National Standards for the Licensure of Wholesale Drug Distributors and Third-Party Logistics Providers, 6708-6757 [2022-01929]
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6708
Federal Register / Vol. 87, No. 24 / Friday, February 4, 2022 / Proposed Rules
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Food and Drug Administration
21 CFR Parts 10, 12, 16, and 205
[Docket No. FDA–2020–N–1663]
RIN 0910–AH11
National Standards for the Licensure
of Wholesale Drug Distributors and
Third-Party Logistics Providers
Food and Drug Administration,
Department of Health and Human
Services (HHS).
ACTION: Proposed rule.
AGENCY:
The Food and Drug
Administration (FDA, the Agency, or
we) is proposing national standards for
the licensing of prescription drug
wholesale distributors (‘‘wholesale
distributors’’ or ‘‘wholesale drug
distributors’’) and third-party logistics
providers (‘‘3PLs’’), as directed under
the Drug Supply Chain Security Act
(DSCSA) (Title II of the Drug Quality
and Security Act). Pursuant to the
Federal Food, Drug, and Cosmetic Act
(FD&C Act), as amended by the DSCSA,
the proposed rule would establish
standards for all State and Federal
licenses issued.
DATES: Submit either electronic or
written comments on the proposed rule
by June 6, 2022. Submit comments on
information collection issues under the
Paperwork Reduction Act of 1995 by
March 7, 2022.
ADDRESSES: You may submit comments
as follows. Please note that late,
untimely filed comments will not be
considered. The https://
www.regulations.gov electronic filing
system will accept comments until
11:59 p.m. Eastern Time on June 6,
2022. Electronic comments must be
submitted on or before that date.
Comments received by mail/hand
delivery/courier (for written/paper
submissions) will be considered timely
if they are postmarked or the delivery
service acceptance receipt is on or
before that date.
SUMMARY:
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Electronic Submissions
Submit electronic comments in the
following way:
• Federal eRulemaking Portal:
https://www.regulations.gov. Follow the
instructions for submitting comments.
Comments submitted electronically,
including attachments, to https://
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the docket unchanged. Because your
comment will be made public, you are
solely responsible for ensuring that your
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comment does not include any
confidential information that you or a
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such as medical information, your or
anyone else’s Social Security number, or
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as a manufacturing process. Please note
that if you include your name, contact
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• If you want to submit a comment
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Submissions’’ and ‘‘Instructions’’).
Written/Paper Submissions
Submit written/paper submissions in
the following ways:
• Mail/Hand Delivery/Courier (for
written/paper submissions): Dockets
Management Staff (HFA–305), Food and
Drug Administration, 5630 Fishers
Lane, Rm. 1061, Rockville, MD 20852.
• For written/paper comments
submitted to the Dockets Management
Staff, FDA will post your comment, as
well as any attachments, except for
information submitted, marked and
identified, as confidential, if submitted
as detailed in ‘‘Instructions.’’
Instructions: All submissions received
must include the Docket No. FDA–
2020–N–1663 for ‘‘National Standards
for the Licensure of Wholesale Drug
Distributors and Third-Party Logistics
Providers.’’ Received comments, those
filed in a timely manner (see
ADDRESSES), will be placed in the docket
and, except for those submitted as
‘‘Confidential Submissions,’’ publicly
viewable at https://www.regulations.gov
or at the Dockets Management Staff
between 9 a.m. and 4 p.m., Monday
through Friday, 240–402–7500.
• Confidential Submissions—To
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submission. You should submit two
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‘‘THIS DOCUMENT CONTAINS
CONFIDENTIAL INFORMATION.’’ The
Agency will review this copy, including
the claimed confidential information, in
its consideration of comments. The
second copy, which will have the
claimed confidential information
redacted/blacked out, will be available
for public viewing and posted on
https://www.regulations.gov. Submit
both copies to the Dockets Management
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Staff. If you do not wish your name and
contact information to be made publicly
available, you can provide this
information on the cover sheet and not
in the body of your comments and you
must identify this information as
‘‘confidential.’’ Any information marked
as ‘‘confidential’’ will not be disclosed
except in accordance with 21 CFR 10.20
and other applicable disclosure law. For
more information about FDA’s posting
of comments to public dockets, see 80
FR 56469, September 18, 2015, or access
the information at: https://
www.govinfo.gov/content/pkg/FR-201509-18/pdf/2015-23389.pdf.
Docket: For access to the docket to
read background documents or the
electronic and written/paper comments
received, go to https://
www.regulations.gov and insert the
docket number, found in brackets in the
heading of this document, into the
‘‘Search’’ box and follow the prompts
and/or go to the Dockets Management
Staff, 5630 Fishers Lane, Rm. 1061,
Rockville, MD 20852, 240–402–7500.
Submit comments on information
collection issues under the Paperwork
Reduction Act of 1995 to the Office of
Management and Budget (OMB) at
https://www.reginfo.gov/public/do/
PRAMain. Find this particular
information collection by selecting
‘‘Currently under Review—Open for
Public Comments’’ or by using the
search function. The title of this
proposed collection is ‘‘National
Standards for the Licensure of
Wholesale Drug Distributors and ThirdParty Logistics Providers.’’
FOR FURTHER INFORMATION CONTACT:
Aaron Weisbuch, Center for Drug
Evaluation and Research, Food and
Drug Administration, 10903 New
Hampshire Ave., Bldg. 51, Rm. 4261,
Silver Spring, MD 20993, 301–796–
3130. With regard to the information
collection: Domini Bean, Office of
Operations, Food and Drug
Administration, Three White Flint
North, 10A–12M, 11601 Landsdown St.,
North Bethesda, MD 20852, 301–796–
5733, PRAStaff@fda.hhs.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
A. Purpose of the Proposed Rule
B. Summary of the Major Provisions of the
Proposed Rule
C. Legal Authority
D. Costs and Benefits
II. Table of Abbreviations/Commonly Used
Acronyms in This Document
III. Background
A. Introduction
B. Need for the Regulation: The DSCSA
and Establishment of National Standards
for Licensure
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C. Changes From the Prescription Drug
Marketing Act (PDMA)
IV. Legal Authority
V. Description of the Proposed Rule
A. Scope/Applicability (Proposed §§ 205.1
and 205.2)
B. Definitions (Proposed § 205.3)
C. National Standards for Third-Party
Logistics Providers
D. Approved Organizations for Third-Party
Logistics Providers
E. National Standards for Wholesale
Distributors
F. Approved Organizations for Wholesale
Distributors
VI. Proposed Effective/Compliance Dates
VII. Preliminary Economic Analysis of
Impacts
VIII. Analysis of Environmental Impact
IX. Paperwork Reduction Act of 1995
X. Federalism
A. Scope of Preemption
B. Effective Date of Preemption
XI. Consultation and Coordination With
Indian Tribal Governments
XII. References
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I. Executive Summary
A. Purpose of the Proposed Rule
The Drug Quality and Security Act
(DQSA) was enacted on November 27,
2013. Title II of the DQSA, the Drug
Supply Chain Security Act (DSCSA),
includes provisions designed to
strengthen the integrity of the
pharmaceutical distribution supply
chain. Among other measures, section
204 of the DSCSA amends section
503(e) of the FD&C Act (21 U.S.C.
353(e)), which requires licensure of
prescription drug wholesale distributors
(wholesale distributors or wholesale
drug distributors or WDDs) and adds
section 583 to the FD&C Act (21 U.S.C.
360eee–2), which requires FDA to
establish by regulation national
standards for the licensure of
prescription drug wholesale
distributors. Section 205 of the DSCSA
adds section 584 to the FD&C Act (21
U.S.C. 360eee–3), which requires
licensure of third-party logistics
providers and requires FDA to establish,
by regulation, national standards for the
licensure of third-party logistics
providers.
This proposed regulation, when
finalized, will establish the national
standards for the licensure of wholesale
drug distributors and 3PLs required
under sections 583 and 584 of the FD&C
Act, as amended by the DSCSA. As
required by statute, the standards, terms
and conditions for licensure established
by this regulation will apply to both
Federal and State licenses (503(e)(1)(B),
583(b), and 584(a)(1)(A) of the FD&C
Act).
As discussed in section X
(Federalism), section 585(b)(1) of the
FD&C Act (21 U.S.C. 360eee–4(b)(1))
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preempts States and localities from
establishing or continuing requirements
for 3PL or WDD licensure that are
different from the national standards
and requirements applicable under
sections 584 and 503(e) of the FD&C
Act. However, the statutory provisions
themselves do not establish these
‘‘standards and requirements’’; instead,
this regulation, once effective, will
establish them. Accordingly, State and
local licensure requirements will be
preempted only once this regulation,
when finalized, takes effect; until such
time, current licensing of WDDs and
3PLs may continue. As discussed below,
this determination will help avoid
supply chain disruption, based on
licensing uncertainties, during the
period between DSCSA’s enactment and
the effective date of this regulation.
Avoiding such interim period supply
chain issues accords with Congress’s
overall intent to secure and strengthen
the supply chain, as evidenced by other
FD&C Act provisions added by DSCSA
that recognize State licensure of WDDs
and 3PLs prior to this regulation
becoming effective.
In addition, pursuant to section 585(c)
of the FD&C Act (21 U.S.C. 360eee–4(c)),
regulation of areas within the historical
police powers of the States would be
unaffected by this regulation, including
prohibiting employees of WDDs and
3PLs from engaging in criminal activity
related to prescription drugs, provided
that the State requirements involved are
not related to licensure of 3PLs or
WDDs.
The requirements for state licensing of
wholesale distributors are currently
established under 21 CFR part 205, and
FDA is now proposing the withdrawal
of that regulation and for part 205 to be
replaced with this proposed rule. Where
a state from which a drug is being
distributed has not established a
licensing program in accordance with
the regulation, the DSCSA establishes
FDA as the licensing authority for
wholesale distributor and 3PL licenses
(sections 503(e)(1)(A)(i)(II) and
584(a)(1)(B) of the FD&C Act). When
finalized, the national standards set
forth in the proposed rule will provide
greater assurance that these supply
chain participants are sufficiently vetted
and qualified to distribute products,
further strengthening the supply chain
and the safety of prescription drugs
provided to American consumers.
When finalized, this proposed rule
will also set forth the standards
applicable to, and the requirements for
approval of, third-party organizations
involved in the licensure and inspection
process (‘‘approved organizations’’ or
‘‘AOs’’). Sections 583(c) and
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584(d)(2)(A) of the FD&C Act provide,
respectively, that FDA may approve
‘‘third-party accreditation’’ or
inspection services or programs to
conduct inspections of facilities used by
wholesale distributors seeking licensure
and to review the qualifications of 3PLs
for licensure. This proposed rule will
also address the standards and
requirements for approving such thirdparty accreditation or inspection
services or programs.
Overall, this proposed rule is
designed to ensure that the supply chain
remains secure and that those
prescription drugs subject to the DSCSA
that are moving through the supply
chain are properly stored, handled, and
transported. These measures are
intended to help protect American
consumers from drugs that may be
counterfeit, stolen, contaminated, or
otherwise harmful.
For purposes of this proposed rule,
FDA has defined ‘‘entity’’ or ‘‘entities’’
to mean a business organization, such as
a corporation, company, association,
firm, partnership, society, or joint stock
company. Unless otherwise noted, the
term ‘‘3PL’’ or ‘‘third-party logistics
provider’’ in this proposed rule includes
both the 3PL entity and the individual
3PL facilities requiring a license.
B. Summary of the Major Provisions of
the Proposed Rule
FDA is proposing to replace the
current part 205 with a new part 205
that will implement the licensure
requirements of the DSCSA and govern
licensure of 3PLs and wholesale
distributors. When finalized, the new
part 205 will replace the existing part
205 in its entirety. Subpart A will set
forth the national licensing standards
for State and Federal licenses issued to
3PLs pursuant to section 584 of the
FD&C Act, and subpart C will set forth
the national licensing standards for
State and Federal licenses issued to
wholesale distributors pursuant to
sections 503(e) (as amended) and 583 of
the FD&C Act. Subparts B and D will set
forth the applicable standards and
processes for approved organizations to
perform licensure reviews and conduct
inspections.
1. National Standards for the Licensure
of Third-Party Logistics Providers
The DSCSA identifies 3PLs as
separate members of the drug supply
chain—distinct from wholesale drug
distributors—and specifically precludes
States from regulating 3PLs as wholesale
distributors (585(b)(2) of the FD&C Act).
FDA is required by section 584 of the
FD&C Act to establish national
standards for the licensure of 3PLs, and
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the Agency is proposing those standards
in subpart A of proposed part 205.
When finalized, each facility of an
entity meeting the definition of a 3PL in
section 581(22) of the FD&C Act (21
U.S.C. 360eee(22)) will be required to be
licensed by a State or Federal licensing
authority in accordance with the
standards articulated in subpart A of
proposed part 205.
2. National Standards for the Licensure
of Wholesale Drug Distributors
Prior to DSCSA’s enactment,
wholesale distributors engaging in
interstate commerce were required to be
licensed by the State in which they were
operating pursuant to section 503(e)(2)
of the FD&C Act (as then in effect). This
section established minimum standards,
terms, and conditions for licensing of
wholesale distributors pre-DSCSA. As
required by sections 503(e)(1)(B) (as
amended by the DSCSA) and 583 of the
FD&C Act, FDA is proposing to establish
national standards, terms, and
conditions through this rulemaking for
the licensure of wholesale distributors
that, when final, will apply to all State
licensing programs as well as to the new
Federal licensing program to be
operated by FDA. These new standards
would replace the previous standards
set forth in current part 205.
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3. Approval of Third Parties To Conduct
Licensure Reviews and Inspections
In accordance with section
584(d)(2)(A) of the FD&C Act, FDA is
proposing to establish a process by
which third-party organizations will be
approved by FDA to review a 3PL’s
qualifications for licensure. In addition,
in accordance with section 583(c) of the
FD&C Act, FDA is proposing to establish
a process by which third-party
organizations will be approved by FDA
to conduct inspections of wholesale
distributors for the purpose of licensure.
4. Conforming Changes
The regulation also proposes to
amend 21 CFR 10.50(c) and 12.21(a)(2),
which list statutory authorities that
provide the opportunity for a formal
evidentiary public hearing under 21
CFR part 12. Because the regulation
proposes that wholesale distributors and
3PLs could request a formal evidentiary
public hearing under part 12 for review
of decisions affecting the denial,
suspension, or revocation of 3PL or
wholesale distributor licenses issued by
the Secretary of Health and Human
Services (Secretary), sections 503(e),
583, and 584 of the FD&C Act would be
added to the list of statutory sections
under which there is the opportunity for
a hearing under §§ 10.50(c) and
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12.21(a)(2), regarding such decisions.
We are also proposing a conforming
change to 21 CFR 16.1(b) to describe
procedures for regulatory hearings that
would add actions related to approved
organizations under proposed §§ 205.19
and 205.33 respectively, including
revocation or suspension of approval, to
the list of actions for which a regulatory
hearing under 21 CFR part 16 may be
held.
C. Legal Authority
We are issuing this proposed rule
under sections 301, 501, 502, 503(e),
582, 583, 584, 585, 701(a), and 704 of
the FD&C Act (21 U.S.C. 331, 351, 352,
353(e), 360eee–1, 360eee–2, 360eee–3,
360eee–4, 371(a), and 374).
D. Costs and Benefits
In this rulemaking, we propose new
national standards for the licensing of
prescription drug wholesale distributors
and third-party logistics providers as
directed under the Drug Supply Chain
Security Act, Title II of the Drug Quality
and Security Act. If finalized, the rule
would also establish a Federal licensing
system for wholesale drug distributors
and third-party logistics providers to
use in the absence of a state licensure
program that is consistent with the
proposed national standards.
The standards for prescription drug
wholesale distribution in the proposed
rule would result in benefits to
consumers and benefits to distributors
from reducing the diversion of
prescription drugs. Other monetized
benefits include cost savings from
reducing the frequency and quantity of
licensure applications and cost savings
from reducing state licensing standards
in some states. We estimate that the
annualized benefits over 10 years would
range from $1.25 million to $31.50
million at a 7 percent discount rate,
with a primary estimate of $10.66
million. We estimate that the
annualized benefits would range from
$1.26 million to $32.18 million at a 3
percent discount rate, with a primary
estimate of $10.89 million.
We also expect that the proposed rule,
if finalized, would impose costs on
wholesale drug distributors, third-party
logistics providers, states, approved
organizations, and the Food and Drug
Administration (FDA). Costs to
wholesale drug distributors and thirdparty logistics providers include costs of
learning about the rule, reporting to
FDA, undergoing routine inspections,
writing and revising standard operating
procedures, and conducting background
checks. Wholesale-drug distributors
would also incur costs to furnish surety
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bonds to their state licensing authority
to obtain or renew their licenses.
Costs to states include the time spent
reading and understanding the rule,
passing or revising the laws and
regulations governing their licensure
programs, and inspecting WDD and 3PL
facilities. Approved organizations
would incur legal, application, and
training costs, as well as costs to inspect
WDD and 3PL facilities. FDA costs
include the costs to establish and
operate a reporting database and a
licensure program for wholesale drug
distributors and third-party logistics
providers and the costs to establish and
operate an approval program for
approved organizations.
We estimate that the annualized costs
over 10 years would range from $13.21
million to $20.63 million at a 7 percent
discount rate, with a primary estimate of
$16.92 million. We estimate that the
annualized costs over 10 years at a 3
percent discount rate would range from
$12.83 million to $20.10 million, with a
primary estimate of $16.47 million.
II. Table of Abbreviations/Commonly
Used Acronyms in This Document
Abbreviation/
acronym
What it means
3PL ...............
AO .................
CFR ..............
DSCSA .........
DQSA ............
FDA or the
Agency.
FD&C Act ......
Third-Party Logistics Provider.
Approved Organization.
Code of Federal Regulations.
Drug Supply Chain Security Act.
Drug Quality and Security Act.
U.S. Food and Drug Administration.
Federal Food, Drug, and Cosmetic
Act.
III. Background
A. Introduction
The DSCSA (Title II of Pub. L. 113–
54) was signed into law on November
27, 2013, to better protect the U.S. drug
supply chain. FDA’s implementation of
the DSCSA includes many activities,
including this proposed rule. Once
final, this rule will establish national
standards for licensure of wholesale
distributors and 3PLs, as required by the
DSCSA. For information on additional
FDA activities related to the DSCSA, a
web page describing FDA’s
implementation activities can be found
at: https://www.fda.gov/Drugs/
DrugSafety/DrugIntegrityand
SupplyChainSecurity/DrugSupplyChain
SecurityAct/default.htm.
B. Need for the Regulation: The DSCSA
and Establishment of National
Standards for Licensure
The U.S. drug supply chain remains
one of the safest in the world. However,
the increasingly globalized nature of the
supply chain brings with it complexities
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that increase threats to the safety and
security of the U.S. drug supply. A
breach at any point in the supply chain
carries potential for dangerous, and
even deadly, outcomes for American
consumers.
In passing the DSCSA, Congress
recognized the need for national
standards for the storage, handling, and
transport of prescription drugs and
directed FDA, in sections 583(a) and
584(d) of the FD&C Act, to establish
such standards by regulation for WDDs
and 3PLs, respectively. These national
standards will help diminish
opportunities for dangerous and
criminal conduct affecting the supply of
prescription drugs in the United States.
When final, every U.S. wholesale
distributor and 3PL facility will be held
to these standards through the statute’s
licensure requirements. Where a State
does not have a licensing program in
accordance with the regulation, FDA
will be the licensing authority.
This proposed rule, when finalized,
will provide much needed certainty and
clarity for wholesale distributors and
3PLs seeking licensure. In passing the
DSCSA, Congress believed the existing
system of different regulation regarding
supply chain security by each state
created a patchwork system of
governance and that a uniform national
standard would address this concern.
See statements of Senator Mikulski (Ref
1), Congressmen Mathis (Ref 2) and
Congressman Latta (Ref 3).
Requirements for wholesale
distributors currently vary significantly
across State lines, and many wholesale
distributors and 3PLs have facilities in
multiple States. Specifically, State
requirements and standards for
licensure can vary on topics such as the
length of time for which records must be
maintained; qualifications of facility
managers and designated
representatives; facility requirements;
licensure duration; renewal procedures;
exemptions from the definition of
wholesale distribution; and inspection
and approval requirements by certain,
specific organizations in order to receive
licensure in certain States. This
proposed rule, when finalized will be an
important first step in harmonizing
these requirements, thus allowing for
greater compliance and management of
licensure.
Additionally, we note that
commenters on FDA’s draft guidance
entitled ‘‘The Effect of Section 585 of
the FD&C Act on Drug Product Tracing
and Wholesale Drug Distributor and
Third-Party Logistics Provider Licensing
Standards and Requirements: Questions
and Answers’’ (Ref 4) agreed that
creation of a uniform national standard
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for licensure, through the issuance of
these regulations, should be the goal of
FDA (see, e.g., Ref 5). Commenters
noted that the patchwork of licensing
standards was precisely the regulatory
burden that the DSCSA was intended to
eliminate. (see, e.g., Ref 6) Comments
added that tracking and complying with
different standards in different States on
a continuing basis would be very time
consuming and add unnecessary costs
to the distribution chain (see, e.g., Ref
7).
We believe that the issuance of these
regulations, when finalized, will
provide far greater clarity to both States
and regulated industry as to the
requirements and expectations FDA has
with respect to licensure. The
publication of these regulations, when
finalized, and the approach to
preemption discussed in this document
will reflect the national standard
Congress intended, but will detail FDA’s
expectations with respect to licensure.
This will allow for greater certainty in
the logistics and distribution industry,
and in the supply chain as a whole.
Since the passage of DSCSA, States
have implemented disparate policies
with respect to licensure of 3PLs. Some
States repealed or eliminated 3PL as a
licensure category, others are waiting for
FDA to publish its regulations before
determining how to proceed, some are
licensing 3PLs under some other form of
licensure, and some do not regulate
3PLs at all (Ref 8). These regulations,
when finalized, will provide certainty
and clarity in the logistics industry.
The Agency believes finalizing these
proposed regulations is crucial to
implementation of licensure of 3PLs as
intended by DSCSA. Under section
582(a)(7) of the FD&C Act (21 U.S.C.
360eee–1(a)(7)), 3PLs are deemed
licensed until the effective date of these
regulations unless the Secretary has
made a finding that the 3PL does not
utilize good handling and distribution
practices and publishes notice thereof.
Until these regulations are issued, and
the framework for licensure established,
the Agency cannot institute the
provisions and the goals of DSCSA—to
further secure the supply chain by
including 3PLs as an authorized
member of the supply chain through the
licensure provisions, which will ensure
that they are appropriately credentialed,
inspected, and therefore duly qualified
to participate in the supply chain.
Theft and diversion of prescription
drugs continue to be major issues,
contributing to drug shortages and
creating significant financial losses, the
effects of which cascade throughout the
supply chain to consumers. FDA has
observed that these instances often
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6711
involve products distributed by
unlicensed wholesale distributors. FDA
standards, oversight, and regulations,
including to implement the
requirements of DSCSA, will lessen and
hopefully eliminate product diversion
in the legitimate supply chain.
According to the National Association
of Boards of Pharmacy (NABP)’s 2013
report entitled ‘‘Wholesale Drug
Distribution: Protecting the Integrity of
the Nation’s Prescription Drug Supply,’’
drug diverters and bad actors seek out
gaps in the distribution and regulatory
structure, specifically seeking out States
whose licensure framework is less
stringent (Ref. 9). This proposed rule,
when finalized, and the preemption of
inconsistent State provisions will
remedy this forum shopping for drug
diverters who seek to take advantage of
the lack of uniform framework.
Additionally, NABP’s 2013 report also
contends that the so-called ‘‘five percent
rule’’ is a policy that has been ripe for
exploitation due to the policy being
inconsistently legislated, interpreted,
and enforced from State to State. This
was a policy under which FDA had
previously concluded that sales of
prescription drugs by a retail pharmacy
to licensed practitioners for office use
would be considered to be minimal and
not constitute wholesale distribution, if
the total dollar volume of these sales
does not exceed 5 percent of the total
dollar volume of that retail pharmacy’s
annual prescription sales (see further
discussion in ‘‘Definitions’’ section
below). However, this interpretation
was not codified. The NABP observed
that ‘‘pharmacies acting as wholesalers
have been found to take advantage of
the parameters set by some States
[regarding minimal quantities] when it
comes to drug distribution. Rather than
dispensing the drugs as mandated, these
pharmacies retain them to resell to
wholesalers at an amount exceeding the
specified quantity of prescription
medications as permitted in certain
States (often times 5% of annual sales).
Some have gone as far as to sell their
entire inventory into the gray market’’
This proposed rule, when finalized,
codifies the principle that the five
percent rule only applies to pharmacy
sales for office use. Sales above five
percent for office use, or any sales to a
wholesale distributor, require the
pharmacy to become licensed and
regulated as a wholesale distributor.
This proposed rule will clarify this
requirement and close a potential
loophole that could lead to diversion of
products and excessive sales from
dispensers who are not licensed and
registered as wholesale distributors
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when they are engaging in wholesale
distribution.
Unlicensed wholesale distribution has
been a major source of diverted
products both leaving and reentering the
supply chain. Significant amounts of
drug diversion involve wholesale
distributors, either diverting the product
themselves from the supply chain, or
purchasing product that was diverted by
another actor. The DSCSA, which
requires uniform national standards for
licensure of wholesale distributors, will
cut down on these types of instances of
diversion since supply chain trading
partners are required to transact with
only other trading partners who meet
the strict requirements laid out in these
regulations. There are many examples of
diversion and criminal action by
wholesale distributors under the current
regulatory scheme, which these
regulations, when finalized, will
discourage, or possibly even prevent, in
the future.
As an example, from 2007–2014,
individuals involved with the
Minnesota Independent Cooperative
bought prescription drugs from a
network of illegal and unlicensed
sources and sold approximately $393
million worth of diverted prescription
drugs to wholesalers and retail
pharmacies throughout the United
States. These individuals falsified
transactional documents, as well as
licensure documents, to enter into
fraudulent transactions with dispensers
and other wholesalers. In a 2008
example detailed in the indictment, the
unlicensed individuals involved
allegedly bought a truckload of stolen
asthma inhalers for $662,000 and sold
them through the Minnesota
Independent Collective to another
wholesaler for about $1 million (Ref 10).
These regulations, when finalized, and
the DSCSA requirements that trading
partners only transact with authorized,
licensed trading partners, and verify
suspect and illegitimate product, will
make these schemes far more difficult to
achieve. Had DSCSA been the
prevailing regulatory scheme at the
time, other wholesale distributors and
dispensers would have been deterred
from doing business with the Minnesota
Independent Collective because they
were not an authorized trading partner.
In 2014, two individuals pleaded
guilty to their involvement in a drug
diversion and distribution scheme
through an entity called Cumberland
Distribution. Both defendants admitted
that Cumberland Distribution purchased
prescription drugs from individuals and
entities that were not licensed to engage
in the wholesale distribution of
prescription drugs and were not
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authorized to distribute prescription
drugs. Cumberland Distribution then
distributed these products to dispensers.
The prescription drugs were acquired
through various networks of ‘‘diverters’’
who obtained prescription drugs from
other unlawful sources. As a result,
Cumberland Distribution could not
lawfully resell the drugs. Pharmacies
throughout the United States purchased
these diverted prescription drugs from
Cumberland Distribution under the
guise that the products had been in the
custody of licensed wholesale
distributors or other authorized
distributors since being sold by the
original manufacturer (Ref 11). Under
DSCSA, the licensure status of these
purported wholesale distributors is
easily searchable and verifiable, thus
making diversion schemes, such as this,
far more difficult to achieve. In addition
to requiring FDA to establish national
licensure standards, the DSCSA outlines
critical steps for building an electronic,
interoperable system to identify and
trace certain prescription drugs as they
are distributed in the United States
(section 582(g) of the FD&C Act). This
system will enhance FDA’s ability to
protect American consumers from
exposure to drugs that may be unfit for
distribution and will increase efficiency
in the detection and removal of
potentially dangerous drugs from the
U.S. drug supply chain.
The FD&C Act, as amended by
DSCSA, requires FDA to establish
national standards for the licensure of
two critical members of the supply
chain: wholesale drug distributors and
3PLs. It also requires that only those
wholesale distributors and 3PL facilities
licensed according to these national
standards may engage in wholesale
distribution or 3PL activities,
respectively. Only licensed wholesale
drug distributors and 3PLs whose
facilities are so licensed will be
considered ‘‘authorized trading
partners’’ permitted under the FD&C
Act, as amended by DSCSA, to engage
in transactions related to the sale and
distribution of certain prescription
drugs with other members of the supply
chain.
To create the standards proposed in
the regulations, FDA conducted a
comprehensive review of existing State
standards for licensure including
storing, handling, and holding
prescription drugs, as well as other
nationally recognized standards and
model rules for wholesale distribution
and logistics, such as those created by
the NABP (Ref 12), Healthcare
Distribution Alliance (Ref 13), World
Health Organization (Ref 14), and the
Pharmaceutical Inspection Convention
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and Pharmaceutical Inspection Cooperation Scheme (jointly referred to as
PIC/S) (Ref 15). The Agency believes
that the proposed standards align with
existing practices and will help ensure
that 3PL and wholesale distribution
activities are undertaken in a manner
that minimizes diversion and threats to
the regulated supply chain.
C. Changes From the Prescription Drug
Marketing Act (PDMA)
Prior to the DSCSA’s enactment, the
last comprehensive legislative action
related to prescription drug distribution
was the Prescription Drug Marketing
Act of 1987 (PDMA) (Pub. L. 100–293).
Among other things, the PDMA required
wholesale distributors to obtain licenses
from States in which they were
operating (sec. 6 of the PDMA; also see
FDA’s 2001 Report to Congress on the
PDMA (Ref 16)). Under the PDMA, FDA
promulgated regulations that
established minimum standards, terms,
and conditions for licensure of
wholesale distributors. The PDMA
provided neither a specific definition of
3PL-type entities nor specific oversight
over them; without a distinct regulatory
framework for 3PLs, some States chose
to regulate and license 3PLs as
wholesale distributors, with some others
choosing to license 3PLs as separate
entities. The DSCSA requires that all
wholesale distributor and 3PL licenses
meet the standards established by FDA
(sections 503(e)(1)(B) and 584(a) of the
FD&C Act), and that 3PLs not be
licensed as wholesale distributors
(section 585(b)(2) of the FD&C Act).
If an entity owns a facility in which
it is engaging in 3PL activities and
wholesale distribution out of the same
facility, the entity will be required to
hold a 3PL license and a separate
wholesale distributor license for the
distinct functions they perform.
IV. Legal Authority
The Agency is proposing this rule
under the authority to propose national
standards for the licensing of wholesale
distributors and 3PLs granted to it by
various sections of the FD&C Act,
including sections 301, 503(e), 582, 583,
584, 585, 701(a), and 704 (21 U.S.C. 331,
351, 352, 353(e), 360eee–1, 360eee–2,
360eee–3, 360eee–4, 371(a), and 374).
Section 503(e) requires wholesale
distributors to be licensed according to
the standards, terms, and conditions
established by the Secretary, and section
583 requires FDA to establish by
regulation national standards for the
licensure of prescription drug wholesale
distributors. Section 584 requires 3PLs
to be licensed according to standards
established in regulations promulgated
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by FDA for the licensure of 3PLs.
Section 301(t) prohibits the failure to
comply with the requirements under
sections 584 and 503(e). Section 301
also prohibits a number of actions
concerning adulterated and misbranded
drugs. Section 585 provides that states
cannot implement licensing standards,
requirements, or regulations that are
inconsistent with, less stringent than,
directly related to, or covered by the
standards applicable under sections
503(e) and 584. Section 585 also
precludes states from regulating 3PLs as
wholesale distributors. To enforce these
and other provisions of the FD&C Act,
section 704 authorizes FDA to conduct
inspections. Section 701(a) of the FD&C
Act provides general authority to issue
regulations for the efficient enforcement
of the FD&C Act. By establishing
national standards for the licensing of
wholesale distributors and 3PLs, this
rule, when finalized, is expected to aid
in the efficient administration and
enforcement of the FD&C Act, and in
particular would help efficiently enforce
the provisions relating to licensure of
wholesale drug distributors and 3PLs.
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V. Description of the Proposed Rule
The national standards for the
licensure of 3PLs, required by section
584 of the FD&C Act, as amended by
DSCSA, are set forth in subpart A of
proposed part 205. The national
standards for the licensure of wholesale
distributors, required by sections 503(e)
and 583 of the FD&C Act, as amended
by DSCSA, are set forth in subpart C of
proposed part 205. The process and
standards for third-party accreditation
programs to become approved by the
Federal Government to evaluate the
qualifications of 3PLs for licensure, as
required by section 584(d) of the FD&C
Act, are established in subpart B of
proposed part 205. The process and
standards for third-party accreditation
and inspection services to become
approved by the Federal Government to
conduct inspections of wholesale
distributors, as permitted by section
583(c) of the FD&C Act, are set forth in
subpart D of proposed part 205.
A. Scope/Applicability (Proposed
§§ 205.1 and 205.2)
In accordance with section 584 of the
FD&C Act, FDA is proposing to establish
the national standards for licensing by
State and Federal licensing authorities
set forth in subpart A of part 205 that
would apply to 3PL facilities in any
State (see proposed § 205.1).
Furthermore, in accordance with section
503(e)(1) of the FD&C Act, FDA is
proposing to establish the national
standards for wholesale distributors set
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forth in subpart C of part 205 that would
apply to wholesale distributors of
prescription drugs in any State (see
proposed § 205.1). The standards, terms,
and conditions for licensure established
under part 205, subparts A and C, once
finalized, would apply to all State and
Federal 3PL and wholesale distributor
licenses.
All 3PL facilities are required to
obtain a 3PL license for each facility of
such 3PL. The FD&C Act, as amended
by DSCSA, prohibits States from
regulating 3PLs as wholesale
distributors. A 3PL that also engages in
wholesale distribution in the same
facility in which it engages in 3PL
activities must obtain a separate
wholesale distribution license (see
proposed § 205.1).
An entity is considered a wholesale
distributor if the entity is engaged in the
distribution of a drug subject to section
503(b) (relating to prescription drugs) of
the FD&C Act (21 U.S.C. 353(b)), to a
person other than a consumer or patient,
with a few exclusions. Under section
201(g) of the FD&C Act (21 U.S.C.
321(g)), a drug includes a bulk drug
substance, and under current FDA
regulations, the term bulk drug
substance means any substance that is
represented for use in a drug and that,
when used in the manufacturing,
processing, or packaging of a drug,
becomes an active ingredient or a
finished dosage form of the drug. The
term does not include intermediates
used in the synthesis of such substances
(21 CFR 203.3(e)). FDA believes that the
distribution of bulk drug substances
must have the same safeguards and
provisions as the distribution of
finished drug products. The same
safeguards that prevent diversion and
theft and secure the pharmaceutical
distribution supply chain generally
must include the transfer of bulk drug
substances, as they are subject to the
same concerns as the distribution of
prescription drugs in finished dosage
form.
FDA is proposing to establish the
process and standards that would apply
to any third-party accreditation or
inspection services seeking to obtain or
maintain approval by FDA to evaluate
qualifications of 3PLs for licensure or to
conduct inspections of wholesale
distributors (see proposed § 205.1).
Once finalized, proposed subparts B and
D of part 205 would establish the
process and standards for third-party
accreditation and inspection services to
become approved by the Secretary to
review the qualifications of 3PLs for
licensure, as required by section 584(d)
of the FD&C Act, and to conduct
inspections of wholesale distributors, as
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permitted by section 583(c) of the FD&C
Act (see proposed § 205.2) (i.e., to
become ‘‘approved organizations’’).
B. Definitions (Proposed § 205.3)
By its terms, the definitions of terms
in section 581 of the FD&C Act (21
U.S.C. 360eee) applies in subchapter H.
However, because those terms are also
used throughout section 503(e) of the
FD&C Act (as amended by the DSCSA),
FDA considers the definitions and
interpretations contained in section 581
of the FD&C Act to apply to those terms
when used in proposed part 205.
Specifically, the definitions of the
following terms contained in section
581 of the FD&C Act apply when used
in proposed part 205: Affiliate,
authorized, dispenser, illegitimate
product, licensed, manufacturer,
product, repackager, return, specific
patient need, suspect product, thirdparty logistics provider, and wholesale
distributor. In addition, FDA is
proposing the definition of the
following additional terms to help
clarify the requirements. FDA believes
that these proposed definitions align
with existing law and regulations, as
well as current industry practices.
• 3PL Activities: Includes
warehousing and ‘‘other logistics
services’’ that are undertaken with
respect to a product (as defined in
proposed § 205.3(k)).
• Change of Entity Ownership:
Recognizing that businesses often
undergo changes in corporate structure
through mergers, acquisitions, and other
transactions, FDA proposes that
‘‘change of entity ownership’’ be
defined to help ensure consistency with
regard to how such changes will affect
licensure. The definition describes the
events that would constitute a change in
ownership with respect to a partnership,
unincorporated sole proprietorship,
corporation, or limited liability
company.
• Co-Licensed Partner: One of two or
more entities that have entered into an
agreement for the right to engage in the
marketing of a prescription drug. The
Agency believes this definition is in
alignment with industry practice and
existing laws.
• Designated Representative: An
individual who is designated as the
representative of the facility manager
and, as such, is identified by the
licensee as responsible for managing the
daily operation of the establishment in
compliance with licensure requirements
and has the authority to implement
corrective action when necessary. This
individual is also responsible for
ensuring that personnel are
appropriately qualified, assigned, and
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trained to accomplish their duties. The
Agency believes this definition reflects
current practices and understanding.
• Entity or Entities: A business
organization, such as a corporation,
company, association, firm, partnership,
society, sole proprietorship, or joint
stock company.
• Facility: A site at one general,
permanent, physical location used to
store or handle prescription drugs. For
purposes of proposed part 205, a facility
does not include a site, such as a
corporate office or headquarters, where
the sole activity conducted at the site is
one of oversight, support, or business
administrative function.
• Key Personnel: Any individual who
has responsibility for managing the
operations of the wholesale distributor,
including any principal, owner,
director, officer of the wholesale
distributor, designated representatives,
and other individuals who are
authorized to enter areas where
prescription drugs are held and are
likely to handle those prescription drugs
as a part their responsibilities within the
operation.
Æ Section 583(b)(5) of the FD&C Act,
as amended by DSCSA, requires that
FDA establish standards for the
‘‘establishment and implementation of
qualifications for key personnel’’ of
wholesale distributors. These key
personnel must be sufficiently qualified
and screened to carry out the important
responsibilities that come with
positions within a wholesale
distribution company. FDA believes
individuals who hold these positions
must be held to a high standard of
qualification as they are entrusted with
important aspects of protecting the
pharmaceutical distribution supply
chain.
• Minimal Quantities: An annual
dollar volume of prescription drugs sold
by a retail pharmacy to licensed
practitioners for office use that does not
exceed 5 percent of the total dollar
volume of that retail pharmacy’s annual
prescription sales.
Æ Section 503(e)(4) of the FD&C Act
excludes a number of activities from the
definition of wholesale distribution.
One excluded category, listed at section
503(e)(4)(E) of the FD&C Act, is ‘‘the
distribution of minimal quantities of a
drug by a licensed retail pharmacy to a
licensed practitioner for office use.’’
FDA has previously considered what
constitutes minimal quantities in
determining when the practices of a
retail pharmacy become wholesale drug
distribution and thereby subject to
licensure (see 64 FR 67720, December 3,
1999). For example, in preamble
discussions around codifying provisions
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related to wholesale distribution, FDA
proposed a minimal quantities limit,
considered comments, and ultimately
concluded that sales of prescription
drugs by a retail pharmacy to licensed
practitioners for office use would be
considered to be minimal and not
wholesale distribution, if the total dollar
volume of these sales does not exceed
5 percent of the total dollar volume of
that retail pharmacy’s annual
prescription sales.
Æ The Agency continues to maintain
its position that a 5-percent limit to
what constitutes minimal quantities is
sufficient ‘‘to meet the needs of licensed
practitioners who may not purchase
enough prescription drugs to go through
a wholesale distributor and thus may
not otherwise be able to easily obtain
drugs for office use’’ (64 FR 67720 at
67748). We believe this standard is still
relevant and is the industry standard.
We note that in January 2013, the NABP
passed a resolution that supports
limiting the five percent rule to allow
for transfer ‘‘between pharmacies, or
from pharmacy to or from pharmacies to
practitioners, only for the purpose of
dispensing or administration, but not for
resale; and to prohibit the transfer,
distribution, or sale of prescription
drugs from pharmacies to wholesalers
for resale’’ (Ref 17). The transfer or sale
from dispenser to dispenser for a
specific patient need is already
considered to not be wholesale
distribution under the FD&C Act (see
section 503(e)(4)). This NABP resolution
accords with FDA’s proposed definition
of minimal quantities. We request
comment on the codification of this 5
percent limit for office use and of the
definition of minimal quantities.
Æ Accordingly, a licensed retail
pharmacy that distributes more than 5
percent of its annual sales to licensed
practitioners is engaging in wholesale
distribution, subject to all the
requirements for wholesale distributors,
unless its activities are otherwise
excluded from the definition of
wholesale distribution. The exemption
for distributing minimal quantities of
drugs by retail pharmacies to licensed
practitioners for office use was ‘‘not
created to confer a special benefit on
retail pharmacies, but to meet the
legitimate need of licensed
practitioners’’ (64 FR 67720 at 67748).
For purposes of section 503(e)(4)(E) of
the FD&C Act, FDA is proposing to
codify its position on ‘‘minimal
quantities’’ in the proposed § 205.3(h) to
mean the ‘‘total annual dollar amount
sold to licensed practitioners for office
use does not exceed 5 percent of the
total dollar volume of that retail
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pharmacy’s annual prescription drug
sales.’’
Æ The Agency also notes that this
exclusion only applies to sales of
prescription drugs from licensed
pharmacies to licensed practitioners for
office use. FDA understands that some
States and other entities have expanded
the applicability of this exclusion from
the definition of wholesale distribution
to allow for distribution from
pharmacies to other entities outside of
licensed practitioners for office use, but
FDA notes that this practice is not
allowed under current Federal law. The
statutory language at section 503(e)(4)(E)
of the FD&C Act specifically limits the
exclusion to the distribution of minimal
quantities of a drug between a licensed
retail pharmacy and a licensed
practitioner for office use. Unless a
specific sale or transfer of a drug from
one dispenser to another dispenser is
outside of the definition of wholesale
distribution because it is to a consumer
or patient (e.g., to fulfill a ‘‘specific
patient need,’’ as defined at section
581(19) of the FD&C Act), a pharmacy
that sells or trades prescription drugs to
other pharmacies or other entities falls
within the definition of wholesale
distribution. Such activity is considered
wholesale distribution under section
503(e)(4) of the FD&C Act, subject to all
the requirements of wholesale
distributors.
