U.S.  Department of Health & Human Services 
Office of Inspector General 
 
 
Drug Supply Chain 
Security:  
Wholesalers 
Exchange Most 
Tracing 
Information 
 
OEI-05-14-00640  Daniel R. Levinson 
OSEeI-p0t0e-m0b0e-0r 02000107   Inspector General 
Ju ly 2017 
  oig.hhs.gov 
oig.hhs.gov  Rep  ort in Brief  U.S.  Department of Health & Human Services 
 
September 2017   Office of Inspector General 
OEI-05-14-00640   
 
 
Why OIG Did This Review  Drug Supply Chain Security:  Wholesalers 
Drug diversion, counterfeiting, and 
Exchange Most Tracing Information  
the importation of unapproved 
 
drugs may result in potentially 
What OIG Found 
dangerous drugs entering the drug 
We found that all 31 selected 
supply chain, posing a threat to  Key Takeaway 
public health and safety.  To  wholesalers exchange drug product   
tracing information.  Of these, 17  We found that selected 
enhance drug supply chain security, 
wholesalers  including the 3 largest  wholesalers were exchanging 
the Drug Supply Chain Security Act 
wholesalers that account for more  drug product tracing 
(DSCSA) requires trading partners in 
than 80 percent of drug distribution  information and about half  
the drug supply chain to create a 
revenue  exchange all required  including the three largest 
record of each drug product 
wholesalers that account for 
drug product tracing information.  
transaction.  The Food and Drug 
more than 80 percent of drug 
The remaining 14 exchange most 
Administration (FDA) can then use 
distribution revenues  
elements of drug product tracing 
such tracing records to investigate 
exchange all required 
information but are missing a few of 
suspect and illegitimate drug  information.  Complete drug 
the required elements.  Missing 
products and potential diversion.  product tracing information 
information among these 
can improve drug supply 
This study is the first in a series of 
wholesalers raises concerns that  chain security by supporting 
Office of Inspector General (OIG) 
complete drug product tracing  FDA and other State and 
examinations of drug supply chain 
information may not always be  Federal agencies 
security that will follow the  available to support investigations  investigations of suspect and 
implementation of various DSCSA  into suspect and illegitimate drug  illegitimate drug products 
provisions.      and potential diversion. 
products and potential diversion.  
Future OIG work will examine 
The 31 wholesalers in this study exchange drug product tracing 
dispensers exchange of drug 
information using a wide variety of transmission modes and formats, 
product tracing information as well 
taking advantage of the latitude provided by DSCSA and FDA 
as test whether drug product 
guidance.  Wholesalers may eventually coalesce around one means 
tracing information can be used to 
of exchange as DSCSA requirements are implemented. However, at 
trace drug products through the 
this time, a standardized way to exchange this information has not 
entire drug supply chain.   
emerged.    
How OIG Did This Review 
What OIG Recommends and How the Agency Responded 
In December 2015 and January 2016, 
To ensure that all wholesalers comply with the DSCSA, we 
we interviewed 31 of 353 
recommend that FDA offer technical assistance where appropriate.  
wholesalers identified in FDAs 
Specifically, we recommend that FDA provide technical assistance to 
database.  These wholesalers from 
wholesalers regarding direct purchase statements, exempt drugs, 
across the country were of varying 
and exchanging drug product tracing information for transactions 
sizes and included the three largest 
involving 340B-covered entities and 340B contract pharmacies.  FDA 
wholesalers.  We also reviewed 
concurred with all of our recommendations. 
examples of drug product tracing 
information provided by each of the  Full report can be found at http://oig.hhs.gov/oei/reports/oei-05-14-00640.asp 
 
31 wholesalers.     
   
TABLE OF CONTENTS  
 
BACKGROUND  3 
 
Methodology  6 
 
FINDINGS  8 
All selected wholesalers exchange drug product tracing information and about half,  8 
including wholesalers representing the vast majority of transactions, exchange everything 
required  
 
Wholesalers exchange drug product tracing information in a variety of ways   9 
 
Wholesalers said two separate issues, exemptions and 340B contract pharmacies, created  13 
complications in exchanging drug product tracing information  
 
CONCLUSION AND RECOMMENDATIONS  16 
Provide technical assistance on requirements regarding direct purchase statements  16 
 
Provide technical assistance regarding exempt products   17 
 
Provide technical assistance regarding the exchange of drug product tracing information  17 
for sales to 340B-covered entities that use 340B contract pharmacies 
 
AGENCY COMMENTS AND OIG RESPONSE  18 
 
APPENDICES  19 
 
A:  DSCSA Definitions   19 
 
B:  Detailed Methodology   23 
 
C:  Product Tracing Form   24 
 
D:  Invoice  25 
 
E:  Packing Slip   26 
 
F:  Drugs Wholesalers Reported as Source of Disagreements About Product Exemptions  27 
 
G:  Agency Comments     28 
 
 
Drug Supply Chain Security:  Wholesalers Exchange Most Tracing Information  1 
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ACKNOWLEDGMENTS  31 
 
ENDNOTES  33 
 
 
 
