McKesson Communicates Serialization & Aggregation Expectations to Suppliers

In a letter this week to its suppliers, McKesson—the largest pharmaceutical distributor in the United States—addressed their expectations relating to Title II of the Drug Supply Chain Security Act (DSCSA). The company’s position is clear: manufacturers and suppliers will be required to serialize materials using GS1 standards, namely: aggregating product from item level to pack/bundle (if applicable); pack/bundle to case level, and case level to pallet level (using the GTIN and SSCC label formats). A similar position is expected from AmerisourceBergen and Cardinal Health, the two other major wholesalers operating within the United States.

While many organizations have begun serialization implementations, few have addressed aggregation as an immediate need. Many manufacturers are currently focusing on unit level serialization to meet 2017 Drug Quality and Security Act (DQSA) requirements and prepare for is the European Union’s ‘serialize and authenticate’ model—neither of which involve aggregation. Further, the resistance to aggregation appears to be based on (1) a literal reading of the DSCSA text, and (2) the additional cost involved in equipping packaging lines to accommodate aggregation and unit level serialization.

Clarkston is working with numerous pharmaceutical manufacturers and suppliers to develop and implement solutions that address DQSA, as well as global serialization and traceability requirements. As such, our general evaluation and recommendations for manufacturers and suppliers are as follows:

1.Wholesalers, such as McKesson, require aggregation in order to efficiently conduct business. Imposing such requirements (which expand upon the compliance requirements of DSCSA) eliminates unpacking and repacking at their facilities, and proposes a practical provision for partnering with them.

2.Manufacturers that decline to implement aggregation prior to the November 27, 2017 deadline will risk losing business to competitors who implement aggregation requirement.

3.The cost of adding aggregation capabilities to lines will never be lower than it is now. In addition, wholesalers/distributors may begin to charge administrative fees to companies who do not address these “expectations” in an efficient manner. This would offset the additional labor and systems required to unpack, scan, and repack materials. (Some may recall that, while earlier lot tracing regulations initially allowed paper records, some wholesalers informed partners that there would be fees to process paper.)

4.Installing and validating aggregation capabilities now will allow companies to take advantage of the downtime already planned for unit level serialization. Otherwise, companies will have to schedule additional downtime during aggregation implementation, testing, training and validation in the future.  Although more complicated to plan, one serialization implementation project is cheaper that two implementations.

5.Third party logistics companies (3PLs) fulfilling orders to wholesalers, such as McKesson, will also have to capture any new aggregations (i.e., partial cases, mixed cases, cases to pallets) and provide them to manufacturers and wholesalers using EPCIS.

6.McKesson will support current lot level communication via ASN; however, they will need access to manufacturer serial numbers when they perform saleable returns verification. With saleable returns verification required by November 27, 2019 (for distributors), companies should prepare for EPCIS transmissions now.

For companies that are installing a single serialization line at a plant to serialize the output of multiple non-serialized packaging lines, aggregation is especially wise. In other cases, installing the same solution capable of both unit level serialization and aggregation allows production planning to flexibly shift among packaging lines. This also enables them to meet the requirements of: countries which currently require aggregation (e.g., Argentina, Turkey), customers who request aggregation even though their country doesn’t require it, and other entities, such as the European Union (i.e., unit level serialization requirements).

In order to effectively meet DSCSA and wholesaler and distributor requirements, manufacturers should strongly consider installing aggregation capabilities, in addition to serialization capabilities, on the packaging lines they will use for serialized products. Doing so will not only ensure flexibility, but will also reduce overall serialization costs, positioning forward-looking manufacturers with a considerable advantage over competitors who choose not to do so.