• Other Logistics Services: Services
provided by entities that accept or
transfer direct possession of products
from that entity’s facility within the
United States and its territories on
behalf of a trading partner (e.g.,
manufacturer, wholesale distributor,
dispenser), but that do not take
ownership of the product or have the
responsibility to direct a product’s sale
or disposition. It also includes services
undertaken with respect to a product for
a repackager that is acting on behalf of
a manufacturer, wholesale distributor,
or dispenser.
Æ Under the DSCSA, the definition of
3PL includes entities that conduct
‘‘other logistics services’’ on behalf of a
manufacturer, wholesale distributor, or
dispenser of a product. The Agency
recognizes that 3PLs may perform 3PL
activities for repackagers and proposes
to include in the definition of ‘‘other
logistics services’’ those services
undertaken with respect to a product for
a repackager acting on behalf of a
manufacturer, wholesale distributor, or
dispenser.
Æ Under this proposed definition, a
common carrier that only transports a
product, but does not take ownership of
the product, is not conducting ‘‘other
logistic services.’’ Similarly, an entity
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that directs the sale or disposition of the
product but does not take possession
(such as a broker) would not be
conducting ‘‘other logistics services’’
and does not meet the definition of a
3PL, but may be engaged in activities
that meet the definition of a
manufacturer or wholesale distributor.
• Other Than a Consumer or Patient:
A person receiving the drug who is not
(i) the individual identified as the
recipient of the prescription drug, (ii) a
dispenser fulfilling a specific patient
need, or (iii) the clinical investigator, as
defined in 21 CFR 312.3(b) (or any
successor regulation).
Æ FDA considers certain types of
prescription drug distribution as outside
the scope of ‘‘wholesale distribution’’
under section 503(e)(4) of the FD&C Act
because they constitute ‘‘the
distribution of a drug’’ to a ‘‘consumer
or patient,’’ which is excluded from the
definition of wholesale distribution. The
first of these is the distribution to, or
receipt by, the patient, who, for
purposes of DSCSA, FDA considers to
be the individual intended to take or be
administered the prescription drug. This
would typically be the individual whose
name appears on the prescription.
Æ FDA also considers the transfer or
sale of a drug from one dispenser to
another to fulfill a ‘‘specific patient
need’’ to be outside the scope of
wholesale distribution. Specific patient
need is defined at section 581(19) of the
FD&C Act as ‘‘the transfer of a product
from one pharmacy to another to fill a
prescription for an identified patient.’’
FDA would note, however, that a
dispenser who transfers or sells a drug
to a trading partner other than another
dispenser, or to another dispenser
where there is no specific patient need
evidenced by a prescription, is
distributing a drug to someone other
than a consumer or patient, which, if
not otherwise excluded under section
503(e)(4) of the FD&C Act, would be
engaging in wholesale drug distribution
requiring a wholesale distributor
license.
Æ Finally, FDA considers the sale or
transfer of a drug for investigational or
research purposes to an investigator, as
defined in 21 CFR 312.3 (or any
successor regulation), under an
investigational new drug application
(IND) submitted to FDA to be outside
the scope of wholesale distribution
because the drug is used for in vitro,
clinical, or other research purposes
under an IND.
Æ For these reasons, FDA is proposing
to exclude these types of transactions
from the scope of wholesale
distribution.
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• Product: A prescription drug in a
finished dosage form that is ready for
administration to a patient without
substantial further manufacturing (e.g.,
capsules, tablets, lyophilized products
before reconstitution).
Æ The definition of ‘‘product’’
proposed here is broader and more
inclusive than that used for purposes of
product tracing detailed in section 582
of the FD&C Act as defined in section
581(13). As used in section 584 of the
FD&C Act for purposes of licensure of
a 3PL, the term ‘‘product’’ excludes
active pharmaceutical ingredients
intended for incorporation into a
finished drug product but have yet to
undergo substantial further
manufacturing to become the finished
dosage form for administration. Of note,
for purposes of section 582 of the FD&C
Act (21 U.S.C. 360eee–1), the definition
for ‘‘product’’ excludes certain types of
prescription drugs in finished dosage
form (section 581(13) of the FD&C Act).
• Significant Disciplinary Action:
Any action by a State or Federal
licensing authority that would limit or
prevent a 3PL from conducting 3PL
activities, or would limit or prevent a
wholesale distributor from distributing
or facilitating the distribution of
prescription drugs. This includes
suspension or revocation of a 3PL or
wholesale distributor license, State
controlled substances license, or Drug
Enforcement Administration (DEA)
registration, and potentially includes
other disciplinary actions such as a
consent decree or final ruling of a State
licensure board, depending on the
impact on the 3PL’s or wholesale
distributor’s legal ability to perform
licensed activities.
• Unfit for Distribution: A
prescription drug that has been
identified as a drug whose sale would
violate the FD&C Act. This definition
includes prescription drugs identified as
suspect or illegitimate (582(c)(4) of the
FD&C Act); adulterated, including drugs
rendered nonsaleable because
conditions (such as return, recall,
damage, or expiry) cast doubt on the
drug’s safety, identity, strength, quality,
or purity (section 501 of the FD&C Act);
or misbranded (section 502 of the FD&C
Act (21 U.S.C. 352)).
Æ FDA believes that prescription
drugs unfit for distribution must be
segregated from those that are fit for
distribution to protect patients from
receiving potentially defective or
harmful prescription drugs and prevent
the distribution of drugs that are unfit
for distribution.
Æ A wholesale distributor or 3PL
could potentially identify a prescription
drug as unfit for distribution through
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their own examination of incoming and
outgoing shipments of prescription
drugs as outlined by proposed 21 CFR
205.12(c)(1) for 3PLs and 205.26(c)(4)
for wholesale distributors, through
inventory review under proposed 21
CFR 205.12(c)(4)(i) for 3PLs and
205.26(c)(5)(i)(B) for wholesale
distributors, through other internal
means designed to detect product that is
unfit for distribution, or be notified of
a prescription drug’s status as unfit for
distribution by a trading partner or
others.
• Wholesale distribution:
Æ Section 503(e)(4) of the FD&C Act
defines wholesale distribution as ‘‘the
distribution of a drug subject to [section
503(b) of the FD&C Act] to a person
other than a consumer or patient, or
receipt of a drug subject to [section
503(b) of the FD&C Act] by a person
other than the consumer or patient.’’
The definition then goes on to list 19
activities that are not considered
wholesale distribution. Of these, FDA is
providing clarification about several
that may be causing some confusion for
industry and the States.
Æ Section 503(e)(4)(C) of the FD&C
Act states that the distribution of a drug
or an offer to distribute a drug for
emergency medical reasons, including a
public health emergency declaration
pursuant to section 319 of the Public
Health Service Act, does not constitute
wholesale distribution. In addition to
distribution of a drug during a declared
public health emergency pursuant to
section 319 of the Public Health Service
Act, FDA considers the following
circumstances to constitute emergency
medical reasons and therefore be
excluded from the definition of
wholesale distribution: (1) The
distribution of a drug to a first
responder or other authorized
individual administering prescription
drugs to acutely ill or injured persons in
an emergency situation and outside a
healthcare facility, and (2) a long-term
care facility receiving an emergency kit
containing drugs for use in emergency
situations to treat acutely ill or injured
persons during hours of the day when
necessary drugs cannot be obtained
from a dispenser. Pursuant to
503(e)(4)(C) of the FD&C Act, this
exclusion from the definition of
wholesale distribution does not include
distributing a drug during a shortage
unless such shortage was caused by a
public health emergency.
Æ The exclusion at section
503(e)(4)(E) of the FD&C Act for the
distribution of minimal quantities of
prescription drugs by a licensed retail
pharmacy to a licensed practitioner for
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office use is discussed in the description
of the term ‘‘minimal quantities.’’
Æ Section 503(e)(4)(H) of the FD&C
Act excludes ‘‘the distribution of a drug
by the manufacturer of such drug’’ from
wholesale distribution. Therefore, FDA
considers the activities of a
manufacturer, as defined at section
581(10) of the FD&C Act, when
distributing its own drug, as excluded
from the definition of wholesale
distribution and not subject to the
requirements that apply to wholesale
distributors. FDA believes this is
supported by the term ‘‘wholesale
distributor,’’ which is defined at section
581(29) of the FD&C Act, in relevant
part, as ‘‘a person (other than a
manufacturer, a manufacturer’s colicensed partner . . .) engaged in
wholesale distribution.’’ The Agency
notes, however, that if Manufacturer A
purchases and distributes Manufacturer
B’s drug, for which Manufacturer A has
no affiliation and is not a co-licensed
partner, Manufacturer A is engaged in
wholesale distribution, subject to all the
requirements for wholesale distributors.
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C. National Standards for Third-Party
Logistics Providers
1. 3PL Licensure
3PL facilities are required to be
licensed in order to conduct activities in
any State (section 584 of the FD&C Act).
As such, the proposed regulation
provides that a 3PL facility may not
conduct 3PL activities unless it is
licensed by the State from which it
conducts 3PL activities, or by FDA if the
State from which 3PL activities are
conducted has not established a
licensure program in accordance with
the regulations, as set forth in section
584(a) of the FD&C Act (see proposed
§ 205.4(a)). In addition, the requirement
in 584(a) of the FD&C Act that each
facility of the 3PL must be licensed,
such that a 3PL with multiple facilities
in a single State will have multiple
licenses from that State, is set forth in
proposed § 205.4(b).
Under FDA’s proposed regulation, if a
3PL owns or leases a facility serving as
a warehouse for products, the State in
which the facility is located will be
considered the State from which the
3PL ‘‘conducts activities’’ and will be
the State from which the 3PL must
obtain a license for that facility under
proposed § 205.4(a)(1). FDA
understands there has been some
confusion about whether an entity hired
or contracted by another trading partner
to provide labor, logistic, or
administrative services for that trading
partner in that trading partner’s facility
would be considered a 3PL. This could
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occur, for example, where a wholesale
distributor hires a contractor to provide
such support services from within the
wholesale distributor’s facility
exclusively for that wholesale
distributor. In this scenario, the
contractor’s activities from within the
wholesale distributor’s licensed facility
would be captured by the wholesale
distributor’s license and obligations for
compliance, and the facility would not
be considered a 3PL or required to have
a 3PL license. However, an entity that
operates a facility in which it engages in
wholesale distribution and performs
3PL activities on behalf of other trading
partners for products it does not own or
direct the sale or disposition of is
required to obtain both a wholesale
distributor and 3PL license for that
facility.
Additionally, pursuant to section
584(a)(2) of the FD&C Act, if a product
is distributed in interstate commerce,
the 3PL must be licensed by the State
into which the product is distributed if
that State requires such license;
however, section 584(a)(2) of the FD&C
Act also provides that if the 3PL is
licensed by FDA, as described in section
584(a)(1)(B), the 3PL is not required to
obtain a license from the State into
which the product is distributed (see
proposed § 205.4(a)(3)). Finally, to
ensure that a facility and those
responsible for its operations meet the
licensing standards, FDA proposes to
require that 3PL licenses be facility- and
owner-specific and not transferable to
another establishment or owner (see
proposed § 205.4(c)). 3PL licenses must
be held at the licensed facility and must
be made available to State, Federal, or
other licensing authorities upon request
(see proposed § 205.4(d)).
Section 584 states that the national
licensing standards for 3PLs established
by regulation take effect 1 year after the
date such final regulation is published
(section 584(d)(1) and (3) of the FD&C
Act). National licensing standards for
wholesale distributors established by
regulation take effect 2 years after the
date such final regulation is published
(section 583(a) and (e)(3) of the FD&C
Act). For several reasons, including
those discussed below, FDA does not
intend to enforce the licensing
requirements for 3PLs until 2 years after
the final regulation is published.
FDA recognizes that 1 year may be
insufficient time for States to implement
3PL licensure programs, should they
decide to implement such a program,
and for 3PLs to apply for licensure
under these programs. Setting up a state
licensure program may require
additional time. This is especially true
in States that will require State
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legislative action to implement a
licensure program, with some State
legislatures only meeting biennially.
Considering these factors, FDA does
not intend to enforce these requirements
with respect to the national standards
for licensure until 2 years after the
regulation is finalized. This will help
ensure there is time for States to
establish or modify their licensure
programs in accordance with the new
standards and time for 3PLs to apply
and obtain a new license.
For 1 year after the effective date of
the final regulation, FDA also does not
intend to enforce the requirements of
section 582(b)(3), (c)(3), (d)(3), and (e)(3)
of the FD&C Act with respect to a
manufacturer, wholesale distributor,
dispenser, or repackager who has as a
trading partner a 3PL that is not
licensed, unless the 3PL is not licensed
because the Secretary or a state
licensing body has made a finding that
the 3PL does not utilize good handling
and distribution practices and has
published notice thereof.
2. General Application Requirements for
Licensure
The general requirements that must be
met for a State or Federal licensing
authority to issue a license to a 3PL
facility are proposed in § 205.5. As
proposed, § 205.5(a) includes
requirements applicable to the
individual who submits the application
and states that the applicant must
submit all required information and pay
any applicable licensing fee to be issued
a license.
The information that would be
required as part of a 3PL’s application
for licensure of a facility is set forth in
proposed § 205.5(b). FDA believes this
information is necessary for the
licensing authority to assess whether the
3PL is in good standing and has the
infrastructure and capabilities to fulfill
its duties and obligations under these
national standards for 3PL licensure.
This includes disclosing whether the
3PL facility manager or designated
representative has ever been convicted
of a felony relating to prescription drug
distribution (see proposed § 205.5(b)(7)).
FDA believes that this information is
crucial to protect the integrity of the
prescription drug supply chain by
ensuring that those responsible for the
daily operations of a 3PL facility do not
have a history of violating the FD&C
Act. In addition, in its application for
licensure renewal, under proposed
§ 205.7, a 3PL would be required to
certify that the 3PL facility has
continually met the requirements of
§ 205.5 and will inform the licensing
authority of certain changes to
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information if such changes have not
already been submitted to the licensing
authority (see proposed § 205.5(c)).
3. The Federal Licensure Process
Section 584(a)(1)(B) of the FD&C Act
gives FDA the authority to license 3PLs
directly if the State from which a 3PL
conducts 3PL activities has not
established a licensure requirement in
accordance with the regulations. The
process that FDA will use for issuing
licenses to 3PLs is detailed in proposed
§ 205.6. While § 205.6 is only applicable
to 3PLs obtaining a license from FDA,
FDA suggests that States implement
similar procedures. FDA intends to help
stakeholders understand who the
appropriate licensing authority is in the
3PL’s State.
The FDA licensure process begins
when a 3PL seeking licensure for a
facility submits an application to FDA
for review and consideration (see
proposed § 205.6(a)). The DSCSA
permits FDA to approve third-party
organizations, referred to as approved
organizations or AOs, to evaluate a
3PL’s qualifications for licensure
(section 584(d)(2)(A)–(B) and 584(e) of
the FD&C Act). If FDA has approved one
or more organizations to review a 3PL’s
qualifications for licensure, a 3PL
should note the AO it prefers on its
application. FDA generally intends to
review a 3PL’s qualifications for
licensure only if the review cannot be
completed by an FDA-approved AO.
The licensure review consists of a
review of all documents submitted in
support of the application and an
inspection of the facility pursuant to
proposed § 205.16. FDA intends for the
licensure application process to be
electronic (see proposed § 205.6(a)) and
to leverage existing technologies to
streamline the licensure process.
While the DSCSA permits AOs to
review a 3PL’s qualifications for
licensure and to recommend to FDA
whether a 3PL should be licensed, the
responsibility for determining whether a
3PL meets all applicable requirements
and to issue the license remains with
FDA (see proposed § 205.6(b)).
So as not to delay the licensure
process, when reviewing an application,
FDA intends to work with 3PLs to
correct minor errors made on the
application and communicate with the
3PL about additional information the
Agency may need (see proposed
§ 205.6(c)). When FDA determines that
a 3PL facility meets the applicable
requirements and that none of the
prohibited factors listed in proposed
§ 205.9(a)(1) are present, FDA will send
the applicant an approval letter and a
licensing certificate, effective on the
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date it is issued (see proposed
§ 205.6(d)).
FDA recognizes that a 3PL may have
concerns about what happens to the
status of its license if the AO that
reviewed its qualifications for licensure
has disciplinary sanctions taken against
it that affect its approval status or if it
is otherwise no longer considered an
approved AO. While a 3PL facility
should not be penalized for the actions
of the AO that reviews its qualifications
for licensure, FDA must ensure that the
AO’s review and findings provide a
reliable basis for licensing decisions.
As such, FDA is proposing that the
approval status of the AO that
performed the licensure review for a
3PL facility will not automatically affect
the licensure of a licensed 3PL facility
that is otherwise in good standing (see
proposed § 205.6(e)). Rather, in the
event that an AO has disciplinary
sanctions taken against it, ends its
business, or is otherwise no longer
considered an approved AO, the license
of any 3PL facility reviewed by that AO
will be subject to appropriate action in
accordance with § 205.9 and other
applicable statutes or regulations. FDA
may verify the 3PL’s compliance status
and review the facts in that situation to
determine the potential effect, if any, on
the licensure of 3PL facilities reviewed
by that AO.
FDA intends to publish additional
guidance regarding the process and
procedures related to obtaining and
maintaining a 3PL license issued by
FDA.
4. Changes to Information, Location, or
Ownership of a Licensed 3PL
For the licensing authority to
effectively carry out its responsibilities,
a 3PL must keep its license information
current and report any changes in
information, including those that may
significantly affect operations such as
changes in location or ownership, to the
licensing authority. Presently, the
reporting requirements for these types of
changes vary by State. FDA is proposing
in § 205.7 that changes to certain
information, including, for example, any
changes in information submitted as
part of an application for licensure, be
submitted electronically to the licensing
authority within 30 calendar days of the
change (see proposed § 205.7(a)).
Additionally, because a license is
facility- and-owner specific (see
proposed § 205.4(c)), the Agency is
proposing that changes in the location
or the ownership of a facility will
require a new license (see proposed
§ 205.7(b) and (c)).
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5. Expiration and Renewal of Licenses
The DSCSA requires that the
regulations establishing national
standards for 3PLs provide that a 3PL
license expires 3 years after the date of
issuance, with the option for renewal for
additional 3-year periods (section
584(d)(2)(H) of the FD&C Act). FDA is
proposing to implement this
requirement under proposed § 205.8 by
saying that all 3PL licenses, whether
newly issued or renewed by the
licensing authority, expire 3 years from
the date of issuance or renewal. FDA
also proposes that 3PLs may not submit
renewal applications more than 90 days
prior to the license’s date of expiration
to ensure that licenses are renewed
based on current information. While we
do not anticipate lengthy administrative
delays by the licensing authority, if a
3PL files an application for a license
renewal within the appropriate time
period and there is an administrative
delay reviewing the license application
that causes the 3PL license to lapse, the
3PL will not be penalized for that
administrative delay. In this scenario,
the 3PL’s license will be considered
valid during the period of the
administrative delay (see proposed
§ 205.8).
The Agency understands that at the
time a final rule covering these
proposed national standards goes into
effect, there are likely to be 3PLs with
existing licenses under State law.
Nevertheless, 3PLs with existing State
licenses must obtain new licenses in
accordance with section 584(a) of the
FD&C Act. These national licensing
standards serve an important function of
ensuring consistency across the
domestic market. However, as described
above, FDA does not intend to enforce
the requirements with respect to the
national standards for licensure of 3PLs
until 2 years after the regulation is
finalized. FDA’s proposed requirements
are further detailed in proposed
§ 205.16, which discusses the required
inspections prior to licensure.
6. Licensure Denial, Suspension,
Reinstatement, and Revocation—Notice
and Opportunity To Request a Hearing
The standards for licensure denial are
set forth in proposed § 205.9.
Proposed § 205.9(a)(1) enumerates 9
circumstances under which the
licensing authority would be required to
deny a 3PL’s request for licensure or
license renewal. FDA believes that this
list will help 3PLs focus on good storage
practices outlined by FDA that are
necessary to protect the integrity of the
products in the pharmaceutical
distribution supply chain. To avoid
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denial or delays of their applications,
3PLs should ensure that they address
the reasons for denial of a license
outlined in proposed § 205.9(a)(1) when
they file for licensure.
Proposed § 205.9(a)(2) details the
process afforded to 3PLs whose
applications for licensure have been
denied. FDA is proposing to provide
applicants with the opportunity to
provide additional information for
reconsideration of the denial. If the
licensing authority denies a 3PL’s
request for licensure after
reconsideration, the 3PL will receive a
notice of opportunity to request a
hearing under existing FDA hearing
procedures. FDA requests comment
regarding the reconsideration and
appeal process outlined in this
regulation for 3PLs whose applications
for licensure have been denied.
The proposed standards for
suspending a 3PL license are set forth in
§ 205.9(b) and (c) and are based on the
severity of risk posed to the public
health. Under most circumstances, we
anticipate that a 3PL would have the
opportunity for a hearing before
licensure suspension. However, under
certain circumstances that involve
repeated conduct detrimental to the
public health or refusal to correct
significant issues that could lead to the
dissemination of illegitimate product,
the Agency may suspend a license
immediately while giving the 3PL an
opportunity to request a hearing. Under
proposed § 205.9(b), a 3PL’s license may
also be suspended after the 3PL receives
a notice of opportunity to request a
hearing. A suspended 3PL must cease
all 3PL activities until their license is reinstated. This provision applies when
the licensing authority has a reasonable
belief that the 3PL is not in compliance
with licensure requirements. FDA is
proposing for § 205.9(b) to require the
licensing authority to notify the 3PL in
writing of the intent to suspend its
license. A 3PL will have 30 days from
the date listed on the notice of intent to
suspend a license to provide additional
information to the licensing authority so
it may reconsider its decision.
If reconsideration is not sought or is
denied, the licensing authority will
inform the 3PL in writing of its formal
intent to proceed with license
suspension. The notice will contain a
statement informing the 3PL that it can
request a hearing on the question of
whether there are sufficient grounds for
suspension. The 3PL will have 10 days
from the date on the notice to inform the
licensing authority of its intent to
request a hearing; otherwise the
opportunity for a hearing will be waived
and the license suspended. FDA
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believes this process will afford 3PLs a
sufficient opportunity to present
information and attempt to remedy
noncompliance issues which may
threaten the safety of products in the
supply chain. FDA requests comment
regarding this reconsideration and
appeal process.
Proposed § 205.9(c) allows for license
suspension prior to opportunity for
hearing and effective immediately if the
3PL’s noncompliance poses an
imminent threat to public safety. For
example, if a 3PL is warehousing or
shipping illegitimate product, and once
made aware, corrective actions to
protect the public health from the threat
of these products are not taken, the
3PL’s license could be suspended
immediately. Another example could be
a scenario where the conditions under
which drugs are held or warehoused
cause the product to be illegitimate and
the 3PL refuses to correct the conditions
or continues to ship these illegitimate
products. Under the proposed
regulation, in such a situation, the
licensing authority will inform the 3PL
in writing that its license is suspended.
The notice will also contain a statement
informing the 3PL that it may request a
hearing and that a hearing, if granted,
will be afforded within 10 days upon
the receipt of the 3PL’s request for
hearing. The 3PL has 10 days from the
date on the notice of suspension to
request a hearing; otherwise its
opportunity for a hearing will be
waived. FDA believes that this limits
the amount of time a 3PL license would
be suspended while providing a
reasonable amount of time both for the
3PL to review the notice of suspension
and collect the necessary information to
demonstrate that its license should not
be suspended, and for FDA to consider
a request for a hearing and to schedule
and prepare for a hearing, if the hearing
request is granted. FDA believes
immediate suspension of a 3PL license
is crucial in cases where continued
operation of the 3PL presents an
imminent threat to public safety and the
pharmaceutical supply chain.
Under proposed § 205.9(d), a 3PL’s
suspended license may be reinstated if
the 3PL can demonstrate to the licensing
authority that it is in compliance with
regulation requirements.
Under the proposed rule, the process
outlined at 21 CFR 10.75 is the default
for appeals regarding a denied
application for a 3PL license, and the
hearing process outlined at 21 CFR part
16 is the default for appeals regarding a
suspended or revoked 3PL license.
However, the 3PL may request any of
the procedures in 21 CFR parts 10
through 16. FDA believes that this
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proposed approach is consistent with
current practice and suggests that States
develop comparable processes.
The standards for revoking a 3PL
license are set forth in proposed
§ 205.9(e). The licensing authority will
revoke a license if it finds that a 3PL
whose license has been suspended is
unable or refuses to comply with the
licensing requirements. The
requirements governing the revocation
of a 3PL license are set forth in
proposed § 205.9(e)(2) through (5) and
mirror those outlined in § 205.9(b)(2)
through (7) for licensure suspension,
with one exception: When the licensing
authority informs the 3PL of its intent
to revoke a license, the 3PL is given no
opportunity for reconsideration since it
already had an opportunity to rectify
deficiencies while its license was
suspended.
In addition, where a 3PL fails to
timely renew its application, the license
will be considered expired and a 3PL
will need to submit an application for
new licensure because the licensing
authority may be unable to confirm that
the 3PL continues to meet all necessary
licensure requirements (see proposed
§ 205.9(f)).
FDA is also proposing to terminate a
3PL’s license upon request from the 3PL
when the request includes a notice of
the 3PL’s intent to discontinue its
activities and a waiver of an opportunity
for a hearing. The 3PL will be required
to apply for a new license should it
decide to resume 3PL activities (see
proposed § 205.9(g)).
7. Good Storage Practices for 3PL
Facilities
The DSCSA charges FDA with
creating national standards for the
licensure of 3PL facilities, including the
requirement that 3PLs comply with
storage practices as determined by the
Secretary (see section 584(d)(2)(C) of the
FD&C Act). Those requirements are
detailed in proposed § 205.10. FDA
considers the requirement that ‘‘each
facility of such [3PL]’’ be licensed ‘‘in
accordance with the regulations’’
(section 584(a) of the FD&C Act) to
mean that 3PLs without a facility are not
required to be licensed. Section 584 of
the FD&C Act provides that FDA will
establish licensure standards that
include requirements relating to storage
of product. These standards address
issues regarding access and
maintenance that presuppose the
existence of a physical facility where
product is maintained. As such, the
requirements apply to each 3PL facility
that is owned, rented, or leased by the
3PL. If the 3PL shares the same name
and location as another trading partner
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(for example, a wholesale distributor),
each entity must be separately licensed
and must have separate systems and
processes in place for their separate
functions (see proposed § 205.10(b)).
The requirements for 3PL facilities
regarding how products will be stored
and adequate security maintained are
set forth in proposed § 205.10(c). This
provision includes requirements for
storage of nonsaleable products within
the 3PL facility. If the facility is in
possession of a suspect product, the
facility must have clearly defined areas
in which to quarantine the suspect
product until the product is
dispositioned (section 584(d)(2)(C)(i) of
the FD&C Act).
FDA is also proposing to require that
3PLs keep illegitimate product and
other products unfit for distribution in
a clearly defined and designated area,
separate from saleable products, until
dispositioned so the illegitimate or
otherwise unfit product is not
inadvertently combined with saleable
products (see proposed § 205.10(c)(2)).
An illegitimate product poses as great a
risk to public health, if not a greater
risk, as a suspect product because a
product is illegitimate when there is
credible evidence shows that the
product is counterfeit, diverted, stolen,
intentionally adulterated such that the
product would result in serious adverse
health consequences or death to
humans, is the subject of a fraudulent
transaction, or appears otherwise unfit
for distribution such that the product
would be reasonably likely to result in
serious adverse health consequences or
death to humans (section 581(8) of the
FD&C Act). As such, it is counter to
public health to store products that are
unfit for distribution alongside saleable
product. Furthermore, it would be
illogical to move suspect product that
has been determined to be illegitimate
out of quarantine and into another area
to be potentially stored with saleable
product.
8. Personnel Requirements Necessary
for Good Storage Practices
Ensuring that 3PL personnel are
appropriately qualified is integral to
establishing good storage practices
(section 584(d)(2)(C) of the FD&C Act).
For this reason, proposed § 205.10(b)(3)
requires that a 3PL facility must be
designed in such a manner that only
personnel who possess appropriate and
verifiable experience and training will
have access to areas in which products
are held. While not proposed to be
required in part 205, FDA believes that
a best practice in order to maintain the
security of prescription drug products,
would be for a 3PL to screen personnel
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who work in areas of its facility where
prescription drug products are held for
records of Federal or State criminal
convictions relating to the possession,
control, or distribution of prescription
drugs. While also not proposed to be
required in part 205, FDA believes it
would be a best practice for a firm to
request that employees state that they
are not engaged in and will not engage
in the illegal use of controlled
substances while serving in their
capacity within the 3PL.
FDA also proposes requiring that 3PLs
maintain and make available to the
licensing authority certain information
about their facilities’ managers and
designated representatives (see
proposed § 205.11). Furthermore, FDA
is establishing specific employee
qualifications with respect to facility
managers or designated representatives
that are necessary to effect good storage
practices (see proposed § 205.11(b)).
Specifically, FDA is proposing to
require that a facility manager or
designated representative of the facility
manager serve in either capacity for
only one facility at any one time (see
proposed § 205.11(b)(2)). FDA believes
that a facility manager or designated
representative of the facility manager
must be accountable for all operations of
a 3PL facility. That facility manager or
designated representative must be
present within the facility, and must be
familiar with the day-to-day operations
of that facility. FDA believes that the
best way to ensure the accountability
and familiarity required for compliance
is for a designated representative or
facility manager to serve only one
facility at a time. This is to ensure that
the facility manager or designated
representative is actively engaged in
managing the daily operations of the
facility and that they remain aware of
any non-compliance issues that may
arise. To ensure the qualified designated
representative can fulfill their
obligations to manage and carry out
daily operations, FDA proposes to
require that a 3PL provide its designated
representative with adequate authority
and the necessary resources (see
proposed § 205.11(c) and (d)). FDA
believes that establishing these
requirements will help ensure that the
products handled by a 3PL are properly
safeguarded to protect the supply chain
and the public health.
Section 584(d)(2)(E) and (F) of the
FD&C Act requires mandatory
background checks for facility managers
or the designated representatives of
facility managers to ensure that neither
the 3PL’s facility manager nor the
designated representative has engaged
in the prohibited behaviors outlined in
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proposed § 205.11(e). Additionally, FDA
is outlining other activities which may
lead to the denial of licensure in
proposed § 205.11(f). They are not bars
to licensure, but they are factors that
may be considered by licensure
authorities when reviewing an
application for licensure to determine
whether the 3PL has storage practices
sufficient to maintain adequate security
over the facility. FDA requests comment
on this section of the regulation and the
scenarios outlined therein.
Requiring that individuals with
significant authority over 3PL activities
be subject to a criminal background
check adds an additional layer of safety
and security to the supply chain (see
proposed § 205.11(g)). Theft of product
by personnel who have direct access to
areas where products are stored is a
known problem across the healthcare
industry; the background checks
required by section 584(d)(2)(F) of the
FD&C Act that FDA is proposing here
are necessary precautions to prevent the
potential theft, loss, or abuse of
prescription drugs.
FDA suggests an additional best
practice for a 3PL to utilize when
staffing their operation. This best
practice, related to staff who work
within a 3PL, is designed to ensure
security within a 3PL. FDA recommends
to 3PLs that the individuals who work
within their operation and have access
to prescription drugs should not have a
record of criminal activity involving
violations of the FD&C Act or other laws
involving prescription drugs.
When screening personnel who work
in areas of a 3PL facility where products
are held, including the facility manager
or designated representative, FDA
recommends that a 3PL consider
whether such personnel have (1)
engaged in a pattern of violating the
requirements of section 584 of the FD&C
Act that present a threat of serious
adverse health consequences or death to
humans; (2) been found to have
committed or facilitated commission of
any prohibited acts under the FD&C Act
or violated or facilitated any violations
of any of the regulations in this part or
analogous provisions of the State
licensing authority, as applicable; (3)
been convicted of any violation of
Federal, State, or local laws relating to
drug samples, wholesale or retail drug
distribution, distribution of controlled
substances, or third-party logistics
services; or (4) been convicted of any
felony under Federal, State, or local
laws involving or related to prescription
drugs. FDA believes that 3PLs should
consider an applicant’s history of
violations of the FD&C Act, or other
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laws involving prescription drugs, when
making staffing decisions.
9. Required Written Policies and
Procedures
Section 584(d)(2)(C)(iii) of the FD&C
Act enumerates certain types of written
policies and procedures that FDA
regulations must require, and tasks FDA
with defining the content with more
specificity. Those written policies and
procedures are set out in proposed
§ 205.12. All 3PLs would be expected to
establish, maintain, and follow the
written policies and procedures set forth
in these proposed subsections for each
3PL facility, to the extent that the
requirements of those sections are
relevant to the scope of their specific
3PL activities. Under the proposed
regulation, all written policies and
procedures will be made available to the
licensing authority upon request, and
the licensing authority will be permitted
to have access to and copy records of
the 3PL to ensure that the 3PL facility
is following its written policies and
procedures (see proposed § 205.12(a)).
Written policies and procedures include
those that are stored and maintained
electronically.
FDA is implementing the statutory
requirements listed in section
584(d)(2)(C)(iii) of the FD&C Act
through proposed § 205.12(c)(1) through
(6). Under these requirements, 3PLs
must maintain written policies and
procedures to address a product’s
receipt, security, storage, inventory,
shipment, and distribution. Proposed
§ 205.12(c)(1) through (6) details the
specific elements that such written
policies and procedures must contain.
Such elements are necessary to maintain
supply chain integrity and align with
current industry practices to protect the
integrity of the drugs that are distributed
through the supply chain.
To ensure good storage practices, FDA
is also proposing to require that 3PLs
establish written policies and
procedures for handling not only
expired product as required in section
584(d)(2)(C)(iii)(VI) of the FD&C Act, but
also products that are unfit for
distribution (see proposed § 205.12(f)).
Furthermore, any drug unfit for
distribution should be segregated and
returned or destroyed to prevent its
distribution to the patient (see proposed
§ 205.12(f)(1)). These requirements will
ensure that drugs, the distribution of
which would violate the FD&C Act and
which may not be fit for consumption
by American consumers for a variety of
reasons, are not distributed into the
supply chain. FDA believes that these
proposed standards align with current
industry practices.
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Similarly, to further ensure the safety
and efficacy of drug products, FDA is
proposing that 3PLs maintain written
policies and procedures related to the
storage, inventory, and disposition of
both suspect and illegitimate products.
In the case of a suspect product, the
written policies and procedures must
include the procedure for quarantine or
destruction of the product if directed to
do so by the product’s manufacturer,
wholesale distributor, dispenser, or an
authorized government agency. In the
instance of an illegitimate product,
written policies and procedures must be
in place to ensure that illegitimate
product is appropriately dispositioned
as directed by the respective
manufacturer, wholesale distributor,
dispenser, or authorized government
agency. This may include segregation in
a clearly defined, designated area from
which the product may be
dispositioned. FDA believes that these
proposed standards align with current
industry practices and will give 3PLs a
clear roadmap for dealing with
potentially difficult situations involving
suspect and illegitimate product.
Finally, FDA views it as a best
practice for a 3PL to establish written
policies and procedures to ensure that it
only engages in 3PL activities on behalf
of authorized trading partners with
respect to a product. DSCSA requires
that all other entities that accept or
transfer direct possession or ownership
in the supply chain are only permitted
to do business with other authorized
trading partners (section 582 of the
FD&C Act). FDA believes that, to further
ensure supply chain security and
integrity, it is important that 3PLs also
only do business with other authorized
trading partners. 3PLs that engage in
transactions with non-authorized
trading partners may expose the supply
chain to potentially harmful or
substandard product. FDA notes that
3PLs are included in the wholesale
distributor and third-party logistics
provider reporting public database
(available at https://www.fda.gov/Drugs/
DrugSafety/DrugIntegrityand
SupplyChainSecurity/DrugSupplyChain
SecurityAct/ucm423749.htm) which
allows manufacturers, wholesale
distributors, repackagers, and
dispensers to determine if the 3PL is
authorized. Similarly, 3PLs should
include using the publicly available
information regarding other trading
partners in their written policies and
procedures to ensure they are doing
business with only authorized trading
partners.
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10. Recordkeeping and List of Trading
Partners
The maintenance, availability, and
accuracy of the records made available
for inspection under section
584(d)(2)(D) of the FD&C Act is critical
to demonstrate that 3PLs are acting in
compliance with relevant laws and
regulations and to ensure their records
can be relied upon to identify any
potential risk to the public health. As
such, FDA is proposing to require that
all records be securely stored, with
procedures in place to restrict access
and protect record integrity, and that
any alterations made to records be
signed and dated while preserving the
original information contained in the
record (see proposed § 205.13(a)). These
records can be stored and maintained
electronically. These records
maintenance requirements will allow
for greater confidence in both the
information that is preserved at the
facility and the information potentially
disseminated to other trading partners.
FDA is proposing that all records
must be retained for a minimum of 3
years, except for records related to
suspect and illegitimate products,
product quality complaints, and
destroyed, returned, and recalled
products, which each must be retained
for a minimum of 6 years (see proposed
§ 205.13(b)). Such record retention is
necessary not only to ensure 3PLs are
complying with the FD&C Act, but also
to ensure that there is consistency and
continuity in the access to the
information across the records required
pursuant to sections 582, 583, and 584
of the FD&C Act. The DSCSA requires
that, upon the licensing authority’s
request, 3PLs provide the licensing
authority with a list of the trading
partners (manufacturers, wholesale
distributors, and dispensers) for which
the 3PL conducts 3PL activities (section
584(d)(2)(G) of the FD&C Act). This
requirement would be codified in
proposed § 205.14 and would also
include repackagers for which the 3PL
provides services when those
repackagers are acting on behalf of a
manufacturer, wholesale distributor, or
dispenser of a product, as explained in
the definition of other logistics services
at § 205.3(i).
11. Annual and Other Reporting to FDA
Under DSCSA, 3PLs must report
certain information to FDA to be
considered an authorized trading
partner (sections 581(2)(C) and 584(b) of
the FD&C Act). The annual reporting
requirements for 3PLs went into effect
on November 27, 2014. Proposed
§ 205.15 clarifies the statutorily
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prescribed annual reporting
requirements and proposes the
collection of additional information to
provide complete and useful
information about 3PLs that can be used
by FDA, States, and trading partners.
The DSCSA requires 3PLs to report to
FDA for each facility: (1) The State by
which the facility is licensed; (2) the
facility’s license number; (3) the
facility’s name and address; and (4) all
trade names under which the facility
conducts business (section 584(b) of the
FD&C Act). If a facility conducts more
than one type of activity, such as 3PL
activities and wholesale distribution
activities, the facility must be licensed
as both a wholesale distributor and a
3PL and must report to FDA separately
as a wholesale distributor and a 3PL
(section 503(e)(2) of the FD&C Act).
FDA is proposing to require that 3PLs
use an electronic system provided by
FDA for reporting (see proposed
§ 205.15(a)). This electronic system will
increase efficiency by providing
uniformity in the content and format of
reports, thereby making the information
easier to process. FDA is proposing that
the annual reporting schedule require
all 3PLs to report each calendar year
between January 1st and March 31st,
although an entity may update
information at any time (see proposed
§ 205.15(b)). For example, if a 3PL
chooses to update a license on
December 15, 2019, that 3PL will still
have to report during the January 1,
2020 through March 31, 2020 annual
reporting period.
The specific information that 3PLs
must electronically report to FDA is set
forth in proposed § 205.15(c). The
DSCSA requires that 3PLs report the
name and address of each facility
(section 584(b)(2) of the FD&C Act). In
fulfilling this requirement, the 3PL must
provide the address that is associated
with the State or Federal license.
Licensed entities are also required to
report to FDA the State by which they
are licensed and the license number
(section 584(b)(1) of the FD&C Act). In
addition, FDA is proposing to require
that the reported company name be
identical to the official company name
appearing on the license (see proposed
§ 205.15(c)(2)). Maintaining an account
in FDA’s electronic system for each 3PL
facility license during the reporting
period is integral to FDA’s ability to
provide oversight, as each facility of a
3PL must be licensed in order for the
3PL to conduct 3PL activities.
In addition to the requirements
specified in the statute, FDA is
proposing to require an additional data
element that FDA views as important to
the Agency, the States, and trading
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partners. This additional information
will inform other trading partners that
the 3PL is in fact an authorized trading
partner with whom they can do
business. To this end, FDA is proposing
to require that 3PLs provide the date
each State license expires. This
information is essential for determining
that licensure status for each 3PL
facility is current.
Also, in addition to the physical
address, which is required to be
reported by statute, FDA believes that it
would be a best practice for 3PLs to
submit a unique facility identifier (UFI)
that corresponds with the facility name
and facility address. The UFI for a 3PL
facility is useful to FDA when
identifying and confirming certain
business information. To be most
helpful to FDA and other trading
partners, a 3PL should obtain a separate
UFI for each physical address that the
3PL is reporting since each 3PL facility
must meet the 3PL requirements, and
licensure is facility specific. FDA also
believes that it would be a best practice
for 3PLs to submit the contact
information of an individual who will
interact with FDA, including that
individual’s name, telephone number,
and email address. FDA recommends as
a best practice that the 3PL designate a
contact person who is familiar with the
daily operations of the 3PL facility, such
as the designated representative, to
ensure efficient processing of inquiries
and minimize the impact inquiries may
have on the daily operations of the
facility.
It is important for other trading
partners and FDA to know whether a
3PL has had a license revoked or
suspended or whether a 3PL has had
any other significant disciplinary
actions taken against them that limits
the ability of a facility to conduct drugrelated business. As such, 3PLs must
report significant disciplinary actions to
FDA. This will involve providing a DEA
registration number or State controlled
substance license number when there is
a significant disciplinary action issued
by the DEA or the State controlled
substance licensing authority that
would limit the ability of the 3PL
facility to conduct 3PL activities related
to the distribution of controlled drug
substances that meet the definition of
product, as defined at § 205.3(k). In such
a situation, information about the DEA
registration or State controlled
substance license is important because
the disciplinary action would likely be
associated with that specific license or
registration.
A significant disciplinary action is
defined in the proposed regulation as an
action that limits the ability of a facility
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to conduct 3PL activities related to the
distribution of prescription drug
products. FDA proposes that, within 30
calendar days after a significant
disciplinary action is imposed or taken
by a State or Federal government, 3PLs
must report the type of disciplinary
action, the date the action was taken,
and the State where the disciplinary
action occurred, as well as submit any
documents associated with the
disciplinary action, including a final
ruling by the relevant State or Federal
agency or board or a consent decree.
Finally, FDA is proposing to require
a 3PL to report to FDA within 30
calendar days of ceasing warehousing or
other logistics services that it is going
out of business or voluntarily
withdrawing a 3PL license from a State.
FDA believes reporting this information
is essential for the information in the
public database to be complete,
accurate, and useful for FDA, the States,
and trading partners.