 
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BACKGROUND 
Objectives  
To describe selected wholesalers exchange of drug product tracing 
information in the drug supply chain as required by the Drug Supply Chain 
Security Act (DSCSA).  
Potentially dangerous drugs entering the drug supply chain pose a threat to 
public health and safety.  In one notable example from 2012, several medical 
practices purchased counterfeit versions of Avastin, an injectable cancer 
drug, from a foreign supplier.  The counterfeit versions contained no active 
ingredients to treat cancer.1  In addition, a 2012 congressional report raised 
concerns about the safety of drugs that pass through complex distribution 
networks that often involve many secondary wholesale distributors that do 
not always purchase drugs directly from drug manufacturers.2   
To strengthen drug supply chain security, Congress passed the DSCSA in 
November 2013, which established, among other things, drug product 
tracing requirements for certain prescription drugs.3  The DSCSA generally 
requires that trading partners in the drug supply chain (i.e. manufacturers, 
repackagers, wholesale distributors, and dispensers (primarily pharmacies)) 
exchange information about each drug every time a transfer of ownership 
occurs, creating a record of each trading partners ownership of the drug.  
This information should help the Food and Drug Administration (FDA), other 
State and Federal agencies, and other stakeholders investigate and identify 
harmful drugs in the drug supply chain to prevent further distribution and 
facilitate efficient drug recalls. 
This study is the first in a series of examinations by the Office of Inspector 
General (OIG) of drug supply chain security and the DSCSA.  This series will 
evolve as new DSCSA provisions become effective.  Future OIG work will 
examine dispensers exchange of drug product tracing information as well 
as test whether drug product tracing information can be used to trace drugs 
through the entire drug supply chain.    
The Drug Supply Chain Security Act  
The DSCSA, enacted as part of the Drug Quality and Security Act in 
November 2013, created a Federal framework to address vulnerabilities in 
the drug supply chain.4   The DSCSA provides FDA and appropriate State 
and Federal officials with new tools to trace drugs through the drug supply 
chain.  For example, in the event of a recall or discovery of counterfeit 
drugs, this system could provide FDA with information to determine at what 
point in the drug supply chain the problem originated. 
  
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The Drug Supply Chain   
The distribution of drugs from the drug manufacturer to the patient may 
involve a variety of trading partners, including drug manufacturers, 
repackagers, wholesale distributors (hereinafter referred to as wholesalers), 
and dispensers.5, 6, 7, 8  Generally, drugs pass between trading partners until 
they ultimately reach the dispensing pharmacy and the patient.  See Exhibit 
1 for one way drugs might flow through a wholesaler in the drug supply 
chain. 
Exhibit 1:  Drug Supply Chain Process Example 
Source:  OIG analysis of the drug supply chain, 2016. 
In Exhibit 1, the wholesaler  purchases a drug directly from the drug 
manufacturer.  A wholesaler purchases directly when it purchases from the 
drug manufacturer, from the exclusive distributor of the drug manufacturer, 
or from a repackager that purchased directly from a drug manufacturer 
(hereinafter, referred to as the direct wholesaler for relevant transactions).9 
Alternatively, drugs may pass through additional wholesalers in the drug 
supply chain.  For example, some transactions may involve an additional 
wholesaler that did not purchase directly from the drug manufacturer, the 
exclusive distributor of the drug manufacturer, or a repackager that 
purchased directly from a drug manufacturer (hereinafter, wholesalers 
engaged in these transactions are referred to as indirect wholesalers for 
relevant transactions).10  See Exhibit 2 for how drugs might flow through the 
drug supply chain when multiple wholesalers are involved.  
Exhibit 2:  Drug Supply Chain Process Example with Multiple 
Wholesalers 
Source:  OIG analysis of the drug supply chain, 2016. 
DSCSA Requirements on Exchanging Drug Product Tracing 
Information  
Starting January 1, 2015, the DSCSA required wholesalers and other trading 
partners to exchange drug product tracing information for transactions 
involving a product.11  DSCSA defines a product as a prescription drug in a 
finished dosage form for administration to a patient without substantial 
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further manufacturing (hereinafter we refer to product as a drug 
product).12, 13  DSCSA defines a transaction generally as the transfer of 
[drug] product between persons in which a change of ownership occurs.14   
Drug product tracing information includes three components:  transaction 
information, transaction history, and a transaction statement.  Transaction 
information is composed of 10 elements that describe the transaction, 
including drug product information, such as the National Drug Code (NDC) 
and dosage form.15, 16  Transaction history is a statement that shows the 
transaction information for each prior transaction.17  The transaction 
statement is a statement that the trading partner transferring ownership 
provides to the subsequent purchaser.18  See Appendix A for complete 
definitions.   
Direct wholesalers do not have to send three of the 10 elements of 
transaction information (lot number of the product, initial transaction date, 
and initial shipment date from the drug manufacturer) to the subsequent 
purchaser (hereinafter referred to as customer).  However, direct 
wholesalers must provide the customer with a statement indicating that 
they purchased the drug product directly from the drug manufacturer, 
exclusive distributor of the manufacturer, or repackager that purchased the 
product directly from the drug manufacturer (hereinafter referred to as a 
direct purchase statement).19  Indirect wholesalers that receive a direct 
purchase statement must inform their customers that they received such a 
statement.20  See Exhibit 3 for a summary of the DSCSA requirements for 
direct and indirect wholesalers. 
Exhibit 3:  Drug Product Tracing Information Provided by Direct and 
Indirect Wholesalers 
Drug Product Tracing Information  
   
Transaction  Transaction  Transaction 
Direct Purchase Information 
Information  History  Statement 
   
Direct    Provides a direct purchase 
 *   *   
Wholesaler  statement to customer  
  Informs customer that it 
Indirect  
received a direct purchase 
Wholesaler       
statement from a direct 
 
wholesaler 
Source: OIG analysis of DSCSA, 2016. 
* Wholesalers purchasing directly do not have to provide the lot number, initial transaction date, or initial 
shipment date from the drug manufacturer. 
In practice, the direct purchase statement helps explain to the customer why 
the lot number, initial transaction date, and initial shipment date are not in 
the transaction information for the first trading partner in the transaction 
history.  Without the direct purchase statement, the customer might think 
that information was erroneously omitted.  
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Drug product tracing information does not need to be exchanged for drugs 
that are excluded from the definition of product in the DSCSA or for 
certain activities that are exempt from the definition of transaction 
(hereinafter we refer to these as drug product exemptions).  Drug product 
exemptions include, blood or blood components intended for transfusion, 
any medical gas, and imaging drugs.21  For a list of excluded drug products 
and activities, see Appendix A.  
FDA Guidance on Exchanging Drug Product Tracing Information   
FDA guidance outlines general parameters for the interoperable exchange 
of drug product tracing information but does not require that trading 
partners exchange drug product tracing information in the same way.  
Instead, the guidance provides trading partners with latitude to choose how 
they exchange information.  For example, trading partners may exchange 
drug product tracing information using any transmission mode, including, 
electronic data interchange advanced ship notices (EDI/ASN), web portals, 
and paper.  In addition, trading partners may exchange information in any 
format, including, but not limited to, invoices and packing slips.  FDA has 
indicated that it may revisit the concept of interoperability as processes and 
capabilities that promote more standardization become available and as 
electronic systems evolve and are more widely accessible.22  
FDA also issued a compliance policy in December 2014 stating that it would 
delay enforcement of drug product tracing requirements to May 1, 2015.23  
The delay was in response to industry need for additional time to 
implement drug product tracing requirements. 
 
