at the details of how the supply chain actually works in the U.S., you will see that there are other characteristics besides data volume per package that need to be considered.

Four views of the U.S. supply chain
In the debates and discussions over pedigree regulatory models, we are used to seeing a view of the supply chain that shows one manufacturer, one distributor, and one pharmacy.  That view masks so much important complexity that if we were to select a regulatory model or solution based on that view, it would be far from ideal.

The most striking thing about this view is that it shows how few distributors there are compared with the number of manufacturers and especially compared with the number of pharmacy delivery points.

Now let’s take a magnified look at the immediate view of the supply chain from the perspective of an average drug manufacturer.

Manufacturers typically want to maximize the availability of their products to all licensed pharmacies in the U.S., so they work to set up and maintain connections with as many licensed distributors as they can handle.  The largest manufacturers deal with most or all of the roughly 70 distributors in the U.S.  Of course, there is bound to be some selectivity by smaller manufacturers, but probably not as much as you might find with many non-commodity consumer products.

Now let’s take a magnified look at the immediate view of the supply chain from the perspective of an average pharmacy.

The great majority of drugs dispensed in U.S. pharmacies are initially sold by the manufacturer to a distributor, which then sells them to the dispensing pharmacy.  Pharmacies typically only buy their drug supplies from a small number of the distributors.  In fact, most have a single primary distributor and a small number of secondary sources, which they usually order from only when their primary supplier is out-of-stock of a given drug that they need.

This is true even of chain pharmacies, although chains maintain their own internal distribution networks. (The largest chains are big enough to buy the highest-volume drugs directly from the manufacturers.)  This is an important exception when considering pedigree models, although even chain pharmacies buy a large number of lower-volume drugs from distributors.

Now let’s take a magnified look at the immediate view of the supply chain from the perspective of an average distributor.

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