To ensure efficient enforcement of
FD&C Act requirements and to make
public the voluntary information
provided by each 3PL facility, FDA
proposes adding 3PL licensure to the
public database to make information
about 3PLs available on FDA’s website.
Having the license status of 3PLs in one
publicly available database will help
FDA, trading partners, and other
stakeholders determine whether 3PLs
are properly licensed and authorized.
12. Inspection Provisions
Section 584(d)(2)(D) of the FD&C Act
requires that the regulations provide for
periodic inspections of 3PL facilities to
ensure compliance with the national
standards and directs FDA to determine
the intervals at which periodic
inspections of a 3PL will be conducted
by the licensing authority to ensure a
facility’s compliance with the law and
this regulation. To this end, FDA is
proposing to require that a physical
inspection of a 3PL facility be
conducted prior to issuance of the
initial license and routinely once every
3 years thereafter (see proposed
§ 205.16(a) and (b)). The regulation
proposes allowing the licensing
authority, or an AO, as determined by
the licensing authority, to conduct
physical inspections (see proposed
§ 205.16(a)). As used in part 205,
subparts A and B, licensing authority
means the State licensing authority or
FDA. When developing the timeframes
for inspections, FDA sought to balance
the risk to the supply chain while
considering FDA’s and State agencies’
resource constraints. FDA is proposing
to require that the physical inspection of
a 3PL facility warehouse space include
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the paper and electronically stored
records detailing the processes related
to all 3PL activities (see proposed
§ 205.16(c)). FDA has authority to
require that an inspection of a 3PL
warehouse include the 3PL’s records,
files, and processes related to product
warehousing. Section 704(a)(1) of the
FD&C Act (21 U.S.C. 374(a)(1)) states
that ‘‘in the case of any . . . warehouse
. . . in which prescription drugs . . .
are held, inspection shall extend to all
things therein (including records, files,
papers, processes, controls, and
facilities).’’ This authority directly
applies to FDA’s ability to inspect a
3PL’s facility warehouse space for
relevant records and files to ensure
compliance with the FD&C Act. FDA
also proposes to require that 3PLs
permit inspections at reasonable times
and that the licensing authority conduct
its inspection in a reasonable manner
(see proposed § 205.16(c) and (d)).
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D. Approved Organizations for 3PLs
1. Approval and Utilization of Outside
Organizations in the Licensure Process
The DSCSA requires that regulations
codified by FDA establish a process by
which a third-party organization
approved by FDA shall, upon a 3PL’s
request, ‘‘issue a license’’ to each 3PL
facility that meets the requirements for
licensure (section 584(d)(2)(A) of the
FD&C Act). However, in situations
where a State has not established a
licensure program in accordance with
the regulations, the DSCSA charges FDA
with issuing 3PL licenses, provided the
applicable requirements for licensure
are met (section 584(a)(1)(B) of the
FD&C Act). Accordingly, FDA interprets
the language of 584(d)(2)(A) of the FD&C
Act to mean that a third-party
organization approved by FDA—an
AO—will conduct a review of the 3PL’s
qualifications for licensure and issue a
report to FDA regarding whether the
3PL ‘‘demonstrates that all applicable
requirements for licensure . . . are
met,’’ which FDA can rely on when
issuing a license per section 584(e) of
the FD&C Act.
The DSCSA allows States and FDA to
approve organizations for purposes of
licensure review and periodic
inspection. Proposed §§ 205.17, 205.18,
and 205.19 contain the process that FDA
will use to approve organizations and
the qualifications to become an AO.
FDA suggests that States that choose to
rely on AOs for licensure reviews have
in place the same or similar processes
for approved organizations to conduct
licensure reviews and for decisions
affecting the approval status of those
organizations.
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The scope of work AOs would be
tasked with performing and the
standards an AO must meet to become
approved are detailed in subpart B of
proposed part 205. The proposed rules
also set forth the process by which FDA
will approve organizations to review the
qualifications of 3PL facilities for
licensure, which we refer to as a
‘‘licensure review.’’
A licensure review consists of
performing a review of all documents
submitted to the licensing authority in
support of an application for 3PL
licensure and conducting an inspection
of the facility as directed by the
licensing authority. If a review of
documentation supports licensure of the
3PL facility, the facility will then be
inspected by an AO, as directed by FDA.
FDA is proposing that the AO’s
licensure review be completed within
90 days upon receiving notice from the
Agency to conduct the licensure review.
FDA believes that this 90-day timeframe
is sufficient for an AO to perform the
work with which they are tasked while
also ensuring that there are no undue
delays in the licensure process. Upon
completion of the licensure review, the
AO would then provide FDA with a
licensure review report within 7 days
(see proposed § 205.17(b)), with a copy
sent to the 3PL facility. As proposed,
using the report submitted by the AO,
FDA would make the final
determination as to whether a 3PL
facility should be issued a license. The
process that AOs should follow when
conducting routine inspections of 3PL
facilities mirrors the process for
licensure review and is detailed in
proposed § 205.17(c).
It is important that FDA can verify an
AO’s continued compliance with the
approval requirements. Therefore, to
keep its approval, FDA is proposing to
require that an AO maintain certain
records for a period of at least 5 years
and these records must be readily
available to FDA upon request. Unless
specified by statute, we believe it is
reasonable for the required length of
maintenance of records to align with the
length of the entity’s licensure term. In
addition, to ensure public safety, FDA is
proposing to require that AOs report
potential violations at 3PL facilities to
FDA within 24 hours of discovery (see
proposed § 205.17(f)). The general
qualifications for approval of AOs are
set out in proposed § 205.18.
To become and remain approved,
FDA is proposing to require that an
organization, and those employed by the
organization, abide by certain
requirements that are intended to secure
against conflicts of interest, promote
professional business practices, and
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protect non-public information (see
proposed § 205.18(a)).
FDA is proposing to allow AOs to hire
outside contractors to conduct licensure
reviews or licensure review-related
activities. Under FDA’s proposed
regulation, AOs who decide to use
outside contractors must ensure that the
contractors not only effectively carry out
the licensure review or licensure
review-related activities in a manner
consistent with this proposed regulation
to ensure public health, but the AO
must also ensure that the contractors
properly protect all non-public
information.
For an AO to maintain approval, FDA
proposes to require that the AO ensures
contractors abide by all applicable
confidentiality agreements, that the AOs
have policies and procedures in place to
ensure the contractors abide by these
proposed standards, and that the
contractors have the necessary training
and expertise to carry out licensure
reviews (see proposed § 205.18(b)(1)).
Also, before a contractor hired by an AO
may perform a licensure review of a 3PL
facility, the 3PL must have entered into
an agreement with the AO giving the
AO permission to share with contractors
the 3PL’s confidential commercial
information (see proposed
§ 205.18(b)(2)). If such consent is not
provided by the 3PL facility, the AO
must perform the licensure review itself.
FDA believes that this approach is
reasonable given that it is the AO’s
decision to work with contractors and,
under this proposed regulation, the
ultimate responsibility for the licensure
review rests with the AO.
In addition, so FDA may keep track of
which organization is responsible for
each licensure review, FDA proposes
that AOs must submit to FDA a list of
the contractors used by the organization
each year and the AO must certify that
such contractors comply with the
applicable requirements (see proposed
§ 205.18(b)(3)). Finally, to ensure that
the standards set forth in this regulation
are followed and that lines of
responsibility are clear, FDA proposes
to require that the AOs remain
responsible for all the work performed
by outside contractors (see proposed
§ 205.18(b)).
FDA proposes to prohibit contractors
from subcontracting licensure review or
licensure review-related activities (see
proposed § 205.18(b)(1)(ii)). Limiting the
ability of contractors to further delegate
their responsibility ensures that FDA
will have accurate information about
who is conducting licensure reviews,
that those responsible for the licensure
reviews have the necessary
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qualifications, and that their conduct is
governed by this proposed regulation.
The proposed process that FDA will
use to approve organizations, including
the application process, as well as the
process for suspending or revoking an
organization’s approval, are set forth in
proposed § 205.19. To ensure
compliance with DSCSA, FDA is
proposing that organizations seeking
approval by FDA must first
electronically submit to FDA an
application demonstrating the
organization’s ability to assess
compliance with all 3PL requirements
detailed in proposed § 205.19 (see
proposed § 205.19(a) and (b)).
Organizations must also provide
training that their employees must pass
before they may conduct licensure
reviews (see proposed § 205.19(c)). To
verify information contained in the
application and further ensure
compliance with the proposed
regulation, FDA proposes that, before an
AO may conduct its first licensing
review, it must be audited by FDA (see
proposed § 205.19(d)). A new approval
will be valid for 5 years (see proposed
§ 205.19(e)).
If an organization’s request for
approval is denied, the organization
may issue a request for reconsideration
under 21 CFR 10.75 (see proposed
§ 205.19(f)). In addition, to ensure
compliance and protect public health,
FDA proposes that an AO may have its
approval suspended if it does not
maintain the standards outlined in this
part (see proposed § 205.19(g)). A
suspended AO must cease all 3PL
licensure review including any pending
inspections of 3PL facilities. A
suspended AO must notify any 3PLs
under a pending licensure review by the
AO, of the AO’s suspension within 7
calendar days (see proposed
§ 205.19(g)(5)). While most suspensions
will happen only after notice and
opportunity to request a hearing, under
the proposed regulations, FDA reserves
the ability to suspend approval prior to
a hearing if there is a reasonable
probability that the organization’s
noncompliance will cause imminent
and serious adverse health
consequences or death to humans (see
proposed § 205.19(h)).
Furthermore, FDA proposes that a
suspended approval can be reinstated if
the issue is resolved within 1 year from
the date of suspension (see proposed
§ 205.19(i)), though it may be revoked if
the organization fails to rectify the
situation that resulted in the suspension
(see proposed § 205.19(j)). FDA believes
that 1 year provides the AO enough time
to remedy most situations. An AO’s
approval may also be reinstated on a
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conditional basis. If the AO is
conditionally reinstated, they will enter
a three-year probationary period, during
which if any material deficiencies arise,
their license will be subject to
immediate revocation (see proposed
§ 205.19(i)(2)).
FDA also proposes to permit an AO to
voluntarily withdraw its approval, but it
must inform FDA of any facilities with
pending reviews (see proposed
§ 205.19(l)). To further ensure that
pending licensure reviews are not
overlooked, under FDA’s proposed
regulation, an AO whose approval has
been suspended, revoked, or voluntarily
withdrawn has the responsibility to
report this information to those 3PL
facilities with pending licensure
reviews (see proposed § 205.19(m)); this
will stop the clock on the 90-day
licensure review while the 3PL applies
for licensure review from another AO or
FDA. Also, to ensure that the AOs
continue to meet the standards put forth
in this subpart, and part 205 generally,
under the proposed regulations, an AO
must inform FDA of any changes to
information that was submitted as part
of its application for approval (see
proposed § 205.19(n)(1)). Since the
approval of an organization is
nontransferable, changes in ownership
also require an AO to submit a new
application to FDA (see proposed
§ 205.19(n)(2)). Finally, as an additional
assurance that an AO continues to
comply with the provisions of this part,
FDA proposes to require that AO’s
remain subject to periodic audits by
FDA (see proposed § 205.19(o)).
E. National Standards for Wholesale
Distributors
1. Requirement That Wholesale
Distributors Be Licensed
To implement section 503(e)(1) of the
FD&C Act, FDA is proposing to codify
at § 205.20(a) the requirement that a
wholesale distributor be licensed by the
State from which the drug is distributed,
or by FDA if the State from which the
drug is distributed has not established a
licensure requirement in accordance
with the standards proposed herein, as
well as by the State into which the drug
is distributed if that State requires such
a license. This requirement is consistent
with how States currently license
wholesale distributors.
FDA anticipates that, for the purposes
of annual reporting, a wholesale
distributor who maintains multiple
licenses to engage in wholesale
distribution, will be able to report their
required information aggregately for all
their licenses (section 503(e)(2) of the
FD&C Act). FDA believes this approach
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will increase efficiency for both
wholesale distributors and the Agency,
ensure that licenses for wholesale
distribution facilities will be granted to
qualified firms, and ensure records
related to their facilities will be
maintained in an organized fashion.
In addition, FDA proposes to set the
licensure term for wholesale distributors
at 2 years (see proposed § 205.20(b)).
FDA considered current State
requirements, as well as the potential
impacts on State and Agency resources,
to determine the term for licensure.
Ultimately, the Agency believes that 2
years aligns with current practices, does
not place an undue burden on State or
FDA resources, and provides adequate
protection to American consumers
because it ensures that renewals will be
based on current information and
operations.
2. Surety Bonds
Wholesale distributors are required to
obtain a surety bond to be licensed and
engage in wholesale distribution
(section 583(b)(3) of the FD&C Act).
FDA is proposing to establish the terms
of this requirement in proposed
§ 205.21. To receive or renew a license,
a surety bond of $100,000, or $25,000 if
applicable (for wholesale distributors
with annual gross receipts of
$10,000,000 or less), must be in place at
the time the wholesale distributor’s
application for licensure or licensure
renewal is submitted to the licensing
authority (see proposed § 205.21(b)).
The surety bond is intended to ensure
compliance with DSCSA and that any
administrative penalties levied by the
licensing authorities are paid. DSCSA
also permits the furnishing of ‘‘other
equivalent means of security acceptable
to the State’’ in lieu of a bond (section
583(b)(3)(A)(i) of the FD&C Act). It
would be up to the State licensing
authority to determine what, if
anything, would constitute an
equivalent means of security to a surety
bond. Where FDA is the licensor, the
wholesale distributor would need to
furnish a surety bond to satisfy the bond
requirement as other equivalent means
of security appear to be specifically
reserved for the States.
While a bond is required before a
wholesale distributor may acquire the
necessary license, section 583(b)(3)(B) of
the FD&C Act provides a set of
circumstances under which the surety
bond requirement will be waived. FDA
is proposing to codify at § 205.21(b)(3)
the DSCSA requirement that if a
wholesale distributor can prove it has
the necessary bond for the State where
the facility is located (e.g., by providing
a copy of the existing security bond
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agreement), the requirement for an
additional surety bond for another State
is waived. In this situation, the
wholesale distributor does not have to
acquire an additional bond to satisfy the
non-resident licensure requirements of
the State into which the wholesale
distributor plans to distribute. However,
it remains unclear if and how this
waiver should apply when an
equivalent means of security to the
surety bond are used. FDA requests
comment specifically related to the
waiver to the surety bond requirement
and whether that waiver should apply
to scenarios where some other
equivalent means of security is used in
lieu of a surety bond.
The terms that a surety bond must
include are outlined in proposed
§ 205.21(c). FDA proposes to require not
only that the terms cover the liability
requirements related to administrative
penalties, but also that the bond remain
in full force for 1 year after the license
expires and that the surety company
guarantee payment within 30 days of
receiving notice from the licensing
authority. FDA also proposes permitting
licensing authorities to make claims
against the surety bond for 1 year after
the wholesale distributor’s license
expires or within 60 days after an
administrative or legal proceeding has
concluded, whichever is longer. These
timeframes seek to ensure that the rights
of the different parties involved in a
potential claim will be adequately
protected. This is particularly important
with respect to the waiver because it
allows the affected States equal access
to the surety bond and ensures
consistent standards across States.
The implications of termination or
lapse in coverage of a surety bond are
detailed in proposed § 205.21(d). A
wholesale distributor may cancel its
surety bond, but FDA proposes to
require that it give all impacted
licensing authorities 30 days’ prior
notice before such cancellation take
effect. Such notice is necessary because
a wholesale distributor’s license will be
suspended upon the cancellation of the
surety bond unless the wholesale
distributor acquires a new bond before
to the old bond is cancelled. FDA
proposes that a license will be
suspended if a licensing authority
discovers a lapse in bond coverage.
FDA also proposes to require that the
surety bond permit actions to be brought
by either a State or Federal licensing
authority (see proposed § 205.21(e)),
provide the contact information for the
surety company (see proposed
§ 205.21(f)), and name the specific
parties to the surety bond (see proposed
§ 205.21(h)).
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3. General Requirements for Licensure
This section includes the
requirements for the application. FDA
notes that the applicant would have to
demonstrate compliance with the
requirements as set forth in subpart C,
including a satisfactory inspection, as
described in proposed § 205.28, and
criminal background checks for facility
managers and designated
representatives, as described in
proposed § 205.25, to be granted a
wholesale distributor license.
The general application requirements
that must be met for a State or Federal
licensing authority to issue a wholesale
distributor license are set forth in
proposed § 205.22. The requirements
applicable to the individual who
submits the licensure application are
detailed in proposed § 205.22(a). FDA
proposes to require that the applicant
submit all required information and pay
a licensing fee in order to be considered
for licensure. FDA believes these
general requirements align with current
industry practices.
FDA is proposing at § 205.22(b) to
require that the applicant provide the
surety bond or other equivalent means
of security acceptable to the State,
required by section 583(b)(3) of the
FD&C Act and detailed in proposed
§ 205.21, as part of the wholesale
distributor’s application for a license.
The information that the licensing
authority will require as part of a
wholesale distributor’s initial
application for licensure and renewal
applications is set forth in proposed
§ 205.22(c) and (d). This information is
necessary for the licensing authority to
assess whether the wholesale distributor
is in good standing and has the
infrastructure and capabilities to fulfill
the duties and obligations of licensure.
For example, FDA is proposing to
require that a wholesale distributor
inform FDA if it has received any
citations for violating requirements for
licensure or received any significant
disciplinary actions within the past 7
years (see proposed § 205.22(c)(8)). FDA
believes this information is necessary to
ensure the wholesale distributor can
demonstrate that it has not engaged in
a pattern of violating the standards for
licensure. The DSCSA defines
prohibited persons, in part, as licensees
who have ‘‘engaged in a pattern of
violating the requirements of this
section, or State requirements for
licensure, that presents a threat of
serious adverse health consequences or
death to humans’’ (section 583(d) of the
FD&C Act). Therefore, this information
is necessary to demonstrate that a
wholesale distributor is not prohibited
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from receiving or maintaining licensure
for wholesale distribution.
Finally, FDA proposes to require that
a wholesale distributor’s license be
readily retrievable at the facility, and
that the facility permit State or Federal
inspectors, or others acting on behalf of
the licensing authority, to inspect the
license (see proposed § 205.22(e)).
4. The Federal Licensure Process
Section 503(e) of the FD&C Act, as
amended by DSCSA, requires FDA to
license wholesale distributors directly if
the State in which it engages in
wholesale distribution has not
established a licensing requirement
(section 503(e)(1) of the FD&C Act).
Proposed § 205.23 details the process
that FDA will use when issuing licenses
to wholesale distributors. While this
section is only applicable to wholesale
distributors obtaining a license from
FDA, FDA suggests States implement
similar procedures to ensure that all
wholesale distributor licenses issued are
consistent with the proposed regulation
pursuant to section 503(e)(1)(B) of the
FD&C Act. FDA plans to make
information available to clarify who is
the appropriate licensing authority in
the wholesale distributor’s State. FDA
believes this streamlined process for
application will allow for greater clarity
and harmonization across the industry.
For wholesale distributor license
applications submitted to FDA, FDA
proposes that the wholesale distributor
submit the application electronically,
including the information outlined in
proposed §§ 205.21 and 205.22, along
with additional supporting
documentation (see proposed
§ 205.23(a)(1)). The DSCSA authorizes
FDA’s use of third-party organizations—
AOs—to conduct inspections of
wholesale distributors required under
section 583(c) of the FD&C Act. If FDA
has approved one or more AOs to
inspect wholesale distributors, the
wholesale distributor should note the
AO it prefers to conduct its inspection
on the application submitted to FDA
(see proposed § 205.23(a)(2)). If no AO
has been approved, FDA will conduct
the inspection (see proposed
§ 205.23(a)(3)). Furthermore, submission
of the application to FDA will not be
considered complete until FDA receives
all pertinent information and fees (see
proposed § 205.23(a)(5)).
While the DSCSA permits AOs to
conduct inspections of wholesale
distributors applying for licensure, the
responsibility of determining whether a
wholesale distributor meets all the
applicable requirements set forth in this
proposed regulation remains with FDA
(see proposed § 205.23(b)). To avoid
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delays in the licensure process, FDA
intends to work with wholesale
distributors to correct minor errors
made on the application (e.g., missing
written policies and procedures) and
communicate with the wholesale
distributor about additional information
the Agency may need to process and
review the application (see proposed
§ 205.23(c)). If the wholesale distributor
meets the requirements outlined in this
proposed part and none of the
prohibited factors listed in proposed
§ 205.30(a)(1) are present, FDA will
approve the application and send an
approval letter and license certificate
(see proposed § 205.23(d)).
FDA recognizes that a wholesale
distributor may have concerns about
what happens to the status of its license
if disciplinary sanctions are taken
against the approval status of the AO
that conducted its inspection when
applying for licensure or if the
organization is otherwise no longer
considered an approved AO. While FDA
believes that a wholesale distributor
should not be penalized for the actions
of the AO, FDA must ensure that the
AO’s review and findings provide a
reliable basis for licensing decisions. As
such, FDA is proposing that, if the
wholesale distributor is otherwise in
good standing, a change in the approval
status of the AO that conducted the
inspection of the wholesale distributor
will not automatically affect the
licensure of a licensed wholesale
distributor (see proposed § 205.23(e)).
Rather, in the event that an AO has
disciplinary sanctions taken against it,
ends its business, or is otherwise no
longer considered an approved AO, the
license of any wholesale distributor
reviewed by that AO will be subject to
appropriate action in accordance with
§ 205.30 and other applicable statutes or
regulations. FDA may verify the
wholesale distributor’s compliance
status and review the facts in that
situation to determine the potential
effect, if any, on the licensure of
wholesale distributors inspected by that
AO.
5. Changes to Information, Ownership,
or Location of Licensed Wholesale
Distributors
FDA recognizes that information
about a business can change over time.
However, for the licensing authority to
effectively carry out its responsibilities,
license information must remain current
and changes in information previously
submitted must be reported to the
licensing authority. Currently, the
reporting requirements for these types of
changes vary by State. FDA is proposing
the establishment of specific timeframes
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for reporting changes (see proposed
§ 205.24) and believes that
standardizing the timeframes will help
make reporting business-related changes
less burdensome for industry and
licensing authorities. FDA is proposing
that the wholesale distributor submit
changes to certain information, such as
the information submitted with a surety
bond or as part of an application for
licensure, to the licensing authority
within 30 calendar days of the date the
change became effective (see proposed
§ 205.24(a)). Significant changes, such
as changes in location or changes to the
person engaged in wholesale
distribution, require the added scrutiny
that comes with an inspection or review
of an application for a new license to
ensure that the entity will be able to
continue to meet the standards for
licensure in its new location or under its
new management. For this reason, FDA
is proposing that changes in location or
changes to the person engaged in
wholesale distribution will require an
inspection or new license (see proposed
§ 205.24(b) and (c)). FDA recognizes that
the ownership of a facility from which
a wholesale distributor leases the
facility and conducts wholesale
distribution may change without the
wholesale distribution operation
changing in any meaningful way. If that
change does not impact the wholesale
distribution operation, the wholesale
distributor will not need to apply for a
new license. As described in proposed
§ 205.24(b)(1), the date the change of
location takes place is the date the new
location begins receiving prescription
drugs.
6. Prohibited Persons and Qualifications
for Key Personnel
The FD&C Act, as amended by
DSCSA, requires FDA to establish and
implement standards for the
qualifications of wholesale distributors’
key personnel (section 583(b)(5) of the
FD&C Act). As discussed above and
proposed at § 205.3(g), FDA considers
key personnel to include individuals
with responsibility for managing the
operations of the wholesale distributor,
including any principal, owner,
director, officer of the wholesale
distributor, facility manager or
designated representative, or other
individuals who are authorized to enter
into areas where prescription drugs are
held and are likely to handle those
prescription drugs as a part of their
responsibilities within the operation.
FDA believes the qualifications for key
personnel proposed in § 205.25 are
necessary to ensure that all the
individuals who are responsible for
operating the wholesale distributor’s
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facility are appropriately qualified to
carry out their duties and that the
wholesale distributor meets the national
standards.
Proposed § 205.25(a) lists conduct
that prohibits a wholesale distributor
from obtaining licensure. Proposed
§ 205.25(b) establishes the basic
standards for key personnel working
within a wholesale distribution facility.
Key personnel must have the
appropriate education, background,
training, and experience necessary to
carry out their assigned functions
within the operation. No one within the
facility should carry out the
responsibilities of key personnel
without the proper training and
expertise.
As a part of FDA’s responsibility to
establish and implement standards for
the qualifications of wholesale
distributors’ key personnel, FDA is
proposing that wholesale distributors
and their key personnel meet certain
other qualifications. Licensure may be
denied if a wholesale distributor or any
of their key personnel do not meet the
standards for qualification as outlined
in proposed § 205.25(c).
Key personnel working for a
wholesale distributor hold critical
positions of trust for protecting the
security of the prescription drug supply
chain. FDA believes it would be a best
practice for a firm to require that all
employees not engage in the illegal use
of controlled substances while serving
in their capacity in the wholesale
distribution operation and request that
all employees so state.
FDA is proposing to require wholesale
distributors to establish and implement
written policies and procedures to
ensure that their key personnel meet the
qualifications contained in this
proposed section (see proposed
§ 205.25(e)) and to maintain certain
information about their key personnel
that demonstrates they are qualified to
carry out the duties assigned to them
(see proposed § 205.25(b)), including
having the proper education and
training (see proposed § 205.25(e)(3)).
Proposed § 205.25(f) also limits a facility
manager or designated representative to
hold that position at one facility at a
time. This is to ensure that the facility
manager or designated representative is
actively engaged in managing the daily
operations of the facility and that they
remain aware of any non-compliance
issues that may arise.
The FD&C Act, as amended by
DSCSA, specifically requires licensure
standards to include mandatory
background checks and fingerprinting of
wholesale distributor facility managers
and their designated representatives
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(section 583(b)(4) of the FD&C Act).
Entrusting individuals with the
responsibility of distributing
prescription drugs prior to a criminal
background check may jeopardize the
integrity of the drug supply chain and
leave the public exposed to unnecessary
harm posed by the possible introduction
of drugs that are unsafe. FDA is
proposing to codify at § 205.25(g) the
requirement for facility managers and
their designated representatives to
submit a full set of fingerprints to
conduct local and national criminal
background checks. The background
check, when completed, must
demonstrate that the facility manager or
designated representative has no history
of criminal convictions pursuant to
proposed § 205.25(a).
FDA suggests, when a wholesale
distributor staffs its operation, it is a
best practice that the individuals who
work within their operation and have
access to prescription drugs not have a
record of criminal activity involving
violations of the FD&C Act or other laws
involving prescription drugs. This best
practice is recommended to help ensure
security within a wholesale distributor.
When screening personnel who work
in areas of a facility where prescription
drugs are held, including the facility
manager or designated representative,
FDA recommends that a wholesale
distributor consider whether such
personnel have (1) engaged in a pattern
of violating the requirements of section
583 of the FD&C Act that present a
threat of serious adverse health
consequences or death to humans; (2)
been found to have committed or
facilitated commission of any prohibited
acts under the FD&C Act or violated or
facilitated any violations of any of the
regulations in this part or analogous
provisions of the State licensing
authority, as applicable; (3) been
convicted of any violation Federal,
State, or local laws relating to drug
samples, wholesale or retail drug
distribution, distribution of controlled
substances, or 3PL services; or (4) been
convicted of any felony under Federal,
State, or local laws involving or related
to prescription drugs. FDA believes that
wholesale distributors should consider
an applicant’s history of violations of
the FD&C Act or other laws involving
prescription drugs when making staffing
decisions.
7. Wholesale Distributor Storage and
Handling of Prescription Drugs, and
Required Policies and Procedures
The DSCSA charges FDA with
creating national standards for the
storage and handling of prescription
drugs by wholesale distributors,
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including facility requirements (section
583(b)(1) of the FD&C Act). To ensure
confidence that the prescription drug
delivered maintains its quality and
integrity throughout the distribution
process, FDA believes that wholesale
distributors should establish and
maintain quality systems that
encompass the organizational structure,
account for potential vulnerabilities or
threats to the systems, and clearly
articulate the procedures and processes
for all wholesale distribution activity. A
proper quality system should be fully
documented, and the effectiveness of
the system should be continually
monitored to ensure the quality is
maintained. This includes ensuring that
facilities and equipment are properly
maintained for their purposes of storing
and distributing prescription drugs; that
personnel are properly qualified,
screened, and trained for their positions;
and that documentation is
comprehensive. Regular management
review of all aspects of the quality
systems in place is important for
maintaining these high standards. FDA
proposes § 205.26, which establishes
basic requirements that will assist
wholesale distributors in achieving
these goals.
Although the FD&C Act permits an
entity to be more than one type of
trading partner so long as it complies
with all the applicable requirements
(section 582(a)(1) of the FD&C Act), FDA
believes that the processes and
functions of each type of entity need to
be kept separate for the licensing
authority to ensure the entity is
complying with all the applicable
requirements. Accordingly, FDA is
proposing that any wholesale
distributor’s facility that is also licensed
or registered as another trading partner
and operating from the same address
must have separate systems and
processes in place for their separate
functions (see proposed § 205.26(a)).
FDA believes that proper storage and
handling of prescription drugs
inherently requires the establishment of
standards that address physical
requirements for the facility space in
which drugs are stored and handled,
along with standards that address the
manner in which drugs are to be
securely stored and handled within the
facility of a wholesale distributor. In
§ 205.26(b), FDA proposes the following
requirements with regard to standards
placed on the wholesale distributor’s
facility. FDA believes these facility
requirements will ensure that their
establishments are appropriate for the
distribution (including storage) of
prescription drugs.
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The facility must be of a suitable size,
configuration, and design to ensure
proper storage, maintenance, and
cleanliness (see proposed
§ 205.26(b)(1)(ii) through (iv)). The
facility must also be equipped with
clearly defined areas that separate drugs
that are unfit for distribution, from those
that are saleable to avoid potential
mistakes when distributing the
prescription drugs (see proposed
§ 205.26(b)(1)(vi)).
The facility must be sufficiently
secure to protect the prescription drugs
in the supply chain from possible theft
or diversion (see proposed
§ 205.26(b)(2)). Facilities must protect
against unauthorized entry and ensure
that the premises are well lit and not
vulnerable to intrusion (see proposed
§ 205.26(b)(2)(i) through (iii)). Entry and
access to areas where prescription drugs
are held within the facility must be
limited to those who have the
appropriate experience and training
needed to conduct wholesale
distribution (see proposed
§ 205.26(b)(2)(iv)). These basic security
requirements will help wholesale
distributors protect and safeguard the
prescription drugs maintained in their
facility.
A wholesale distributor has the
responsibility of ensuring that
prescription drugs are stored under
proper conditions to maintain the safety
and effectiveness of the drugs it
distributes. Accordingly, a wholesale
distributor’s facility must maintain
appropriate equipment (e.g.,
refrigeration and air conditioning
equipment) in good working order to
ensure that prescription drugs are
properly stored in the facility (see
proposed § 205.26(b)(3)). To this end,
FDA is proposing to require that a
wholesale distributor establish written
procedures to ensure that its equipment
is installed and maintained by qualified
individuals (see proposed
§ 205.26(b)(3)(i)). Written policies and
procedures include those that are stored
and maintained electronically. Upon
inspection, a wholesale distributor must
demonstrate and verify that its
equipment is in working order and has
been periodically assessed in
accordance with the wholesale
distributor’s written procedures to
ensure the equipment’s continued
functionality (see proposed
§ 205.26(b)(3)(i)), which is critical in
ensuring that those drugs retain their
safety and effectiveness throughout the
supply chain.
Additionally, a wholesale distributor
must regularly conduct and document
facility assessments to make sure that
drugs are properly stored in accordance
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with their labeling (see proposed
§ 205.26(b)(4)).
FDA expects that, as a crucial part of
the creation of a quality system,
wholesale distributors will establish,
maintain, and follow written policies
and procedures regarding the
safeguarding of the prescription drugs
within their control. Proposed
§ 205.26(c) outlines several
requirements for maintaining written
policies and procedures to ensure that
the requirements are carried out
properly and consistently. Wholesale
distributors are not limited to
establishing written policies and
procedures for the stated functions in
proposed § 205.26(c), as a wholesale
distributor may wish to establish
written policies and procedures
pertaining to other aspects of wholesale
distribution and staffing of their
facilities. The purpose of requiring
written policies and procedures is to
assist staff and management at a
wholesale distribution facility to
determine the processes required to
ensure safe storage and distribution of
prescription drugs.
Proposed § 205.26(c) includes the
requirement that wholesale distributors
establish and follow written policies
and procedures to ensure that a
wholesale distributor: (1) Only does
business with other authorized trading
partners (see proposed § 205.26(c)(1));
(2) properly maintains equipment in
good working order as outlined in
proposed § 205.26(b)(3) (see proposed
§ 205.26(c)(2)); (3) transports
prescription drugs in a manner designed
to avoid breakage and exposure (see
proposed § 205.26(c)(3)); (4) inspects
shipping containers for suspect or
illegitimate products, as well as other
quality issues that may render the
prescription drug unfit for distribution
(see proposed § 205.26(c)(4)); (5) stores
and handles the prescription drugs they
warehouse and distribute in accordance
with the prescription drug’s labeling
(see proposed § 205.26(c)(5)); (6)
properly retains, returns, or destroys
drugs removed from the supply chain
depending on the proper disposition of
the prescription drug (see proposed
§ 205.26(c)(6)); and (7) is prepared to
protect against reasonably foreseeable
crises that could affect security or
operations at the facility (see proposed
§ 205.26(c)(7)).
8. Recordkeeping
Proper recordkeeping is essential to
the timely identification, recording, and
reporting of issues arising within the
supply chain. Section 583(b)(2) of the
FD&C Act requires FDA to create
national standards for establishing and
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maintaining records pertaining to the
distribution of prescription drugs. FDA
is proposing in § 205.27(a) that these
records include documentation
pertaining to the security, storage,
handling, inventory, shipping, sale,
purchase, trade, delivery, and receipt of
prescription drugs, as well as policies,
procedures, instructions, contracts, data,
inspection reports, and any other
documentation related to compliance
with this part, such as invoices,
purchase orders, packing slips, and
shipping records. These records could
be stored and maintained electronically.
These records maintenance
requirements will allow for greater
confidence in the information preserved
at the facility and potentially
disseminated to other trading partners.
The maintenance, availability, and
accuracy of the records made available
for inspection under section 583(b)(6) of
the FD&C Act are critical to ensure that
wholesale distributors are acting in
compliance with this proposed
regulation and that the records can be
relied upon to identify any potential
risk to the public health. As such, FDA
is proposing to require that all records
be securely stored, and that any
alterations made to records be signed
and dated, while preserving the original
information contained in the record (see
proposed § 205.27(b)). This is intended
to ensure that all records related to the
distribution of prescription drugs
provide transparency and accurately
reflect the activities of the wholesale
distributor. FDA also believes that
reliability of the records is contingent
on having processes and procedures in
place that restrict access to and protect
the integrity of the data. To this end,
FDA is proposing to require in
§ 205.27(c) that wholesale distributors
implement written policies and
procedures to protect the integrity of
their records.
Under proposed § 205.27(d), all
records would be retained for a period
of 3 years, except records related to
suspect and illegitimate products,
prescription drug quality complaints,
and destroyed, returned, and recalled
prescription drugs, which would need
to be retained for a period of 6 years.
Such record retention is necessary to
ensure compliance and consistent
enforcement of the various record
keeping requirements of sections 582,
583, and 584 of the FD&C Act.
9. Inspections
Section 583(b)(6) of the FD&C Act
directs FDA to establish national
standards for a mandatory physical
inspection of any facility used in
wholesale distribution within a
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6727
reasonable time frame from the initial
application (section 583(b)(6) of the
FD&C Act). FDA believes that it is
imperative for the mandatory physical
inspection to take place prior to issuing
an initial license to a wholesale
distributor to ensure that only those
wholesale distributors who have the
ability to properly store, handle, and
distribute prescription drugs in
accordance with the national standards
are licensed. Accordingly, in proposed
§ 205.28(a), wholesale distributors are
required to undergo a physical
inspection before the licensing authority
issues the initial license. As used in
subpart C, licensing authority means the
State licensing authority or FDA. To
satisfy the inspection requirement,
section 583(c) of the FD&C Act permits
the licensing authority to conduct the
inspection or accept an inspection by
the State in which the facility is located
or by a third-party accreditation or
inspection service approved by the
licensing authority in accordance with
these standards. FDA has codified this
provision at proposed § 205.28(a)(1) and
(2). Additionally, FDA believes that
section 583(c) can be applied to State
licensure of non-resident wholesale
distributors to ship into a State and
proposes that a State into which a drug
is distributed may use the same
methods to satisfy the inspection
requirement for non-resident wholesale
distributors (see proposed
§ 205.28(a)(1)(iii)). FDA believes that
requiring a satisfactory inspection prior
to licensure will ensure that only
wholesale distributors with appropriate
facilities and equipment for storing and
distributing prescription drugs are
granted a license to participate in the
supply chain.
FDA is proposing to require that the
physical inspection of wholesale
distributor facilities include the facility
itself, processes related to all wholesale
distribution activities, and paper and
electronically stored records; that
wholesale distributors permit
inspections at reasonable times; and that
the licensing authority conduct its
inspection in a reasonable manner (see
proposed § 205.28(b) and (c)). FDA
believes that authentication of records
during an inspection is important to
maintain confidence in documentation
preserved by the wholesale distributor,
which may contain information about
nonsaleable prescription drugs or be
disseminated to other trading partners.
FDA proposes that a wholesale
distributor be required to make records
available during inspections, including
records that are held offsite in the
normal course of business. The failure
of a wholesale distributor to produce
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records in a timely manner during an
inspection can significantly affect the
licensing authority’s ability to complete
the inspection. Therefore, FDA is
proposing that a wholesale distributor
be required to provide offsite records
within 2 business days of a request for
such records by a State or Federal
official, or sooner if necessitated by the
duration of the inspection (see proposed
§ 205.28(b)). FDA also proposes the
requirement that a wholesale distributor
cooperate with the State or Federal
licensing authority, or the AO
conducting the inspection, at reasonable
times, within reasonable limits, and in
a reasonable manner to achieve the
objective of the inspection (see
proposed § 205.28(c)).
Finally, FDA believes routine
inspections are an essential tool to
ensure that wholesale distributors
continue to comply with the national
standards after obtaining their initial
wholesale distributor license and move
to renew that license. Accordingly, FDA
is proposing to require that wholesale
distributors undergo routine inspections
at least once every 3 years (see proposed
§ 205.28(d)). In developing the
inspection timeframes, FDA sought to
balance the risk to the supply chain
with FDA’s and State licensing
authorities’ resource constraints. These
routine inspections allow FDA or the
licensing authority to ensure that
wholesale distributors maintain the
levels of quality storage and
maintenance of prescription drugs at
their facilities expected by FDA to
safeguard the supply chain.
10. Annual and Other Reporting to FDA
Under DSCSA, wholesale distributors
must report certain information to FDA
as part of the requirement to be
considered an authorized trading
partner (sections 581(2)(B) and
503(e)(2)(A) of the FD&C Act). The
annual reporting requirements for
wholesale distributors went into effect
on January 1, 2015, and FDA has
published draft industry guidance that
communicates draft Agency
expectations for annual reporting while
these regulations are being developed
(79 FR 73083, December 9, 2014, and 82
FR 3004, January 10, 2017). Proposed
§ 205.29 clarifies the statutorily
prescribed annual reporting
requirements.
The DSCSA requires that any
wholesale distributor who owns or
operates an establishment that engages
in wholesale distribution report to FDA
on an annual basis: (1) The State in
which the wholesale distributor is
licensed; (2) the identification number
of its wholesale distributor’s license; (3)
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the name, address, and contact
information for the wholesale
distributor; (4) all trade names under
which the licensed wholesale
distributor conducts business; and (5)
any significant disciplinary actions
taken against the wholesale distributor
(section 503(e)(2)(A) of the FD&C Act).
FDA is proposing to require that
wholesale distributors use an electronic
reporting system provided by FDA (see
proposed § 205.29(a)). This electronic
system will increase efficiency by
providing uniformity in report content
and format, making the information
easier to process for regularly updating
the public database (section 503(e)(2)(B)
of the FD&C Act). In addition, FDA
believes having the license status of
wholesale distributors in one publicly
available database would be helpful for
FDA, trading partners, and other
stakeholders in determining whether
wholesale distributors are authorized, as
defined in section 581(2)(B) of the FD&C
Act. Reporting information for each
wholesale distributor in FDA’s
electronic system during the reporting
period is integral to FDA’s ability to
provide oversight, as wholesale
distributors are prohibited from
distributing product without a license.
FDA proposes that the annual
reporting schedule will require all
wholesale distributors to report each
calendar year between January 1st and
March 31st, although an entity may
update information at any time (see
proposed § 205.29(b)). For example, if a
wholesale distributor chooses to update
a license on December 15, 2019, that
wholesale distributor will still have to
report during the January 1, 2020,
through March 31, 2020, annual
reporting period.
The specific information that
wholesale distributors must
electronically report to FDA is set forth
in proposed § 205.29(c). The DSCSA
requires licensed entities to report to
FDA each State by which they are
licensed and each license number
(section 503(e)(2)(A)(i)(I) of the FD&C
Act). FDA is proposing that the
wholesale distributor also submit the
expiration date of its State licenses (see
proposed § 205.29(c)). The submission
of the wholesale distributor’s license
expiration date is paramount to FDA’s
ability to establish and maintain a
public database identifying each
authorized wholesale distributor as
required by section 503(e)(2)(B) of the
FD&C Act. If a wholesale distributor’s
license expires, it is no longer an
authorized trading partner, and FDA
will remove it from the public database
until the license is renewed or a new
license issued. Similarly, FDA is
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proposing that a wholesale distributor
be required to report to FDA within 30
calendar days that it has gone out of
business or voluntarily withdrawn a
wholesale distributor’s license from a
State (see proposed § 205.30(e)). Again,
FDA believes that requiring a wholesale
distributor to report this information
about the status of its license is essential
for FDA to comply with the
requirements under section 503(e)(2)(B)
of the FD&C Act and to ensure that the
database is accurate and helpful for the
States and trading partners.
The DSCSA also requires that
wholesale distributors report the name,
address, and contact information for
each facility at which, and all the trade
names under which, the wholesale
distributor conducts business (section
503(e)(2)(A)(i)(II) of the FD&C Act). In
implementing this requirement, FDA is
proposing to require the wholesale
distributor to provide the company
name that is identical to the official
company name appearing on the
license, along with the full business
address that is associated with the State
or Federal license (see proposed
§ 205.29(c)(2)).
Additionally, FDA is requesting that
wholesale distributors submit a UFI that
corresponds with the facility name and
facility address. The UFI for a wholesale
distributor’s facility is useful to FDA in
identifying and confirming certain
business information. A wholesale
distributor should obtain a separate UFI
for each physical address it reports.