Methodology  This study reviewed a nonrepresentative selection of 31 wholesalers of 
varying size.  The 31 were comprised of the 3 largest wholesalers that 
generate more than 80 percent of all revenues from drug distribution, as 
well as 15 medium wholesalers, and 13 small wholesalers.24  We designated 
wholesalers as medium and small on the basis of the number of licenses 
in the FDA wholesale distributor database.  For more detail about the 
sample selection, see Appendix B. 
To address our objective, we first reviewed examples of wholesalers drug 
product tracing information and then conducted phone interviews with 
wholesalers.  We interviewed wholesalers about their implementation of 
drug product tracing requirements.  To support our understanding of their 
implementation, we asked about the drug product tracing information that 
they provided.  Staff who we interviewed were primarily compliance or 
regulatory managers and, for smaller wholesalers, often included the 
president or owner. 
We collected this information between December 2015 and January 2016.  
We conducted our data collection in this timeframe  7 months after the 
enforcement delay from FDA and a year after the DSCSA required 
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wholesalers to exchange information  to increase the likelihood that 
wholesalers had implemented processes to address drug product tracing 
requirements. 
 
Limitations 
We based our findings on wholesalers self-reported information from 
interviews and on examples of drug product tracing information.  We did 
not independently verify the responses.  Our findings represent only the 
31 selected wholesalers and cannot be projected to the whole population of 
wholesalers.   
Standards  This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
   
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FINDINGS 
All 31 wholesalers reported that they had implemented processes to address 
All selected 
DSCSA product tracing requirements and were able to exchange drug 
wholesalers 
product tracing information.  Of these, 17 wholesalers  including the 3 
exchange drug 
largest that account for more than 80 percent of revenue from drug 
product tracing  distribution  exchange all required drug product tracing information (i.e., 
transaction information, transaction history, transaction statements  
information and 
including a direct purchase statement, where applicable).   
about half, 
Of 31 wholesalers, 14 did not exchange all required drug product tracing 
including 
information 
wholesalers 
Fourteen wholesalers did not exchange one or more required elements of 
representing the 
drug product tracing information.  FDA guidance notes that missing drug 
vast majority of  product tracing information may be an indication that the drug product is 
transactions,  suspect and warrants heightened scrutiny.25  Wholesalers with missing drug 
product tracing information may not be in compliance with DSCSA 
exchange 
requirements.  All but one of these wholesalers purchased all or at least a 
everything required  
portion of drug products indirectly.  See Exhibit 4 for which information 
each wholesaler was missing.  
Exhibit 4: Wholesalers Missing Drug Product Tracing Information 
Transaction Information  Inform Receipt 
Provide Direct 
of Direct  Transaction 
Wholesaler  Size  Dosage  Container  Purchase 
 NDC   Strength  Purchase  Statement 
form  size  Statement  
Statement  
1  Small            X   
2  Small      X         
3  Small              X 
4  Small      X         
5  Small  X        X  X   
6  Small          X     
7  Medium  X          X   
8  Medium    X      X     
9  Medium      X      X   
10  Medium              X 
11  Medium    X  X  X       
12  Medium            X   
13  Medium            X   
14  Medium            X   
 Total wholesalers 
7  3  7  2 
missing information  
Source:  OIG analysis of wholesaler interview notes and product tracing examples, 2016. 
Seven wholesalers were missing one or more elements of transaction 
information.  Dosage form was the most common element of the 
transaction information that was missing.  One wholesaler explained that 
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the dosage form was not necessary, stating that it was sufficiently conveyed 
by the NDC. Looking up the NDC is one way to determine product type, 
including dosage form.  Although the NDC can be used to determine the 
dosage form, the DSCSA lists the NDC and dosage form as distinct required 
elements of the transaction information.    
Three wholesalers reported that they did not provide their customers with a 
direct purchase statement for relevant transactions.  Two of these 
wholesalers reported that they did not understand the direct purchase 
statement requirement.  The other wholesaler understood the requirement 
but decided not to include the direct purchase statement because it was 
constrained by the field size on the packing slip that it uses to convey drug 
product tracing information. Without the direct purchase statement, the 
wholesalers customers may conclude that the lot number of the drug 
product, initial transaction date, and initial shipment date were erroneously 
omitted from transaction information.   
Seven wholesalers reported that they did not inform customers that they 
themselves received direct purchase statements for relevant transactions 
from the suppliers of certain drug products.  One wholesaler noted that, 
without explicitly providing this information, customers could infer whether 
a drug product was purchased directly by looking at the trading partner 
names in the transaction history.  The wholesaler explained that if the prior 
transaction involved a large wholesaler, the direct purchase was implied 
because large wholesalers purchase everything directly.  Although this may 
be true in certain cases, even large wholesalers do not purchase everything 
directly, so the transaction history will not always be an adequate stand-in 
for the required direct purchase statement.  Further, two wholesalers 
reported that they did not know that they had to inform customers that 
they had received a direct purchase statement in instances in which they 
purchase indirectly.   
 
Wholesalers  Not all 31 wholesalers in this study exchange drug product tracing 
information in the same way.  Rather, wholesalers exchange this information 
exchange drug 
using a wide variety of transmission modes and formats, taking advantage 
product tracing 
of the latitude provided by the DSCSA and FDA guidance.  Wholesalers may 
information in a  eventually coalesce around one way to exchange drug product tracing 
information as DSCSA requirements are implemented. However, at this time, 
variety of ways 
they have not adopted a standardized way to exchange this information.    
 
