In healthcare, we're pretty good at grand plans that occasionally go sideways. The Drug Supply Chain Security Act (DSCSA) is a prime example.

We all agree counterfeit drugs are bad. No one wants to end up with a sugar pill when they need a lifesaving one. But the DSCSA, designed to lock down the supply chain, is proving to be a masterclass in unintended consequences. Hospitals are increasingly encountering a difficult situation: The very rules designed to secure the supply chain are, in some instances, complicating access to legitimate medications, particularly during shortages.[1]

DSCSA's intricate compliance requirements have inadvertently acted as a barrier to entry to some and a competitive advantage for others. While significant attention has been on the market dominance of the Big Three distributors, a less visible but equally impactful power shift is occurring elsewhere.

For instance, PBMs now include DSCSA compliance in their pharmacy audits, requiring “T3” reports with detailed transaction information, history, and statements.[2] PBMs sometimes use DSCSA compliance as financial and contractual leverage with independent pharmacies, recouping payments or terminating network access due to documentation gaps. These gaps are common among independents, which often lack the IT systems and compliance staff that larger, vertically integrated organizations rely on to manage DSCSA requirements. In contrast, large players can more easily absorb the higher compliance costs that may be prohibitive for smaller competitors.

The FDA recognizes the gap in compliance capabilities between large and small pharmacies.[3] In creating its Assessment of Small Dispensers, the FDA proposed to study whether the technology requirements of compliance are prohibitive to smaller pharmacies and stated that the law “instructs FDA to consider the assessment and provide provisions for alternative methods of compliance,” including waivers and special “timelines for compliance if it is determined the enhanced drug distribution security requirements would result in undue economic hardship.”[4] When compliance costs are high, they drive market consolidation, with the largest players benefiting most from DSCSA enforcement.

The operational reality is straightforward: Increased regulatory requirements combined with a reduced number of active players can narrow the channels through which essential medications flow, especially during periods of shortage. Previously, hospitals could often leverage alternative suppliers during shortages. However, DSCSA's serialization mandates[5] have effectively limited these emergency sourcing options, forcing hospitals to navigate a difficult choice between strict regulatory adherence and ensuring continuous patient care.

The objective is not to abandon security, but to implement it more intelligently. This requires a nuanced approach that includes:

• Implementing tiered compliance schedules while recognizing the varying capacities of different market participants to avoid disproportionately disadvantaging smaller entities.
• Establishing mechanisms that allow for expedited access to essential drugs during supply crises without compromising security (i.e., creating safe harbor provisions for critical shortage medication).

• Designing regulatory approaches that achieve security goals without accelerating market consolidation. This could include things like:

  (1) A phased implementation approach that would allow for building capacity and stabilizing complex processes over time;

  (2) Sector-specific exemptions while technology and data quality improve;

  (3) Recognizing good faith efforts in enforcement priorities;

  (4) Enhanced partner collaboration to resolve issues;

  (5) Providing equitable enforcement that acknowledges implementation complexities;

  (6) Offering direct subsidies for critical infrastructure. These subsidies could be targeted specifically at: small distributors handling critical shortage medications, rural or underserved regions where distribution consolidation would have particularly severe effects, and distributors serving specialized patient populations with unique medication needs.

The unintended consequences of DSCSA implementation offer important lessons about regulatory impacts on market dynamics. While the law's security objectives remain important, achieving them should not come at the expense of supply chain resilience and medication availability.

In the pursuit of enhanced drug security, we must carefully consider the impact on drug availability. This dynamic underscores a persistent challenge in healthcare: A secure supply chain is only effective if there is a consistent supply to secure.