FDA has published guidance on annual
reporting that can assist wholesale
distributors if they require additional
information regarding the UFI reporting
recommendation.
In addition, FDA believes the
wholesale distributor’s contact
information should include someone
familiar with the daily operations of the
wholesale distributor’s facility and who
has the authority to act on inquiries to
ensure efficient processing of inquiries
and minimize the impact inquiries may
have on the facility’s daily operations.
Therefore, wholesale distributors must
submit the contact information of the
facility manager or designated
representative, including that
individual’s name, telephone number,
and email address, with its annual
reporting requirements pursuant to
section 503(e)(2)(A)(i)(II) of the FD&C
Act.
DSCSA requires a wholesale
distributor to report to FDA any
significant disciplinary action taken by
a State or Federal government against
the wholesale distributor (section
503(e)(2) of FD&C Act). A significant
disciplinary action is defined in the
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proposed regulation, in relevant part, as
any action by a State or Federal
licensing authority that limits or
prevents a wholesale distributor from
distributing or facilitating the
distribution of prescription drugs (see
proposed § 205.3(l)). FDA proposes that
wholesale distributors report during the
reporting period to FDA all significant
disciplinary actions that occurred
during the preceding 12-month period
(see proposed § 205.29(d)(1)). After the
reporting period, FDA proposes that
within 30 calendar days after a
significant disciplinary action is
imposed or taken by a State or Federal
government, wholesale distributors
report the type of disciplinary action,
the date the action was taken, and the
State where the disciplinary action
occurred, as well as submit any
documents associated with the
disciplinary action, including a final
ruling by the relevant State or Federal
agency or board or a consent decree (see
proposed § 205.29(c)(4) and (d)). While
wholesale distributors do not ordinarily
have to report DEA registration numbers
or State controlled substances licenses
to FDA for annual reporting purposes,
FDA suggests that such information be
provided as part of its report under
section 503(e)(2)(A)(ii) of the FD&C Act
when there is a significant disciplinary
action issued by the DEA or the State
controlled substances licensing
authority that would limit the ability of
the wholesale distributor to distribute
controlled drug substances. In such a
situation, information about the DEA
registration or State controlled
substance license should be reported
since the disciplinary action is reported
under that specific license or
registration.
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11. Licensure Denial, Suspension,
Reinstatement and Revocation—Notice
and Opportunity To Request a Hearing
The standards for licensure denial are
set forth in proposed § 205.30. Proposed
§ 205.30(a)(1) lists 10 circumstances
under which a licensing authority will
be required to deny a wholesale
distributor’s request for licensure or
licensure renewal. FDA believes that
these reasons requiring denial will
ensure wholesale distributors focus on
good storage practices outlined by FDA
and are necessary to protect the integrity
of the products in the pharmaceutical
distribution supply chain. Wholesale
distributors should seek to ensure that
these reasons outlined in proposed
§ 205.30(a)(1) are addressed when the
wholesale distributor files for licensure
to avoid denial or delays of their
application.
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Proposed § 205.30(a)(2) through (5)
details the process afforded to wholesale
distributors whose applications for
licensure have been denied. FDA is
proposing to give applicants the
opportunity to provide additional
information for reconsideration of the
denial. If the licensing authority denies
a wholesale distributor’s request for
licensure after reconsideration, the
wholesale distributor will receive a
notice of opportunity to request for
hearing under existing FDA hearing
procedure. FDA requests comment
regarding the reconsideration and
appeal process outlined in this
regulation for wholesale distributors
whose applications for licensure have
been denied.
The proposed standards for
suspending a wholesale distributor’s
license are set forth in § 205.30(b) and
(c). A suspended wholesale distributor
must cease all receipt and distribution
of prescription drugs until their license
is re-instated. The proposed standards
for suspension are based on the severity
of risk posed to the public health. For
example, under proposed § 205.30(b), a
wholesale distributor’s license may be
suspended only after the wholesale
distributor receives a notice of
opportunity for hearing. If the licensing
authority has a reasonable belief that the
wholesale distributor is not in
compliance with licensure requirements
and such noncompliance threatens the
quality of the product or threatens
public safety, the licensing authority is
required to notify the wholesale
distributor in writing of the intent to
suspend its license. A wholesale
distributor will have 30 days upon the
date of the notice of intent to suspend
a license to provide additional
information to the licensing authority so
it may reconsider its decision to
suspend the wholesale distributor
license. If reconsideration is not sought,
or if reconsideration is denied, the
licensing authority will inform the
wholesale distributor in writing of its
formal intent to proceed with license
suspension. The notice will contain a
statement informing the wholesale
distributor that it has an opportunity to
request a hearing on the question of
whether there are sufficient grounds for
suspension. The wholesale distributor
will have 10 days after the date of the
notice to inform the licensing authority
of its intent to request a hearing;
otherwise the opportunity for a hearing
will be waived and the license
suspended. FDA requests comment
regarding this reconsideration and
appeal process.
Proposed § 205.30(c) allows for
suspension prior to notice and
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opportunity for a hearing and for
suspension to be effective immediately
if the wholesale distributor’s
noncompliance poses an imminent
threat to public safety. For example, if
a wholesale distributor is distributing
illegitimate product, and once made
aware, does not take corrective actions
to protect the public from the threat of
these products, its license could be
suspended immediately. Another
example would be a scenario where the
conditions under which drugs are held
cause the product to be illegitimate and
the wholesale distributor refuses to
correct the conditions or continues to
ship these illegitimate products. Under
the proposed regulation, if the licensing
authority proceeds with suspension in
such a situation, the licensing authority
will inform the wholesale distributor in
writing that its license is suspended.
The notice will also contain a statement
informing the wholesale distributor that
it may request a hearing and that
hearing, if granted, will be afforded
within 10 days of the receipt of the
wholesale distributor’s request for
hearing. The wholesale distributor has
10 days from the date on the notice of
suspension to request a hearing;
otherwise its opportunity for a hearing
will be waived. FDA believes that this
limits the amount of time a wholesale
distributor’s license would be
suspended while providing a reasonable
amount of time both for the wholesale
distributor to review a notice of
suspension and collect the necessary
information to demonstrate that its
license should not be suspended, and
for FDA to consider the hearing request,
and to schedule and prepare for a
hearing, if the hearing request is
granted. FDA believes immediate
suspension of a wholesale distributor’s
license is crucial in cases where
continued operation of the wholesale
distributor presents an imminent threat
to public safety and the pharmaceutical
supply chain.
Under proposed § 205.30(d), a
wholesale distributor’s suspended
license may be reinstated if the
wholesale distributor can demonstrate
to the licensing authority that it is in
compliance with this proposed
regulation.
Under the proposed rule the process
outlined at § 10.75 is the default for
appeals related to a denied application
for a wholesale distributor license, and
the hearing process outlined at 21 CFR
part 16 is the default for appeals related
to a suspended or revoked wholesale
distributor license. However, the
wholesale distributor may request any
of the procedures contained in 21 CFR
parts 10 through 16. FDA believes that
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this proposed approach is consistent
with current practice and suggests that
States develop comparable processes.
The standards for revoking a
wholesale distributor license are set
forth in proposed § 205.30(e). The
licensing authority will revoke a license
if it finds that a wholesale distributor
whose license has been suspended is
unable or refuses to comply with the
licensing requirements. The
requirements governing the revocation
of a wholesale distributor license are set
forth in proposed § 205.30(e)(2) through
(4) and mirror the process outlined in
§ 205.30(b)(2) through (7), with one
exception: When the licensing authority
informs the wholesale distributor of its
intent to revoke a license, the wholesale
distributor is given no opportunity for
reconsideration since it already had an
opportunity to rectify deficiencies while
its license was suspended.
In addition, where a wholesale
distributor fails to timely renew its
application, the license will be
considered expired and the wholesale
distributor will need to submit an
application for new licensure if it seeks
to resume wholesale distribution
activities, because the licensing
authority may be unable to confirm that
the wholesale distributor continues to
meet all necessary licensure
requirements (see proposed § 205.30(f)).
If a wholesale distributor’s license
expires, it must cease receipt and
distribution of prescription drugs until
their license has been re-instated.
FDA is also proposing that the
licensing authority will terminate a
wholesale distributor’s license upon
request from the wholesale distributor
when the request includes a notice of
the wholesale distributor’s intent to
discontinue its activities and a waiver of
an opportunity for a hearing. The
wholesale distributor will be required to
apply for a new license should it decide
to resume wholesale distribution
activities (see proposed § 205.30(g)).
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F. Approved Organizations for
Wholesale Distributors
1. Approval of Outside Organizations
and Utilization of Such Organizations in
the Licensure Process
The FD&C Act, as amended by
DSCSA, allows the Federal or State
licensing authority to accept inspections
of wholesale distributors conducted by
third-party accreditation or inspection
services they have approved to be part
of the licensure process (section 583(c)
of FD&C Act). Subpart D of the proposed
rules defines the scope of work these
approved organizations (AOs) would be
tasked with performing, as well as the
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standards an AO must meet to become
approved by FDA. Additionally, this
subpart will explain the circumstances
in which an inspection conducted by an
AO may be used, what activities the
AOs have the authority to conduct and
are expected to conduct, and the
qualifications that each third-party
organization must possess to become
approved by FDA. FDA suggests that
States that choose to rely on AOs to
conduct inspections have in place the
same or similar qualifications and
processes for approved organizations to
conduct those inspections and for
decisions affecting the approval status
of those organizations.
FDA proposes that an AO must
complete an inspection no more than 90
days after receiving notice from the
licensing authority to conduct an
inspection (see proposed § 205.31(b)).
FDA believes this allows AOs sufficient
time to perform the work with which
they are tasked while also ensuring that
the wholesale distributor’s activities are
not significantly delayed or otherwise
impacted due to delays in the
inspection process. Upon completion of
the inspection, the AO would then
provide FDA with a report based on the
inspection within 7 days (see proposed
§ 205.31(b)(2) and (3)), with copy of the
report to the wholesale distributor
facility (see proposed § 205.31(b)(3)).
Using the report submitted by the AO,
FDA makes the final determination as to
whether a wholesale distributor facility
should be issued a license.
It is important that FDA be able to
verify an AO’s continued compliance
with the requirements of the proposed
regulation. Therefore, to become an AO
and keep its approval, FDA is proposing
to require that an AO maintain certain
records for a period of at least 5 years
and make these records readily available
to FDA upon request (see proposed
§ 205.31(c)). In addition, to ensure
public safety, FDA is proposing to
require that AOs report certain
observations at wholesale distributor
facilities to FDA immediately (see
proposed § 205.31(c)(4)). The general
qualifications for approval are set out in
proposed § 205.32.
To become and remain approved,
FDA is proposing to require that an
organization, and those employed by the
organization, abide by certain guidelines
intended to secure against conflicts of
interest, promote professional business
practices, and protect non-public
information (see proposed § 205.32(a)).
FDA is proposing to allow AOs to hire
outside contractors to conduct
inspections. Under FDA’s proposed
regulation, AOs who decide to use
outside contractors must ensure that
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they effectively carry out the inspection
in a manner consistent with this
proposed regulation to protect public
health, conform to conflict of interest
provisions, and properly protect all nonpublic information (see proposed
§ 205.32(b)). For an AO to maintain
approval, FDA proposes to require that
the AO ensure contractors abide by all
applicable confidentiality agreements,
the AO has policies and procedures in
place to ensure the contractors abide by
these proposed standards, and the
contractors have the necessary training
and expertise to carry out inspections of
wholesale distributor facilities (see
proposed § 205.32(b)(1)).
Before a contractor hired by an AO
may perform an inspection of a
wholesale distributor, the wholesale
distributor must have entered into an
agreement with the AO giving the AO
permission to share with contractors the
wholesale distributor’s confidential
commercial information (see proposed
§ 205.32(b)(2)). If such consent is not
provided by the wholesale distributor,
the AO will perform the inspection
itself, without the use of contractors.
FDA believes that this approach is
reasonable given that it is the AO’s
decision to work with contractors and,
under this proposed regulation, the
ultimate responsibility for the
inspection and the protection of the
wholesale distributor’s information rests
with the AO.
In addition, FDA proposes that AOs
must submit to FDA a list of the
contractors used by the organization and
must certify that such contractors
comply with the applicable regulations
(see proposed § 205.32(b)(3)). Finally, to
ensure that the standards set forth in
this subpart are followed, FDA proposes
to require that the AOs remain
responsible for all the work performed
by outside contractors (see proposed
§ 205.32(b)).
FDA proposes that to maintain their
approved status, AOs must prohibit
contractors from subcontracting their
inspection duties (see proposed
§ 205.32(b)(1)(ii)). Limiting the ability of
contactors to further delegate their
responsibility ensures that FDA will
have accurate information about who is
conducting inspections, that those
responsible for the inspections have the
necessary qualifications, and that their
conduct is governed by this proposed
regulation.
The proposed process that FDA will
use to approve organizations, including
the application process, as well as the
process for suspending or revoking an
organization’s approval, are set forth in
proposed § 205.33. FDA is proposing
that organizations seeking approval by
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FDA must electronically submit to FDA
an application demonstrating the
organization’s ability to assess
compliance with all wholesale
distributor requirements detailed in
proposed part 205 (see proposed
§ 205.33(a) and (b)), and employees
must complete the necessary training as
directed by FDA (see proposed
§ 205.33(c)). To verify information
contained in the application and ensure
compliance with the proposed
regulation, FDA proposes that, before an
AO may conduct its first inspection, a
newly approved organization must be
audited by FDA (see proposed
§ 205.33(d)). A new approval will be
valid for 5 years (see proposed
§ 205.33(e)).
If an organization’s request for
approval is denied, the organization
may submit a request for
reconsideration under § 10.75 (see
proposed § 205.33(f)). In addition, FDA
proposes that an AO may have its
approval suspended if it does not
maintain the standards outlined in this
section (see proposed § 205.33(g)). A
suspended AO must cease all
inspections of wholesale distributors. A
suspended AO must notify any
wholesale distributors with a pending
inspection to be performed by the AO of
the AO’s suspension within 7 calendar
days (see proposed § 205.33(g)(5). While
most suspensions will happen only after
notice and opportunity to request a
hearing, under the proposed regulations,
FDA reserves the ability to suspend
approval prior to a hearing if there is a
reasonable probability that the
organization’s noncompliance will
cause imminent and serious adverse
health consequences or death to humans
(see proposed § 205.33(h)).
Furthermore, FDA proposes that a
suspended approval can be reinstated if
the issue is resolved within 1 year from
the date of suspension (see proposed
§ 205.33(i)), though it may be revoked if
the organization fails to rectify the
situation that resulted in the suspension
(see proposed § 205.33(j)). FDA believes
that 1 year provides the AO enough time
to remedy most situations. An AO’s
approval may also be reinstated on a
conditional basis. If the AO is
conditionally reinstated, they will enter
a three-year probationary period, during
which if any material deficiencies arise,
their approval will be subject to
immediate revocation (see proposed
§ 205.33(i)(2)).
FDA also proposes to permit an AO to
voluntarily withdraw its approval or
otherwise cease operations as an AO
under this part, but it must inform FDA
of any facilities with pending
inspections (see proposed § 205.33(l)).
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To further ensure that pending
inspections are not overlooked, under
FDA’s proposed regulation, an AO
whose approval has been suspended or
revoked has the responsibility to report
this information to those wholesale
distributors that have pending
inspections (see proposed § 205.33(m));
this will stop the clock on the 90-day
licensure review while the wholesale
distributor applies for inspection from
another AO or FDA. Also, to ensure
wholesale distributors continue to
comply with the provisions of this part,
and to ensure that AOs remain able to
assess compliance with the wholesale
distributor requirements, an AO must
inform FDA of any changes to
information that was submitted as part
of its application for approval (see
proposed § 205.33(n)(1)). Since the
approval of an organization is
nontransferable, changes in ownership
require an AO to submit a new
application to FDA (see proposed
§ 205.33(n)(2)). Finally, as an additional
assurance that an AO continues to
comply with the provisions of this part,
FDA proposes to require that AOs
remain subject to periodic audits by
FDA (see proposed § 205.33(o)).
VI. Proposed Effective/Compliance
Dates
Section 584 of the FD&C Act states
that the national licensing standards for
3PLs established by regulation take
effect 1 year after the date such final
regulation is published (section
584(d)(1) and (3) of the FD&C Act), and
that national licensing standards for
wholesale distributors established by
regulation take effect 2 years after the
date such final regulation is published
(section 583(a) and (e)(3) of the FD&C
Act). For several reasons, FDA does not
intend to enforce the 3PL requirements
until 2 years after the final regulation is
published.
FDA recognizes that 1 year may be
insufficient time for States to implement
3PL licensure programs, should they
decide to implement such programs,
and for 3PLs to apply for licensure
under these programs. Setting up a state
licensure program may require
additional time. This is especially true
in States that will require State
legislative action to implement a
licensure program, with some State
legislatures only meeting biennially.
As the DSCSA states that the national
standards for prescription drug
wholesale distributors established by
regulation pursuant to section 583 of the
FD&C Act will take effect 2 years after
the date such final regulation is
published (section 583(a) and (e) of the
FD&C Act), the national standards for
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6731
licensing wholesale distributors in
subpart C will be effective 2 years after
the date the final rule is published.
Although the DSCSA states that the
national licensing standards for 3PLs
established by regulation pursuant to
section 584 of the FD&C Act will take
effect one year after the date such final
regulation is published (section
584(d)(1) and (3) of the FD&C Act), as
noted, FDA does not intend to enforce
requirements with respect to the
national standards for licensure of 3PLs
until 2 years after the regulation is
finalized, in order to provide States with
the opportunity to establish or modify
their licensure programs in accordance
with the new standards and time for
3PLs to apply and obtain a new license.
For 1 year after the effective date of the
final regulation, FDA also does not
intend to enforce the requirements of
section 582(b)(3), (c)(3), (d)(3), and (e)(3)
of the FD&C Act with respect to a
manufacturer, wholesale distributor,
dispenser, or repackager who has as a
trading partner a 3PL that is not
licensed, unless the 3PL is not licensed
because the Secretary or a state
licensing body has made a finding that
the 3PL does not utilize good handling
and distribution practices and the
Secretary has published notice thereof.
VII. Preliminary Economic Analysis of
Impacts
We have examined the impacts of the
proposed rule under Executive Order
12866, Executive Order 13563, the
Regulatory Flexibility Act (5 U.S.C.
601–612), and the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104–4).
Executive Orders 12866 and 13563
direct us to assess all costs and benefits
of available regulatory alternatives and,
when regulation is necessary, to select
regulatory approaches that maximize
net benefits (including potential
economic, environmental, public health
and safety, and other advantages;
distributive impacts; and equity). We
believe that this proposed rule is a
significant regulatory action as defined
by Executive Order 12866.
The Regulatory Flexibility Act
requires us to analyze regulatory options
that would minimize any significant
impact of a rule on small entities.
Because the proposed rule could impose
significant, although uncertain, new
economic burdens on small entities, we
find that the proposed rule will have a
significant economic impact on a
substantial number of small entities.
The Unfunded Mandates Reform Act
of 1995 (section 202(a)) requires us to
prepare a written statement, which
includes an assessment of anticipated
costs and benefits, before proposing
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‘‘any rule that includes any Federal
mandate that may result in the
expenditure by State, local, and tribal
governments, in the aggregate, or by the
private sector, of $100,000,000 or more
(adjusted annually for inflation) in any
one year.’’ The current threshold after
adjustment for inflation is $158 million,
using the most current (2020) Implicit
Price Deflator for the Gross Domestic
Product. This proposed rule would not
result in an expenditure in any year that
meets or exceeds this amount.
In this rulemaking, we propose new
national standards for the licensing of
prescription drug wholesale distributors
and third-party logistics providers as
directed under the Drug Supply Chain
Security Act, Title II of the Drug Quality
and Security Act. If finalized, the rule
would also establish a Federal licensing
system for wholesale drug distributors
and third-party logistics providers to
use in the absence of a state licensure
program that is consistent with the
proposed national standards.
This rulemaking is being published in
conjunction with the proposed rule
entitled ‘‘Certain Requirements
Regarding Prescription Drug Marketing’’
(or part 203), published elsewhere in
this issue of the Federal Register. We
include the benefits and costs of part
203 in this economic analysis and,
unless otherwise specified, references to
the ‘‘proposed rule’’ in this analysis
encompass both proposed rules.
We summarize the benefits and costs
of the proposed rule in table 1. The
standards for prescription drug
wholesale distribution in the proposed
rule would result in benefits to
consumers and benefits to distributors
from reducing the diversion of
prescription drugs. Other monetized
benefits include cost savings from
reducing the frequency and quantity of
licensure applications and cost savings
from reducing state licensing standards
in some states. We estimate that the
annualized benefits over 10 years would
range from $1.25 million to $31.50
million at a 7 percent discount rate,
with a primary estimate of $10.66
million. We estimate that the
annualized benefits would range from
$1.26 million to $32.18 million at a 3
percent discount rate, with a primary
estimate of $10.89 million.
We also expect that the proposed rule,
if finalized, would impose costs on
wholesale drug distributors, third-party
logistics providers, states, approved
organizations, and the Food and Drug
Administration (FDA). Costs to
wholesale drug distributors and thirdparty logistics providers include costs of
learning about the rule, reporting to
FDA, undergoing routine inspections,
writing and revising standard operating
procedures, and conducting background
checks. Wholesale-drug distributors
would also incur costs to furnish surety
bonds to their state licensing authority
to obtain or renew their licenses.
Costs to states include the time spent
reading and understanding the rule,
passing or revising the laws and
regulations governing their licensure
programs, and inspecting WDD and 3PL
facilities. Approved organizations
would incur legal, application, and
training costs, as well as costs to inspect
WDD and 3PL facilities. FDA costs
include the costs to establish and
operate a reporting database and a
licensure program for wholesale drug
distributors and third-party logistics
providers and the costs to establish and
operate an approval program for
approved organizations.
We estimate that the annualized costs
over 10 years would range from $13.21
million to $20.63 million at a 7 percent
discount rate, with a primary estimate of
$16.92 million. We estimate that the
annualized costs over 10 years at a 3
percent discount rate would range from
$12.83 million to $20.10 million, with a
primary estimate of $16.47 million.
TABLE 1—SUMMARY OF BENEFITS, COSTS, AND DISTRIBUTIONAL EFFECTS OF THE PROPOSED RULE
Units
Primary
estimate
Category
Benefits:
Annualized Monetized ($ millions/year) ...............
Low
estimate
High
estimate
Year
dollars
Discount
rate
(%)
Period
covered
(years)
$10.66
10.89
$1.25
1.26
$31.50
32.18
2020
2020
7
3
10
10
16.92
16.47
13.21
12.83
20.63
20.10
2020
2020
7
3
10
10
0.12
0.11
0.09
0.08
0.14
0.14
2020
2020
7
3
10
10
..................
..................
Notes
There is a high degree of
uncertainty in the magnitude of benefits.
Qualitative.
Costs:
Annualized Monetized ($ millions/year) ...............
Qualitative.
Transfers:
Federal Annualized Monetized ($ millions/year)
From: States
Other Annualized Monetized ($ millions/year) ....
..................
To: Firms
..................
..................
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From:
..................
To:
Effects:
State, Local, or Tribal Government: Annualized net costs to states over 10 years ranging from $0.62 million to $1.44 million at a 7 percent discount and from
$0.58 million to $1.38 million at a 3 percent discount rate.
Small Business: Quantified effects of more than 1 percent of average annual revenues for small 3PL firms. Unquantified effects are uncertain.
Wages: No estimated effect.
Growth: No estimated effect.
We have developed a comprehensive
Preliminary Economic Analysis of
Impacts (PRIA) that assesses the impacts
of the proposed rule. The full
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preliminary analysis of economic
impacts is available in the docket for
this proposed rule (Ref 18) and at
https://www.fda.gov/AboutFDA/Reports
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VIII. Analysis of Environmental
Impacts
FDA has carefully considered the
potential environmental effects of this
action and has concluded, under 21 CFR
25.30(h), that this action is of a type that
does not individually or cumulatively
have a significant effect on the human
environment.
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IX. Paperwork Reduction Act of 1995
This proposed rule contains
information collection provisions that
are subject to review by the Office of
Management and Budget (OMB) under
the Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3521). A description of
these provisions is given in the
Description section of this document
with an estimate of the annual
reporting, recordkeeping, and thirdparty disclosure burden. Included in the
estimate is the time for reviewing
instructions, searching existing data
sources, gathering and maintaining the
data needed, and completing and
reviewing each collection of
information.
FDA invites comments on these
topics: (1) Whether the proposed
collection of information is necessary
for the proper performance of FDA’s
functions, including whether the
information will have practical utility;
(2) the accuracy of FDA’s estimate of the
burden of the proposed collection of
information, including the validity of
the methodology and assumptions used;
(3) ways to enhance the quality, utility,
and clarity of the information to be
collected; and (4) ways to minimize the
burden of the collection of information
on respondents, including through the
use of automated collection techniques,
when appropriate, and other forms of
information technology.
Title: Requirements to Obtain a
License to Distribute Drugs, Annual
Reporting and Recordkeeping for
Procedures, for Third-Party Logistics
Providers and Prescription Drug
Wholesale Distributors to Obtain a
License to Distribute Drugs; 21 CFR part
205; OMB Control Number 0910–0251—
Reinstatement
Description: The proposed rule would
establish standards, terms, and
conditions for the licensing of 3PLs and
prescription drug wholesale distributors
by State or Federal licensing authorities,
including process for the revocation,
reissuance, and renewal of such
licenses. Sections 584 and 583 of the
FD&C Act (21 U.S.C. 360eee–3, 360eee–
2)) as added by the DSCSA (Title II of
Pub. L. 113–54) requires FDA to issue
regulations on national standards for the
licensing of 3PLs and wholesale
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distributors. Accordingly, FDA is
proposing requirements for licensing of
wholesale distributors and third-party
logistics providers. The proposed rule
outlines these requirements, including
information collection provisions, that
3PLs and wholesale distributors must
meet to obtain a license. The licensing
authority is the State, from which the
3PLs distribute drug or the State from
which wholesale distributors distribute
drug. However, if a State does not
establish the licensure programs for
3PLs or wholesale distributors
consistent with these regulations, FDA
will issue the licenses to 3PLs or
wholesale distributors in that State. In
addition, States may require that a 3PL
or a wholesale distributor obtain a
license to ship drugs into that State. The
FD&C Act does not require that States
issue these types of licenses. However,
if a State chooses to implement such a
licensure requirement, the State must
ensure that it is consistent with these
regulations, and any wholesale
distributor or 3PL wishing to ship
products into that State must have a
license.
Proposed part 205, subpart A, would
set forth the national licensing
standards for State and Federal licenses
issued to 3PLs pursuant to section 584
of the FD&C Act (21 U.S.C. 360eee–3).
Proposed part 205, subpart C, would set
forth the national licensing standards
for State and Federal licenses issued to
wholesale distributors pursuant to
sections 503(e) and 583 of the FD&C Act
(21 U.S.C. 353(e) and 21 U.S.C. 360eee–
2)) and replaces the existing regulations
in proposed part 205 that outlined
guidelines for State licensing of
wholesale distributors that were
developed under the Prescription Drug
Marketing Act of 1987 (Pub. L. 100–
293).
In addition, the FD&C Act, as
amended by DSCSA, allows FDA to
approve ‘‘third party accreditation’’
entities to evaluate the qualifications of
3PLs for licensure or inspect wholesale
distributors facilities on behalf of FDA.
These organizations are referred to in
this proposed rule as approved
organizations or ‘‘AOs.’’ The application
to become an AO is the same whether
the AO will be evaluating the
qualifications of 3PLs for licensure,
inspecting wholesale distributors
facilities, or both. Subparts B and D of
the proposed rule outline the
qualifications for AOs to perform
licensure reviews/inspections for 3PL
facilities and inspections of wholesale
distributors respectively.
Description of Respondents:
Respondents to the information
collection are third-party logistics
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6733
providers and wholesale distributors in
any State and any entity engaging in
wholesale distribution of prescription
drugs in any State. We are proposing
that these respondents submit
applications for licensure and maintain
records of procedures and documents
pertaining to licensure review,
inspections, policies, and training.
The DSCSA establishes 3PLs as
members of the drug supply chain,
which are distinct from wholesale drug
distributors, and specifically precludes
States from regulating 3PLs as wholesale
distributors (section 585(b)(2) of the
FD&C Act (21 U.S.C. 360eee–4(b)(2)).
FDA is required by section 584 of the
FD&C Act (21 U.S.C. 360eee–3) to
establish national standards for the
licensure of 3PLs and is proposing those
standards in part 205, subpart A. When
the proposed rule is finalized, we will
require that each facility of an entity
that meets the definition of a 3PL in
section 581(22) of the FD&C Act (21
U.S.C. 360eee(22)) be licensed by the
State or FDA in accordance with the
standards articulated in proposed part
205, subpart A.
Proposed part 205, subpart C, of the
proposed rule, §§ 205.20 through
205.30, establishes the national
standards for the licensure of wholesale
drug distributors. When the proposed
rule is finalized, we will require that
each wholesale distributor be licensed
by the State or FDA in accordance with
the standards in proposed part 205,
subpart C.
Proposed part 205, subpart B
(§§ 205.17 through 205.19), and subpart
D (§§ 205.31 through 205.33), of the
proposed rule describe the content
requirements, application process, and
reporting schedules to become an
approved organization to conduct
licensure review/inspections for 3PL
facilities or conduct inspections of
wholesale distributors. Although the
work differs among licensure review
and inspection for 3PLs and wholesale
distributors, FDA believes that the same
entities will apply to conduct licensure
reviews and inspection of both types of
entities. In addition, the submission of
an application to become an AO is the
same in subparts B and D. Because of
this, we are combining the discussions
of AOs for 3PLs and wholesale
distributors, and the resulting burden
estimates.
The national licensure standards FDA
is proposing are intended to help ensure
that the supply chain remains secure
and that those finished prescription
drug products subject to the DSCSA
moving through the supply chain are
properly stored, handled, and
transported. These measures are
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intended to help protect U.S. consumers
from drugs that may be counterfeit,
stolen, contaminated, or otherwise
harmful. The required information
collection to comply with the proposed
rule is necessary for the States or FDA
to assess the ability of 3PLs or wholesale
distributors to properly maintain drug
quality and security while the drug
products are under their possession or
control.
We estimate the burden of the
information collection as follows:
TABLE 3—ESTIMATED ANNUAL REPORTING BURDEN 1
Subpart A (3PLs):
§§ 205.5 and 205.6; application and process requirements .........................................................................
§ 205.7; changes to licensure .......................................
§ 205.8; expiry and renewal of licensure ......................
§ 205.9; denials, suspensions, reinstatements, revocations ...........................................................................
§ 205.11; personnel list .................................................
§ 205.15; annual reports ...............................................
Subpart B (Approved Organizations for 3PLs):
§ 205.17; licensure review and inspection reports of
3PL facilities ..............................................................
§ 205.19; applications, denials, revocations, suspensions, renewals, reinstatements for AO status .........
Subpart C (WDD Standards):
§§ 205.22 and 205.23; application and process requirements for licensure ............................................
§ 205.24; changes to WDD information ........................
§ 205.26; confirmation of theft or loss of Rx drug ........
§§ 205.29 and 205.30; denials, suspensions, reinstatements, revisions, and terminations—requests
for hearing .................................................................
§ 205.29(a)—WDD annual reports ...............................
Subpart D (Approved Organizations for WDDs):
§§ 205.32 and 205.33; documentation of qualifications
and disclosures to FDA .............................................
Total .......................................................................
1 There
Number of
responses per
respondent
Number of
respondents
Proposed 21 CFR part 205 section; IC activity
Average
burden per
response
(in hours)
Total annual
responses
Total hours
459
6
149
1
1
1
459
6
149
2
1
1
918
6
149
35
459
459
1
1
1
35
459
459
1
.5
.25
35
230
115
6
15
90
5
450
3
1
3
2
6
1,951
39
25
1
1
1
1,951
39
25
2
1
.5
3,902
39
13
38
1,951
1
1
38
1,951
1
1
38
1,951
6
31
186
5
930
........................
........................
5,890
........................
........................
Average
burden per
response
(in hours)
Total hours
are no capital costs or operating and maintenance costs associated with the information collection.
TABLE 4—ESTIMATED ANNUAL RECORDKEEPING BURDEN 1
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Subpart A (3PLs):
205.4; general requirements (retrievable records) .......
205.12; written procedures ...........................................
205.13; record and document maintenance .................
205.14; list of trading partners ......................................
Subpart B (Approved Organizations for 3PLs):
205.17; licensure review and inspection records .........
205.19; written procedures, policies, training records ..
Subpart C (WDD Standards):
205.21; surety bond ......................................................
205.25; personnel records ............................................
205.26; facility records ..................................................
205.28; inspection records ...........................................
Subpart D (Approved Organizations for WDDs):
205.31; records demonstrating qualification status ......
Total .......................................................................
1 There
Number of
responses per
respondent
Number of
respondents
Proposed 21 CFR part 205 section; IC activity
Total annual
responses
459
459
459
459
1
1
1
1
459
459
459
459
.5
21
1
2
230
9,639
459
918
6
6
15
1
90
6
2
3
180
18
1,951
1,951
1,951
1,951
1
1
1
1
1,951
1,951
1,951
1,951
1
1
1
1
1,951
1,951
1,951
1,951
6
1
6
1
6
........................
........................
9,742
........................
19,254
are no capital costs or operating and maintenance costs associated with the information collection.
Reporting Burden
Among the reporting requirements
found in proposed part 205 are content
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and format provisions pertaining to
issuance, changes, expiry, renewal, and
annual reports for 3PLs, as well as
WDDs, as reflected above in table 3. The
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proposed regulations also prescribe
procedural steps and reporting
schedules for submitting information
regarding licensure, changes to
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licensure, reinstatement, and annual
reporting, including requisite reporting
timeframes. Consistent with our PRIA,
we estimate that 459 3PL facilities and
1,951 WDDs will become subject to the
reporting requirements described in
proposed part 205, where we ascribe
specific burden associated with the
provisions found in table 3. Because we
currently lack specific submission data
regarding the proposed reporting
requirements, we rely on our experience
with similar information collection as
the primary basis for our estimates.
However, we invite specific comment
from potential respondents regarding
burden estimates we ascribe to the
reporting elements found in the
proposed regulations, along with a
discussion of the basis for their
computation.
Recordkeeping Burden
As set forth in the proposed
regulations, 3PLs and WDDs must
maintain records documenting
procedures, management practice,
policies, training, and personnel, among
others. Under proposed § 205.4, all
records are subject to FDA inspection
and must be made available upon
request in the format prescribed by the
proposed regulations. Additional
specific recordkeeping practice
elements are also enumerated in the
proposed regulations. Consistent with
our PRIA, we estimate that 459 3PLs
and 1,951 WDDs will become subject to
these requirements, if the proposed rule
is finalized. These provisions are
reflected above in table 4, along with an
estimated number of annual records and
recordkeeping hours we attribute to the
corresponding activity. As with the
proposed reporting requirements, we
currently lack specific data regarding
recordkeeping associated with the
proposed regulations. We invite specific
comment from potential respondents
regarding burden estimates we ascribe
to the recordkeeping activities, along
with a discussion of the basis for their
computation.
To ensure that comments on
information collection are received,
OMB recommends that written
comments be submitted through
reginfo.gov (see ADDRESSES). All
comments should be identified with the
title of the information collection.
In compliance with the Paperwork
Reduction Act of 1995 (44 U.S.C.
3407(d)), we have submitted the
information collection provisions of this
proposed rule to OMB for review. These
information collection requirements
will not be effective until FDA
publishes a final rule, OMB approves
the information collection requirements,
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and the rule goes into effect. FDA will
announce OMB approval of these
requirements in the Federal Register.
X. Federalism
We have analyzed this proposed rule
in accordance with the principles set
forth in Executive Order 13132,
‘‘Federalism’’ (64 FR 43255, August 10,
1999). This Executive order sets forth
principles and criteria that agencies
must adhere to in formulating and
implementing policies that have
federalism implications, defined in
section 1(a) of the order as including
regulations that have ‘‘substantial direct
effects on the States, on the relationship
between the national government and
the States, or on the distribution of
power and responsibilities among the
various levels of government.’’ Section
4(a) of the Executive order requires
agencies to ‘‘construe . . . a Federal
statute to preempt State law only where
the statute contains an express
preemption provision or there is some
other clear evidence that the Congress
intended preemption of State law, or
where the exercise of State authority
conflicts with the exercise of Federal
authority under the Federal statute.’’
The DSCSA added to the FD&C Act an
express preemption provision under
section 585, which addresses state
licensure of WDDs and 3PLs in section
585(b)(1).
A. Scope of Preemption
FDA interprets section 585(b)(1) of the
FD&C Act as preempting States and
localities from establishing or
continuing requirements for 3PL or
WDD licensure that are different from
the standards and requirements
applicable under sections 584 and
amended 503(e) of the FD&C Act. In
other words, States and local
governments may not establish or
continue licensure requirements for
3PLs or WDDs unless those State
requirements are the same as Federal
requirements; different requirements are
preempted.
As noted above, a draft guidance
issued in October 2014 (Ref. 4) proposed
a different preemption interpretation
under which States and localities could
impose requirements on 3PL and WDD
licensure that were different from
Federal requirements so long as those
requirements did not fall below the
minimum Federal standards. Several
stakeholders commented that the
agency’s interpretation of section
585(b)(1) was too narrow. Instead, they
argued Congress intended to preempt all
state licensure laws not identical to
Federal licensure standards, i.e., that
Congress wanted the Federal system to
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6735
provide both a ‘‘floor’’ and a ‘‘ceiling’’
when it came to the issue of
preemption.
FDA has reconsidered its earlier
proposed interpretation and determined
that its current interpretation—that the
Federal requirements will establish both
a ‘‘floor’’ and a ‘‘ceiling’’—is more
consistent with the language of the
statute, Congressional purpose, and
policy considerations. Section 585(b)(1)
provides for the preemption of any state
requirements that are, among other
things, ‘‘inconsistent with’’ or ‘‘covered
by’’ Federal requirements—which
suggests both a floor and a ceiling.
Furthermore, the fundamental purpose
of the DSCSA provisions was to
strengthen the security and integrity of
the drug supply chain through uniform
national requirements (Refs 2, 3, 18),
including with respect to licensure (see
e.g., section 583(b)). In contrast, under
the interpretation proposed in our
October 2014 draft guidance, 3PLs and
WDDs could be required to comply with
a patchwork of State and local licensure
requirements, which would undermine
the goal of national uniformity and
could create barriers to the statute’s
implementation and administrability.
That approach would not create the
intended uniformity in national policy
because States and localities would not
be preempted from establishing unique
or disparate requirements.
Accordingly, FDA is withdrawing, as
of the date of publication of this
proposed rule, that portion of the
October 2014 draft guidance addressing
preemption with respect to WDD/3PL
licensure.
B. Effective Date of Preemption
Section 585(b)(1) provides that it is
effective ‘‘[b]eginning on the date of
enactment of the Drug Supply Chain
Security Act [November 27, 2013].’’
However, that provision applies only to
state requirements that are inconsistent
with the national standards and
requirements applicable under sections
584 and 503(e) of the FD&C Act. Those
national standards will be established
by this regulation, once finalized and
effective. Thus, by its very terms,
section 585(b)(1) has no current
application. Accordingly, State and
local licensure requirements will be
preempted only once this regulation,
when finalized, takes effect; until such
time, current State and local licensing of
WDDs and 3PLs may continue.
We believe that this result is dictated
by the terms of the statute. However,
even if the statute were considered
ambiguous, this interpretation is
consistent with the statutory framework
and purposes. Other provisions added
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Federal Register / Vol. 87, No. 24 / Friday, February 4, 2022 / Proposed Rules
by the DSCSA recognized state licensure
of WDDs and 3PLs before the effective
date of this regulation. For example,
DSCSA requires both WDDs and 3PLs to
report their state licensure, beginning
January 1, 2015, for WDDs and
November 27, 2014, for 3PLs (see
sections 503(e)(2)(A) and section
584(b)). Because these reporting
requirements apply during the period
between DSCSA’s enactment and the
effective date of Federal licensing
standards, they suggest that Congress
intended to preserve the status quo in
terms of permitting state licensure
during this interim period. Indeed, if
state licensing were viewed as
preempted during this interim period,
there could be no valid state licensure
for 3PLs and WDDs to report, rendering
this reporting provision meaningless. In
addition, section 582(a)(6) expressly
recognizes state WDD licensure during
the period between DSCSA’s enactment
and the effective date of Federal
licensure regulations, and section
582(a)(7) similarly deems 3PLs to be
‘‘licensed’’ during this time, including
by acknowledging and accommodating
state licensure of 3PLs.
Further, the WDD licensure rules take
effect two years after publication of the
final rule, per section 583(e)(3), and the
3PL rules take effect one year after
publication of the final rule, per section
584(d)(3)(C). Thus, despite the reference
to DSCSA’s enactment date in section
585(b)(1), the statute also expressly
provides that the Federal licensure
standards will not be effective until
several years after DSCSA’s enactment.
The interpretation is also supported
by reading the provisions of a statute as
an integrated whole, consistent with its
fundamental purpose. As noted, the
purpose is to strengthen the security
and integrity of the drug supply chain
through uniform national requirements,
including with respect to licensure. This
purpose would be frustrated if the
statute were implemented in a manner
that could lead to supply chain
disruption, due to licensing
uncertainties, while the national
licensure standards are pending. Thus,
Congress included in the DSCSA
provisions which recognize state
licensure of WDDs and 3PLs prior to the
effective date of Federal licensing
standards. If preemption under section
585(b)(1) were construed to preempt
states from continuing to license WDDs
and 3PLs even before Federal standards
are in place, there could be confusion
whether these supply chain entities
have valid licensure, to the detriment of
supply chain operations. Accordingly,
we believe that read as a whole, the
statute can be reasonably interpreted as
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20:32 Feb 03, 2022
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providing for preemption to apply only
upon the effective date of this
regulation, once finalized.
XI. Consultation and Coordination With
Indian Tribal Governments
We have analyzed this proposed rule
in accordance with the principles set
forth in Executive Order 13175. We
have tentatively determined that the
rule does not contain policies that
would have a substantial direct effect on
one or more Indian Tribes, on the
relationship between the Federal
Government and Indian Tribes, or on
the distribution of power and
responsibilities between the Federal
Government and Indian Tribes. The
Agency solicits comments from tribal
officials on any potential impact on
Indian Tribes from this proposed action.
XII. References
The following references marked with
an asterisk (*) are on display at the
Dockets Management Staff (see
ADDRESSES) and are available for
viewing by interested persons between
9 a.m. and 4 p.m., Monday through
Friday; they also are available
electronically at https://
www.regulations.gov. References
without asterisks are not on public
display at https://www.regulations.gov
because they have copyright restriction.