 
 
 
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Wholesalers exchange drug product tracing information using four different 
transmission modes:  paper, web portals, EDI/ASN, and email  
Wholesalers reported using four different transmission modes to exchange 
drug product tracing information  most using more than one.  The mode 
in which they receive drug product tracing information is not necessarily the 
same mode they use to provide information to their customers.  
Wholesalers receive drug product tracing information from suppliers and 
then generate new drug product tracing information for their customers 
specific to each sale.  The modes they use to transmit information for each 
sale depend on the systems they use as well as the systems their suppliers 
and customers use.  See Exhibit 5 for which modes the 31 wholesalers in this 
study use to receive and send drug product tracing information in their 
business operations.  
Exhibit 5:  Wholesalers Use a Variety of Transmission Modes to 
Exchange Drug Product Tracing Information 
Source:  OIG wholesaler interviews and drug product tracing examples, 2016. 
* Numbers do not add to 31 because wholesalers use multiple modes to receive and send information. 
Paper is the most common transmission mode through which wholesalers 
receive drug product tracing information.  Wholesalers reported that paper 
is prevalent because many drug manufacturers provide drug product 
tracing information on packing slips or invoices. 
Web portals are the most common transmission mode that wholesalers use 
to provide drug product tracing information to customers.  Wholesalers 
reported using web portals because they do not require the use of a 
common software program; customers need only an internet connection to 
access drug product tracing information on the web portal.   
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Several wholesalers, including all three large wholesalers and several 
medium wholesalers, use EDI/ASN to electronically receive or send drug 
product tracing information.  EDI/ASN is a set of standards used to 
electronically communicate the contents of a shipment to a customer.26  
Wholesalers use EDI/ASN to exchange drug product tracing information 
electronically, in discrete, or structured, fields.  The use of structured data 
can be advantageous because that data can be easily stored and 
searched.27  Searchable data facilitates quick retrieval when, for example, a 
drug product should be quarantined or recalled.        
All wholesalers using EDI/ASN also use other transmission modes because 
some suppliers and customers cannot send or receive EDI/ASN 
transmissions.  One of the three large wholesalers reported that only about 
a quarter of its customers, primarily larger hospitals and national retail 
pharmacies, have implemented the technology required to receive EDI/ASN 
transmissions.  
Email is the least commonly used transmission mode that wholesalers use to 
receive drug product tracing information.  The wholesalers that do use 
email reported receiving drug product tracing information generally as an 
email attachment after placing an order.    
Wholesalers exchange drug product tracing information using three 
different formats:  product tracing forms, invoices, and packing slips 
Wholesalers reported exchanging drug product tracing information using 
three different formats, with most wholesalers using more than one format.  
The format refers to the way in which drug product tracing information is 
organized and presented.  See Exhibit 6 for the prevalence of each format 
that wholesalers receive and use to send drug product tracing information. 
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Exhibit 6:  Wholesalers Use a Variety of Formats to Exchange Drug 
Product Tracing Information 
Source:  OIG wholesaler interviews and product tracing examples, 2016. 
* Numbers do not add to 31 because wholesalers use multiple formats to receive and send information. 
Wholesalers in this study most commonly used product tracing forms to 
exchange drug product tracing information.  Product tracing forms are 
designed specifically to capture and clearly represent drug product tracing 
information.  See Appendix C for an example of a product tracing form. 
Wholesalers also reported that they use invoices and packing slips to 
exchange drug product tracing information.  Invoices include information 
about the drug products being exchanged and the prices charged for those 
drug products.  Packing slips detail the contents of shipments.  See 
Appendix D and E for examples of a packing slip and invoice used to 
exchange drug product tracing information.  
 
 
 
 
 
 
 
 
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Wholesalers said  Wholesalers reported that two separate issues  drug product exemptions 
two separate issues,  and 340B contract pharmacies  have created complications during their 
implementation of the DSCSA.  Several wholesalers expressed an interest in 
exemptions and 
guidance from FDA on these two topics.  
340B contract 
Wholesalers reported disagreements with suppliers and customers about 
pharmacies, created 
drug product exemptions  
complications in 
Ten wholesalers, including two of the large wholesalers, reported that they 
exchanging drug 
had disagreements with suppliers or customers about which drugs are 
product tracing  exempt from the DSCSAs definition of product and thus do not require 
drug product tracing information.  Although the DSCSA identifies broad 
information 
drug groups that are exempt from the definition of product (e.g., blood 
products, medical gas, or certain intravenous products  see complete list in 
Appendix A), it does not provide detailed lists of all drug NDCs that are 
exempt.28  In practice, wholesalers identify which drug products are exempt 
at the NDC level.  One of the large wholesalers estimated that 
approximately 10 percent of the prescription drugs it supplied were exempt 
from the DSCSA.   
Wholesalers reported that these disagreements occur over the 
interpretation of which NDCs are associated with the general categories 
used to describe exempt drugs in the DSCSA (e.g., which NDC numbers are 
associated with blood products).  These disagreements occur, in part, 
because wholesalers and others in the drug supply chain determine which 
NDCs fall under the exemption in different ways.  Although some 
wholesalers reported relying on drug manufactures determinations, several 
reported that they rely on other wholesalers or make their own 
determinations.  Other wholesalers reported making no distinction at all, 
instead choosing to exchange drug product tracing information for all 
drugs.  The following examples illustrate how different trading partners 
might arrive at different conclusions about whether a specific drug falls 
under the general category exempted in the DSCSA:   
  One of the large wholesalers noted that manufacturers sometimes 
make different decisions about the same drug being exempt.  The 
wholesaler reported that discrepancies like this have occurred with 
sodium chloride  where one manufacturer of the drug told the 
wholesaler it was exempt and another manufacturer said it was not.  
This wholesaler relies on manufacturers determinations about which 
drugs are exempt. In a case like this, the wholesaler sends drug 
product tracing information only when the drug it sells is made by 
one of the manufacturers that determined the drug is not exempt.  
The wholesaler reported that this has led to confusion and 
complaints from customers.    
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  A wholesaler also reported that Sevoflurane liquid was the subject of 
disagreements.  Sevoflurane liquid is delivered to the patient in a 
gas form, but otherwise it is a liquid.  The wholesaler explained that 
some would not consider this drug to be subject to the DSCSA 
because they believe it is a medical gas, which is one of the 
exemptions to the definition of product.  The wholesaler also 
explained that other trading partners would consider the drug to be 
subject to the DSCSA because it is a liquid, not a gas, when it is 
transferred to customers.   
See Appendix F for a list of additional drugs that wholesalers reported as 
the source of these types of disagreements.   
Wholesalers reported that these disagreements lead to inconsistent 
exchange of drug product tracing information for certain drug products 
because trading partners do not send information for NDC that they believe 
to be exempt.  These inconsistencies may create an incomplete record of 
the owners of the drug product.  Incomplete drug product tracing 
information may impede the usefulness of this information for FDA and 
others to investigate suspect and illegitimate drug products.    
The three large wholesalers reported complications with sending drug 
product tracing information to 340B contract pharmacies  
The three large wholesalers reported complications with sending drug 
product tracing information to 340Bcontract pharmacies.  They explained 
that there are two entities to consider when sending drug product tracing 
information for sales to 340B-covered entities that use 340B contract 
pharmacies.  Wholesalers sell drug products to 340B-covered entities but 
ship the drug products to the 340B contract pharmacies that dispense on 
behalf of the 340B-covered entities.29  To comply with the DCSCA, 
wholesalers send drug product tracing information to the 340B-covered 
entities because the 340B-covered entities maintain ownership of the drug 
product.  See Exhibit 7 for an illustration of drug products and the 
associated drug product tracing information following different paths.  
 
