By: Evan Bonnstetter
My last blog post focused on the relationship between the public and private sectors in regulating the Russian pharmaceutical industry. I emphasized possible consequences of a bifurcated policy aimed at decreasing pharmaceutical imports through: (1) government promotion of private, localized pharmaceutical companies; accompanied with (2) significant government participation in the pharmaceutical industry both as a purchaser, and as a distributor through the Russian State Corporation (Rostec).
In this post, I am returning to report new developments in the Russian pharmaceutical industry, relating to efforts to introduce a regulatory system for tracking pharmaceutical products from producer to patient. Significantly, these developments must be placed within their proper context—similar drug tracking systems have been introduced and are in various stages of implementation in many countries around the world.
This post first provides a brief introduction to the purpose and operation of pharmaceutical tracking regulations, generally. For comparison, several comments on the status of tracking regulations at the international level are offered. Finally, the current status of Russian tracking regulations is noted.
In the simplest terms, track and trace refers to the mechanisms by which individual pharmaceutical products are assigned a unique identifier that follows the drug throughout the distribution chain from manufacturer, to warehouse, to pharmacy, to patient. At each stage, the drug’s travel is recorded into a database, enabling any party involved to check the status of the product.
The primary aim of track and trace is to prevent stolen or counterfeit pharmaceuticals from reaching patients. Stolen products cost pharmaceutical companies massive sums of money each year in lost sales and anti-theft measures. Counterfeit pharmaceuticals pose serious health risks for patients, including death.
In addition, industry and policymakers alike have recognized the valuable business benefits an effective track and trace database could offer. These benefits stem from the value of a complete snapshot of the supply chain—inventory optimization could lead to waste reduction, for example.
However, there are several obstacles and objections to the implementation of track and trace. The first obstacle relates to mindset—while proactive industry leaders have been moving towards a similar strategy, reactive companies continue to drag their heels and are more likely to create “over simplified” systems that fail to address the larger “product or market requirements.” The second objection is cost; some companies are reluctant to spend the significant sums required for compliance, while other, often smaller companies, have insufficient capital to comply. As a result of financial concerns, the rate of adoption and compliance is stunted. Two important policy questions must also be answered in implementing any track and trace system: (1) whether data should be centralized in a government-sponsored database; and (2) how to address differences in requirements in various countries.
Over 40 countries have adopted track and trace laws; by one count, within the next year and a half 75% or more of pharmaceuticals will be regulated by track and trace laws. In recent years, the United States and the European Union have both introduced track and trace systems. In the US, track and trace is scheduled for implementation in three phases over a ten-year period. While implementation in the US is underway, the FDA recently granted a one-year extension for compliance with serialization requirements
Recent Developments in Russia
In late 2016, a track and trace pilot program was introduced; a corresponding decree was released in January 2017. The pilot program, which required participating companies to label their products, began, with a quick turnaround, on February 1, 2017 and continued through December 31 of the same year. A number of manufacturers, distributors, pharmacies, and hospitals all participated in the pilot program. A report prepared by Ministry of Health assessing the implementation of the pilot program is scheduled for publication by February 1, 2018. The initial goal was to implement track and trace throughout Russia by December 31, 2018.
However, near the close of the pilot program, domestic and international pharmaceutical companies operating in Russia successfully persuaded the government to delay full introduction of the labeling requirement of track and trace. A primary concern was what the industry perceived as an unusually short period for implementation of serialization, with one government spokesperson noting, after the delay that similar processes have taken two to three years in other countries. Another concern was that the costs of compliance would be so high as to result in both a suspension of imports and ultimately a shortage of drugs.
If the industry proposal is accepted, what may result is a tiered implementation period, beginning in 2019. In the first period, expensive publicly procured drugs would be the first to require serialization. The second phase, in 2021, would require serialization for all other drugs. Announcement of a revised plan has not yet occurred at the time of writing.