Some may be available at the website
address, if listed. References without
asterisks are available for viewing only
at the Dockets Management Staff. FDA
has verified the website addresses, as of
the date this document publishes in the
Federal Register, but websites are
subject to change over time.
* 1. 159 Cong. Rec. S8028 (2013)
(Statement of Senator Barbara Mikulski);
available at: https://www.congress.gov/113/
crec/2013/11/14/CREC-2013-11-14-pt1PgS8027-6.pdf.
* 2. 159 Cong. Rec. H5964 (2013)
(Statement of Representative James
Matheson); available at: https://
www.congress.gov/113/crec/2013/09/28/
CREC-2013-09-28-pt1-PgH5946-2.pdf.
* 3. 159 Cong. Rec. H5962 (2013)
(Statement of Representative Robert Latta);
available at: https://www.congress.gov/113/
crec/2013/09/28/CREC-2013-09-28-pt1PgH5946-2.pdf.
* 4. FDA, Guidance for Industry: ‘‘Draft
Guidance for Industry on The Effect of
Section 585 of the FD&C Act on Drug Product
Tracing and Wholesale Drug Distributor and
Third-Party Logistics Provider Licensing
Standards and Requirements: Questions and
Answers’’ October 2014, (available at https://
www.fda.gov/media/89954/download),
accessed December 14, 2021.
* 5. Ducca, A., Healthcare Distribution
Management Association, Public comment
letter Document ID: FDA–2014–D–1411–
0012, submitted on December 24, 2014, to
PO 00000
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Sfmt 4702
Docket No. FDA–2014–D–1411 pertaining to
the ‘‘Draft Guidance for Industry on The
Effect of Section 585 of the FD&C Act on
Drug Product Tracing and Wholesale Drug
Distributor and Third-Party Logistics
Provider Licensing Standards and
Requirements: Questions and Answers;
Availability,’’ October 8, 2014 (available at
https://www.regulations.gov/
document?D=FDA-2014-D-1411-0012),
accessed December 14, 2021.
* 6. Ventimiglia, V., Pharmaceutical
Distribution Security Alliance, Public
comment letter Document ID: FDA–2014–D–
1411–0007, submitted on December 24, 2014,
to Docket No. FDA–2014–D–1411 pertaining
to the ‘‘Draft Guidance for Industry on The
Effect of Section 585 of the FD&C Act on
Drug Product Tracing and Wholesale Drug
Distributor and Third-Party Logistics
Provider Licensing Standards and
Requirements: Questions and Answers;
Availability,’’ October 8, 2014 (available at
https://www.regulations.gov/document?
D=FDA-2014-D-1411-0007), accessed
December 14, 2021.
* 7. Rouse O’Neill, L., Health Industry
Distributors Alliance, Public comment letter
Document ID: FDA–2014–D–1411–0013,
submitted on December 24, 2014, to Docket
No. FDA–2014–D–1411 pertaining to the
‘‘Draft Guidance for Industry on The Effect of
Section 585 of the FD&C Act on Drug Product
Tracing and Wholesale Drug Distributor and
Third-Party Logistics Provider Licensing
Standards and Requirements: Questions and
Answers; Availability,’’ October 8, 2014
(available at https://www.regulations.gov/
document?D=FDA-2014-D-1411-0013),
accessed December 14, 2021.
8. Gallenagh, E.A, L.F. Hirsch, and K.L.
Palmer, ‘‘Title II—Licensure of Wholesale
Distributors and 3PLs,’’ presented at Food
and Drug Law Institute’s Drug Quality
Security Act Conference, November 15, 2017
(available at https://www.fdli.org/wp-content/
uploads/2017/11/DQSA-Hrisch-B.pdf),
accessed December 14, 2021.
9. National Association of Boards of
Pharmacy, ‘‘Wholesale Drug Distribution:
Protecting the Integrity of the Nation’s
Prescription Drug Supply,’’ August 2013
(available at https://nabp.pharmacy/wpcontent/uploads/2016/07/wholesale-drugdistribution-protecting-the-integrity-of-thenations-prescription-drug-supply.pdf),
accessed December 14, 2021.
10. United States Department of Justice,
‘‘Three California Men and Minnesota
Corporation Indicted in Nationwide
Prescription Drug Diversion Scheme,’’ May
2015 (available at https://www.justice.gov/
opa/pr/three-california-men-and-minnesotacorporation-indicted-nationwideprescription-drug), accessed December 14,
2021.
* 11. United States Department of Justice,
‘‘Two Plead Guilty In Prescription Drug
Diversion Scheme,’’ May 2014 (available at
https://www.justice.gov/usao-mdtn/pr/twoplead-guilty-prescription-drug-diversionscheme), accessed December 14, 2021.
12. National Association of Boards of
Pharmacy, ‘‘Model State Pharmacy Act and
Model Rules of the National Association of
Boards of Pharmacy’’ (available at https://
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Federal Register / Vol. 87, No. 24 / Friday, February 4, 2022 / Proposed Rules
nabp.pharmacy/publications-reports/
resource-documents/model-pharmacy-actrules/), accessed December 14, 2021.
13. Healthcare Distributors Alliance, ‘‘HDA
Model Licensure Standards for Third-Party
Logistics Providers for FDA Consideration,’’
February 2015 (available at https://
www.hda.org/∼/media/pdfs/governmentaffairs/2015-02-10-traceability-resource-3pllicensure-model.ashx), accessed December
14, 2021.
* 14. World Health Organization, ‘‘Annex
5: WHO good distribution practices for
pharmaceutical products,’’ 2010 (available at
https://www.who.int/medicines/areas/
quality_safety/quality_assurance/
GoodDistributionPracticesTRS
957Annex5.pdf)), accessed December 14,
2021.
15. National Association of Boards of
Pharmacy and the Pharmaceutical Inspection
Convention and Pharmaceutical Inspection
Co-operation Scheme (jointly referred to as
PIC/S) (available at https://
www.picscheme.org/), accessed December 14,
2021.
* 16. U.S. Food and Drug Administration,
‘‘Prescription Drug Marketing Act, Report to
Congress,’’ June 2001 (available at https://
wayback.archive-it.org/7993/
20170405002846/https://www.fda.gov/
RegulatoryInformation/LawsEnforcedbyFDA/
SignificantAmendmentstotheFDCAct/
PrescriptionDrugMarketingActof1987/
ucm203148.htm), accessed December 14,
2021.
17. National Association of Boards of
Pharmacy, ‘‘Prescription Medication
Distribution—The Five Percent Rule for
Resale (Resolution 109–2–13),’’ June 2013
(available at https://nabp.pharmacy/news/
news-releases/prescription-medicationdistribution-the-five-percent-rule-for-resaleresolution-109-2-13/), accessed December 14,
2021.
18. FDA, ‘‘National Standards for the
Licensure of Wholesale Drug Distributors and
Third-Party Logistics Providers; Preliminary
Regulatory Impacts Analysis,’’ (available at
https://www.fda.gov/AboutFDA/Reports
ManualsForms/Reports/EconomicAnalyses/
default.htm).
List of Subjects
21 CFR Part 10
Administrative practice and
procedure, News media.
21 CFR Parts 12 and 16
Administrative practice and
procedure.
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Intergovernmental relations,
Prescription drugs, Reporting and
recordkeeping requirements, Security
measures, Warehouses.
Therefore, under the Federal Food,
Drug, and Cosmetic Act and under
authority delegated to the Commissioner
of Food and Drugs, we propose that 21
CFR parts 10, 12, 16, and 205 be
amended as follows:
20:32 Feb 03, 2022
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1. The authority citation for part 10
continues to read as follows:
■
Authority: 5 U.S.C. 551–558, 701–706; 15
U.S.C. 1451–1461; 21 U.S.C. 141–149, 321–
397, 467f, 679, 821, 1034; 28 U.S.C. 2112; 42
U.S.C. 201, 262, 263b, 264.
2. In § 10.50, add paragraph (c)(21) to
read as follows:
■
§ 10.50 Promulgation of regulations and
orders after an opportunity for a formal
evidentiary public hearing.
*
*
*
*
*
(c) * * *
(21) Sections 503(e), 583, and 584 on
denial, suspension, or revocation of
third-party logistics provider licenses or
wholesale distributor licenses.
PART 12—FORMAL EVIDENTIARY
PUBLIC HEARING
3. The authority citation for part 12
continues to read as follows:
■
Authority: 21 U.S.C. 141–149, 321–393,
467f, 679, 821, 1034; 42 U.S.C. 201, 262,
263b–263n, 264; 15 U.S.C. 1451–1461; 5
U.S.C. 551–558, 701–721; 28 U.S.C. 2112.
4. In § 12.21, revise paragraphs (a)
introductory text and (a)(2) to read as
follows:
■
§ 12.21 Initiation of a hearing involving the
issuance, amendment, or revocation of an
order.
(a) A proceeding under section 503(e);
505(d) or (e); 512(d), (e), (m)(3) or (4);
515(g)(1); 583; or 584 of the Federal
Food, Drug, and Cosmetic Act, or
section 351(a) of the Public Health
Service Act, may be initiated—
*
*
*
*
*
(2) By a petition in the form specified
elsewhere in this chapter, e.g., § 205.9
for licenses for third-party logistics
providers, § 205.30 for licenses for
wholesale distributors, § 314.50 for new
drug applications, § 514.1 for new
animal drug applications, § 514.2 for
applications for animal feeds, or § 601.3
for licenses for biologic products; or
*
*
*
*
*
PART 16—REGULATORY HEARING
BEFORE THE FOOD AND DRUG
ADMINISTRATION
21 CFR Part 205
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PART 10—ADMINISTRATIVE
PRACTICES AND PROCEDURES
5. The authority citation for part 16
continues to read as follows:
■
Authority: 15 U.S.C. 1451–1461; 21 U.S.C.
141–149, 321–394, 467f, 679, 821, 1034; 28
U.S.C. 2112; 42 U.S.C. 201–262, 263b, 364.
6. In § 16.1:
a. Designate the 16 undesignated
paragraphs immediately following
paragraph (b)(1) as paragraphs (b)(1)(i)
through (xvi).
■
■
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6737
b. In paragraph (b)(2):
i. Remove ‘‘§§ ’’ and ‘‘§ ’’ everywhere
they appear and add ‘‘Sections’’ and
‘‘Section’’ in their places, respectively;
■ ii. Designate the first 14 undesignated
paragraphs immediately following
paragraph (b)(2) as paragraphs (b)(2)(i)
through (xiv);
■ iii. Add paragraphs (b)(2)(xv) and
(xvi); and
■ iv. Designate the last 23 undesignated
paragraphs as paragraphs (b)(2)(xvii)
through (xxxix).
The additions read as follows:
■
■
§ 16.1
Scope.
*
*
*
*
*
(b) * * *
(2) * * *
(xv) Section 205.19, relating to
revocation or suspension of approval for
an approved organization to conduct
licensure reviews for third-party
logistics provider applicants.
(xvi) Section 205.33, relating to
revocation or suspension of approval for
an approved organization to conduct
inspections of wholesale distributors.
*
*
*
*
*
■ 7. Revise part 205 to read as follows:
PART 205—NATIONAL STANDARDS
FOR THIRD-PARTY LOGISTICS
PROVIDERS AND PRESCRIPTION
DRUG WHOLESALE DISTRIBUTORS
Sec.
205.1
205.2
205.3
Scope.
Purpose.
Definitions.
Subpart A—Third-Party Logistics Providers
Licensure Standards
205.4 Requirement that third-party logistics
providers be licensed.
205.5 General application requirements for
licensure.
205.6 Federal licensure process.
205.7 Changes to information, location, or
ownership of a licensed 3PL.
205.8 Expiry and renewal.
205.9 Licensure denial, suspension,
reinstatement, revocation, and voluntary
termination: notice and opportunity to
request a hearing.
205.10 Good storage practices for 3PL
facilities.
205.11 Personnel requirements necessary
for good storage practices.
205.12 Required written policies and
procedures.
205.13 Recordkeeping and document
maintenance.
205.14 3PLs must provide upon request a
list of trading partners.
205.15 Requirements for initial and annual
reporting to the Food and Drug
Administration.
205.16 Inspections.
Subpart B—Approved Organizations for
3PLS
205.17 Use of approved third-party
organizations.
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205.18 General qualifications of approved
organizations.
205.19 Process and procedures for approval
by the Food and Drug Administration.
Subpart C—Wholesale Distributors
Licensure Standards
205.20 Requirement that prescription drug
wholesale distributors be licensed.
205.21 Surety bond requirement.
205.22 General application requirements for
licensure.
205.23 Federal licensure process.
205.24 Changes to information, operation,
location, or ownership of a wholesale
distributor.
205.25 Prohibited persons and
qualifications for key personnel.
205.26 National standards for the storage
and handling of prescription drugs for
wholesale distribution.
205.27 Standards for the establishment and
maintenance of records of the
distribution of prescription drugs.
205.28 Inspections.
205.29 Requirements for initial and annual
reporting to the Food and Drug
Administration.
205.30 Licensure denial, suspension,
reinstatement, revocation, and voluntary
termination—notice and opportunity to
request a hearing.
Subpart D—Approved Organizations for
Wholesale Distributors
205.31 Use of approved third-party
organizations.
205.32 General qualifications of approved
organizations.
205.33 Process and procedures for approval
by the Food and Drug Administration.
Authority: 21 U.S.C. 351, 352, 353,
360eee–2, 360eee–3, 360eee–4, 371, 374.
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§ 205.1
Scope.
(a) This part applies to the licensure
of third-party logistics providers (3PLs)
in any State and to any entity engaging
in wholesale distribution of prescription
drugs in any State. The standards
established under subpart A of this part
will apply to all State and Federal
licenses described under sections
503(e)(5) and 584 of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C.
353(e)(5) and 360eee–3). The standards
established under subpart C of this part
will apply to all State and Federal
licenses described under sections
503(e)(1) and 583 of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C.
353(e)(1) and 360eee–2).
(b) A facility or entity that conducts
3PL activities must obtain a 3PL license
for each facility as described in this part
and is not required to obtain a license
as a wholesale distributor unless it is
also conducting wholesale distribution
activities, in which case, the entity or
facility must obtain both a 3PL license
as described in subpart A of this part
and a wholesale distributor license as
described in subpart C of this part.
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Unless otherwise noted, the term ‘‘3PL’’
or ‘‘third-party logistics provider’’ in
this part applies to both the entity and
the individual facilities requiring a
license.
(c) Subpart B of this part applies to
any third-party organization seeking to
obtain or maintain approval by the Food
and Drug Administration (FDA or the
Agency) to evaluate the qualifications of
3PLs for licensure. Subpart D of this
part applies to any third-party
organization seeking to obtain or
maintain approval by the Food and Drug
Administration to conduct inspections
of wholesale distributors.
§ 205.2
Purpose.
The purpose of this part is to establish
standards, terms, and conditions for the
licensing of 3PLs and prescription drug
wholesale distributors by State or
Federal licensing authorities, including
a process for the revocation, reissuance,
and renewal of such licenses. This part
also establishes the process and
standards the Food and Drug
Administration will use to approve
third-party organizations to evaluate the
qualifications of 3PLs for licensure and
conduct inspections of wholesale
distributor facilities.
§ 205.3
Definitions.
The definitions and interpretations of
terms contained in section 581 of the
Federal Food, Drug, and Cosmetic Act
(21 U.S.C. 360eee) apply to those terms
when used in this part. The following
terms are also defined for purposes of
this part:
(a) 3PL activities means the provision
or coordination of warehousing, or other
logistics services of a product in
interstate commerce on behalf of a
manufacturer, wholesale distributor, or
dispenser of a product, while not taking
ownership of the product, nor having
the responsibility to direct the sale or
disposition of the product.
(b) Change of entity ownership means:
(1) Partnership. In the case of a
partnership, the removal, addition, or
substitution of a partner.
(2) Unincorporated sole
proprietorship. In the case of an
unincorporated sole proprietorship, the
transfer of title and property to another
party.
(3) Corporation. In the case of a
corporation, the merger of the licensed
corporation into another corporation or
the consolidation of two or more
corporations, resulting in the creation of
a new corporation. Transfer of corporate
stock or the merger of another
corporation into the licensed
corporation does not constitute change
of entity ownership.
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Sfmt 4702
(4) Limited liability company (LLC). In
the case of an LLC, the merger of the
licensed LLC into another LLC or the
consolidation of two or more LLCs,
resulting in the creation of a new LLC.
Transfer of company stock or the merger
of another LLC into the licensed LLC
does not constitute change of
ownership.
(c) Co-licensed partner means one of
two or more entities that have entered
a written agreement for the right to
engage in the marketing of a
prescription drug.
(d) Designated representative means
an individual who is designated as the
representative of the facility manager
and is responsible for managing the
daily operations of the wholesale
distributor or 3PL facility.
(e) Entity or entities means a business
organization, such as a corporation,
company, association, firm, partnership,
society, sole proprietorship, or joint
stock company.
(f) Facility means an establishment,
warehouse, structure, or structures
under common ownership at one
general, permanent, physical location
used for distribution, including storage
and handling, of prescription drugs.
(g) Key personnel means any
individual who has responsibility for
managing the operations of the
wholesale distributor, including any
principal, owner, director, officer of the
wholesale distributor, facility manager,
or designated representative, or other
individuals who are authorized to enter
areas where prescription drugs are held
and are likely to handle those
prescription drugs as a part their
responsibilities within the operation.
(h) Minimal quantities means the total
annual dollar volume of prescription
drugs sold by a retail pharmacy to
licensed practitioners for office use does
not exceed 5 percent of the total dollar
volume of that retail pharmacy’s annual
prescription drug sales.
(i) Other logistics services include
services provided by entities that accept
or transfer direct possession of products
from that entity’s facility within the
United States and its territories on
behalf of a trading partner (e.g.,
manufacturer, wholesale distributor,
dispenser) but that do not take
ownership of the product nor have the
responsibility to direct a product’s sale
or disposition. ‘‘Other logistics services’’
also means services undertaken with
respect to a product for a repackager
acting on behalf of a manufacturer,
wholesale distributor, or dispenser.
(j) Other than a consumer or patient
means the person receiving the drug is
not:
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(1) The individual identified as the
recipient of the prescription drug;
(2) A dispenser fulfilling a specific
patient need as defined in section
581(19) of the Federal Food, Drug, and
Cosmetic Act; or
(3) The clinical investigator, as
defined in § 312.3(b) of this chapter.
(k) Product means a prescription drug
in a finished dosage form for
administration to a patient without
substantial further manufacturing (e.g.,
capsules, tablets, lyophilized products
before reconstitution).
(l) Significant disciplinary action
means any action by a State or Federal
licensing authority that limits or
prevents a 3PL from conducting 3PL
activities related to the distribution of
prescription drugs, or limits or prevents
a wholesale distributor from
distributing, as that term is defined in
section 581(5) of the Federal Food, Drug
and Cosmetic Act, or facilitating the
distribution of prescription drugs. This
includes the revocation or suspension of
a 3PL or wholesale distributor license,
or of a registration with the Drug
Enforcement Administration.
(m) Unfit for distribution means a
prescription drug that has been
identified as a drug whose sale would
violate the Federal Food, Drug, and
Cosmetic Act. This includes
prescription drugs identified as suspect
or illegitimate pursuant to section 582(c)
of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 360eee–1(c)); adulterated
pursuant to section 501 of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C.
351), including drugs rendered
nonsaleable because conditions such as
return, recall, damage, or expiry cast
doubt on the drug’s safety, identity,
strength, quality, or purity; or
misbranded pursuant to section 502 of
the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 352).
(n) Wholesale distribution means the
distribution of a drug subject to section
503(b) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 353(b)) to a
person other than a consumer or patient,
or receipt of a drug subject to section
503(b) of the Federal Food, Drug, and
Cosmetic Act by a person other than the
consumer or patient, but does not
include:
(1) Intracompany distribution of any
drug between members of an affiliate or
within a manufacturer;
(2) The distribution of a drug or an
offer to distribute a drug among
hospitals or other health care entities
that are under common control;
(3) The distribution of a drug or an
offer to distribute a drug for emergency
medical reasons, including a public
health emergency declaration pursuant
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20:32 Feb 03, 2022
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to section 319 of the Public Health
Service Act (42 U.S.C. 247d), except
that, for purposes of this paragraph
(n)(3), a drug shortage not caused by a
public health emergency will not
constitute an emergency medical reason;
(4) The dispensing of a drug pursuant
to a prescription executed in accordance
with section 503(b) of the Federal Food,
Drug, and Cosmetic Act;
(5) The distribution of minimal
quantities of a drug by a licensed retail
pharmacy to a licensed practitioner for
office use;
(6) The distribution of a drug or an
offer to distribute a drug by a charitable
organization to a nonprofit affiliate of
the organization to the extent otherwise
permitted by law;
(7) The purchase or other acquisition
by a dispenser, hospital, or other health
care entity of a drug for use by such
dispenser, hospital, or other health care
entity;
(8) The distribution of a drug by the
manufacturer of such drug;
(9) The receipt or transfer of a drug by
an authorized 3PL, provided that such
3PL does not take ownership of the
drug;
(10) A common carrier that transports
a drug, provided that the common
carrier does not take ownership of the
drug;
(11) The distribution of a drug, or an
offer to distribute a drug by an
authorized repackager that has taken
ownership or possession of the drug and
repacks it in accordance with section
582(e) of the Federal Food, Drug, and
Cosmetic Act;
(12) Saleable drug returns when
conducted by a dispenser;
(13) 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 paragraphs (n)(13)(i)
through (iv) of this section 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) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C.
360(b)(2));
(ii) The medical convenience kit does
not contain a controlled substance that
appears in a schedule contained in the
Controlled Substances Act;
(iii) In the case of a medical
convenience kit that includes a product,
the person that manufactures the kit:
(A) Purchased such product directly
from the pharmaceutical manufacturer
or from a wholesale distributor that
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purchased the product directly from the
pharmaceutical manufacturer; and
(B) Did not alter the product’s primary
container or label as purchased from the
manufacturer or wholesale distributor;
(iv) In the case of a medical
convenience kit that includes a product,
the product is:
(A) An intravenous solution intended
for the replenishment of fluids and
electrolytes;
(B) A product intended to maintain
the equilibrium of water and minerals in
the body;
(C) A product intended for irrigation
or reconstitution;
(D) An anesthetic;
(E) An anticoagulant;
(F) A vasopressor; or
(G) A sympathomimetic;
(14) The distribution of an
intravenous drug 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);
(15) The distribution of an
intravenous drug used to maintain the
equilibrium of water and minerals in the
body (such as dialysis solutions);
(16) The distribution of a drug that is
intended for irrigation, or sterile water,
whether intended for such purposes or
for injection;
(17) The distribution of medical gas,
as defined in section 575 of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C.
360ddd);
(18) Facilitating the distribution of a
product by providing solely
administrative services, including
processing of orders and payments; or
(19) The transfer of a product by a
hospital or other health care entity, or
by a wholesale distributor or
manufacturer operating at the direction
of the hospital or other health care
entity, to a repackager as described in
section 581(16)(B) of the Federal Food,
Drug, and Cosmetic Act and registered
under section 510 of the Federal Food,
Drug, and Cosmetic Act for the purpose
of repackaging the drug for use by that
hospital or other health care entity, and
other health care entities that are under
common control, if ownership of the
drug remains with the hospital or other
health care entity at all times.
Subpart A—Third-Party Logistics
Providers Licensure Standards
§ 205.4 Requirement that third-party
logistics providers be licensed.
(a) No 3PL may conduct 3PL activities
unless each facility of the 3PL is
licensed:
(1) By the State from which the 3PL
conducts 3PL activities; or
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(2) If the State from which the 3PL
conducts 3PL activities has not
established a licensure requirement in
accordance with the standards set forth
in this part, by the Food and Drug
Administration; and
(3) If the product is distributed
interstate, by the State into which the
3PL distributes the product if such
licensure is required by that State, and
the 3PL is not licensed by the Food and
Drug Administration under § 205.6.
(b) Each facility owned, leased, or
rented by a 3PL must have a separate
license.
(c) Licenses are facility- and ownerspecific and are not transferable.
(d) The 3PL must maintain its license
at the licensed facility in a readily
retrievable manner and must permit
inspection of the license by any official,
agent, or employee of the licensing
authority or of any Federal, State, or
local agency engaged in enforcement of
laws relating to the distribution of
prescription drugs.
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§ 205.5 General application requirements
for licensure.
(a) Applicant requirements. An
individual who submits an application
on behalf of a 3PL for a license issued
pursuant to this subpart must:
(1) Be 18 years of age or older;
(2) Submit an affidavit that such
individual’s ownership or management
of or employment by the 3PL would not
preclude the 3PL from receiving or
maintaining a license under § 205.11(f);
(3) Submit all application information
required in the form required by the
licensing authority; and
(4) Pay any licensing fees that are
required by the licensing authority
pursuant to section 584(c) of the Federal
Food, Drug, and Cosmetic Act.
(b) General requirements for licensure
application. The State or Federal
licensing authority will require the
following information from each 3PL
facility as part of the initial application
for the license described in § 205.4 and
as part of any renewal of such license:
(1) The name and title of the
individual who submits the application
for licensure on behalf of the 3PL;
(2) The name of the 3PL as it should
appear on the license, full business
address of the facility, and telephone
number;
(3) All trade or business names used
by the 3PL, including prior trade or
business names, within the past 7 years;
(4) Name, email address, and
telephone number of the 3PL’s facility
manager or designated representative;
(5) The type of ownership or
operation of the business entity, such as
a partnership, corporation, limited
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liability company, or sole
proprietorship;
(6) The name of any owners or
operators of the 3PL, including:
(i) If a sole proprietorship, the full
name of the sole proprietor and the
name of the business entity;
(ii) If a partnership, the name of each
partner and the name of the partnership;
(iii) If a corporation, the corporate
names, the names of any subsidiaries
and affiliates, the name and title of each
corporate officer and director, and the
State of incorporation; and
(iv) If a limited liability company, the
name of the limited liability company,
including any subsidiaries and affiliates,
the name of each member, and the State
in which the limited liability company
was organized; and
(7) Whether the 3PL facility manager
or designated representative has ever
been convicted of a felony relating to
prescription drug distribution,
including a conviction under section
301(i) or (k) of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 331(i) or
(k)) or 18 U.S.C. 1365, relating to
product tampering, together with details
concerning any such events.
(c) General requirements for renewal
applications. On the renewal
application provided by the State or
Federal licensing authority, the 3PL
must:
(1) Certify that the 3PL has continued
to meet all the standards and complied
with the requirements in this subpart
since the previous license was issued;
and
(2) Inform the applicable licensing
authority of any changes to information
previously submitted pursuant to
paragraph (b) of this section or
§ 205.6(a)(2) for which a notification
was not already submitted to the
licensing authority under § 205.7.
§ 205.6
Federal licensure process.
(a) Procedures for filing an FDA
application for a 3PL license. (1) Each
3PL facility must electronically submit
an application to the Food and Drug
Administration for a license to conduct
3PL activities in a State if the State does
not have a 3PL licensure program
consistent with the standards set forth
in this section. The application must
include the information specified in
§ 205.5, along with supporting
documentation that demonstrates the
applicant’s storage practices are
sufficient to ensure the continued
safety, identity, strength, quality, and
purity of the products in the facility.
(2) If one or more organizations have
been approved by the Food and Drug
Administration to conduct a review of a
3PL’s qualifications for licensure
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pursuant to § 205.17, the 3PL will
indicate in its application to the Food
and Drug Administration which
approved organization (AO) it prefers to
conduct its licensure review. If there is
no organization approved by the Food
and Drug Administration to conduct
licensure review, the Food and Drug
Administration will conduct the review,
as described in § 205.17(b). Licensure
review must consist of:
(i) Review of all documents submitted
in support of the application for 3PL
licensure; and
(ii) Inspection of the facility, as
directed by the licensing authority
pursuant to § 205.16(a) or (b).
(3) The applicant, or the applicant’s
agent or other authorized official, must
sign the application.
(4) An application for a 3PL license
will not be considered as filed until the
Food and Drug Administration has
received all pertinent information and
fees.
(b) Determination that licensing
requirements have been met. The Food
and Drug Administration, not an AO,
will determine whether the 3PL meets
all the applicable requirements set forth
in this part.
(c) Notification of easily correctable
deficiencies. The Food and Drug
Administration will make every
reasonable effort to promptly
communicate to applicants easily
correctable deficiencies found in an
application when those deficiencies are
discovered, particularly deficiencies
concerning storage, handling,
distribution, or recordkeeping issues.
The Food and Drug Administration will
also promptly inform applicants of its
need for more data or information or for
changes in the application needed to
facilitate the Agency’s review.
(d) Issuance of 3PL license by FDA.
Approval of a 3PL license application or
issuance of a 3PL license constitutes a
determination by the Food and Drug
Administration that, based upon the
information provided and reviewed, the
3PL meets the applicable requirements
to be licensed under section 584 of the
Federal Food, Drug, and Cosmetic Act.
The Food and Drug Administration will
approve an application and send the
applicant an approval letter and license
certificate if none of the reasons in
§ 205.9(a)(1) for refusing to approve the
application applies. Applicable
requirements for the maintenance of
3PL facilities to conduct 3PL activities
will include but not be limited to the
good storage practices set forth under
§ 205.10. A license is effective on the
date of issuance of the license
certificate.
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(e) Validity of 3PL license. Licenses
issued to 3PL facilities will remain valid
until the date of expiration, unless
suspended or revoked.
§ 205.7 Changes to information, location,
or ownership of a licensed 3PL.
(a) Any change to any information
required in this subpart, including
changes to any information required
pursuant to §§ 205.5, 205.6, 205.11, and
205.15, must be submitted electronically
to the licensing authority within 30
calendar days after such change is
effective, except where otherwise
provided in this subpart.
(b) Any change in the location of a
facility at which 3PL activities are
conducted will require a new license
and inspection of the new facility prior
to its beginning operations.
(1) The application for a new license
required by § 205.5 must be submitted
no later than 90 calendar days prior to
beginning operations at the new
location.
(2) On the date the change of location
takes place, the license for the original
facility is void.
(c) Any change in the entity engaged
in 3PL activities in a facility will require
a new license prior to beginning
operations.
(1) The application for a new license
required by § 205.5 must be submitted
no later than 30 calendar days prior to
the change in ownership.
(2) A new inspection of the facility
may also be required at the licensing
authority’s discretion.
(3) A 3PL can continue to operate
under the original license for 30
calendar days after the change of
ownership occurs or until the license
application of the new owner is
approved, whichever is sooner.
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§ 205.8
Expiry and renewal.
Any license issued or renewed
pursuant to § 205.5 or § 205.6 will
expire 3 years after the date issued. A
3PL renewal application will not be
accepted more than 90 calendar days
before the date of expiration. A 3PL will
not be penalized for administrative
delay on the part of the licensing
authority in issuing a new license. A
license will be considered valid during
the period of the administrative delay if
the 3PL timely submitted the renewal
application.
§ 205.9 Licensure denial, suspension,
reinstatement, revocation, and voluntary
termination: notice and opportunity to
request a hearing.
(a) Denial of application for licensure.
(1) The licensing authority will refuse to
approve or renew a 3PL license
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application for any of the following
reasons:
(i) The facilities and controls used for
the receipt, security, storage, inventory,
shipment, or distribution of the product
are inadequate to facilitate safe
operations pursuant to § 205.10(b).
(ii) The methods or procedures to be
used in the receipt, security, storage,
inventory, shipment, or distribution of
the product do not comply with the
requirements for good storage practices
in § 205.10.
(iii) The personnel employed by the
applicant do not meet the requirements
necessary for good storage practices in
§ 205.11.
(iv) There is insufficient information
in the written policies and procedures
required in § 205.12 to determine
whether the methods or procedures to
be used in the receipt, security, storage,
inventory, shipment, or distribution of
the product comply with the
requirements for good storage practices
in § 205.10, or to determine whether the
facilities and controls to be used in the
receipt, security, storage, inventory,
shipment, or distribution of the product
facilitate safe operations.
(v) The methods or procedures to be
used in the receipt, storage, handling, or
distribution of the product do not
comply with the requirements for
adequate recordkeeping in § 205.10 or
§ 205.13.
(vi) The application contains an
untrue statement of material fact.
(vii) The applicant does not permit a
properly authorized officer or employee
of FDA, a State licensing authority, or
an organization approved by the Food
and Drug Administration pursuant to
§ 205.17 an adequate opportunity to
inspect the facilities, controls, and any
records relevant to the application.
(viii) For renewal applications, failure
to report to the licensing authority any
pertinent change of information
required in § 205.5 or § 205.7.
(ix) For renewal applications, failure
to comply with any of the requirements
for annual reporting in § 205.15.
(2) If a 3PL’s application fails to
demonstrate that the 3PL meets the
requirements for licensure set forth in
this part, the licensing authority will
provide written notice to the applicant
that its license application may be
denied, setting forth the grounds for the
denial and an opportunity to
demonstrate that the 3PL meets the
requirements for licensure.
(3) The notice will inform the
applicant of its right to provide
additional information and request
reconsideration of the denial by the
licensing authority within 14 calendar
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6741
days of the date of the licensing
authority’s written notice.
(4) If no reconsideration is sought or
if, upon reconsideration, the licensing
authority denies the applicant’s request
for licensure, the licensing authority
will provide the applicant written
notice of the denial and will provide the
applicant notice of the opportunity to
request a hearing.
(5) The applicant who wishes to
request a hearing has 10 calendar days
after the date of the notice of denial to
submit a written notice of participation
and request for a hearing. The applicant
who fails to submit a written notice of
participation and request for a hearing
within 10 calendar days waives the
opportunity for a hearing.
(6) Parts 10 through 16 of this chapter
apply to 3PL licenses issued by the
Food and Drug Administration under
section 584 of the Federal Food, Drug,
and Cosmetic Act.
(b) Suspension of license after notice
and opportunity to request a hearing. (1)
The licensing authority may move to
suspend a license if the licensing
authority has a reasonable belief that the
licensee has failed to comply with any
of the standards for receiving and
maintaining licensure described in this
subpart.
(2) The licensing authority will
provide written notice of intent to
suspend a 3PL license setting forth the
grounds for the suspension pursuant to
this part, including what information
would be required to demonstrate or
achieve compliance. The notice will
inform the applicant of its right to
provide additional information, request
reconsideration of the suspension by the
licensing authority, and demonstrate or
achieve compliance before suspension.
(3) Each 3PL license holder has 30
calendar days from the date of the
notice of intent to suspend to present,
in writing, comments and information
bearing on the initial decision.
(4) If no comments or information are
received within 30 calendar days or if,
upon reconsideration, the licensing
authority believes the 3PL license
should still be suspended, the licensing
authority will provide the 3PL a second
written notice of the intent to suspend,
informing the 3PL of the opportunity to
request a hearing on the question of
whether there are grounds for
suspension.
(5) The written notice will contain a
statement that the 3PL will be afforded
an opportunity to request a hearing.
(6) The 3PL must submit a written
notice of participation and request a
hearing in writing within 10 calendar
days after the date of notice of the intent
to suspend. A 3PL that fails to submit
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a written notice of participation and
request for hearing within 10 calendar
days waives the opportunity for a
hearing and the license will be
suspended.
(7) Parts 10 through 16 of this chapter
apply to 3PL licenses issued by the
Food and Drug Administration under
section 584 of the Federal Food, Drug,
and Cosmetic Act.
(8) If a 3PL’s license is suspended and
the 3PL does not demonstrate or achieve
compliance to the licensing authority’s
satisfaction within the time period
indicated in the notice of suspension,
the licensing authority will move to
revoke the 3PL’s license.
(c) Immediate suspension of license.
(1) The licensing authority may suspend
a license effective immediately if the
licensing authority reasonably believes
that the licensee has failed to comply
with any of the standards for receiving
and maintaining licensure described in
this subpart and that the nature of the
noncompliance at issue would
reasonably be expected to cause an
imminent threat to public health.
(2) The licensing authority will
provide the 3PL with written notice of
immediate suspension of its license
setting forth the grounds for the
immediate suspension pursuant to this
part, including what information would
be required to demonstrate compliance,
and the opportunity to request a hearing
within 10 calendar days of the 3PL’s
request for such hearing.
(3) The 3PL must submit a written
notice of participation and request a
hearing in writing within 10 calendar
days after the date of the written notice
of immediate suspension. A 3PL that
fails to submit a written notice of
participation and request for hearing
within 10 calendar days after the date of
the written notice waives the
opportunity for a hearing.
(4) Parts 10 through 16 of this chapter
apply to 3PL licenses issued by the
Food and Drug Administration under
section 584 of the Federal Food, Drug,
and Cosmetic Act.
(5) If a 3PL’s license is suspended and
the 3PL does not demonstrate or achieve
compliance to the licensing authority’s
satisfaction within the time period
indicated in the notice of suspension,
the licensing authority will move to
revoke the 3PL’s license.
(d) Reinstatement of suspended
licenses. The licensing authority may
reinstate a previously suspended license
upon a 3PL’s showing of compliance
with requirements in this part and upon
such inspection and examination as the
licensing authority may require.
(e) Revocation. (1) If compliance is
not demonstrated or achieved to the
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licensing authority’s satisfaction within
the time period indicated in the notice
of suspension, the licensing authority
will move to revoke the 3PL’s license.
(2) The licensing authority will notify
the 3PL of the intent to revoke the 3PL’s
license, setting forth the grounds for the
revocation and offering an opportunity
to request a hearing on the proposed
revocation.
(3) The written notice will contain a
statement that the 3PL may request a
hearing.
(4) The 3PL must submit a written
notice of participation and request a
hearing within 10 calendar days after
the date of the notice of revocation. A
3PL that fails to submit a written notice
of participation and request for hearing
within 10 calendar days waives the
opportunity for a hearing.
(5) Parts 10 through 16 of this chapter
apply to 3PL licenses issued by the
Food and Drug Administration under
section 584 of the Federal Food, Drug,
and Cosmetic Act.
(f) Nonrenewal. If a license is
suspended and the 3PL does not submit
a renewal application by the date of
expiration of the suspended license, the
license will be considered expired. A
3PL may not conduct 3PL activities with
an expired license and must submit a
new application for licensure if it
wishes to conduct 3PL activities.
(g) Voluntary termination of licensure
upon request by the 3PL. The licensing
authority will terminate a 3PL facility’s
license upon the 3PL’s request, which
includes a notice of intent to
discontinue its 3PL activities and waive
opportunity for a hearing. A 3PL facility
that voluntarily terminates licensure
must obtain a new license before
resuming 3PL activities.
(1) If a 3PL facility that has had its
license revoked wishes to apply for a
new license, that facility must submit a
new license application, which may
include an inspection if required by the
licensing authority under § 205.16.
(2) [Reserved]
§ 205.10 Good storage practices for 3PL
facilities.
(a) A facility owned, rented, or leased
by a 3PL for the purpose of conducting
3PL activities must meet the storage
practices for facilities required in
paragraphs (b) through (d) of this
section.
(b) A facility to which a 3PL license
has been issued in the same name and
at the same address as another trading
partner, such as a wholesale distributor,
must maintain separate systems and
processes for products that are specific
to the 3PL.
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(c) A facility owned, leased, or rented
by a 3PL in which 3PL activities are
conducted must have suitable storage
practices in place for such facility, as
demonstrated by the following:
(1) General requirements. The facility
is:
(i) Not a personal residence;
(ii) Of a suitable size, construction,
and configuration to ensure proper
storage and distribution of all products
warehoused at the facility, including
lighting, ventilation, temperature,
sanitation, humidity, space, equipment,
and secure conditions where products
are stored;
(iii) Of a suitable size, construction,
and configuration to facilitate cleaning,
maintenance, proper logistics, and
distribution operations, and to provide
protection from intrusion; and
(iv) Maintained in a clean and orderly
condition, free from infestation of any
kind.
(A) A cleaning program schedule
must be maintained, documented, and
followed.
(B) A pest control program, which is
designed to ensure that the facility is
free from infestation, must be in place,
and pest control records must be kept.
(2) Areas to handle separation of
products that are unfit for distribution.
The facility has:
(i) Clearly defined, designated areas
separate from saleable products to
quarantine suspect product, illegitimate
product, and other products that are
unfit for distribution until
dispositioned.
(ii) Clearly defined, designated areas
to handle separation of products that are
returned, recalled, or expired.
(iii) For returned or recalled products,
clearly defined, designated areas
separate from saleable products to
handle returned or recalled product.
(iv) For expired products, clearly
defined, designated areas separate from
saleable products from which expired
product may be returned to the
manufacturer or repackager or
destroyed.
(3) Security of premises. The facility
is:
(i) Designed so that designated areas
of the facility where products are held
are accessible only to personnel,
regardless of employee or contractor
status, position title, or ownership
interest, who possess appropriate and
verifiable experience and training
necessary to safely and lawfully engage
in 3PL activities; and
(ii) Equipped with adequate security
to protect from vulnerabilities and
potential breaches. Adequate security
must include precautions taken to
ensure that:
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(A) The facility is secure from
unauthorized entry;
(B) Access from outside the premises
is limited, well controlled, and
documented;
(C) The outside perimeter of the
premises is well lit;
(D) The facility is equipped with an
alarm system to detect and notify
appropriate personnel of entry after
hours; and
(E) The facility is equipped with a
security system that provides suitable
protection against theft and diversion of
products.
(4) Facility assessments. Facility
assessments, including temperature
mapping and other assessments
designed to ensure products are
properly stored in accordance with their
labeling, must be regularly conducted
and documented.
(5) Equipment. Equipment must be
utilized and maintained in good repair
and must be suitable for 3PL activities,
as demonstrated by the following:
(i) The 3PL must be able to
demonstrate that all equipment has been
calibrated, as applicable, and validated
at regular intervals to achieve the
intended results accurately,
consistently, and in a manner that can
be reproduced by qualified individuals
following approved procedures;
(ii) The 3PL must use appropriate
manual, electromechanical, or
electronic temperature and humidity
recording equipment or logs to
document proper storage of products;
and
(iii) The monitoring equipment must
alert appropriate personnel in a timely
manner of any deviations from the
intended storage conditions.
(d) In addition to the requirements set
forth in this subpart, products must be
handled and stored in accordance with
all applicable Federal and State laws.
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§ 205.11 Personnel requirements
necessary for good storage practices.
(a) The 3PL must maintain a list of
officers, directors, managers, and
designated representatives; a
description of their duties; and a
summary of their qualifications. This
list must be available for review by the
State or Federal licensing authority.
(b) Qualifications for the 3PL’s facility
manager or designated representative of
such facility manager must include that
the individual:
(1) Has the education, background,
training, and experience necessary to
perform such individual’s assigned
functions;
(2) Serves as the facility manager or
designated representative of such
facility manager for only one facility at
a time; and
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(3) Is actively involved in and
responsible for managing the daily
operations of the 3PL facility.
(c) The 3PL must provide the facility
manager or designated representative
adequate authorities and resources to
effectively manage the 3PL’s daily
operations in accordance with the
standards in this part.