 
 
 
 
 
 
 
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Exhibit 7:  Pathway of Drug Product Tracing Information and Drug 
Products in 340B Contract Pharmacy Arrangements 
 
Source:  OIG analysis of wholesaler interviews, 2016. 
The three large wholesale distributors reported that 340B contract 
pharmacies often request drug product tracing information even though 
they do not take ownership of the product.  Two of the large wholesale 
distributors provide drug product tracing information directly to 340B 
contract pharmacies if the 340B contract pharmacy has a third-party 
agreement with the 340B-covered entity to confidentially maintain the 
information.30   The third large wholesale distributor sends the information 
to the 340B-covered entity only.   
Wholesalers requested clarification about sharing drug product tracing 
information with 340B contract pharmacies because they are concerned 
about sharing information with an entity that does not take ownership of 
the drug products.  Such clarification could help ensure compliance. 
Specifically, the wholesaler needs to know whether its knowledge of a 
third-party agreement between the 340B entity and the contract pharmacy 
is sufficient for the wholesaler to share drug product tracing information 
with the pharmacy. Similarly, the wholesaler needs to know whether a 
third-party agreement between the wholesaler and the 340B entity to 
maintain drug product tracing information is sufficient for the wholesaler to 
share that product tracing information with the pharmacy.  
 
   
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CONCLUSION AND RECOMMENDATIONS 
We found that all selected wholesalers were exchanging drug product 
tracing information, and about halfincluding the three largest wholesalers 
that account for more than 80 percent of drug distribution revenues
exchange all required information.  Wholesalers that do not have complete 
drug product tracing information account for a smaller portion of drug 
distribution revenues, and of those, most purchase all or at least a portion 
of drug products indirectly.  Although they account for a smaller portion of 
drug distribution, small or indirect wholesalers have been involved in cases 
in which illegitimate drugs have played a part.  As such, missing information 
among these wholesalers raises concerns that complete drug product 
tracing information may not always be available to support investigations 
into suspect and illegitimate drug products and potential diversion.   
We also found that not all 31 wholesalers in this study exchange drug 
product tracing information in the same way.  Rather, wholesalers exchange 
drug product tracing information using a wide variety of transmission 
modes and formats, taking advantage of the latitude provided by the 
DSCSA and FDA guidance.  Wholesalers may eventually coalesce around 
one means of exchange as DSCSA requirements are implemented but, at 
this time, they have not adopted a standardized way to exchange this 
information.    
We recommend that FDA provide technical assistance to facilitate 
wholesalers compliance with the DSCSA.  Specifically, we recommend that 
FDA should: 
Provide technical assistance on requirements regarding direct 
purchase statements  
FDA should provide technical assistance to help ensure that wholesalers 
understand their responsibilities related to exchanging drug product tracing 
information when conducting direct purchases or engaging in transactions 
with products that were obtained by direct purchases.  We found instances 
in which wholesalers were not aware of or did not understand DSCSA 
requirements to provide customers with a direct purchase statement or to 
inform a customer that they received a direct purchase statement.  FDA 
could also clarify whether wholesalers are responsible for providing direct 
purchase information when they make purchases from another wholesaler 
that purchased indirectly.    
 
 
 
 
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OEI-05-14-00640   
Provide technical assistance regarding exempt products  
FDA should provide technical assistance regarding exempt products.  FDA 
could, for example, hold a webinar or create a frequently-asked-questions 
document about product exemptions and ideas to resolve or prevent 
disagreements, including those noted in this report.  
Provide technical assistance regarding the exchange of drug 
product tracing information for sales to 340B-covered entities 
that use 340B contract pharmacies 
FDA should provide technical assistance to ensure that wholesalers 
understand the circumstances under which they can provide drug product 
tracing information to 340B contract pharmacies.  For example, FDA could 
clarify whether the presence of a third-party agreement between the 340B 
contract pharmacy and the 340B-covered entity is sufficient to ensure that 
the wholesaler is not violating the confidentiality of the drug product tracing 
information. 
   