These delays should not be seen as unusual—similar delays have occurred in the US. Given the inherent difficulties in successfully creating and implementing a regulatory measure as track and trace, care must be made to ensure a realistic timeline is put in place. Industry reluctance related to the significant costs and changes could be addressed by mitigating uncertainty as to the timing of each step necessary to implement full track and trace. Serialization is a critical first step. The hopefully valuable lessons gleaned during the pilot program would be best used to establish a firm foundation for serialization, and ultimately a complete track and trace database.
 Albert I. Wertheimer, Welcome Track and Trace, 7 J. Pharmaceutical Health Services Research 207 (2016).
 Eric Marshall & Alissa McCaffrey, How Can Global Markets Establish and Implement Efficient, Flexible, and Effective Global Pharmaceutical Serialization and Traceability Systems?, Food and Drug Law Institute (May 2, 2017), https://www.fdli.org/2017/04/can-global-markets-56345633/.
 See Marvin Shepherd, Pharmaceutical Cargo Theft: Uncovering the True Loss (2015).
 Erwin A. Blackstone et al., The Health and Economic Effects of Counterfeit Drugs, 7 Am. Health & Drug Benefits 216, 217, 221 (2014).
 Agnes Shanley, Waking Up to Track-and-Trace Benefits, Pharmaceutical Tech. Eur. 49 (May 2016).
 Id. at 46.
 Id. at 49.
 Sean Riley, Global Pharma Market Increases Need for Track-and-Trace, Pharmaceutical Processing (Nov. 3, 2017, 9:00 AM), https://www.pharmpro.com/article/2017/11/global-pharma-market-increases-need-track-and-trace.
 Drug Supply Chain Security Act, Pub. L. No. 113-54, 127 Stat. 599 (2013).
 Council Directive 2011/62, 2011 O.J. (L 174).
 Drug Supply Chain Security Act (DSCSA) Implementation Plan, U.S. Food & Drug Administration, https://www.fda.gov/Drugs/DrugSafety/DrugIntegrityandSupplyChainSecurity/DrugSupplyChainSecurityAct/ucm388726.htm (last visited Jan. 8, 2018).
 See U.S. Dep’t of Health and Human Services, Product Identifies Requirements Under the Drug Supply Chain Security Act, https://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM565272.pdf.
 The Russian Federation Closes in on a Serialized Track and Trace Model, Excellis Health Solutions, https://excellishealth.com/russian-federation-closes-serialized-track-trace-model/ (last visited Jan. 8, 2018).
 List of Manufacturers Participating in the Russian Project on Drug Labelling, GMP News (Dec. 6, 2017), https://gmpnews.net/2017/06/list-of-manufacturers-participating-in-the-russian-project-on-drug-labelling/ [hereinafter List of Manufacturers.
 Phil Taylor, Pharma Serialization Snapshot: Russia, Securing Industry (Dec. 20, 2017), https://www.securingindustry.com/pharmaceuticals/pharma-serialization-snapshot-russia/s40/a6503/. For a list of participating manufacturers, see List of Manufacturers, supra note 16.
 Dirk Rodgers, The Russia Serialization Pilot Guideline, RxTrace (Mar. 13, 2017), https://www.rxtrace.com/tag/russia/.
 Russia to Postpone Mandatory Drug Labeling for Two Years, PharmaLetter (Nov. 30, 2017), https://www.thepharmaletter.com/article/russia-to-postpone-mandatory-drug-labeling-for-two-years [hereinafter Russia to Postpone].
 See Drugs to be Subjected to Total Labeling in Russian Pharmaceutical Market, PharmaLetter (July 29, 2017), https://www.thepharmaletter.com/article/drugs-to-be-subjected-to-total-labeling-in-russian-pharmaceutical-market; Russia May Face Drugs Shortages in Future Due to New Labeling System, PharmaLetter (May 18, 2017), https://www.thepharmaletter.com/article/russia-may-face-drugs-shortages-in-future-due-to-new-labeling-system.
 Russia to Postpone, supra note 19.