(d) The facility manager or designated
representative is responsible for
managing all the daily operations of the
3PL facility, including those duties
delegated to other personnel.
(e) A 3PL is prohibited from obtaining
or maintaining licensure if the 3PL
employs a facility manager or
designated representative who has been:
(1) Convicted of any felony violation
of section 301(i) or (k) of the Federal
Food, Drug, and Cosmetic Act; or
(2) Convicted of any violation of 18
U.S.C. 1365, relating to product
tampering.
(f) Licensure may also be denied
when storage practices are not sufficient
to maintain adequate security because a
facility manager or designated
representative of such facility manager
has been:
(1) Found to have delayed or
otherwise impeded an inspection by the
Federal or State licensing authority or
an approved third-party inspector, or if
an inspector, after reasonable efforts,
was unable to gain access to an
establishment or a location to carry out
the inspection required under § 205.16
as permitted by section 704(a) of the
Federal Food, Drug, and Cosmetic Act
(21 U.S.C. 374(a));
(2) Found to have omitted material
information or furnished false or
fraudulent information in an application
made in connection with the
distribution of prescription drugs; or
(3) Subject to licensure suspension or
revocation by Federal, State, or local
government for any license currently or
previously held by the applicant for the
manufacture or distribution of any
drugs, including controlled substances.
(g) Any facility manager or designated
representative will be subject to
criminal background checks. The results
of the background checks must
demonstrate no history of criminal
convictions pursuant to paragraph (e) of
this section.
§ 205.12 Required written policies and
procedures.
(a) General requirements for written
policies and procedures. Every 3PL
must establish, maintain, and follow
written policies and procedures as
described in this section and relevant to
the scope of their 3PL activities. The
written policies and procedures must
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clearly delineate the responsibilities of
the 3PL and any contractors used to
fulfill any of the 3PL’s duties. The
written policies and procedures must
also describe a system by which the 3PL
will monitor all processes and, if
deviations occur, document and
investigate to determine the root cause
of the deviation in a timely manner.
Such written policies and procedures
must be made available to the licensing
authority upon request, and the
licensing authority may copy records to
ensure the 3PL is following written
policies and procedures.
(1) Written policies and procedures
must include, but are not limited to, the
following:
(i) Documentation pertaining to
receipt, security, storage, handling,
inventory, shipment, and distribution of
products, including written policies and
procedures for identifying, recording,
and reporting confirmed losses, thefts,
diversions, and products unfit for
distribution; and
(ii) Documentation pertaining to all
policies, procedures, instructions,
contracts, data, inspection reports, and
any other documentation related to
compliance with this part.
(b) Personnel. The 3PL must establish,
maintain, and follow written policies
and procedures that ensure the
qualifications of personnel are met,
maintained, and documented as
required in § 205.11. These written
policies and procedures must be
available for review by the State or
Federal licensing authority, as provided
in § 205.13.
(c) Written policies and procedures.
The 3PL must maintain written policies
and procedures to address receipt,
security, storage, inventory, shipment,
and distribution of the product.
(1) Receipt. The 3PL must establish,
maintain, and follow written policies
and procedures providing for the
inspection of all shipping containers in
accordance with the following
standards:
(i) Incoming shipments. Upon receipt,
each shipping container must be
visually examined for identity and for
conditions that would suggest the
product may be unfit for distribution.
(ii) Outgoing shipments. Each
outgoing shipment must be properly
inspected for identity of the product and
to ensure that there is no shipment of
product that is unfit for distribution.
(2) Security. The 3PL must establish,
maintain, and follow written policies
and procedures that provide for the
secured storage of products and
preserve the integrity of the 3PL’s data
and records.
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(3) Storage. The 3PL must establish,
maintain, and follow written policies
and procedures that ensure products are
stored at appropriate temperatures and
under appropriate conditions, in
accordance with the requirements in the
products’ labeling, to preserve their
identity, strength, quality, and purity.
(4) Inventory. The 3PL must establish,
maintain, and follow written policies
and procedures related to inventory
controls that:
(i) Ensure the facility’s stock is
inventoried regularly to protect against
diversion and against distribution of
product that may be unfit for
distribution;
(ii) Contain procedures to identify,
investigate, document, and correct stock
errors, inaccuracies, and irregularities,
including product theft, loss, or
diversion;
(iii) Identify, record, and report
confirmed product losses or theft
immediately to the owner of the
products and relevant authorities; and
(iv) Ensure that the 3PL can trace the
receipt and outbound distribution of a
product, as well as maintain supply and
inventory records.
(5) Shipment. The 3PL must establish,
maintain, and follow written policies
and procedures providing for the
transportation of products in accordance
with the following standards:
(i) Products must be transported in a
manner that will:
(A) Protect against breakage,
contamination, adulteration, and theft;
(B) Prevent exposure to conditions
that may compromise their quality and
integrity; and
(C) Ensure that deviations from
storage requirements during transport
are promptly identified, investigated,
documented, and reported to the trading
partner from whom the product was
received and to the manufacturer to
determine if further commercial
distribution is appropriate.
(ii) A 3PL that outsources
transportation of products to a
transportation provider, such as a
common carrier, remains responsible for
compliance with this part while the
products are in transit to the intended
trading partner. Arrangements for
transportation by a transportation
provider must be documented and
carried out in accordance with the
requirements in this section.
(6) Distribution. The 3PL must
establish, maintain, and follow written
policies and procedures related to the
distribution of products that:
(i) Ensure products are distributed at
appropriate temperatures and under
appropriate conditions in accordance
with the requirements in the products’
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labeling to preserve their identity,
strength, quality, and purity; and
(ii) Protect against diversion and
against distribution of products that
may be unfit for distribution.
(d) Recalled products. The 3PL must
establish, maintain, and follow written
policies and procedures to support
manufacturer recalls.
(e) Preparing for foreseeable crises.
The 3PL must establish, maintain, and
follow written policies and procedures
to prepare for, protect against, and
address any reasonably foreseeable
crises that could affect security or
operations (such as strike, fire, or flood).
(f) Products that are unfit for
distribution. The 3PL must establish,
maintain, and follow written policies
and procedures for handling products
that are adulterated, misbranded, or
otherwise unfit for distribution, as well
as returned products, that:
(1) Require such products to be
physically segregated from other
products and dispositioned as directed
by the applicable manufacturer,
wholesale distributor, dispenser, or an
authorized government agency and in
accordance with all applicable State and
Federal laws;
(2) Identify a contact person
responsible for communicating with the
manufacturer, wholesale distributor,
dispenser, or an authorized government
agency regarding nonsaleable and
returned products;
(3) Include procedures to prevent
products unfit for distribution from
entering the supply chain through the
3PL’s disposition of nonsaleable
products; and
(4) Require the 3PL to document the
disposition of all nonsaleable and
returned products, and maintain such
records for inventory accountability.
(g) Suspect product. The 3PL must
establish, maintain, and follow written
policies and procedures to quarantine or
destroy a suspect product if directed to
do so by the product’s manufacturer,
wholesale distributor, dispenser, or an
authorized government agency.
(h) Illegitimate product. The 3PL must
establish, maintain, and follow written
policies and procedures to store
illegitimate product in a clearly defined,
designated area from which the product
may be dispositioned as directed by the
respective manufacturer, wholesale
distributor, dispenser, or an authorized
government agency.
§ 205.13 Recordkeeping and document
maintenance.
(a) Maintenance, availability, and
accuracy of records and written policies
and procedures. All required records
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and written policies and procedures
outlined in § 205.12 must:
(1) Be readily retrievable and made
available to licensing authorities upon
request;
(2) Be securely stored from
unauthorized access or modifications;
(3) Contain only alterations signed
and dated by the individual who made
the alteration. Such alteration must
preserve the original information and
document the reason for the alteration;
and
(4) Accurately reflect the name of the
3PL as it appears on the 3PL facility’s
license, which must match the
information that is reported to the Food
and Drug Administration pursuant to
the Food and Drug Administration
reporting requirements at § 205.15.
(b) Record and document retention.
(1) Except for the records listed in
paragraph (b)(2) of this section, all
records and written policies and
procedures required to be maintained by
this part must be retained for a period
of 3 years.
(2) Records of suspect and illegitimate
products and destroyed, returned, and
recalled products must be retained for a
period of 6 years.
§ 205.14 3PLs must provide upon request
a list of trading partners.
A list of all manufacturers, wholesale
distributors, repackagers, and
dispensers for which the 3PL conducts
3PL activities must be readily
retrievable and made available to
regulatory authorities upon request.
§ 205.15 Requirements for initial and
annual reporting to the Food and Drug
Administration.
(a) Electronic reporting requirement.
The 3PL must report electronically to
the Food and Drug Administration using
a secure mechanism in a format the
Food and Drug Administration can
review, process, and archive.
Information reported will be included in
the Food and Drug Administration’s
public database for 3PLs to the extent
allowable by law.
(b) Reporting periods—(1) Initial
reporting. Any entity that owns or
operates a facility that conducts 3PL
activities must report to the Food and
Drug Administration within 30 calendar
days of obtaining an initial State or
Federal 3PL license.
(2) Annual reporting. Any entity that
owns or operates a facility that is
licensed to engage in 3PL activities must
report to the Food and Drug
Administration each calendar year
between January 1 and March 31.
(c) Required information. Information
reported for each 3PL facility separately
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licensed by the licensing authority must
include:
(1) A complete list of States by which
the 3PL facility is licensed, including
the corresponding identification number
and the expiration date of each such
license;
(2) Name of company as it appears on
the license and full business address;
and
(3) All trade names or business names
under which the 3PL conducts business.
(d) Timing for significant disciplinary
action reporting—(1) Initial reporting.
The 3PL must report to the Food and
Drug Administration any significant
disciplinary actions that occurred in the
previous 12 months.
(2) Subsequent reporting. The 3PL
must, within 30 calendar days of a final
action taken by a State or Federal
licensing authority, report significant
disciplinary actions to the Food and
Drug Administration.
(e) Reporting voluntary withdrawal of
a State license. The 3PL must report to
the Food and Drug Administration that
it has withdrawn its license in a State
within 30 calendar days after such
withdrawal, including the reasons for
the voluntary withdrawal of licensure.
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§ 205.16
Inspections.
(a) A physical inspection of a facility
owned, rented, or leased by a 3PL for
conducting 3PL activities must be
conducted prior to issuance of the
initial license by the licensing authority.
(1) Where the State is the licensing
authority, the State may conduct the
inspection or may accept an inspection
by a third-party accreditation or
inspection service approved by the State
licensing authority. If the facility is out
of state, the State may conduct the
inspection or may accept an inspection
by the State in which the facility is
located.
(2) Where the Food and Drug
Administration is the licensing
authority, the Food and Drug
Administration may conduct the
inspection or may accept an inspection
by an organization approved by the
Food and Drug Administration under
§ 205.18.
(b) Routine inspections must be
conducted thereafter once every 3 years
by the licensing authority, a third-party
approved organization or inspection
service approved by the Food and Drug
Administration under § 205.18, or the
State licensing the 3PL.
(c) Records described in § 205.12(a)(1)
that are kept at the inspection site or
that can be immediately retrieved by
computer or other electronic means
must be readily available for inspection
during the retention period. Records
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kept at a central location apart from the
inspection site and not electronically
retrievable must be made available for
inspection within 2 business days of a
request by a State or Federal official, or
sooner if necessitated by the duration of
the inspection.
(d) The 3PLs must permit the Federal
or State licensing authority and thirdparty approved organizations or
inspection services approved by the
Food and Drug Administration or the
State to enter and inspect their facilities
and to audit their records and written
operating procedures.
Subpart B—Approved Organizations
for 3PLS
§ 205.17 Use of approved third-party
organizations.
(a) A third-party organization that has
been approved by the Food and Drug
Administration pursuant to § 205.18 (or
‘‘approved organization’’ (AO)) may
conduct licensure review of a 3PL’s
qualifications for licensure and may
conduct inspections of 3PLs at the
periodic intervals specified in § 205.16,
as directed by the Food and Drug
Administration.
(b) If an organization has been
approved by the Food and Drug
Administration to conduct licensure
review, the AO will:
(1) Conduct the licensure review,
which consists of:
(i) Reviewing all documents
submitted in support of the application
for 3PL licensure; and
(ii) Inspecting the facility, as directed
by the licensing authority;
(2) Complete the licensure review
within a timeframe not to exceed 90
calendar days after receiving notice to
conduct a licensure review from the
Food and Drug Administration;
(3) Based on the licensure review,
write a detailed document including
any findings and observations in
support of the AO’s recommendation to
the Food and Drug Administration to
grant or deny licensure; and
(4) Send the original document to the
Food and Drug Administration, with a
copy to the 3PL, within 7 calendar days
of completing the licensure review.
(c) When conducting routine
inspections at periodic intervals, the AO
will:
(1) Complete the inspection within a
timeframe not to exceed 90 calendar
days after receiving notice to conduct an
inspection from the Food and Drug
Administration;
(2) Based on the inspection, write a
detailed document including any
findings and observations in support of
the AO’s recommendation to the Food
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and Drug Administration regarding a
3PL’s licensure; and
(3) Send the original document to the
Food and Drug Administration, with a
copy to the 3PL, within 7 calendar days
of completing the inspection.
(d) To maintain approval, an
organization approved by the Food and
Drug Administration must:
(1) Maintain records that support the
AO’s initial and continuing
qualifications for approval for a
minimum of 5 years;
(2) Maintain the following records
related to licensure reviews for a
minimum of 5 years:
(i) Supporting documentation
reviewed as part of a licensure review;
(ii) Licensure review and inspection
reports;
(iii) Correspondence with the Food
and Drug Administration and the 3PL
associated with a licensure review; and
(iv) Information on the identity and
qualifications of all AO personnel who
contributed to the licensure review,
including a certification that such
personnel have complied with all
applicable requirements set forth in
subpart A of this part and are free of any
conflicts of interest, as set forth at 5 CFR
part 2635 and 18 U.S.C. 208.
(e) Records maintained by the AO
must:
(1) Be readily retrievable and made
available to Federal licensing authorities
upon request;
(2) Be maintained and protected in
accordance with all applicable laws,
including those regarding protection of
personal identifying information and
confidential commercial information;
(3) Be secure from unauthorized
access or modifications; and
(4) Contain only alterations signed
and dated by the individual who made
the alteration. Such alteration must
preserve the original information and
document the reason for the alteration.
(f) An AO must report to the Food and
Drug Administration within 24 hours of
discovering any evidence or
observations of potential violations
found at a 3PL facility during an
inspection of the facility that could pose
an imminent threat to the public health.
Reports must be made in the manner
prescribed by the Food and Drug
Administration.
§ 205.18 General qualifications of
approved organizations.
(a) To become and remain an AO, the
organization and anyone employed by
the organization, including contractors
used by the organization:
(1) Must not be a current Federal or
State government employee;
(2) Must not engage in prescription
drug-related activities, excluding
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participation in the Agency’s AO
program and related activities, but
including and not limited to
manufacturing, wholesale distribution,
repackaging, relabeling, dispensing, or
3PL activities;
(3) Must disclose to the Food and
Drug Administration any participation
or financial interest in entities that
participate in the design, manufacture,
promotion, or sale of articles or
activities that are predominantly FDAregulated or are expected to result in
FDA-regulated articles;
(4) Must not be owned or controlled
by, or have any organizational, material,
or financial affiliation with, any of the
entities engaged in manufacturing,
wholesale distribution, repackaging,
relabeling, dispensing, 3PL activities, or
the design, manufacture, promotion, or
sale of prescription drugs as defined in
section 581(12) of the Federal Food,
Drug, and Cosmetic Act;
(5) Must enter and abide by a written
agreement with the applicant before
data and information otherwise exempt
from public disclosure may be disclosed
to the AO or a contractor;
(6) Must operate in accordance with
professional and ethical business
practices and applicable legal
requirements, which include, but are
not limited to:
(i) Protecting against conflicts of
interest as set forth in 5 CFR part 2635
and 18 U.S.C. 208;
(ii) Ensuring that the personnel
employed or contracted by the AO who
are working on licensure reviews have
sufficient education, training,
knowledge, and experience to conduct
licensure reviews of 3PLs;
(iii) Treating received information,
records, and reports that qualify as
confidential commercial information as
described at 5 U.S.C. 552(b)(4)
according to applicable requirements for
such information;
(iv) Maintaining appropriate security
and protection, physical and electronic,
of any information received in relation
to licensure reviews to preserve
confidentiality and ensure that the
release of any information is limited to
authorized disclosures to either the
Food and Drug Administration or the
3PL facility;
(v) Reporting information to the Food
and Drug Administration and entities
for which licensure reviews were
conducted that accurately reflects data
reviewed, inspectional observations
made, and other matters that relate to
compliance with the Federal Food,
Drug, and Cosmetic Act; and
(vi) Promptly responding to and
attempting to resolve any complaints
regarding activities for which it is
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approved by the Food and Drug
Administration; and
(7) Must establish and maintain
policies, procedures, and
documentation to demonstrate that, at
the time of application and throughout
their tenure as an AO, the applicant has
satisfied and can continue to satisfy the
requirements to qualify as an AO
capable of assessing compliance with all
3PL requirements. Such policies,
procedures, and documentation must
include, but are not limited to:
(i) AO program administration;
(ii) Disciplinary actions and corrective
measures;
(iii) Recordkeeping and
confidentiality;
(iv) Use of contractors; and
(v) Personnel qualifications and
ongoing training.
(b) If an AO elects to use contractors
for licensure reviews or licensure
review-related activities, the AO
remains responsible for the work of the
contractors at all times.
(1) AOs that use contractors to
conduct licensure reviews must abide
by the confidentiality agreements
between the Food and Drug
Administration and the AO and have
policies and procedures in place to
ensure the contractor’s continuing
compliance with this part, as well as
competence and qualifications to
conduct licensure reviews. Such
policies and procedures must ensure
that contractors:
(i) Meet the qualifications set forth in
paragraph (a) of this section;
(ii) Do not subcontract their licensure
review duties, and that contractors are
removed if such requirement is violated;
(iii) Abide by the policies and
procedures of the AO, as set forth in
§ 205.19(b); and
(iv) Complete and pass the same
training required by the AO, as set forth
in § 205.19(c).
(2) If an AO elects to use contractors
to conduct licensure reviews, the AO
must receive and keep a record of
written consent from the 3PL to share
confidential commercial information
with contractors by which a licensure
review is being conducted.
(3) AOs that elect to use contractors
must submit to the Food and Drug
Administration a list of contractors used
by the organization, accompanied by a
statement from the organization
certifying that such contractors meet the
requirements of this subpart.
§ 205.19 Process and procedures for
approval by the Food and Drug
Administration.
(a) Application. An application to
become an AO must be completed and
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submitted electronically to the Food and
Drug Administration in a format the
Food and Drug Administration can
review, process, and archive.
(b) Required application information.
Policies, procedures, and
documentation as required by
§ 205.18(a)(7) must accompany the
application.
(c) Training. Organizations must
provide training as prescribed by the
Food and Drug Administration, and any
individual who conducts licensure
reviews or supervises individuals who
conduct licensure reviews is required to
undergo and pass the prescribed
training.
(1) If an individual does not pass
training, that person must wait 30 days
before retaking the training and may be
required to show proof of additional
education or experiential learning to
demonstrate competence before retaking
the training evaluation.
(2) To maintain approval, individuals
employed by the AO and conducting
licensure reviews or supervising those
who conduct licensure reviews must
undergo and pass annual training as
prescribed by the Food and Drug
Administration. Failure to complete and
pass annual training may result in
suspension of approval of the AO.
(3) The Food and Drug
Administration may require additional
training. If such additional training is
required, AOs will be given a set time
period during which training must be
completed and passed to maintain
approval.
(d) Auditing. Prior to conducting
licensure reviews, an AO must undergo
an onsite audit by the Food and Drug
Administration. The Food and Drug
Administration may also conduct
random, periodic audits, as well as forcause audits, of an AO, as set forth in
paragraph (o) of this section.
(e) Duration of approval and renewal
process. (1) The Food and Drug
Administration approval to conduct
licensure reviews is valid for a period of
5 years.
(2) AOs may submit a renewal
application to the Food and Drug
Administration 6 months prior to the
expiration date, but no later than 3
months prior to the expiration date, to
renew the approval.
(i) If a renewal application is
submitted less than 3 months before the
date of expiration, the AO’s approval
will expire if approval is not renewed
prior to the date of expiration.
(ii) Upon expiration of the AO’s
approval, the AO must cease conducting
any licensure review or inspectionrelated activities.
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(f) Denial of approval. If an
organization does not meet all of the
Food and Drug Administration’s
standards detailed in §§ 205.17 and
205.18 for becoming an AO, the Food
and Drug Administration will deny
approval of the application in writing.
Requests for review and reconsideration
of a denial of approval must be
submitted to the Food and Drug
Administration within 30 calendar days
of the date of the Food and Drug
Administration’s decision to deny the
application. If, upon reconsideration,
the Food and Drug Administration
denies the applicant’s request for
approval, the Food and Drug
Administration will provide the
applicant written notice of the denial
and an opportunity to appeal pursuant
to § 10.75 of this chapter.
(g) Suspension of approval after
notice and opportunity to request a
hearing. (1) The Food and Drug
Administration may suspend approval
of an organization after an opportunity
to request a hearing when there is a
reasonable probability that the
organization’s noncompliance will
negatively impact public health.
(2) If an AO fails to maintain the Food
and Drug Administration’s standards
pursuant to §§ 205.17 and 205.18, the
Food and Drug Administration will give
written notice of the intent to suspend
the organization’s approval, including
the grounds for the suspension, and the
AO will have 30 days to provide
additional information to the Food and
Drug Administration for
reconsideration.
(3) If, upon reconsideration, the Food
and Drug Administration still believes
the AO’s approval should be suspended,
the Food and Drug Administration will
issue the AO a written formal notice of
intent to suspend, along with notice of
the opportunity to request a hearing
pursuant to part 16 of this chapter.
(4) An AO that wishes to request a
hearing has 10 calendar days after the
date of the formal notice of intent to
suspend to submit a written notice of
participation and request for a hearing.
An AO that fails to submit a written
notice of participation and request for a
hearing within 10 calendar days from
the date of the notice waives the
opportunity for a hearing.
(5) A suspended AO must notify any
3PLs under a pending licensure review
by the AO of the AO’s suspension
within 7 calendar days.
(h) Immediate suspension of
approval. (1) When there is a reasonable
probability that the organization’s
noncompliance will cause imminent
and serious adverse health
consequences or death to humans, the
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Food and Drug Administration will
suspend an AO’s approval effective
immediately.
(2) In such a situation, the Food and
Drug Administration will provide the
AO a written notice of immediate
suspension, along with notice and
opportunity to request a hearing
pursuant to part 16 of this chapter
within 14 calendar days of the AO’s
request for such hearing.
(3) An AO that wishes to request a
hearing has 10 calendar days after the
date of the formal notice of suspension
to submit a written notice of
participation and request for a hearing.
An AO that fails to submit a written
notice of participation and request for a
hearing within 10 calendar days waives
the opportunity for a hearing.
(i) Reinstatement of approval. (1) An
organization’s approval may be
reinstated if the Food and Drug
Administration determines that the
suspended organization has rectified the
issues leading to the suspension and can
meet the standards set forth in this
subpart. The organization must rectify
the issues and come into compliance
with the standards set forth in this
subpart within 1 year from the date of
suspension. If the issues have not been
rectified within 1 year, or if the
organization otherwise has failed to
come into compliance with the
standards set forth in this subpart
within such time period, the Food and
Drug Administration may revoke the
AO’s approval subject to the provisions
of this part.
(2) An organization whose approval
has been reinstated on a conditional
basis will be subject to a 3-year
probationary period, and if any material
deficiencies arise during that period, the
organization’s approval will be revoked.
(j) Revocation of approval. (1) The
Food and Drug Administration may
revoke approval of an organization
whose approval has been suspended
pursuant to paragraphs (g) and (h) of
this section:
(i) If an organization fails to
demonstrate its intent to rectify the
issues leading to the suspension within
6 months from the date of suspension;
or
(ii) If the Food and Drug
Administration determines that the
organization failed to rectify the issues
leading to the suspension to the
Agency’s satisfaction within 1 year of
the date of suspension.
(2) The Food and Drug
Administration will give written notice
of the intent to revoke the organization’s
approval, including the grounds for the
revocation, and an opportunity to
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request a hearing pursuant to part 16 of
this chapter.
(3) The AO must submit a written
notice of participation and request a
hearing within 10 calendar days after
the date of the notice of revocation. An
AO that fails to submit a written notice
of participation and request for hearing
within 10 calendar days waives the
opportunity for a hearing.
(4) An organization whose approval
has been revoked that wishes to reapply
to be an AO must submit a new
application to the Food and Drug
Administration.
(k) Requests for reconsideration of
Agency decision. (1) The Food and Drug
Administration will follow the process
outlined at § 10.75 of this chapter to
review matters relating to denial of
approval, including review of the
organization’s application.
(2) The Food and Drug
Administration will follow the process
outlined at part 16 of this chapter to
review matters relating to a suspension
or revocation action, including review
of the organization’s application and
administrative file.
(3) The Food and Drug
Administration’s decision after a request
for reconsideration of denial,
suspension, or revocation constitutes a
final Agency action under 5 U.S.C. 702.
(l) Voluntary withdrawal of approval.
(1) An organization wishing to
voluntarily withdraw its approval,
including but not limited to when an
AO goes out of business, must notify the
Food and Drug Administration in
writing at least 6 months prior to the
date the organization intends for the
withdrawal to become effective.
(i) If an AO determines it will be
withdrawing its approval with the Food
and Drug Administration in less than 6
months, it must notify the Food and
Drug Administration immediately of its
intent to withdraw, and such
notification must inform the Food and
Drug Administration of the date the
organization will cease business
operations.
(ii) [Reserved]
(2) No later than 7 calendar days after
notifying FDA, the organization must
notify any facilities with pending
reviews that it intends to withdraw its
approval with the Food and Drug
Administration and must provide the
date on which the withdrawal is
effective.
(m) AO-required notifications to 3PLs.
The AO must, within 7 calendar days of
the date of suspension, revocation, or
voluntary withdrawal of approval,
notify those 3PL facilities that have
pending licensure reviews of the AO’s
suspension or revocation. This
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notification must inform the 3PL facility
that it must apply for licensure review
with another AO, or the Food and Drug
Administration if no other AO is
available to conduct the licensure
review.
(n) Change of operation or ownership.
(1) The AO must report to the Food and
Drug Administration within 30 calendar
days any changes to the information
submitted in the application for
approval.
(2) Approval is not transferable.
(i) Changes in ownership of an AO
require the organization to submit a new
application to the Food and Drug
Administration.
(ii) Such application must be
submitted to the Food and Drug
Administration no later than 30
calendar days prior to the date of the
change of ownership.
(iii) No later than 30 calendar days
before the date of the change of
ownership, the AO must notify any 3PL
facilities with pending applications of
the pending change in ownership.
(iv) On the date the change of
ownership takes place, the original
approval is void.
(o) Monitoring by the Food and Drug
Administration. (1) AOs are subject to
audits by the Food and Drug
Administration to ensure compliance
with the Food and Drug
Administration’s requirements for
approval.
(2) If an AO refuses to cooperate with
the Food and Drug Administration’s
audit, the organization’s approval may
be suspended pursuant to paragraph
(g)(1) of this section.
Subpart C—Wholesale Distributors
Licensure Standards
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§ 205.20 Requirement that prescription
drug wholesale distributors be licensed.
(a) No wholesale distributor may
engage in wholesale distribution of a
prescription drug unless the person is
licensed:
(1) By the State from which the drug
is distributed; or
(2) If the State from which the drug is
distributed has not established a
licensure requirement in accordance
with the standards set forth in this part,
by the Food and Drug Administration;
and
(3) If the drug is distributed interstate,
by the State into which the drug is
distributed if such licensure is required
by that State.
(b) Any license issued or renewed
pursuant to this section will expire 2
years after the date on which the license
was issued. A wholesale distributor may
submit a renewal application up to 90
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calendar days before the date of
expiration. A license will be considered
valid during any period of the
administrative delay on the part of the
licensing authority, if the wholesale
distributor timely submitted the renewal
application.
§ 205.21
Surety bond requirement.
(a) Surety bond compliance. No
wholesale distributor will be licensed
under this section unless the wholesale
distributor has furnished a bond, or
other equivalent means of security
acceptable to the State if the State is the
licensing authority, that complies with
the requirements of this section.
(b) Surety bond requirements. (1) For
the issuance or renewal of a wholesale
distributor license, an applicant that is
not a government-owned and -operated
wholesale distributor must submit to the
licensing authority a surety bond from
an authorized surety company of
$100,000 or other equivalent means of
security acceptable to the State. The
term of the initial surety bond must be
effective on the date that the application
is submitted to the licensing authority.
(2) The licensing authority may accept
a surety bond from an authorized surety
company in the amount of $25,000 if the
annual gross receipts of the previous tax
year for the wholesale distributor are
$10,000,000 or less.
(3) If a wholesale distributor can
provide evidence that it possesses the
required bond in the State where the
wholesale distributor is located, the
requirement for a bond in another State
for a non-resident wholesale distributor
license will be waived.
(c) Terms of the surety bond. (1) The
terms of the bond submitted by a
wholesale distributor must on its face
reflect the requirements of this section,
including meeting the requirements of
liability coverage ($100,000 or $25,000,
as applicable), as well as the
responsibilities of the surety company
and wholesale distributor as set forth in
this section.
(2) The bond must be continuous and
remain in full force and effect, running
concurrently with the license period
and for every succeeding licensing
period for which the wholesale
distributor may be licensed. The bond
must remain in full force and effect
until 1 year after the license expires,
after which liability for license
administrative fees ceases except as to
any liability or indebtedness incurred or
accrued before the termination date.
(3) The bond must guarantee that after
receiving written notice from the
licensing authority containing sufficient
evidence to establish the surety’s
liability under the bond, the surety
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company will pay within 30 calendar
days any administrative fines or
penalties imposed by the licensing
authority on the wholesale distributor
holding the surety bond in that State.
This includes any fees and costs
incurred by the licensing authority
regarding that license authorized by law
and which the wholesale distributor
fails to pay within 30 calendar days
after the fine or costs become final. Any
such claim may be made directly to the
surety company and need not be
preceded by the filing of any action in
a proper court.
(4) The licensing authority may make
a claim against the surety bond until 1
year after the date of expiration on the
wholesale distributor’s license or until
60 calendar days after any
administrative or legal proceeding,
which involved the wholesale
distributor, is concluded, including any
appeal, whichever occurs later.
(d) Cancellation of a bond and lapse
of surety bond coverage. (1) A wholesale
distributor may cancel its surety bond
and must provide written notice 30
calendar days before the effective date
of the cancellation to all applicable
licensing authorities and the surety
company.
(2) Cancellation of a surety bond is
grounds for suspension of the wholesale
distributor’s license unless the
wholesale distributor provides a new
bond before the effective date of the
bond’s cancellation. If a new surety
bond is provided before the effective
date of the bond’s cancellation, the
liability of the surety company
continues until the cancellation date.
Otherwise, the liability of the surety
company continues for 1 year after the
date of cancellation, after which liability
ceases except as to any liability or
indebtedness incurred or accrued before
the cancellation date.
(3) The wholesale distributor must
immediately notify the licensing
authority if there is a lapse in the
wholesale distributor’s surety coverage.
(4) If the licensing authority discovers
a lapse in bond coverage that has not
been previously disclosed by the
wholesale distributor, the wholesale
distributor’s license will be suspended
pursuant to § 205.30.
(e) Actions under the surety bond.
The bond must provide that actions
under the bond may be brought by a
State or Federal licensing authority.
(f) Required surety company
information on the surety bond. The
bond must provide the surety
company’s name, street address or post
office box number, city, State, and zip
code.
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(g) Change of surety company. A
wholesale distributor that obtains a
replacement surety bond from a
different surety company to cover the
remaining term of a previously obtained
bond must submit the new surety bond
to the licensing authority 30 calendar
days prior to the expiration of the
previous surety bond. There must be no
gap in the coverage of the surety bond
periods.
(h) Parties to the surety bond. The
surety bond must name the wholesale
distributor as Principal, the licensing
authority as obligee, and the surety
company (and its heirs, executors,
administrators, successors, and
assignees, jointly and severally) as
surety.
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§ 205.22 General application requirements
for licensure.
(a) Applicant requirements. An
individual who submits an application
on behalf of a wholesale distributor for
a license issued pursuant to this subpart
must:
(1) Be 18 years of age or older;
(2) Submit an affidavit that their
ownership or management of or
employment by the entity would not
preclude the entity from receiving or
maintaining a license under § 205.25(a);
(3) Submit all application information
required in the form required by the
licensing authority; and
(4) Pay any licensing fees that are
required by the licensing authority
pursuant to section 503(e)(3) of the
Federal Food, Drug, and Cosmetic Act.
(b) Surety bond requirement. The
wholesale distributor must furnish a
bond, or other equivalent means of
security acceptable to the State, with the
application for licensure in accordance
with the surety bond requirements in
§ 205.21.
(c) General requirements for licensure
application. The State or Federal
licensing authority will require the
following information from each
wholesale distributor as part of the
initial application for the license
described in this section and as part of
any renewal of such license:
(1) The name and title of the
individual who submits the application
for licensure on behalf of the wholesale
distributor;
(2) The name of the wholesale
distributor as it should appear on the
license and the full business address
and telephone number of the wholesale
distributor;
(3) All trade or business names used
by the wholesale distributor, including
prior trade or business names, within
the past 7 years;
(4) Name, email address, and
telephone number of the designated
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representative or facility manager for the
wholesale distributor;
(5) The type of ownership or
operation of the business entity, such as
a partnership, corporation, limited
liability company, or sole
proprietorship;
(6) The name of any owners or
operators of the wholesale distributor,
including:
(i) If a sole proprietorship, the full
name of the sole proprietor and the
name of the business entity;
(ii) If a partnership, the name of each
partner and the name of the partnership;
(iii) If a corporation, the corporate
names, the names of any subsidiaries
and affiliates, the name and title of each
corporate officer and director, and the
State of incorporation; and
(iv) If a limited liability company, the
name of the limited liability company,
including any subsidiaries and affiliates,
the name of each member, and the State
in which the limited liability company
was organized;
(7) Whether the wholesale distributor
has ever been convicted of a felony
relating to wholesale drug distribution,
a felony conviction of section 301(i) or
(k) of the Federal Food, Drug, and
Cosmetic Act, or a felony conviction of
18 U.S.C. 1365, relating to product
tampering, together with details
concerning any such events; and
(8) Whether the wholesale distributor
has received any citations for violating
requirements for licensure within the
past 7 years or has received any
significant disciplinary actions within
the past 7 years that presented a threat
of serious adverse health consequences
or death to humans, together with
details concerning any such events.
(d) General requirements for licensure
renewal. To renew a license, the
wholesale distributor must submit the
following to the renewing licensing
authority:
(1) Certification that the wholesale
distributor has continued to meet all the
standards and complied with the
requirements in this subpart since the
previous license was issued; and
(2) Information about any changes to
information previously submitted under
this section, or § 205.21, or § 205.23(c)
for which a notification was not already
submitted to the licensing authority
under § 205.24.
(e) License availability requirement.
The wholesale distributor must
maintain its license in a readily
retrievable manner and must permit
inspection of the license by any official,
agent, or employee of the licensing
authority or of any Federal, State, or
local agency engaged in enforcement of
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6749
laws relating to the distribution of
prescription drugs.
§ 205.23
Federal licensure process.
(a) Procedures for filing an FDA
application for a wholesale distributor
license. (1) All wholesale distributors
must electronically submit an
application to the Food and Drug
Administration for a license to engage in
wholesale distribution if the State does
not have a licensing program for
wholesale distributors consistent with
the standards set forth in this section.
The application must include the
information in §§ 205.21 and 205.22,
along with a surety bond and supporting
documentation that demonstrates the
applicant’s ability to comply with
requirements intended to ensure the
continued safety, identity, strength,
quality, and purity of the prescription
drugs.
(2) If one or more organizations have
been approved by the Food and Drug
Administration under § 205.32 to
conduct inspections of wholesale
distributors, the wholesale distributor
will indicate in its application to the
Food and Drug Administration which
AO it prefers to conduct its inspection.
(3) If there is no organization
approved by the Food and Drug
Administration to conduct inspections
for wholesale distributors, the Food and
Drug Administration will conduct the
inspection, as described in § 205.28(b).
(4) The applicant, or the applicant’s
agent or other authorized official, must
sign the application.
(5) An application for a wholesale
distributor license will not be
considered as filed until the Food and
Drug Administration has received all
required information and fees.
(b) Determination that licensing
requirements have been met. The Food
and Drug Administration, not an AO,
will determine whether the wholesale
distributor meets all the applicable
requirements set forth in this part.
(c) Notification of easily correctable
deficiencies. The Food and Drug
Administration will make reasonable
efforts to promptly communicate to
applicants easily correctable
deficiencies found in an application
when those deficiencies are discovered.
The Food and Drug Administration will
also promptly inform applicants if more
data or information is needed to
facilitate the Agency’s review.
(d) Issuance of wholesale distributor
license by FDA. Approval of a wholesale
distributor license application or
issuance of a wholesale distributor
license constitutes a determination by
the Food and Drug Administration that,
based upon information received, the
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wholesale distributor meets the
applicable requirements to be licensed
under sections 503(e)(1) and 583 of the
Federal Food, Drug, and Cosmetic Act.
The Food and Drug Administration will
approve an application and send the
applicant an approval letter and license
certificate if none of the reasons in
§ 205.30(a)(1) for refusing to approve the
application applies. Applicable
requirements for wholesale distributors
to engage in wholesale distribution must
include but not be limited to the good
storage practices set forth under
§ 205.26. A license is effective on the
date of issuance of the license
certificate.
(e) Validity of a wholesale distributor
license. Licenses issued to a wholesale
distributor will remain valid until the
date of expiration, unless suspended or
revoked.
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§ 205.24 Changes to information,
operation, location, or ownership of a
wholesale distributor.
(a) Any change to any information
required in this subpart, including
changes to any information required
pursuant to §§ 205.21, 205.22, and
205.25, must be submitted electronically
to the licensing authority within 30
calendar days after such change is
effective, except where otherwise
provided in this subpart.
(b) Any change in the location of a
wholesale distributor at which
wholesale distribution occurs will
require an inspection of the new facility
prior to the wholesale distributor
beginning operations at the new facility.
(1) On the date the change of location
takes place, the wholesale distributor
may not engage in wholesale
distribution at the original facility.
(2) [Reserved]
(c) Any change in the person engaged
in wholesale distribution will require a
new license prior to beginning
operations.
(1) The application for a new license
required by § 205.23 must be submitted
no later than 30 calendar days prior to
the change in ownership.
(2) A new inspection of the wholesale
distributor will be performed within a
reasonable time.
(3) A wholesale distributor can
continue to operate under the original
license for 30 calendar days after the
change of ownership occurs or until the
license application of the new owner is
approved, whichever is sooner.
§ 205.25 Prohibited persons and
qualifications for key personnel.
(a) A wholesale distributor is
prohibited from obtaining or
maintaining licensure if the wholesale
distributor has been:
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(1) Convicted of any felony for
violation of section 301(i) or (k) of the
Federal Food, Drug, and Cosmetic Act;
(2) Convicted of any felony violation
of 18 U.S.C. 1365 relating to product
tampering; or
(3) Cited on two or more occasions
within the previous 7 years for violating
one or more of the requirements of
section 583 or section 503(e) of the
Federal Food, Drug, and Cosmetic Act
or State requirements for licensure in
such a way that presents a threat of
serious adverse health consequences or
death to humans.
(b) All key personnel must have the
education, background, training, and
experience necessary to perform his or
her assigned functions.
(c) Licensure may also be denied
when an applicant wholesale distributor
or any of their key personnel has been:
(1) Found to have delayed or
otherwise impeded an inspection by the
Federal or State licensing authority or
an approved third-party inspector, or an
inspector, after reasonable efforts, was
unable to gain access to an
establishment or a location to carry out
the inspection required under § 205.28,
as permitted by section 704(a) of the
Federal Food, Drug, and Cosmetic Act
(21 U.S.C. 374(a));
(2) Found to have omitted material
information or furnished false or
fraudulent information in an application
made about the distribution of
prescription drugs; or
(3) Subject to licensure suspension or
revocation by Federal, State, or local
government for any license currently or
previously held by the applicant for the
manufacture or distribution of any
drugs, including controlled substances.
(d) The wholesale distributor must
maintain a list of officers, directors,
facility managers, designated
representatives, and other key personnel
in charge of wholesale distribution,
including storage and handling, and
include a description of their duties and
a summary of their qualifications. This
list must be available for review by the
State or Federal licensing authority.
(e) The wholesale distributor must
establish and implement written
policies and procedures designed to
ensure that the qualifications of key
personnel as required in this section are
met, maintained, and documented.
These written policies and procedures
must be available for review by the State
or Federal licensing authority, as
provided in § 205.27. These policies and
procedures must identify the personnel
at the wholesale distributor’s facility
who are responsible for the following
actions:
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(1) Implementing and maintaining all
facility and personnel requirements;
(2) Ensuring that the facility complies
with all licensure and reporting
requirements; and
(3) Ensuring that key personnel
receive initial and regular training to
ensure competence relevant to their job
functions.
(f) In addition to the qualifications for
key personnel in paragraphs (a) through
(e) of this section, a facility manager or
designated representative must have the
following qualifications to carry out
those responsibilities:
(1) Serves as the facility manager or
designated representative of such
facility manager for only one facility at
any one time;
(2) Is actively involved in and
responsible for managing the daily
operations of the wholesale distributor
facility; and
(3) Remains responsible for all facility
manager or designated representative
duties that are delegated to other
personnel at the facility.
(g) Any facility manager or designated
representative, prior to their association,
employment, or contracting with the
wholesale distributor as a facility
manager or designated representative,
must submit a full set of fingerprints for
purposes of conducting local and
national criminal background checks.
The results of the background checks
must demonstrate no history of criminal
convictions pursuant to paragraph (a) of
this section.
§ 205.26 National standards for the
storage and handling of prescription drugs
for wholesale distribution.
Any facility owned, rented, or leased
by a wholesale distributor for engaging
in wholesale distribution must meet the
facility requirements in paragraphs (a)
and (b) of this section, and the
wholesale distributor must establish,
maintain, and follow policies and
procedures as set forth in paragraph (c)
of this section.
(a) A wholesale distributor to which
a license has been issued in the same
name and at the same address as
another authorized trading partner, such
as a 3PL, must maintain separate
systems and processes for the
distribution of drugs that are specific to
the wholesale distributor.