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AGENCY COMMENTS AND OIG RESPONSE 
FDA concurred with all three of our recommendations.  
FDA plans to issue additional guidance to facilitate the interoperable 
exchange of product tracing information.  FDA also stated that it is actively 
working on recommendations for standardization of data and 
documentation practices. 
In response to our first recommendation, FDA intends to provide additional 
information related to direct purchase statements in a guidance document 
for industry.  
In response to our second recommendation, FDA will explore options for 
clarifying the types of products that are exempt from the DSCSA.  FDA will 
also consider providing suggestions for how trading partners might resolve 
or prevent disagreements about whether a particular product has exempt 
status.   
In response to our third recommendation, FDA intends to provide additional 
information on third-party agreements in a guidance document for industry.  
In developing this guidance, we encourage FDA to consider clarifying the 
specific issues raised in our report about confidentiality requirements.  In 
particular, we encourage FDA to consider addressing whether wholesalers 
may send tracing information directly to contract pharmacies without 
violating confidentiality requirements.   
For the full text of FDAs response, see Appendix G. 
   
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APPENDIX A: DSCA Definitions 
Transaction ( 581(24) (A) of the FD&C Act) 
Transaction-  
In General.  The term transaction means the transfer of product between 
persons in which a change of ownership occurs. 
Exemptions ( 581(24) (B) of the FD&C Act): The term transaction does not  
include  
(i) intracompany distribution of any product between members of an 
affiliate or within a manufacturer;  
(ii) the distribution of a product among hospitals or other health care 
entities that are under common control;  
(iii) the distribution of a product for emergency medical reasons including 
a public health emergency declaration pursuant to section 319 of the Public  
Health Service Act, except that a drug shortage not caused by a public 
health emergency shall not constitute an emergency medical reason;  
 (iv) the dispensing of a product pursuant to a prescription executed in 
accordance with section 503(b)(1);  
(v) the distribution of product samples by a manufacturer or a licensed 
wholesale distributor in accordance with section 503(d);  
(vi) the distribution of blood or blood components intended for 
transfusion;  
(vii) the distribution of minimal quantities of product by a licensed retail 
pharmacy to a licensed practitioner for office use;  
(viii) the sale, purchase, or trade of a drug or an offer to sell, purchase, or 
trade a drug by a charitable organization described in section 501(c)(3) of 
the Internal Revenue Code of 1986 to a nonprofit affiliate of the 
organization to the extent otherwise permitted by law;  
(ix) the distribution of a product pursuant to the sale or merger of a 
pharmacy or pharmacies or a wholesale distributor or wholesale 
distributors, except that any records required to be maintained for the 
product shall be transferred to the new owner of the pharmacy or 
pharmacies or wholesale distributor or wholesale distributors;  
(x) the dispensing of a product approved under section 512(c);  
(xi) products transferred to or from any facility that is licensed by the 
Nuclear Regulatory Commission or by a State pursuant to an agreement 
with such  
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Commission under section 274 of the Atomic Energy Act of 1954 (42 U.S.C. 
2021);  
(xii) a combination product that is not subject to approval under section 
505 or licensure under section 351 of the Public Health Service Act, and that 
is  
(I) a product comprised of a device and 1 or more other regulated 
components (such as a drug/device, biologic/device, or 
drug/device/biologic) that are physically, chemically, or otherwise combined 
or mixed and produced as a single entity;  
(II) 2 or more separate products packaged together in a single package or 
as a unit and comprised of a drug and device or device and biological 
product; or  
(III) 2 or more finished medical devices plus one or more drug or biological 
products that are packaged together in what is referred to as a medical 
convenience kit as described in clause (xiii);  
(xiii) the distribution of a collection of finished medical devices, which may 
include a product or biological product, assembled in kit form strictly for  
the convenience of the purchaser or user (referred to in this clause as a 
medical convenience kit) if  
(I) the medical convenience kit is assembled in an establishment that is 
registered with the Food and Drug Administration as a device manufacturer 
in accordance with section 510(b)(2);  
(II) the medical convenience kit does not contain a controlled substance 
that appears in a schedule contained in the Comprehensive Drug Abuse 
Prevention and Control Act of 1970;  
(III) in the case of a medical convenience kit that includes a product, the 
person that manufacturers the kit  
(aa) purchased such product directly from the pharmaceutical 
manufacturer or from a wholesale distributor that purchased the product 
directly from the pharmaceutical manufacturer; and  
(bb) does not alter the primary container or label of the product as 
purchased from the manufacturer or wholesale distributor; and  
(IV) in the case of a medical convenience kit that includes a product, the 
product is  
(aa) an intravenous solution intended for the replenishment of fluids and 
electrolytes;  
(bb) a product intended to maintain the equilibrium of water and minerals 
in the body;  
(cc) a product intended for irrigation or reconstitution;  
(dd) an anesthetic;  
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(ee) an anticoagulant;  
(ff) a vasopressor; or  
(gg) a sympathomimetic;  
(xiv) the distribution of an intravenous product that, by its formulation, is 
intended for the replenishment of fluids and electrolytes (such as sodium, 
chloride, and potassium) or calories (such as dextrose and amino acids);  
(xv) the distribution of an intravenous product used to maintain the 
equilibrium of water and minerals in the body, such as dialysis solutions;  
(xvi) the distribution of a product that is intended for irrigation, or sterile 
water, whether intended for such purposes or for injection;  
(xvii) the distribution of a medical gas (as defined in section 575); or  
(xviii) the distribution or sale of any licensed product under section 351 of 
the Public Health Service Act that meets the definition of a device under 
section 201(h).  
 
Transaction information ( 581(26) of the FD&C Act)   
The term transaction information  means 
(A) the proprietary or established name or names of the product; 
(B) the strength and dosage form of the product; 
(C) the National Drug Code of the product; 
(D) the container size; 
(E) the number of containers; 
(F) the lot number of the product; 
(G) the date of the transaction; 
(H) the date of the shipment, if more than 24 hours after the date of the 
transaction; 
(I) the business name and address of the person from whom ownership is 
being transferred; and 
(J) the business name and address of the person to whom ownership is 
being transferred. 
 