(b) The facility the wholesale
distributor owns, leases, or rents for
purposes of engaging in wholesale
distribution must be suitable for the
storage and handling of prescription
drugs, as demonstrated by the following:
(1) General requirements. The facility
is:
(i) Not a personal residence;
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(ii) Of a suitable size, construction,
and configuration designed to ensure
proper distribution, including storage
and handing, of all prescription drugs
stored at or distributed from the facility;
(iii) Of a suitable size, construction,
and configuration to facilitate cleaning,
maintenance, and proper wholesale
distribution operations;
(iv) Maintained in a clean and orderly
condition, free from infestation of any
kind;
(v) Equipped with sufficient lighting,
ventilation, temperature, sanitation,
humidity, space, equipment, and secure
conditions for prescription drug storage;
and
(vi) Equipped with clearly defined
designated areas that separate saleable
prescription drugs from prescription
drugs that are unfit for distribution.
(2) Security of premises. The facility
must be equipped with adequate
security to prevent breaches. Adequate
security includes ensuring that:
(i) The facility is secure from
unauthorized entry;
(ii) Access from outside the premises
is limited, well controlled, and
documented;
(iii) The outside perimeter of the
premises is well lit;
(iv) Entry into areas where
prescription drugs are held is limited to
key personnel who possess appropriate
and verifiable experience and training
necessary to safely and lawfully engage
in the distribution of prescription drugs,
as described in § 205.25, and to staff for
purposes of maintenance and cleaning;
and
(v) The facility is equipped with a
security system that protects against
theft and diversion of prescription drugs
and accidental or unsanctioned
modifications to data, including an
alarm system to detect and notify
appropriate personnel of any
unauthorized entry.
(3) Equipment. The facility must have
equipment that ensures prescription
drugs are properly stored, including
cold storage, refrigerators, temperature
and humidity devices, and air handling
units. All equipment utilized must be
maintained in good repair and must be
suitable for the distribution, including
receipt, storing, and handling,
warehousing, holding, displaying, or
transporting of prescription drugs, as
demonstrated by the following:
(i) All equipment must be installed,
maintained, and repaired by qualified
individuals following written
procedures established by the wholesale
distributor. The wholesale distributor
must be able to demonstrate that all
equipment has been calibrated, as
applicable, and validated at regular
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intervals to achieve the intended results
accurately, consistently, and in a
manner that can be reproduced by
qualified individuals following the
wholesale distributor’s written
procedures. Such actions must be
documented;
(ii) Appropriate manual,
electromechanical, or electronic
temperature and humidity recording
equipment or logs must be used to
document proper storage of prescription
drugs; and
(iii) Monitoring equipment must
immediately alert appropriate personnel
of any deviations from the required
storage conditions.
(4) Facility assessments. Facility
assessments, including temperature
mapping and other assessments
designed to ensure prescription drugs
are properly stored in accordance with
their labeling, must be regularly
conducted and documented.
(c) Every wholesale distributor must
establish, maintain, and follow written
policies and procedures for each of the
requirements described in this section
that are relevant to the scope of the
wholesale distributor’s activities
involving prescription drugs at the
facility. The written policies and
procedures must describe a system by
which the wholesale distributor will
monitor all processes, and, if deviations
occur, promptly document and
investigate to determine the root cause
of the deviation. If a wholesale
distributor uses a contractor to carry out
any of its duties, the wholesale
distributor remains responsible for
compliance with this subpart and must
ensure that the contractor abides by the
applicable written policies and
procedures. The written policies and
procedures must clearly describe the
responsibilities of the wholesale
distributor and any contractors used to
fulfill the wholesale distributor’s duties.
Such arrangements must be documented
and carried out in accordance with the
requirements of this section.
(1) Authorized trading partners. The
wholesale distributor must ensure that it
conducts business only with other
authorized trading partners as defined
in section 581(2) and (23) of the Federal
Food, Drug, and Cosmetic Act.
(2) Facility and equipment
maintenance management. The
wholesale distributor must ensure that
the facility requirements in paragraph
(b) of this section are met.
(3) Transportation. The wholesale
distributor must ensure prescription
drugs are transported in a manner that:
(i) Protects against breakage,
contamination, adulteration, and theft;
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(ii) Prevents exposure to conditions
that may compromise prescription drug
identity, strength, quality, or purity; and
(iii) Ensures that deviations from
storage requirements during transport
are identified, investigated,
documented, corrected, and reported no
later than 24 hours after discovery to the
authorized trading partner from which
the prescription drug was received, and
to the manufacturer to determine if
further commercial distribution is
appropriate.
(4) Examination of shipping
containers. The wholesale distributor
must ensure that all shipping containers
are examined in accordance with the
following standards:
(i) Incoming shipments. Upon receipt,
each shipping container must be
visually examined for identity and to
prevent the acceptance of prescription
drugs that are unfit for distribution. This
examination must be adequate to detect
conditions that would suggest that the
prescription drug may be unfit for
distribution, such as alterations made or
damage to the shipping container.
(ii) Outgoing shipments. Each
outgoing shipment must be properly
inspected for identity of the prescription
drug to ensure that there is no shipment
of a prescription drug that has been
damaged in storage or held under
improper conditions and to prevent the
introduction or further shipment of any
prescription drug that is unfit for
distribution, including through the
wholesale distributor’s processing of
returned or recalled drugs.
(5) Storage and handling. The
wholesale distributor must ensure that
prescription drugs are stored at
appropriate temperatures and under
appropriate conditions in accordance
with the drugs’ labeling, except that if
no storage requirements are established
in the drug’s labeling, the drug may be
held at controlled room temperature to
preserve the drug’s identity, strength,
quality, and purity.
(i) Inventory management. The
wholesale distributor must:
(A) Ensure compliance with the
requirements of section 582(c) of the
Federal Food, Drug, and Cosmetic Act;
(B) Ensure that the facility’s stock is
inspected regularly to protect against
drug diversion and distribution of
prescription drugs that are unfit for
distribution;
(C) Investigate, document, and correct
any stock irregularities, including theft,
loss, or diversion of prescription drugs,
in accordance with section 582(c) of the
Federal Food, Drug, and Cosmetic Act,
as applicable;
(D) Ensure that any prescription drug
that appears to be unfit for distribution
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is removed from saleable stock and
handled appropriately according to the
requirements in paragraphs (c)(5)(ii)
through (iv) of this section;
(E) Immediately report any confirmed
losses or theft of prescription drugs to
the manufacturer of the drug and the
Food and Drug Administration; and
(F) Ensure that records related to the
actions required in paragraphs (c)(5)(i)
through (iv) of this section are kept
according to § 205.27.
(ii) Handling of prescription drugs.
The wholesale distributor must ensure
that only prescription drugs fit for
distribution are further distributed or
transferred.
(A) Any prescription drug that
appears to be unfit for distribution must
be stored in a secure area clearly
defined for such use and physically
segregated from saleable drugs, or
electronically segregated, if appropriate,
until the wholesale distributor
determines by thorough examination
that such drugs are fit for human use or
nonsaleable.
(B) Any prescription drug found to be
adulterated, misbranded, or otherwise
unfit for distribution must be stored in
a secure area clearly defined for such
use and physically or electronically
segregated from saleable drugs until
they are returned to the supplier or
destroyed in accordance with the
standards in paragraph (c)(6) of this
section.
(C) If a prescription drug is
determined to be a suspect or
illegitimate product, those suspect or
illegitimate products must be handled
according to the requirements of section
582(c)(4) of the Federal Food, Drug, and
Cosmetic Act.
(iii) Returned prescription drugs. All
returned prescription drugs must be
stored in a secure area clearly defined
for such use and physically segregated
from saleable prescription drugs, until
the wholesale distributor determines by
thorough examination that such drugs
are saleable or nonsaleable.
(A) Saleable returns. Prescription
drugs may be returned to saleable stock
only if the conditions under which the
drug has been returned do not cast
doubt on the drug’s safety, identity,
strength, quality, or purity. In
determining whether the conditions
under which a drug has been returned
cast doubt on the drug’s safety, identity,
strength, quality, or purity, the
wholesale distributor must consider,
among other things, the conditions
under which the drug has been held,
stored, or shipped.
(B) Nonsaleable returns. If the
conditions under which the prescription
drug has been returned cast doubt on
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the drug’s safety, identity, strength,
quality, or purity, drugs may be
returned to the manufacturer or
repackager, to the wholesale distributor
from which such drug was purchased,
or to an individual acting on behalf of
such an entity, including a returns
processor, or may be destroyed in a
timely manner and in accordance with
paragraph (c)(6) of this section and all
applicable Federal and State laws.
(iv) Recalled drugs. Recalled
prescription drugs must be handled as
instructed by the manufacturer in the
recall notice, which may require that the
recalled drugs be stored in a secure area
clearly defined for such purpose and
physically segregated from saleable
drugs until they are returned to the
manufacturer or repackager, to the
wholesale distributor from which such
drug was purchased, or to an individual
acting on behalf of such an entity,
including a returns processor, or
destroyed in accordance with the
standards in paragraph (c)(6) of this
section.
(6) Disposition of drugs. The
wholesale distributor must establish,
maintain, and follow written policies
and procedures that ensure that
prescription drugs removed from the
pharmaceutical distribution supply
chain because they are determined to be
unfit for distribution are retained for
further examination, returned to the
manufacturer or repackager, returned to
the wholesale distributor from which
such drug was purchased, or returned to
an individual acting on behalf of such
an entity, including a returns processor,
or destroyed in accordance with all
applicable Federal and State laws and
the following standards:
(i) Quarantine and transfer for further
examination. The wholesale distributor
must establish and maintain records for
prescription drugs retained in
quarantine and subsequently transferred
to a manufacturer or regulatory or law
enforcement agency for further
additional physical examination or
laboratory analysis.
(ii) Return the drugs. The wholesale
distributor must establish and maintain
records for the return of prescription
drugs to the manufacturer, repackager,
or wholesale distributor from which the
wholesale distributor acquired the
drugs, including when returned using a
returns processor or reverse logistics
provider to return the drugs.
(iii) Destroy. When prescription drugs
are authorized for destruction, the
wholesale distributor must:
(A) Destroy all containers, labels, and
packaging to ensure that such items
cannot be used in counterfeiting
activities;
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(B) Ensure that the destruction of
prescription drugs, containers, labels,
and packaging are witnessed; and
(C) Establish and maintain records for
destroyed drugs and the witnessing
thereof.
(7) Preparation for foreseeable crises.
The wholesale distributor must prepare
for, protect against, and address any
reasonably foreseeable crises that could
affect security or operation of the
facility such as strike, fire, flood, or
other natural disaster, or other
situations of local, State, or national
emergency.
§ 205.27 Standards for the establishment
and maintenance of records of the
distribution of prescription drugs.
(a) Required records. Required records
include, but are not limited to, the
following:
(1) Documentation pertaining to
distribution, including storage and
handling, security, inventory, transport,
and shipping of prescription drugs,
including written policies and
procedures for identifying, recording,
and reporting confirmed losses, thefts,
and diversions, and prescription drugs
that are unfit for distribution;
(2) All policies, procedures,
instructions, contracts, data, inspection
reports, and any documentation related
to compliance with this subpart; and
(3) Invoices, purchase orders, packing
slips, shipping records, and any other
records of the distribution of
prescription drugs.
(b) Maintenance, availability, and
accuracy of records. Records must:
(1) Accurately reflect the name of the
wholesale distributor as it appears on
the wholesale distributor license and
must match the information that is
reported to the Food and Drug
Administration pursuant to the Food
and Drug Administration reporting
requirements at § 205.29;
(2) Be readily retrievable and made
available to regulatory authorities upon
request;
(3) Be securely stored and protected
from unauthorized access or
modifications; and
(4) Contain only alterations signed
and dated by the individual who made
the alteration. Such alteration must
preserve the original information and
document the reason for the alteration.
(c) Written policies and procedures.
Written policies and procedures must be
implemented by the wholesale
distributor to protect the integrity of
records.
(d) Record retention. (1) Except for the
records listed in paragraph (d)(2) of this
section, all records required to be
maintained by this subpart must be
retained for a period of 3 years.
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(2) Records of investigation of suspect
and illegitimate products and of
destroyed, nonsaleable returned, and
recalled prescription drugs must be
retained for a period of 6 years.
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§ 205.28
Inspections.
(a) A facility to be used in wholesale
distribution must undergo a physical
inspection prior to issuance of the
initial license by the Federal or State
licensing authority.
(1) Where the State is the licensing
authority, such inspection may be
conducted by:
(i) The State in which the facility to
be licensed is located; or
(ii) A third-party accreditation or
inspection service approved by the State
licensing the wholesale distributor; or
(iii) If the facility is located out of
State, the State issuing the license may
conduct the inspection or may accept an
inspection by the State in which the
facility is located or by a third party, as
described in paragraph (a)(1)(ii) of this
section.
(2) Where the Food and Drug
Administration is the licensing
authority, the Food and Drug
Administration may conduct the
inspection or may accept an inspection
conducted by an organization approved
by the Food and Drug Administration
under § 205.32.
(b) Records described in § 205.27 that
are kept at the inspection site or that can
be immediately retrieved by computer
or other electronic means must be
readily available for inspection during
the retention period. Records kept at a
central location apart from the
inspection site and not electronically
retrievable must be made available for
inspection within 2 business days of a
request by a State or Federal official, or
sooner if necessitated by the duration of
the inspection.
(c) Wholesale distributors must
permit the appropriate Federal, or State
licensing authority and State- or FDAapproved third-party inspection services
to enter and inspect their premises and
to audit their records and written
operating procedures.
(d) To ensure compliance with this
subpart, routine inspections will be
conducted once every 3 years by the
licensing authority, or a third-party
accreditation or inspection service
approved by the Food and Drug
Administration or the State licensing
the wholesale distributor.
§ 205.29 Requirements for initial and
annual reporting to the Food and Drug
Administration.
(a) Electronic reporting requirement.
The wholesale distributor must report
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electronically to the Food and Drug
Administration using a secure
mechanism in a format the Food and
Drug Administration can review,
process, and archive pursuant to section
503(e)(2)(A) of the Federal Food, Drug,
and Cosmetic Act. Information reported
will be included in the Food and Drug
Administration’s public database for
wholesale distributors pursuant to
section 503(e)(2)(B) of the Federal Food,
Drug, and Cosmetic Act.
(b) Reporting periods—(1) Initial
reporting. Any entity that owns or
operates an establishment that engages
in wholesale distribution must report
within 30 calendar days of obtaining an
initial State or Federal wholesale
distributor license.
(2) Annual reporting. Any entity that
is licensed to engage in wholesale
distribution must report to the Food and
Drug Administration each calendar year
between January 1 and March 31.
(c) Required information. Information
to be reported for each wholesale
distributor must include:
(1) A complete list of States where the
wholesale distributor is licensed,
including the corresponding
identification number and the
expiration date of each such license;
(2) Name of company as it appears on
the license, full business address, and
contact information for the facility
manager or designated representative of
the wholesale distributor;
(3) All trade names or business names
under which the wholesale distributor
conducts business; and
(4) Any significant disciplinary
actions by any State or Federal Agency
taken against the wholesale distributor
license related to the distribution of
prescription drugs, including the State
where the disciplinary action occurred,
date of final action, type of disciplinary
action, description of the violation, and
documents associated with the
disciplinary action.
(d) Timing of significant disciplinary
action reporting—(1) Initial reporting.
The wholesale distributor must report to
the Food and Drug Administration any
significant disciplinary actions,
including but not limited to revocation
or suspension of a wholesale distributor
license by a State or Federal licensing
authority, which occurred in the 12
months prior to obtaining licensure.
(2) Subsequent reporting. The
wholesale distributor must, within 30
calendar days after a final action taken
by a State or Federal licensing authority,
report significant disciplinary actions to
the Food and Drug Administration.
(e) Other reports—(1) Closure of a
facility. The wholesale distributor must
report to the Food and Drug
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Administration that a facility has ceased
operations within 30 calendar days after
it has stopped operating as a wholesale
distributor.
(2) Voluntary withdrawal of a State
license. The wholesale distributor must
report to the Food and Drug
Administration that it has withdrawn its
license in a State within 30 calendar
days after such withdrawal, including
any reasons for the voluntary
withdrawal of licensure.
§ 205.30 Licensure denial, suspension,
reinstatement, revocation, and voluntary
termination—notice and opportunity to
request a hearing.
(a) Denial of application for licensure.
(1) The licensing authority will refuse to
approve a wholesale distributor license
application for any of the following
reasons:
(i) The methods or procedures to be
used in the distribution of the
prescription drug, including receipt,
storage, and handling, are inadequate to
preserve its safety, identity, strength,
quality, or purity.
(ii) The facilities and controls used for
the distribution of the prescription drug,
including receipt, storage, and handling,
are inadequate to preserve its safety,
identity, strength, quality, or purity.
(iii) The methods or procedures to be
used in the distribution of the
prescription drug, including receipt,
storage, and handling, do not comply
with the requirements for good storage
practices in § 205.26.
(iv) The personnel employed by the
applicant do not meet the requirements
necessary for good storage practices in
§ 205.25.
(v) There is insufficient information
in the written policies and procedures
required under § 205.26(c) to determine
whether the methods or procedures to
be used in the distribution of the
prescription drug, including receipt,
storage, and handling, comply with the
requirements for good storage practices
in § 205.26 and preserve the safety,
identity, strength, quality, or purity of
the prescription drug.
(vi) The methods or procedures to be
used in the distribution of the
prescription drug, including receipt,
storage, and handling, do not comply
with the requirements for adequate
recordkeeping in § 205.27.
(vii) The application contains an
untrue statement of material fact.
(viii) The applicant does not permit a
properly authorized officer or employee
of the Food and Drug Administration, a
State licensing authority, or an AO
approved by the Food and Drug
Administration pursuant to § 205.32 an
adequate opportunity to inspect the
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facilities, controls, and any records
relevant to the application.
(ix) For renewal applications, the
applicant fails to report to the licensing
authority any pertinent change of
information required in § 205.21,
§ 205.22, or § 205.24.
(x) For renewal applications, the
applicant fails to report to the Food and
Drug Administration any of the
requirements for annual reporting in
§ 205.29.
(2) If review of a wholesale
distributor’s application fails to
demonstrate that the wholesale
distributor meets the requirements for
licensure set forth in § 205.22 and
paragraph (a)(1) of this section, the
licensing authority will provide written
notice to the applicant that its license
application may be denied, setting forth
the grounds for the denial and providing
an opportunity to demonstrate that the
wholesale distributor meets the
requirements for licensure.
(3) The notice will inform the
applicant of its right to provide
additional information and request
reconsideration of the denial by the
licensing authority within 14 calendar
days of the date of the licensing
authority’s written notice.
(4) If no reconsideration is sought, or,
if upon reconsideration, the licensing
authority denies the applicant’s request
for licensure, the licensing authority
will provide the applicant written
notice of the denial and will provide the
applicant notice of the opportunity to
request a hearing.
(5) The applicant who wishes to
request a hearing has 10 calendar days
after the date of the notice of denial to
submit a written notice of participation
and request for a hearing. The applicant
who fails to submit a written notice of
participation and request for a hearing
within 10 calendar days waives the
opportunity for a hearing.
(6) Parts 10 through 16 of this chapter
apply to wholesale distributor licenses
issued by the Food and Drug
Administration under sections 503(e)
and 583 of the Federal Food, Drug, and
Cosmetic Act.
(b) Suspension of license after notice
and opportunity to request a hearing. (1)
The licensing authority may move to
suspend a license if the licensing
authority has a reasonable belief that the
licensee has failed to comply with any
of the standards for receiving and
maintaining licensure described in this
subpart and that the nature of the
noncompliance at issue would likely
compromise the quality of product or
threaten public safety.
(2) The licensing authority will
provide written notice of the intent to
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suspend a wholesale distributor license
setting forth the grounds for the
suspension pursuant to this part,
including what information would be
required to demonstrate or achieve
compliance. The notice will inform the
applicant of its right to provide
additional information, request
reconsideration of the suspension by the
licensing authority, and demonstrate or
achieve compliance before suspension.
(3) Each wholesale distributor license
holder has 30 calendar days from the
date of the notice of intent to suspend
to present, in writing, comments and
information bearing on the initial
decision.
(4) If no comments or information is
received within 30 calendar days or, if
upon reconsideration, the licensing
authority believes the wholesale
distributor license should still be
suspended, the licensing authority will
provide the wholesale distributor a
second written notice of the intent to
suspend, informing the wholesale
distributor of the opportunity to request
a hearing on the question of whether
there are grounds for suspension.
(5) The wholesale distributor must
submit a written notice of participation
and request a hearing in writing within
10 calendar days after the date of the
notice of the intent to suspend. A
wholesale distributor that fails to submit
a written notice of participation and
request for hearing within 10 calendar
days waives the opportunity for a
hearing.
(6) Parts 10 through 16 of this chapter
apply to wholesale distributor licenses
issued by the Food and Drug
Administration under sections 503(e)
and 583 of the Federal Food, Drug, and
Cosmetic Act.
(7) If a wholesale distributor’s license
is suspended and the wholesale
distributor does not demonstrate or
achieve compliance to the licensing
authority’s satisfaction within the time
period indicated in the notice of
suspension, the licensing authority will
move to revoke the wholesale
distributor’s license.
(c) Immediate suspension of license.
(1) The licensing authority may suspend
a license effective immediately if the
licensing authority reasonably believes
that the licensee has failed to comply
with any of the standards for receiving
and maintaining licensure described in
this subpart and that the nature of the
noncompliance at issue would
reasonably be expected to cause an
imminent threat to public health.
(2) The licensing authority will
provide the wholesale distributor with
written notice of immediate suspension
of its license setting forth the grounds
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for the suspension pursuant to this part,
including what information would be
required to demonstrate compliance,
and the opportunity to request a hearing
within 10 calendar days of the
wholesale distributor’s request for such
hearing.
(3) The wholesale distributor must
submit a written notice of participation
and request a hearing in writing within
10 calendar days after the date of the
written notice of immediate suspension.
A wholesale distributor that fails to
submit a written notice of participation
and request for hearing within 10
calendar days from the date of the
written notice waives the opportunity
for a hearing.
(4) Parts 10 through 16 of this chapter
apply to wholesale distributor licenses
issued by the Food and Drug
Administration under sections 503(e)
and 583 of the Federal Food, Drug, and
Cosmetic Act.
(5) If a wholesale distributor’s license
is suspended and the wholesale
distributor does not demonstrate or
achieve compliance to the licensing
authority’s satisfaction within the time
period indicated in the notice of
suspension, the licensing authority will
move to revoke the wholesale
distributor’s license.
(d) Reinstatement of suspended
licenses. The licensing authority may
reinstate a previously suspended license
upon a wholesale distributor’s showing
of compliance with requirements in this
part and upon such inspection and
examination as the licensing authority
may require.
(e) Revocation. (1) If compliance is
not demonstrated or achieved to the
licensing authority’s satisfaction within
the time period indicated in the notice
of suspension, the licensing authority
will move to revoke the wholesale
distributor’s license.
(2) The licensing authority will notify
the wholesale distributor of the intent to
revoke the wholesale distributor’s
license, setting forth the grounds for the
revocation and offering an opportunity
to request a hearing on the proposed
revocation.
(3) The wholesale distributor must
submit a written notice of participation
and request a hearing within 10
calendar days after the date of the notice
of revocation. A wholesale distributor
that fails to submit a written notice of
participation and request for hearing
within 10 calendar days waives the
opportunity for a hearing.
(4) Parts 10 through 16 of this chapter
apply to wholesale distributor licenses
issued by the Food and Drug
Administration under sections 503(e)
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and 583 of the Federal Food, Drug, and
Cosmetic Act.
(f) Nonrenewal. If a license renewal
application is not submitted by the date
of expiration of the license, the license
will be considered expired. A wholesale
distributor may not engage in wholesale
distribution with an expired license and
must submit a new application for
licensure.
(g) Voluntary termination of licensure
upon request by the wholesale
distributor. The licensing authority will
terminate a wholesale distributor’s
license upon the wholesale distributor’s
request, which will include a notice of
intent to discontinue prescription drug
wholesale distribution and waive
opportunity for a hearing. A wholesale
distributor that voluntarily terminates
licensure must obtain a new license
before resuming wholesale distribution.
(1) If a wholesale distributor that has
had its license revoked wishes to apply
for a new license, the wholesale
distributor must submit a new license
application, which may include an
inspection if required by the licensing
authority under § 205.28(a).
(2) [Reserved]
Subpart D—Approved Organizations
for Wholesale Distributors
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§ 205.31 Use of approved third-party
organizations.
(a) A third-party organization that has
been approved by the Food and Drug
Administration pursuant to § 205.32
(‘‘approved organization’’ (AO)) may be
used to conduct initial and routine
inspections of the wholesale
distributor’s facility, as directed by the
Food and Drug Administration.
(b) If an organization has been
approved by the Food and Drug
Administration to conduct inspections,
the AO must:
(1) Complete inspections within a
timeframe not to exceed 90 calendar
days after receiving notice from the
Food and Drug Administration to
conduct an inspection;
(2) Based on the inspection, write a
detailed document including a summary
of the AO’s findings; and
(3) Send the original document to the
Food and Drug Administration, with a
copy to the wholesale distributor,
within 7 calendar days of completing
the inspection.
(c) To become an AO, and to maintain
its approval, an organization seeking the
Food and Drug Administration’s
approval and current AOs must:
(1) Maintain records, including those
that support the AO’s initial and
continuing qualifications for approval,
for a minimum of 5 years.
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(2) Maintain the following records of
inspections submitted to the licensing
authority for a minimum of 5 years:
(i) Copies of the records and
supporting documentation reviewed as
part of an inspection;
(ii) Inspection reports;
(iii) Correspondence with the Food
and Drug Administration and the
wholesale distributor associated with an
inspection; and
(iv) Information on the identity,
conflict of interest certification/
compliance statement, and
qualifications of all AO personnel who
contributed to the inspection.
(3) Records maintained by the AO
must:
(i) Be readily retrievable and made
available to Federal licensing authorities
upon request;
(ii) Be secure from unauthorized
access or modifications; and
(iii) Contain only alterations signed
and dated by the individual who made
the alteration. Such alteration must
preserve the original information and
document the reason for the alteration.
(4) An AO must immediately report to
the Food and Drug Administration the
discovery of any evidence or
observations of potential violations
found at a wholesale distributor facility
during an inspection of the facility that
could pose imminent and serious
adverse health consequences or death to
humans. Reports must be made in the
manner prescribed by the Food and
Drug Administration.
§ 205.32 General qualifications of
approved organizations.
(a) To become and remain an AO, the
organization and anyone employed by
the organization, including contractors
used by the organization:
(1) Must not be a current Federal or
State government employee;
(2) Must not engage in prescription
drug-related activities, excluding
participation in the Agency’s AO
program and related activities, but
including and not limited to
manufacturing, wholesale distribution,
repackaging, relabeling, dispensing, or
3PL activities;
(3) Must disclose to the Food and
Drug Administration any participation
or financial interest in entities that
participate in the design, manufacture,
promotion, or sale of articles or
activities that are predominantly Food
and Drug Administration-regulated or
are expected to result in Food and Drug
Administration-regulated articles;
(4) Must not be owned or controlled
by, or have any organizational, material,
or financial affiliation with, any of the
entities engaged in manufacturing,
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wholesale distribution, repackaging,
relabeling, dispensing, 3PL activities, or
the design, manufacture, promotion, or
sale of prescription drugs as defined in
section 581(12) of the Federal Food,
Drug, and Cosmetic Act;
(5) Must enter and abide by a written
agreement with the applicant before
data and information otherwise exempt
from public disclosure may be disclosed
to the AO or the contractor;
(6) Must operate in accordance with
professional and ethical business
practices, which include:
(i) Protecting against conflicts of
interest as set forth in 5 CFR part 2635
and 18 U.S.C. 208;
(ii) Ensuring that the personnel
employed or contracted by the AO who
are working on inspections have
sufficient education, training,
knowledge, and experience to conduct
inspections of wholesale distributors;
(iii) Protecting against unauthorized
disclosure of nonpublic information
received, records, reports, and
recommendations and maintaining
appropriate security and protection of
such information;
(iv) Maintaining appropriate security
and protection, physical and electronic,
of any information received in relation
to inspections;
(v) Reporting information to the Food
and Drug Administration and entities
for which licensure reviews were
conducted that accurately reflects data
reviewed, inspectional observations
made, and other matters that relate to or
may influence compliance with the
Federal Food, Drug, and Cosmetic Act;
and
(vi) Promptly responding to and
attempting to resolve any complaints
regarding activities for which it is
approved by the Food and Drug
Administration; and
(7) Must establish and maintain
policies, procedures, and
documentation to demonstrate that, at
the time of application, and throughout
their tenure as an AO, the applicant has
and can continue to satisfy the
requirements to qualify as an AO
capable of assessing compliance with all
wholesale distributor requirements.
Such policies, procedures, and
documentation must include, but are
not limited to:
(i) AO program administration;
(ii) Disciplinary actions and corrective
measures;
(iii) Recordkeeping and
confidentiality;
(iv) Use of contractors; and
(v) Personnel qualifications and
ongoing training.
(b) If an AO elects to use contractors
for inspections, the AO remains
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responsible for the work of the
contractors at all times.
(1) AOs that use contractors to
conduct inspections must have policies
and procedures in place to ensure the
contractor’s continuing compliance with
this part, as well as competence and
qualifications to conduct inspections.
Such policies and procedures must
ensure that contractors:
(i) Meet the qualifications set forth in
paragraph (a) of this section;
(ii) Do not subcontract their
inspection duties, and that contractors
are removed if such requirement is
violated;
(iii) Abide by the policies and
procedures of the AO, as set forth in
§ 205.33(b); and
(iv) Complete and pass the same
training required by the AO, as set forth
in § 205.33(c).
(2) If an AO elects to use contractors
to conduct inspections, the AO must
receive and keep a record of written
consent from the wholesale distributor
to share confidential commercial
information with contractors for which
an inspection is being conducted.
(3) AOs that elect to use contractors
must submit to the Food and Drug
Administration a list of contractors used
by the organization, accompanied by a
statement from the organization
certifying that such contractors meet the
requirements of this subpart.
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§ 205.33 Process and procedures for
approval by the Food and Drug
Administration.
(a) Application. An application to
become an AO must be completed and
submitted electronically to the Food and
Drug Administration in a format the
Food and Drug Administration can
renew, process, and archive.
(b) Required application information.
Policies, procedures, and
documentation as required by
§ 205.32(a)(7) must accompany the
application.
(c) Training. Organizations must
provide training and any individual
who conducts inspections or supervises
individuals who conduct inspections is
required to undergo and pass the
prescribed training.
(1) If an individual does not pass
training, that person must wait 30 days
before retaking the training, and may be
required to show proof of additional
education or experiential learning to
demonstrate competence before retaking
the training evaluation.
(2) To maintain approval, individuals
employed by the AO and conducting
inspections or supervising those who
conduct inspections must undergo and
pass annual training as prescribed by
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20:32 Feb 03, 2022
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the Food and Drug Administration.
Failure to complete and pass annual
training may result in suspension of
approval.
(3) The Food and Drug
Administration may require additional
training. If such additional training is
required, AOs will be given a set time
period during which training must be
completed and passed to maintain
approval.
(d) Auditing. Prior to conducting its
first inspection, an AO must undergo an
onsite audit by the Food and Drug
Administration. The Food and Drug
Administration may also conduct
random, periodic audits, as well as forcause audits, of an AO, as set forth in
paragraph (o) of this section.
(e) Duration of approval and renewal
process. (1) The Food and Drug
Administration approval to conduct
inspections is valid for a period of 5
years.
(2) AOs must submit a renewal
application to the Food and Drug
Administration no later than 6 months
prior to the expiration date to renew its
approval.
(i) If a renewal application is
submitted less than 6 months before the
date of expiration, the AO’s approval
will expire if approval is not renewed
prior to the date of expiration.
(ii) Upon expiration of the AO’s
approval, the AO must cease conducting
any inspection-related activities.
(f) Denial of approval. If an
organization does not meet all of the
Food and Drug Administration’s
standards detailed in §§ 205.31 and
205.32 for becoming an AO, the Food
and Drug Administration will deny the
application in writing. Requests for
review and reconsideration of a denial
of an application must be submitted to
the Food and Drug Administration
within 30 calendar days of the date of
the Food and Drug Administration’s
decision. If, upon reconsideration, the
licensing authority denies the
applicant’s request for approval, the
licensing authority will provide the
applicant written notice of the denial
and an opportunity to appeal pursuant
to § 10.75 of this chapter.
(g) Suspension of approval after
notice and opportunity to request a
hearing. (1) The Food and Drug
Administration may suspend approval
of an organization after opportunity to
request a hearing when there is a
reasonable probability that the
organization’s noncompliance will
negatively impact public health.
(2) If an AO fails to maintain the Food
and Drug Administration’s standards
pursuant to §§ 205.31 and 205.32, the
Food and Drug Administration will give
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Frm 00050
Fmt 4701
Sfmt 4702
written notice of the intent to suspend
the organization’s approval, including
the grounds for the suspension, and the
AO will have 30 days after the date of
the notice to provide additional
information to the Food and Drug
Administration for reconsideration.
(3) If no additional information is
provided or, if upon reconsideration,
the Food and Drug Administration still
believes the AO’s approval should be
suspended, the Food and Drug
Administration will issue the AO a
formal written notice of intent to
suspend, along with notice of the
opportunity to request a hearing
pursuant to part 16 of this chapter.
(4) An AO that wishes to request a
hearing has 10 calendar days after the
date of the formal notice of intent to
suspend to submit a written notice of
participation and request for a hearing.
An AO that fails to submit a written
notice of participation and request for a
hearing within 10 calendar days from
the date of the notice waives the
opportunity for a hearing.
(5) A suspended AO must notify any
wholesale distributors with a pending
inspection to be performed by the AO of
the AO’s suspension within 7 calendar
days.
(h) Immediate suspension of
approval. (1) When there is a reasonable
probability that the organization’s
noncompliance will cause imminent
and serious adverse health
consequences or death to humans, the
Food and Drug Administration will
suspend an AO’s approval effective
immediately.
(2) In such a situation, the Food and
Drug Administration will provide the
AO a written notice of immediate
suspension, along with notice and
opportunity to request a hearing
pursuant to part 16 of this chapter
within 14 calendar days of the AO’s
request for such hearing.
(3) An AO that wishes to request a
hearing has 10 calendar days after the
date of the formal notice of suspension
to submit a written notice of
participation and request for a hearing.
An AO that fails to submit a written
notice of participation and request for a
hearing within 10 calendar days waives
the opportunity for a hearing.
(i) Reinstatement of approval. (1) An
organization’s approval may be
reinstated if the Food and Drug
Administration determines that the
suspended organization has rectified the
issues leading to the suspension and can
meet the standards set forth in this
subpart. Pursuant to this paragraph (i),
the organization must rectify the issues
and come into compliance with the
Food and Drug Administration’s
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standards within 1 year from the date of
suspension. If the issues have not been
rectified within 1 year, the Food and
Drug Administration may revoke the
AO’s approval subject to the provisions
of this part.
(2) An organization whose approval
has been reinstated on a conditional
basis will be subject to a 3-year
probationary period, and if any material
deficiencies arise during that period, the
organization’s approval may be revoked.
(j) Revocation of approval. (1) The
Food and Drug Administration may
revoke approval of an organization
whose approval has been suspended
pursuant to paragraphs (g) and (h) of
this section:
(i) If an organization fails to
demonstrate intent to comply with the
issues leading to the suspension within
6 months from the date of suspension;
or
(ii) If the Food and Drug
Administration determines that the
organization failed to rectify the issues
leading to the suspension to the
Agency’s satisfaction within 1 year of
the date of suspension.
(2) The Food and Drug
Administration will give written notice
of the intent to revoke the organization’s
approval, including the grounds for the
revocation, and an opportunity to
request a hearing pursuant to part 16 of
this chapter.
(3) The AO must submit a written
notice of participation and request a
hearing within 10 calendar days after
the date of the notice of revocation. An
AO that fails to submit a written notice
of participation and request for hearing
within 10 calendar days waives the
opportunity for a hearing.
(4) An organization whose approval is
revoked that wishes to reapply to be an
AO must submit a new application to
the Food and Drug Administration.
(k) Requests for reconsideration of
Agency decision. (1) The Food and Drug
Administration will follow the process
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20:32 Feb 03, 2022
Jkt 256001
outlined at § 10.75 of this chapter to
review matters relating to denial of
approval, including review of the
organization’s application.
(2) The Food and Drug
Administration will follow the process
outlined at part 16 of this chapter to
review matters relating to a suspension
or revocation action, including review
of the organization’s application and
administrative file.
(3) The Food and Drug
Administration’s decision after request
for reconsideration of denial,
suspension, or revocation constitutes a
final Agency action under 5 U.S.C. 702.
(l) Voluntary withdrawal of approval.
(1) An organization wishing to
voluntarily withdraw its approval,
including but not limited to when an
AO goes out of business, must notify the
Food and Drug Administration in
writing at least 6 months prior to the
date the organization intends for the
withdrawal to become effective.
(i) If an AO determines it will be
withdrawing its approval with the Food
and Drug Administration in less than 6
months, it must notify the Food and
Drug Administration immediately of its
intent to withdraw, and such
notification must inform the Food and
Drug Administration of the date the
organization will cease business
operations.
(ii) [Reserved]
(2) No later than 7 calendar days after
notifying the Food and Drug
Administration, the organization must
notify any facilities with pending
inspections that it intends to withdraw
its approval with the Food and Drug
Administration and must provide the
date on which the withdrawal is
effective.
(m) AO-required notifications to
wholesale distributors. The AO must,
within 7 calendar days of the date of
suspension, revocation, or voluntary
withdrawal of approval, notify those
wholesale distributor facilities that have
PO 00000
Frm 00051
Fmt 4701
Sfmt 9990
6757
pending inspections of the AO’s
suspension or revocation. This
notification must inform the wholesale
distributor facility that it must apply for
inspection with another AO, or the Food
and Drug Administration if no other
organization is approved.
(n) Change of operation or ownership.
(1) The AO must report to the Food and
Drug Administration within 30 calendar
days any changes to the information
submitted with its application for
approval.
(2) Approval is not transferable.
(i) Changes in ownership of an AO
require the organization to submit a new
application to the Food and Drug
Administration.
(ii) Such application must be
submitted to the Food and Drug
Administration no later than 30
calendar days prior to the date of the
change of ownership.
(iii) No later than 30 calendar days
before the date of the change of
ownership, the AO must notify any
wholesale distributor facilities with
pending applications of the pending
change in ownership.
(iv) On the date the change of
ownership takes place, the original
approval is void.
(o) Monitoring by the Food and Drug
Administration. (1) AOs are subject to
both periodic and for-cause audits by
the Food and Drug Administration to
ensure compliance with the Food and
Drug Administration’s requirements for
approval in this part.
(2) If an AO refuses to cooperate with
the Food and Drug Administration’s
audit, the organization’s approval may
be suspended.
Dated: January 24, 2022.
Janet Woodcock,
Acting Commissioner of Food and Drugs.
[FR Doc. 2022–01929 Filed 2–3–22; 8:45 am]
BILLING CODE 4164–01–P
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Agencies
[Federal Register Volume 87, Number 24 (Friday, February 4, 2022)]
[Proposed Rules]
[Pages 6708-6757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01929]
[[Page 6707]]
Vol. 87
Friday,
No. 24
February 4, 2022
Part III
Department of Health and Human Services
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Food and Drug Administration
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21 CFR Parts 10, 12, 16, et al.
National Standards for the Licensure of Wholesale Drug Distributors and
Third-Party Logistics Providers; Proposed Rule
Federal Register / Vol. 87 , No. 24 / Friday, February 4, 2022 /
Proposed Rules
[[Page 6708]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
21 CFR Parts 10, 12, 16, and 205
[Docket No. FDA-2020-N-1663]
RIN 0910-AH11
National Standards for the Licensure of Wholesale Drug
Distributors and Third-Party Logistics Providers
AGENCY: Food and Drug Administration, Department of Health and Human
Services (HHS).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Food and Drug Administration (FDA, the Agency, or we) is
proposing national standards for the licensing of prescription drug
wholesale distributors (``wholesale distributors'' or ``wholesale drug
distributors'') and third-party logistics providers (``3PLs''), as
directed under the Drug Supply Chain Security Act (DSCSA) (Title II of
the Drug Quality and Security Act). Pursuant to the Federal Food, Drug,
and Cosmetic Act (FD&C Act), as amended by the DSCSA, the proposed rule
would establish standards for all State and Federal licenses issued.
DATES: Submit either electronic or written comments on the proposed
rule by June 6, 2022. Submit comments on information collection issues
under the Paperwork Reduction Act of 1995 by March 7, 2022.
ADDRESSES: You may submit comments as follows. Please note that late,
untimely filed comments will not be considered. The https://www.regulations.gov electronic filing system will accept comments until
11:59 p.m. Eastern Time on June 6, 2022. Electronic comments must be
submitted on or before that date. Comments received by mail/hand
delivery/courier (for written/paper submissions) will be considered
timely if they are postmarked or the delivery service acceptance
receipt is on or before that date.
Electronic Submissions
Submit electronic comments in the following way:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. Comments submitted
electronically, including attachments, to https://www.regulations.gov
will be posted to the docket unchanged. Because your comment will be
made public, you are solely responsible for ensuring that your comment
does not include any confidential information that you or a third party
may not wish to be posted, such as medical information, your or anyone
else's Social Security number, or confidential business information,
such as a manufacturing process. Please note that if you include your
name, contact information, or other information that identifies you in
the body of your comments, that information will be posted on https://www.regulations.gov.
If you want to submit a comment with confidential
information that you do not wish to be made available to the public,
submit the comment as a written/paper submission and in the manner
detailed (see ``Written/Paper Submissions'' and ``Instructions'').
Written/Paper Submissions
Submit written/paper submissions in the following ways:
Mail/Hand Delivery/Courier (for written/paper
submissions): Dockets Management Staff (HFA-305), Food and Drug
Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
For written/paper comments submitted to the Dockets
Management Staff, FDA will post your comment, as well as any
attachments, except for information submitted, marked and identified,
as confidential, if submitted as detailed in ``Instructions.''
Instructions: All submissions received must include the Docket No.
FDA-2020-N-1663 for ``National Standards for the Licensure of Wholesale
Drug Distributors and Third-Party Logistics Providers.'' Received
comments, those filed in a timely manner (see ADDRESSES), will be
placed in the docket and, except for those submitted as ``Confidential
Submissions,'' publicly viewable at https://www.regulations.gov or at
the Dockets Management Staff between 9 a.m. and 4 p.m., Monday through
Friday, 240-402-7500.
Confidential Submissions--To submit a comment with
confidential information that you do not wish to be made publicly
available, submit your comments only as a written/paper submission. You
should submit two copies total. One copy will include the information
you claim to be confidential with a heading or cover note that states
``THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.'' The Agency will
review this copy, including the claimed confidential information, in
its consideration of comments. The second copy, which will have the
claimed confidential information redacted/blacked out, will be
available for public viewing and posted on https://www.regulations.gov.