Transaction statement ( 581(27) of the FD&C Act)   
The transaction statement is a statement, in paper or electronic form, that 
the entity transferring ownership in a transaction 
(A) Is authorized as required under DSCSA; 
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OEI-05-14-00640   
(B) Received the product from a person that is authorized as required 
under the DSCSA; 
(C) Received transaction information and a transaction statement from the 
prior owner of the product, as required under section 582; 
(D) Did not knowingly ship a suspect or illegitimate product; 
(E) Had systems and processes in place to comply with verification 
requirements under section 582; 
(F) Did not knowingly provide false transaction information; and 
(G) Did not knowingly alter the transaction history.  
 
Product ( 581(13) of the FD&C Act)  
The  term  product  means  a  prescription drug  in  a  finished  dosage  
form  for  administration  to  a  patient without  substantial  further  
manufacturing  (such  as  capsules, tablets,  and  lyophilized  products  
before  reconstitution),  but  for purposes  of  section  582,  does  not  
include  blood  or  blood  components intended for transfusion, radioactive 
drugs or radioactive biological  products  (as  defined  in  section  600.3(ee)  
of  title  21,  Code of Federal Regulations) that are regulated by the Nuclear 
Regulatory Commission or by a State pursuant to an agreement with  such  
Commission  under  section  274  of  the  Atomic  Energy  Act  of  1954  (42  
U.S.C.  2021), imaging  drugs,  an  intravenous  product  described  in  
clause  (xiv),  (xv),  or  (xvi)  of  paragraph  (24)(B),  any  medical  gas  (as  
defined  in  section  575),  homeopathic  drugs  marketed  in  accordance  
with  applicable  guidance  under  this  Act,  or  a  drug  compounded  in  
compliance  with  section 503A or 503B. 
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APPENDIX B: Detailed Methodology 
Sample Selection  
We selected our sample from the FDA wholesale distributor database in 
October 2015.  Although this database is composed of self-reported data 
that is not verified by FDA, it is the only centralized listing of wholesalers 
nationwide.  At the time we took our sample, the database contained 
licenses for 353 wholesalers.31   
To select our sample, we first categorized wholesalers as large, medium, and 
small to address variations in practices dependent on size of their business.  
We put the three wholesalers widely acknowledged to generate the vast 
majority of all revenues from drug distribution --  over 80 percent according 
to one source -- in the large category.32  We put the remainder of 
wholesalers in the small or medium categories on the basis of the number 
of State licenses they had listed in FDAs wholesaler database.  The median 
number of licenses was seven, so we defined the small group as those with 
seven or fewer licenses and the medium group as those with more than 
seven licenses that are not among the three wholesalers in the large group.  
To finalize our sample, we included the 3 large wholesalers and selected a 
simple random sample of 15 medium wholesalers and 15 small wholesalers.  
We subsequently removed 2 of the small wholesalers from our sample 
because they dealt only with products not covered by the DSCSAs drug 
product tracing requirements, leaving 13 small wholesalers in the final 
sample.  See Exhibit 8 for the number and type of wholesalers in the final 
sample.   
Exhibit 8:  Wholesaler Sample 
Wholesaler size   Data source   Sample size 
Large   N/A  3 
Medium  FDA Wholesaler  15 
Small   Database  13 
          Total  31 
Source:  OIG analysis and sampling of the FDA wholesaler database, 2016. 
 
   
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APPENDIX C: Product Tracing Form
 
 
 
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APPENDIX D: Invoice 
 
 
 
 
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APPENDIX E: Packing Slip 
 
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APPENDIX F: Drugs That Wholesalers 
Reported as a Source of Disagreements 
About Product Exemptions 
 
Wholesalers reported disagreements with customers or suppliers about 
whether the following drugs were exempt from DSCSA drug product tracing 
requirements.  
  All presentations of Albumin 
  Drugs not in their final finished form/active product ingredients 
  Esmolol  
  Heparin Loc  
  Nutritional fluids and nutritional electrolytes 
  Potassium Chloride 
  Prescription vitamins 
  Sevoflurane liquid  
  Sodium Bicarb syringes 
  Veterinary drugs manufactured for use in humans (e.g., Claritin)   
   
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APPENDIX G: Agency Comments 
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Drug Supply Chain Security:  Wholesalers Exchange Most Tracing Information  29 
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ACKNOWLEDGEMENTS 
Kelly Waldhoff served as team leader for this study and Lauren Anderson 
served as lead analyst.  Other Office of Evaluation and Inspections staff from 
the Chicago regional office who conducted the study include Philip Sung.  
Office of Evaluation and Inspections staff who provided support include 
Althea Hosein, Seta Hovagimian, Meghan Kearns, and Christine Moritz.  We 
would also like to acknowledge the contributions of other Office of 
Inspector General staff, including Jessica Swanstrom and Peter 
Taschenberger. 
This report was prepared under the direction of Tom Komaniecki, Regional 
Inspector General for Evaluation and Inspections in the Chicago regional 
office, and Laura Kordish, Deputy Regional Inspector General.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
To obtain additional information concerning this report or to obtain copies, 
contact the Office of Public Affairs at Public.Affairs@oig.hhs.gov.    
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OEI-05-14-00640   
ABOUT THE OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public 
Law 95-452, as amended, is to protect the integrity of the Department of 
Health and Human Services (HHS) programs, as well as the health and 
welfare of beneficiaries served by those programs.  This statutory mission is 
carried out through a nationwide network of audits, investigations, and 
inspections conducted by the following operating components: 
Office of Audit  The Office of Audit Services (OAS) provides auditing services for HHS, either 
by conducting audits with its own audit resources or by overseeing audit 
Services 
work done by others.  Audits examine the performance of HHS programs 
and/or its grantees and contractors in carrying out their respective 
responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, 
abuse, and mismanagement and promote economy and efficiency 
throughout HHS. 
Office of Evaluation  The Office of Evaluation and Inspections (OEI) conducts national evaluations 
to provide HHS, Congress, and the public with timely, useful, and reliable 
and Inspections 
information on significant issues.  These evaluations focus on preventing 
fraud, waste, or abuse and promoting economy, efficiency, and 
effectiveness of departmental programs.  To promote impact, OEI reports 
also present practical recommendations for improving program operations.   
Office of  The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of fraud and misconduct related to HHS programs, 
Investigations 
operations, and beneficiaries.  With investigators working in all 50 States 
and the District of Columbia, OI utilizes its resources by actively 
coordinating with the Department of Justice and other Federal, State, and 
local law enforcement authorities.  The investigative efforts of OI often lead 
to criminal convictions, administrative sanctions, and/or civil monetary 
penalties. 
Office of Counsel to  The Office of Counsel to the Inspector General (OCIG) provides general 
legal services to OIG, rendering advice and opinions on HHS programs and 
the Inspector 
operations and providing all legal support for OIGs internal operations.  
General 
OCIG represents OIG in all civil and administrative fraud and abuse cases 
involving HHS programs, including False Claims Act, program exclusion, and 
civil monetary penalty cases.  In connection with these cases, OCIG also 
negotiates and monitors corporate integrity agreements.  OCIG renders 
advisory opinions, issues compliance program guidance, publishes fraud 
alerts, and provides other guidance to the health care industry concerning 
the anti-kickback statute and other OIG enforcement authorities. 
   
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OEI-05-14-00640   
ENDNOTES 
 
 
1 Food and Drug Administration (FDA).  FDA sends letters to 19 medical practices about counterfeit product and other 
unapproved cancer medicines.  February 14, 2012.  Available online at 
http://www.fda.gov/Drugs/ResourcesForYou/Consumers/BuyingUsingMedicineSafely/CounterfeitMedicine/ucm33828
3.htm. 
2 Senate Staff Report.  June 25, 2012.  Shining Light on the Gray Market.  Available online at https://democrats-
oversight.house.gov/sites/democrats.oversight.house.gov/files/migrated/uploads/7.25.12%20Staff%20Report%20Shini
ng%20Light%20on%20the%20Gray%20Market.pdf. 
3  582 of the Federal Food, Drug, & Cosmetic Act (FD&C Act), as amended by DSCSA  202. 
4 DSCSA, P.L. 113-54, Title II. 
5 A manufacturer is defined as the holder of a products FDA-approved application or license or, if a product is 
unapproved, the products manufacturer.  This term also includes a co-licensed partner or an affiliate of the 
application holder.   581(10) of the FD&C Act. 
6 A wholesale distributor is defined as a person engaged in wholesale distribution.   581(29) of the FD&C Act. 
7 A dispenser is defined to include a retail pharmacy, hospital pharmacy, a group of chain pharmacies under common 
ownership and control, or any person legally authorized to dispense or administer prescription drugs.   581(3) of the 
FD&C Act. 
8 The term repackager means a person who owns or operates an establishment that repacks and relabels a product 
or package for--(A) further sale; or (B) distribution without a further transaction.   581(16) of the FD&C Act. 
9  582(c)(1)(A) of the FD&C Act. 
10 For purposes of this report, an indirect wholesaler does not purchase directly from the manufacturer, the exclusive 
distributor of the manufacturer, or a repackager that purchased directly from the manufacturer.  See  582 (c)(1)(A)(iii) 
of the FD&C Act. 
11  582(b)(1), (c)(1), (d)(1) and (e)(1) of the FD&C Act. 
12 The definition of product is limited by exemptions listed in Appendix A.  See  581(13) of the FD&C Act. 
13 The DSCSA defines product at  581(13) of the FD&C Act. 
14  581(24)(A) of the FD&C Act. 
15  581(26) of the FD&C Act.   
16 Drugs are identified using a unique, three-segment number, called NDC, which serves as a universal product 
identifier for drugs.  Definition available online at http://www.fda.gov/Drugs/InformationOnDrugs/ucm142438.htm. 
17  581(25) of the FD&C Act. 
18  581(27) of the FD&C Act. 
19  582(c)(1)(A)(ii) of the FD&C Act. 
20  582(c)(1)(A)(iii)-(iv) of the FD&C Act. 
21  581(24) of the FD&C Act and  581(13) of the FD&C Act.    
22 FDA.  DSCSA Standards for the Interoperable Exchange of Information for Tracing of Certain Human, Finished, 
Prescription Drugs:  How to Exchange Product Tracing Information; Draft Guidance.  November 2014. 
23 FDA.  DSCSA Implementation:  Product Tracing Requirements  Compliance Policy.  Guidance for Industry.  
December 2014. 
24 Modern Distribution Management.  2014 Market Leaders:  Top Pharmaceutical Distributors.  Available online at 
http://www.mdm.com/2014_pharmaceuticals_mdm-market-leaders. 
25 FDA. Drug Supply Chain Security Act Implementation: Identification of Suspect Product and Notification Guidance for 
Industry.  December 2016.  Available online at 
http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM400470.pdf. 
26 1EDISource. EDI 856 Overview.  Available online at http://www.1edisource.com/transaction-sets?tset=856.  
 
Drug Supply Chain Security:  Wholesalers Exchange Most Tracing Information  33 
OEI-05-14-00640   
 
27 Bright Planet.  Structured vs. Unstructured data.  June 28, 2012.  Available online at 
https://brightplanet.com/2012/06/structured-vs-unstructured-data/. 
28  581(13) of the FD&C Act.    
29 In the 340B Drug Discount Program the owner of the product is the covered entity (i.e. a federally qualified health 
center) and the 340B contract pharmacy possesses the physical products and dispenses the products to patients of the 
covered entity.  HRSA.  340B Drug Pricing Program.  Available online at http://www.hrsa.gov/opa/ and HRSA.  
Contract Pharmacy Services.  Available online at http://www.hrsa.gov/opa/implementation/contract/.  
30  582(d)(1)(B) of the FD&C Act. 
31 Approximate count of unique wholesalers in the FDA database as of October 28, 2015.  The count is based on the 
number of unique reporter contact names in the database for wholesalers with active licenses. 
32 Modern Distribution Management.  2014 Market Leaders:  Top Pharmaceutical Distributors.  Available online at 
http://www.mdm.com/2014_pharmaceuticals_mdm-market-leaders.  
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