Submit both copies to the Dockets Management Staff. If you do not wish
your name and contact information to be made publicly available, you
can provide this information on the cover sheet and not in the body of
your comments and you must identify this information as
``confidential.'' Any information marked as ``confidential'' will not
be disclosed except in accordance with 21 CFR 10.20 and other
applicable disclosure law. For more information about FDA's posting of
comments to public dockets, see 80 FR 56469, September 18, 2015, or
access the information at: https://www.govinfo.gov/content/pkg/FR-2015-09-18/pdf/2015-23389.pdf.
Docket: For access to the docket to read background documents or
the electronic and written/paper comments received, go to https://www.regulations.gov and insert the docket number, found in brackets in
the heading of this document, into the ``Search'' box and follow the
prompts and/or go to the Dockets Management Staff, 5630 Fishers Lane,
Rm. 1061, Rockville, MD 20852, 240-402-7500.
Submit comments on information collection issues under the
Paperwork Reduction Act of 1995 to the Office of Management and Budget
(OMB) at https://www.reginfo.gov/public/do/PRAMain. Find this
particular information collection by selecting ``Currently under
Review--Open for Public Comments'' or by using the search function. The
title of this proposed collection is ``National Standards for the
Licensure of Wholesale Drug Distributors and Third-Party Logistics
Providers.''
FOR FURTHER INFORMATION CONTACT: Aaron Weisbuch, Center for Drug
Evaluation and Research, Food and Drug Administration, 10903 New
Hampshire Ave., Bldg. 51, Rm. 4261, Silver Spring, MD 20993, 301-796-
3130. With regard to the information collection: Domini Bean, Office of
Operations, Food and Drug Administration, Three White Flint North, 10A-
12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-5733,
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
A. Purpose of the Proposed Rule
B. Summary of the Major Provisions of the Proposed Rule
C. Legal Authority
D. Costs and Benefits
II. Table of Abbreviations/Commonly Used Acronyms in This Document
III. Background
A. Introduction
B. Need for the Regulation: The DSCSA and Establishment of
National Standards for Licensure
[[Page 6709]]
C. Changes From the Prescription Drug Marketing Act (PDMA)
IV. Legal Authority
V. Description of the Proposed Rule
A. Scope/Applicability (Proposed Sec. Sec. 205.1 and 205.2)
B. Definitions (Proposed Sec. 205.3)
C. National Standards for Third-Party Logistics Providers
D. Approved Organizations for Third-Party Logistics Providers
E. National Standards for Wholesale Distributors
F. Approved Organizations for Wholesale Distributors
VI. Proposed Effective/Compliance Dates
VII. Preliminary Economic Analysis of Impacts
VIII. Analysis of Environmental Impact
IX. Paperwork Reduction Act of 1995
X. Federalism
A. Scope of Preemption
B. Effective Date of Preemption
XI. Consultation and Coordination With Indian Tribal Governments
XII. References
I. Executive Summary
A. Purpose of the Proposed Rule
The Drug Quality and Security Act (DQSA) was enacted on November
27, 2013. Title II of the DQSA, the Drug Supply Chain Security Act
(DSCSA), includes provisions designed to strengthen the integrity of
the pharmaceutical distribution supply chain. Among other measures,
section 204 of the DSCSA amends section 503(e) of the FD&C Act (21
U.S.C. 353(e)), which requires licensure of prescription drug wholesale
distributors (wholesale distributors or wholesale drug distributors or
WDDs) and adds section 583 to the FD&C Act (21 U.S.C. 360eee-2), which
requires FDA to establish by regulation national standards for the
licensure of prescription drug wholesale distributors. Section 205 of
the DSCSA adds section 584 to the FD&C Act (21 U.S.C. 360eee-3), which
requires licensure of third-party logistics providers and requires FDA
to establish, by regulation, national standards for the licensure of
third-party logistics providers.
This proposed regulation, when finalized, will establish the
national standards for the licensure of wholesale drug distributors and
3PLs required under sections 583 and 584 of the FD&C Act, as amended by
the DSCSA. As required by statute, the standards, terms and conditions
for licensure established by this regulation will apply to both Federal
and State licenses (503(e)(1)(B), 583(b), and 584(a)(1)(A) of the FD&C
Act).
As discussed in section X (Federalism), section 585(b)(1) of the
FD&C Act (21 U.S.C. 360eee-4(b)(1)) preempts States and localities from
establishing or continuing requirements for 3PL or WDD licensure that
are different from the national standards and requirements applicable
under sections 584 and 503(e) of the FD&C Act. However, the statutory
provisions themselves do not establish these ``standards and
requirements''; instead, this regulation, once effective, will
establish them. Accordingly, State and local licensure requirements
will be preempted only once this regulation, when finalized, takes
effect; until such time, current licensing of WDDs and 3PLs may
continue. As discussed below, this determination will help avoid supply
chain disruption, based on licensing uncertainties, during the period
between DSCSA's enactment and the effective date of this regulation.
Avoiding such interim period supply chain issues accords with
Congress's overall intent to secure and strengthen the supply chain, as
evidenced by other FD&C Act provisions added by DSCSA that recognize
State licensure of WDDs and 3PLs prior to this regulation becoming
effective.
In addition, pursuant to section 585(c) of the FD&C Act (21 U.S.C.
360eee-4(c)), regulation of areas within the historical police powers
of the States would be unaffected by this regulation, including
prohibiting employees of WDDs and 3PLs from engaging in criminal
activity related to prescription drugs, provided that the State
requirements involved are not related to licensure of 3PLs or WDDs.
The requirements for state licensing of wholesale distributors are
currently established under 21 CFR part 205, and FDA is now proposing
the withdrawal of that regulation and for part 205 to be replaced with
this proposed rule. Where a state from which a drug is being
distributed has not established a licensing program in accordance with
the regulation, the DSCSA establishes FDA as the licensing authority
for wholesale distributor and 3PL licenses (sections
503(e)(1)(A)(i)(II) and 584(a)(1)(B) of the FD&C Act). When finalized,
the national standards set forth in the proposed rule will provide
greater assurance that these supply chain participants are sufficiently
vetted and qualified to distribute products, further strengthening the
supply chain and the safety of prescription drugs provided to American
consumers.
When finalized, this proposed rule will also set forth the
standards applicable to, and the requirements for approval of, third-
party organizations involved in the licensure and inspection process
(``approved organizations'' or ``AOs''). Sections 583(c) and
584(d)(2)(A) of the FD&C Act provide, respectively, that FDA may
approve ``third-party accreditation'' or inspection services or
programs to conduct inspections of facilities used by wholesale
distributors seeking licensure and to review the qualifications of 3PLs
for licensure. This proposed rule will also address the standards and
requirements for approving such third-party accreditation or inspection
services or programs.
Overall, this proposed rule is designed to ensure that the supply
chain remains secure and that those prescription drugs subject to the
DSCSA that are moving through the supply chain are properly stored,
handled, and transported. These measures are intended to help protect
American consumers from drugs that may be counterfeit, stolen,
contaminated, or otherwise harmful.
For purposes of this proposed rule, FDA has defined ``entity'' or
``entities'' to mean a business organization, such as a corporation,
company, association, firm, partnership, society, or joint stock
company. Unless otherwise noted, the term ``3PL'' or ``third-party
logistics provider'' in this proposed rule includes both the 3PL entity
and the individual 3PL facilities requiring a license.
B. Summary of the Major Provisions of the Proposed Rule
FDA is proposing to replace the current part 205 with a new part
205 that will implement the licensure requirements of the DSCSA and
govern licensure of 3PLs and wholesale distributors. When finalized,
the new part 205 will replace the existing part 205 in its entirety.
Subpart A will set forth the national licensing standards for State and
Federal licenses issued to 3PLs pursuant to section 584 of the FD&C
Act, and subpart C will set forth the national licensing standards for
State and Federal licenses issued to wholesale distributors pursuant to
sections 503(e) (as amended) and 583 of the FD&C Act. Subparts B and D
will set forth the applicable standards and processes for approved
organizations to perform licensure reviews and conduct inspections.
1. National Standards for the Licensure of Third-Party Logistics
Providers
The DSCSA identifies 3PLs as separate members of the drug supply
chain--distinct from wholesale drug distributors--and specifically
precludes States from regulating 3PLs as wholesale distributors
(585(b)(2) of the FD&C Act). FDA is required by section 584 of the FD&C
Act to establish national standards for the licensure of 3PLs, and
[[Page 6710]]
the Agency is proposing those standards in subpart A of proposed part
205. When finalized, each facility of an entity meeting the definition
of a 3PL in section 581(22) of the FD&C Act (21 U.S.C. 360eee(22)) will
be required to be licensed by a State or Federal licensing authority in
accordance with the standards articulated in subpart A of proposed part
205.
2. National Standards for the Licensure of Wholesale Drug Distributors
Prior to DSCSA's enactment, wholesale distributors engaging in
interstate commerce were required to be licensed by the State in which
they were operating pursuant to section 503(e)(2) of the FD&C Act (as
then in effect). This section established minimum standards, terms, and
conditions for licensing of wholesale distributors pre-DSCSA. As
required by sections 503(e)(1)(B) (as amended by the DSCSA) and 583 of
the FD&C Act, FDA is proposing to establish national standards, terms,
and conditions through this rulemaking for the licensure of wholesale
distributors that, when final, will apply to all State licensing
programs as well as to the new Federal licensing program to be operated
by FDA. These new standards would replace the previous standards set
forth in current part 205.
3. Approval of Third Parties To Conduct Licensure Reviews and
Inspections
In accordance with section 584(d)(2)(A) of the FD&C Act, FDA is
proposing to establish a process by which third-party organizations
will be approved by FDA to review a 3PL's qualifications for licensure.
In addition, in accordance with section 583(c) of the FD&C Act, FDA is
proposing to establish a process by which third-party organizations
will be approved by FDA to conduct inspections of wholesale
distributors for the purpose of licensure.
4. Conforming Changes
The regulation also proposes to amend 21 CFR 10.50(c) and
12.21(a)(2), which list statutory authorities that provide the
opportunity for a formal evidentiary public hearing under 21 CFR part
12. Because the regulation proposes that wholesale distributors and
3PLs could request a formal evidentiary public hearing under part 12
for review of decisions affecting the denial, suspension, or revocation
of 3PL or wholesale distributor licenses issued by the Secretary of
Health and Human Services (Secretary), sections 503(e), 583, and 584 of
the FD&C Act would be added to the list of statutory sections under
which there is the opportunity for a hearing under Sec. Sec. 10.50(c)
and 12.21(a)(2), regarding such decisions. We are also proposing a
conforming change to 21 CFR 16.1(b) to describe procedures for
regulatory hearings that would add actions related to approved
organizations under proposed Sec. Sec. 205.19 and 205.33 respectively,
including revocation or suspension of approval, to the list of actions
for which a regulatory hearing under 21 CFR part 16 may be held.
C. Legal Authority
We are issuing this proposed rule under sections 301, 501, 502,
503(e), 582, 583, 584, 585, 701(a), and 704 of the FD&C Act (21 U.S.C.
331, 351, 352, 353(e), 360eee-1, 360eee-2, 360eee-3, 360eee-4, 371(a),
and 374).
D. Costs and Benefits
In this rulemaking, we propose new national standards for the
licensing of prescription drug wholesale distributors and third-party
logistics providers as directed under the Drug Supply Chain Security
Act, Title II of the Drug Quality and Security Act. If finalized, the
rule would also establish a Federal licensing system for wholesale drug
distributors and third-party logistics providers to use in the absence
of a state licensure program that is consistent with the proposed
national standards.
The standards for prescription drug wholesale distribution in the
proposed rule would result in benefits to consumers and benefits to
distributors from reducing the diversion of prescription drugs. Other
monetized benefits include cost savings from reducing the frequency and
quantity of licensure applications and cost savings from reducing state
licensing standards in some states. We estimate that the annualized
benefits over 10 years would range from $1.25 million to $31.50 million
at a 7 percent discount rate, with a primary estimate of $10.66
million. We estimate that the annualized benefits would range from
$1.26 million to $32.18 million at a 3 percent discount rate, with a
primary estimate of $10.89 million.
We also expect that the proposed rule, if finalized, would impose
costs on wholesale drug distributors, third-party logistics providers,
states, approved organizations, and the Food and Drug Administration
(FDA). Costs to wholesale drug distributors and third-party logistics
providers include costs of learning about the rule, reporting to FDA,
undergoing routine inspections, writing and revising standard operating
procedures, and conducting background checks. Wholesale-drug
distributors would also incur costs to furnish surety bonds to their
state licensing authority to obtain or renew their licenses.
Costs to states include the time spent reading and understanding
the rule, passing or revising the laws and regulations governing their
licensure programs, and inspecting WDD and 3PL facilities. Approved
organizations would incur legal, application, and training costs, as
well as costs to inspect WDD and 3PL facilities. FDA costs include the
costs to establish and operate a reporting database and a licensure
program for wholesale drug distributors and third-party logistics
providers and the costs to establish and operate an approval program
for approved organizations.
We estimate that the annualized costs over 10 years would range
from $13.21 million to $20.63 million at a 7 percent discount rate,
with a primary estimate of $16.92 million. We estimate that the
annualized costs over 10 years at a 3 percent discount rate would range
from $12.83 million to $20.10 million, with a primary estimate of
$16.47 million.
II. Table of Abbreviations/Commonly Used Acronyms in This Document
------------------------------------------------------------------------
Abbreviation/ acronym What it means
------------------------------------------------------------------------
3PL................................ Third-Party Logistics Provider.
AO................................. Approved Organization.
CFR................................ Code of Federal Regulations.
DSCSA.............................. Drug Supply Chain Security Act.
DQSA............................... Drug Quality and Security Act.
FDA or the Agency.................. U.S. Food and Drug Administration.
FD&C Act........................... Federal Food, Drug, and Cosmetic
Act.
------------------------------------------------------------------------
III. Background
A. Introduction
The DSCSA (Title II of Pub. L. 113-54) was signed into law on
November 27, 2013, to better protect the U.S. drug supply chain. FDA's
implementation of the DSCSA includes many activities, including this
proposed rule. Once final, this rule will establish national standards
for licensure of wholesale distributors and 3PLs, as required by the
DSCSA. For information on additional FDA activities related to the
DSCSA, a web page describing FDA's implementation activities can be
found at: https://www.fda.gov/Drugs/DrugSafety/DrugIntegrityandSupplyChainSecurity/DrugSupplyChainSecurityAct/default.htm.
B. Need for the Regulation: The DSCSA and Establishment of National
Standards for Licensure
The U.S. drug supply chain remains one of the safest in the world.
However, the increasingly globalized nature of the supply chain brings
with it complexities
[[Page 6711]]
that increase threats to the safety and security of the U.S. drug
supply. A breach at any point in the supply chain carries potential for
dangerous, and even deadly, outcomes for American consumers.
In passing the DSCSA, Congress recognized the need for national
standards for the storage, handling, and transport of prescription
drugs and directed FDA, in sections 583(a) and 584(d) of the FD&C Act,
to establish such standards by regulation for WDDs and 3PLs,
respectively. These national standards will help diminish opportunities
for dangerous and criminal conduct affecting the supply of prescription
drugs in the United States. When final, every U.S. wholesale
distributor and 3PL facility will be held to these standards through
the statute's licensure requirements. Where a State does not have a
licensing program in accordance with the regulation, FDA will be the
licensing authority.
This proposed rule, when finalized, will provide much needed
certainty and clarity for wholesale distributors and 3PLs seeking
licensure. In passing the DSCSA, Congress believed the existing system
of different regulation regarding supply chain security by each state
created a patchwork system of governance and that a uniform national
standard would address this concern. See statements of Senator Mikulski
(Ref 1), Congressmen Mathis (Ref 2) and Congressman Latta (Ref 3).
Requirements for wholesale distributors currently vary
significantly across State lines, and many wholesale distributors and
3PLs have facilities in multiple States. Specifically, State
requirements and standards for licensure can vary on topics such as the
length of time for which records must be maintained; qualifications of
facility managers and designated representatives; facility
requirements; licensure duration; renewal procedures; exemptions from
the definition of wholesale distribution; and inspection and approval
requirements by certain, specific organizations in order to receive
licensure in certain States. This proposed rule, when finalized will be
an important first step in harmonizing these requirements, thus
allowing for greater compliance and management of licensure.
Additionally, we note that commenters on FDA's draft guidance
entitled ``The Effect of Section 585 of the FD&C Act on Drug Product
Tracing and Wholesale Drug Distributor and Third-Party Logistics
Provider Licensing Standards and Requirements: Questions and Answers''
(Ref 4) agreed that creation of a uniform national standard for
licensure, through the issuance of these regulations, should be the
goal of FDA (see, e.g., Ref 5). Commenters noted that the patchwork of
licensing standards was precisely the regulatory burden that the DSCSA
was intended to eliminate. (see, e.g., Ref 6) Comments added that
tracking and complying with different standards in different States on
a continuing basis would be very time consuming and add unnecessary
costs to the distribution chain (see, e.g., Ref 7).
We believe that the issuance of these regulations, when finalized,
will provide far greater clarity to both States and regulated industry
as to the requirements and expectations FDA has with respect to
licensure. The publication of these regulations, when finalized, and
the approach to preemption discussed in this document will reflect the
national standard Congress intended, but will detail FDA's expectations
with respect to licensure. This will allow for greater certainty in the
logistics and distribution industry, and in the supply chain as a
whole.
Since the passage of DSCSA, States have implemented disparate
policies with respect to licensure of 3PLs. Some States repealed or
eliminated 3PL as a licensure category, others are waiting for FDA to
publish its regulations before determining how to proceed, some are
licensing 3PLs under some other form of licensure, and some do not
regulate 3PLs at all (Ref 8). These regulations, when finalized, will
provide certainty and clarity in the logistics industry.
The Agency believes finalizing these proposed regulations is
crucial to implementation of licensure of 3PLs as intended by DSCSA.
Under section 582(a)(7) of the FD&C Act (21 U.S.C. 360eee-1(a)(7)),
3PLs are deemed licensed until the effective date of these regulations
unless the Secretary has made a finding that the 3PL does not utilize
good handling and distribution practices and publishes notice thereof.
Until these regulations are issued, and the framework for licensure
established, the Agency cannot institute the provisions and the goals
of DSCSA--to further secure the supply chain by including 3PLs as an
authorized member of the supply chain through the licensure provisions,
which will ensure that they are appropriately credentialed, inspected,
and therefore duly qualified to participate in the supply chain.
Theft and diversion of prescription drugs continue to be major
issues, contributing to drug shortages and creating significant
financial losses, the effects of which cascade throughout the supply
chain to consumers. FDA has observed that these instances often involve
products distributed by unlicensed wholesale distributors. FDA
standards, oversight, and regulations, including to implement the
requirements of DSCSA, will lessen and hopefully eliminate product
diversion in the legitimate supply chain. According to the National
Association of Boards of Pharmacy (NABP)'s 2013 report entitled
``Wholesale Drug Distribution: Protecting the Integrity of the Nation's
Prescription Drug Supply,'' drug diverters and bad actors seek out gaps
in the distribution and regulatory structure, specifically seeking out
States whose licensure framework is less stringent (Ref. 9). This
proposed rule, when finalized, and the preemption of inconsistent State
provisions will remedy this forum shopping for drug diverters who seek
to take advantage of the lack of uniform framework.
Additionally, NABP's 2013 report also contends that the so-called
``five percent rule'' is a policy that has been ripe for exploitation
due to the policy being inconsistently legislated, interpreted, and
enforced from State to State. This was a policy under which FDA had
previously concluded that sales of prescription drugs by a retail
pharmacy to licensed practitioners for office use would be considered
to be minimal and not constitute wholesale distribution, if the total
dollar volume of these sales does not exceed 5 percent of the total
dollar volume of that retail pharmacy's annual prescription sales (see
further discussion in ``Definitions'' section below). However, this
interpretation was not codified. The NABP observed that ``pharmacies
acting as wholesalers have been found to take advantage of the
parameters set by some States [regarding minimal quantities] when it
comes to drug distribution. Rather than dispensing the drugs as
mandated, these pharmacies retain them to resell to wholesalers at an
amount exceeding the specified quantity of prescription medications as
permitted in certain States (often times 5% of annual sales). Some have
gone as far as to sell their entire inventory into the gray market''
This proposed rule, when finalized, codifies the principle that the
five percent rule only applies to pharmacy sales for office use. Sales
above five percent for office use, or any sales to a wholesale
distributor, require the pharmacy to become licensed and regulated as a
wholesale distributor. This proposed rule will clarify this requirement
and close a potential loophole that could lead to diversion of products
and excessive sales from dispensers who are not licensed and registered
as wholesale distributors
[[Page 6712]]
when they are engaging in wholesale distribution.
Unlicensed wholesale distribution has been a major source of
diverted products both leaving and reentering the supply chain.
Significant amounts of drug diversion involve wholesale distributors,
either diverting the product themselves from the supply chain, or
purchasing product that was diverted by another actor. The DSCSA, which
requires uniform national standards for licensure of wholesale
distributors, will cut down on these types of instances of diversion
since supply chain trading partners are required to transact with only
other trading partners who meet the strict requirements laid out in
these regulations. There are many examples of diversion and criminal
action by wholesale distributors under the current regulatory scheme,
which these regulations, when finalized, will discourage, or possibly
even prevent, in the future.
As an example, from 2007-2014, individuals involved with the
Minnesota Independent Cooperative bought prescription drugs from a
network of illegal and unlicensed sources and sold approximately $393
million worth of diverted prescription drugs to wholesalers and retail
pharmacies throughout the United States. These individuals falsified
transactional documents, as well as licensure documents, to enter into
fraudulent transactions with dispensers and other wholesalers. In a
2008 example detailed in the indictment, the unlicensed individuals
involved allegedly bought a truckload of stolen asthma inhalers for
$662,000 and sold them through the Minnesota Independent Collective to
another wholesaler for about $1 million (Ref 10). These regulations,
when finalized, and the DSCSA requirements that trading partners only
transact with authorized, licensed trading partners, and verify suspect
and illegitimate product, will make these schemes far more difficult to
achieve. Had DSCSA been the prevailing regulatory scheme at the time,
other wholesale distributors and dispensers would have been deterred
from doing business with the Minnesota Independent Collective because
they were not an authorized trading partner.
In 2014, two individuals pleaded guilty to their involvement in a
drug diversion and distribution scheme through an entity called
Cumberland Distribution. Both defendants admitted that Cumberland
Distribution purchased prescription drugs from individuals and entities
that were not licensed to engage in the wholesale distribution of
prescription drugs and were not authorized to distribute prescription
drugs. Cumberland Distribution then distributed these products to
dispensers. The prescription drugs were acquired through various
networks of ``diverters'' who obtained prescription drugs from other
unlawful sources. As a result, Cumberland Distribution could not
lawfully resell the drugs. Pharmacies throughout the United States
purchased these diverted prescription drugs from Cumberland
Distribution under the guise that the products had been in the custody
of licensed wholesale distributors or other authorized distributors
since being sold by the original manufacturer (Ref 11). Under DSCSA,
the licensure status of these purported wholesale distributors is
easily searchable and verifiable, thus making diversion schemes, such
as this, far more difficult to achieve. In addition to requiring FDA to
establish national licensure standards, the DSCSA outlines critical
steps for building an electronic, interoperable system to identify and
trace certain prescription drugs as they are distributed in the United
States (section 582(g) of the FD&C Act). This system will enhance FDA's
ability to protect American consumers from exposure to drugs that may
be unfit for distribution and will increase efficiency in the detection
and removal of potentially dangerous drugs from the U.S. drug supply
chain.
The FD&C Act, as amended by DSCSA, requires FDA to establish
national standards for the licensure of two critical members of the
supply chain: wholesale drug distributors and 3PLs. It also requires
that only those wholesale distributors and 3PL facilities licensed
according to these national standards may engage in wholesale
distribution or 3PL activities, respectively. Only licensed wholesale
drug distributors and 3PLs whose facilities are so licensed will be
considered ``authorized trading partners'' permitted under the FD&C
Act, as amended by DSCSA, to engage in transactions related to the sale
and distribution of certain prescription drugs with other members of
the supply chain.
To create the standards proposed in the regulations, FDA conducted
a comprehensive review of existing State standards for licensure
including storing, handling, and holding prescription drugs, as well as
other nationally recognized standards and model rules for wholesale
distribution and logistics, such as those created by the NABP (Ref 12),
Healthcare Distribution Alliance (Ref 13), World Health Organization
(Ref 14), and the Pharmaceutical Inspection Convention and
Pharmaceutical Inspection Co-operation Scheme (jointly referred to as
PIC/S) (Ref 15). The Agency believes that the proposed standards align
with existing practices and will help ensure that 3PL and wholesale
distribution activities are undertaken in a manner that minimizes
diversion and threats to the regulated supply chain.
C. Changes From the Prescription Drug Marketing Act (PDMA)
Prior to the DSCSA's enactment, the last comprehensive legislative
action related to prescription drug distribution was the Prescription
Drug Marketing Act of 1987 (PDMA) (Pub. L. 100-293). Among other
things, the PDMA required wholesale distributors to obtain licenses
from States in which they were operating (sec. 6 of the PDMA; also see
FDA's 2001 Report to Congress on the PDMA (Ref 16)). Under the PDMA,
FDA promulgated regulations that established minimum standards, terms,
and conditions for licensure of wholesale distributors. The PDMA
provided neither a specific definition of 3PL-type entities nor
specific oversight over them; without a distinct regulatory framework
for 3PLs, some States chose to regulate and license 3PLs as wholesale
distributors, with some others choosing to license 3PLs as separate
entities. The DSCSA requires that all wholesale distributor and 3PL
licenses meet the standards established by FDA (sections 503(e)(1)(B)
and 584(a) of the FD&C Act), and that 3PLs not be licensed as wholesale
distributors (section 585(b)(2) of the FD&C Act).
If an entity owns a facility in which it is engaging in 3PL
activities and wholesale distribution out of the same facility, the
entity will be required to hold a 3PL license and a separate wholesale
distributor license for the distinct functions they perform.
IV. Legal Authority
The Agency is proposing this rule under the authority to propose
national standards for the licensing of wholesale distributors and 3PLs
granted to it by various sections of the FD&C Act, including sections
301, 503(e), 582, 583, 584, 585, 701(a), and 704 (21 U.S.C. 331, 351,
352, 353(e), 360eee-1, 360eee-2, 360eee-3, 360eee-4, 371(a), and 374).
Section 503(e) requires wholesale distributors to be licensed
according to the standards, terms, and conditions established by the
Secretary, and section 583 requires FDA to establish by regulation
national standards for the licensure of prescription drug wholesale
distributors. Section 584 requires 3PLs to be licensed according to
standards established in regulations promulgated
[[Page 6713]]
by FDA for the licensure of 3PLs. Section 301(t) prohibits the failure
to comply with the requirements under sections 584 and 503(e). Section
301 also prohibits a number of actions concerning adulterated and
misbranded drugs. Section 585 provides that states cannot implement
licensing standards, requirements, or regulations that are inconsistent
with, less stringent than, directly related to, or covered by the
standards applicable under sections 503(e) and 584. Section 585 also
precludes states from regulating 3PLs as wholesale distributors. To
enforce these and other provisions of the FD&C Act, section 704
authorizes FDA to conduct inspections. Section 701(a) of the FD&C Act
provides general authority to issue regulations for the efficient
enforcement of the FD&C Act. By establishing national standards for the
licensing of wholesale distributors and 3PLs, this rule, when
finalized, is expected to aid in the efficient administration and
enforcement of the FD&C Act, and in particular would help efficiently
enforce the provisions relating to licensure of wholesale drug
distributors and 3PLs.
V. Description of the Proposed Rule
The national standards for the licensure of 3PLs, required by
section 584 of the FD&C Act, as amended by DSCSA, are set forth in
subpart A of proposed part 205. The national standards for the
licensure of wholesale distributors, required by sections 503(e) and
583 of the FD&C Act, as amended by DSCSA, are set forth in subpart C of
proposed part 205. The process and standards for third-party
accreditation programs to become approved by the Federal Government to
evaluate the qualifications of 3PLs for licensure, as required by
section 584(d) of the FD&C Act, are established in subpart B of
proposed part 205. The process and standards for third-party
accreditation and inspection services to become approved by the Federal
Government to conduct inspections of wholesale distributors, as
permitted by section 583(c) of the FD&C Act, are set forth in subpart D
of proposed part 205.
A. Scope/Applicability (Proposed Sec. Sec. 205.1 and 205.2)
In accordance with section 584 of the FD&C Act, FDA is proposing to
establish the national standards for licensing by State and Federal
licensing authorities set forth in subpart A of part 205 that would
apply to 3PL facilities in any State (see proposed Sec. 205.1).
Furthermore, in accordance with section 503(e)(1) of the FD&C Act, FDA
is proposing to establish the national standards for wholesale
distributors set forth in subpart C of part 205 that would apply to
wholesale distributors of prescription drugs in any State (see proposed
Sec. 205.1). The standards, terms, and conditions for licensure
established under part 205, subparts A and C, once finalized, would
apply to all State and Federal 3PL and wholesale distributor licenses.
All 3PL facilities are required to obtain a 3PL license for each
facility of such 3PL. The FD&C Act, as amended by DSCSA, prohibits
States from regulating 3PLs as wholesale distributors. A 3PL that also
engages in wholesale distribution in the same facility in which it
engages in 3PL activities must obtain a separate wholesale distribution
license (see proposed Sec. 205.1).
An entity is considered a wholesale distributor if the entity is
engaged in the distribution of a drug subject to section 503(b)
(relating to prescription drugs) of the FD&C Act (21 U.S.C. 353(b)), to
a person other than a consumer or patient, with a few exclusions. Under
section 201(g) of the FD&C Act (21 U.S.C. 321(g)), a drug includes a
bulk drug substance, and under current FDA regulations, the term bulk
drug substance means any substance that is represented for use in a
drug and that, when used in the manufacturing, processing, or packaging
of a drug, becomes an active ingredient or a finished dosage form of
the drug. The term does not include intermediates used in the synthesis
of such substances (21 CFR 203.3(e)). FDA believes that the
distribution of bulk drug substances must have the same safeguards and
provisions as the distribution of finished drug products. The same
safeguards that prevent diversion and theft and secure the
pharmaceutical distribution supply chain generally must include the
transfer of bulk drug substances, as they are subject to the same
concerns as the distribution of prescription drugs in finished dosage
form.
FDA is proposing to establish the process and standards that would
apply to any third-party accreditation or inspection services seeking
to obtain or maintain approval by FDA to evaluate qualifications of
3PLs for licensure or to conduct inspections of wholesale distributors
(see proposed Sec. 205.1). Once finalized, proposed subparts B and D
of part 205 would establish the process and standards for third-party
accreditation and inspection services to become approved by the
Secretary to review the qualifications of 3PLs for licensure, as
required by section 584(d) of the FD&C Act, and to conduct inspections
of wholesale distributors, as permitted by section 583(c) of the FD&C
Act (see proposed Sec. 205.2) (i.e., to become ``approved
organizations'').
B. Definitions (Proposed Sec. 205.3)
By its terms, the definitions of terms in section 581 of the FD&C
Act (21 U.S.C. 360eee) applies in subchapter H. However, because those
terms are also used throughout section 503(e) of the FD&C Act (as
amended by the DSCSA), FDA considers the definitions and
interpretations contained in section 581 of the FD&C Act to apply to
those terms when used in proposed part 205. Specifically, the
definitions of the following terms contained in section 581 of the FD&C
Act apply when used in proposed part 205: Affiliate, authorized,
dispenser, illegitimate product, licensed, manufacturer, product,
repackager, return, specific patient need, suspect product, third-party
logistics provider, and wholesale distributor. In addition, FDA is
proposing the definition of the following additional terms to help
clarify the requirements. FDA believes that these proposed definitions
align with existing law and regulations, as well as current industry
practices.
3PL Activities: Includes warehousing and ``other logistics
services'' that are undertaken with respect to a product (as defined in
proposed Sec. 205.3(k)).
Change of Entity Ownership: Recognizing that businesses
often undergo changes in corporate structure through mergers,
acquisitions, and other transactions, FDA proposes that ``change of
entity ownership'' be defined to help ensure consistency with regard to
how such changes will affect licensure. The definition describes the
events that would constitute a change in ownership with respect to a
partnership, unincorporated sole proprietorship, corporation, or
limited liability company.
Co-Licensed Partner: One of two or more entities that have
entered into an agreement for the right to engage in the marketing of a
prescription drug. The Agency believes this definition is in alignment
with industry practice and existing laws.
Designated Representative: An individual who is designated
as the representative of the facility manager and, as such, is
identified by the licensee as responsible for managing the daily
operation of the establishment in compliance with licensure
requirements and has the authority to implement corrective action when
necessary. This individual is also responsible for ensuring that
personnel are appropriately qualified, assigned, and
[[Page 6714]]
trained to accomplish their duties. The Agency believes this definition
reflects current practices and understanding.
Entity or Entities: A business organization, such as a
corporation, company, association, firm, partnership, society, sole
proprietorship, or joint stock company.
Facility: A site at one general, permanent, physical
location used to store or handle prescription drugs. For purposes of
proposed part 205, a facility does not include a site, such as a
corporate office or headquarters, where the sole activity conducted at
the site is one of oversight, support, or business administrative
function.
Key Personnel: Any individual who has responsibility for
managing the operations of the wholesale distributor, including any
principal, owner, director, officer of the wholesale distributor,
designated representatives, and other individuals who are authorized to
enter areas where prescription drugs are held and are likely to handle
those prescription drugs as a part their responsibilities within the
operation.
[cir] Section 583(b)(5) of the FD&C Act, as amended by DSCSA,
requires that FDA establish standards for the ``establishment and
implementation of qualifications for key personnel'' of wholesale
distributors. These key personnel must be sufficiently qualified and
screened to carry out the important responsibilities that come with
positions within a wholesale distribution company. FDA believes
individuals who hold these positions must be held to a high standard of
qualification as they are entrusted with important aspects of
protecting the pharmaceutical distribution supply chain.
Minimal Quantities: An annual dollar volume of
prescription drugs sold by a retail pharmacy to licensed practitioners
for office use that does not exceed 5 percent of the total dollar
volume of that retail pharmacy's annual prescription sales.
[cir] Section 503(e)(4) of the FD&C Act excludes a number of
activities from the definition of wholesale distribution. One excluded
category, listed at section 503(e)(4)(E) of the FD&C Act, is ``the
distribution of minimal quantities of a drug by a licensed retail
pharmacy to a licensed practitioner for office use.'' FDA has
previously considered what constitutes minimal quantities in
determining when the practices of a retail pharmacy become wholesale
drug distribution and thereby subject to licensure (see 64 FR 67720,
December 3, 1999). For example, in preamble discussions around
codifying provisions related to wholesale distribution, FDA proposed a
minimal quantities limit, considered comments, and ultimately concluded
that sales of prescription drugs by a retail pharmacy to licensed
practitioners for office use would be considered to be minimal and not
wholesale distribution, if the total dollar volume of these sales does
not exceed 5 percent of the total dollar volume of that retail
pharmacy's annual prescription sales.
[cir] The Agency continues to maintain its position that a 5-
percent limit to what constitutes minimal quantities is sufficient ``to
meet the needs of licensed practitioners who may not purchase enough
prescription drugs to go through a wholesale distributor and thus may
not otherwise be able to easily obtain drugs for office use'' (64 FR
67720 at 67748). We believe this standard is still relevant and is the
industry standard. We note that in January 2013, the NABP passed a
resolution that supports limiting the five percent rule to allow for
transfer ``between pharmacies, or from pharmacy to or from pharmacies
to practitioners, only for the purpose of dispensing or administration,
but not for resale; and to prohibit the transfer, distribution, or sale
of prescription drugs from pharmacies to wholesalers for resale'' (Ref
17). The transfer or sale from dispenser to dispenser for a specific
patient need is already considered to not be wholesale distribution
under the FD&C Act (see section 503(e)(4)). This NABP resolution
accords with FDA's proposed definition of minimal quantities. We
request comment on the codification of this 5 percent limit for office
use and of the definition of minimal quantities.
[cir] Accordingly, a licensed retail pharmacy that distributes more
than 5 percent of its annual sales to licensed practitioners is
engaging in wholesale distribution, subject to all the requirements for
wholesale distributors, unless its activities are otherwise excluded
from the definition of wholesale distribution. The exemption for
distributing minimal quantities of drugs by retail pharmacies to
licensed practitioners for office use was ``not created to confer a
special benefit on retail pharmacies, but to meet the legitimate need
of licensed practitioners'' (64 FR 67720 at 67748). For purposes of
section 503(e)(4)(E) of the FD&C Act, FDA is proposing to codify its
position on ``minimal quantities'' in the proposed Sec. 205.3(h) to
mean the ``total annual dollar amount sold to licensed practitioners
for office use does not exceed 5 percent of the total dollar volume of
that retail pharmacy's annual prescription drug sales.''
[cir] The Agency also notes that this exclusion only applies to
sales of prescription drugs from licensed pharmacies to licensed
practitioners for office use. FDA understands that some States and
other entities have expanded the applicability of this exclusion from
the definition of wholesale distribution to allow for distribution from
pharmacies to other entities outside of licensed practitioners for
office use, but FDA notes that this practice is not allowed under
current Federal law. The statutory language at section 503(e)(4)(E) of
the FD&C Act specifically limits the exclusion to the distribution of
minimal quantities of a drug between a licensed retail pharmacy and a
licensed practitioner for office use. Unless a specific sale or
transfer of a drug from one dispenser to another dispenser is outside
of the definition of wholesale distribution because it is to a consumer
or patient (e.g., to fulfill a ``specific patient need,'' as defined at
section 581(19) of the FD&C Act), a pharmacy that sells or trades
prescription drugs to other pharmacies or other entities falls within
the definition of wholesale distribution. Such activity is considered
wholesale distribution under section 503(e)(4) of the FD&C Act, subject
to all the requirements of wholesale distributors.
Other Logistics Services: Services provided by entities
that accept or transfer direct possession of products from that
entity's facility within the United States and its territories on
behalf of a trading partner (e.g., manufacturer, wholesale distributor,
dispenser), but that do not take ownership of the product or have the
responsibility to direct a product's sale or disposition. It also
includes services undertaken with respect to a product for a repackager
that is acting on behalf of a manufacturer, wholesale distributor, or
dispenser.
[cir] Under the DSCSA, the definition of 3PL includes entities that
conduct ``other logistics services'' on behalf of a manufacturer,
wholesale distributor, or dispenser of a product. The Agency recognizes
that 3PLs may perform 3PL activities for repackagers and proposes to
include in the definition of ``other logistics services'' those
services undertaken with respect to a product for a repackager acting
on behalf of a manufacturer, wholesale distributor, or dispenser.
[cir] Under this proposed definition, a common carrier that only
transports a product, but does not take ownership of the product, is
not conducting ``other logistic services.'' Similarly, an entity
[[Page 6715]]
that directs the sale or disposition of the product but does not take
possession (such as a broker) would not be conducting ``other logistics
services'' and does not meet the definition of a 3PL, but may be
engaged in activities that meet the definition of a manufacturer or
wholesale distributor.
Other Than a Consumer or Patient: A person receiving the
drug who is not (i) the individual identified as the recipient of the
prescription drug, (ii) a dispenser fulfilling a specific patient need,
or (iii) the clinical investigator, as defined in 21 CFR 312.3(b) (or
any successor regulation).
[cir] FDA considers certain types of prescription drug distribution
as outside the scope of ``wholesale distribution'' under section
503(e)(4) of the FD&C Act because they constitute ``the distribution of
a drug'' to a ``consumer or patient,'' which is excluded from the
definition of wholesale distribution. The first of these is the
distribution to, or receipt by, the patient, who, for purposes of
DSCSA, FDA considers to be the individual intended to take or be
administered the prescription drug. This would typically be the
individual whose name appears on the prescription.
[cir] FDA also considers the transfer or sale of a drug from one
dispenser to another to fulfill a ``specific patient need'' to be
outside the scope of wholesale distribution. Specific patient need is
defined at section 581(19) of the FD&C Act as ``the transfer of a
product from one pharmacy to another to fill a prescription for an
identified patient.'' FDA would note, however, that a dispenser who
transfers or sells a drug to a trading partner other than another
dispenser, or to another dispenser where there is no specific patient
need evidenced by a prescription, is distributing a drug to someone
other than a consumer or patient, which, if not otherwise excluded
under section 503(e)(4) of the FD&C Act, would be engaging in wholesale
drug distribution requiring a wholesale distributor license.
[cir] Finally, FDA considers the sale or transfer of a drug for
investigational or research purposes to an investigator, as defined in
21 CFR 312.3 (or any successor regulation), under an investigational
new drug application (IND) submitted to FDA to be outside the scope of
wholesale distribution because the drug is used for in vitro, clinical,
or other research purposes under an IND.
[cir] For these reasons, FDA is proposing to exclude these types of
transactions from the scope of wholesale distribution.
Product: A prescription drug in a finished dosage form
that is ready for administration to a patient without substantial
further manufacturing (e.g., capsules, tablets, lyophilized products
before reconstitution).
[cir] The definition of ``product'' proposed here is broader and
more inclusive than that used for purposes of product tracing detailed
in section 582 of the FD&C Act as defined in section 581(13). As used
in section 584 of the FD&C Act for purposes of licensure of a 3PL, the
term ``product'' excludes active pharmaceutical ingredients intended
for incorporation into a finished drug product but have yet to undergo
substantial further manufacturing to become the finished dosage form
for administration. Of note, for purposes of section 582 of the FD&C
Act (21 U.S.C. 360eee-1), the definition for ``product'' excludes
certain types of prescription drugs in finished dosage form (section
581(13) of the FD&C Act).
Significant Disciplinary Action: Any action by a State or
Federal licensing authority that would limit or prevent a 3PL from
conducting 3PL activities, or would limit or prevent a wholesale
distributor from distributing or facilitating the distribution of
prescription drugs. This includes suspension or revocation of a 3PL or
wholesale distributor license, State controlled substances license, or
Drug Enforcement Administration (DEA) registration, and potentially
includes other disciplinary actions such as a consent decree or final
ruling of a State licensure board, depending on the impact on the 3PL's
or wholesale distributor's legal ability to perform licensed
activities.
Unfit for Distribution: A prescription drug that has been
identified as a drug whose sale would violate the FD&C Act. This
definition includes prescription drugs identified as suspect or
illegitimate (582(c)(4) of the FD&C Act); adulterated, including drugs
rendered nonsaleable because conditions (such as return, recall,
damage, or expiry) cast doubt on the drug's safety, identity, strength,
quality, or purity (section 501 of the FD&C Act); or misbranded
(section 502 of the FD&C Act (21 U.S.C. 352)).
[cir] FDA believes that prescription drugs unfit for distribution
must be segregated from those that are fit for distribution to protect
patients from receiving potentially defective or harmful prescription
drugs and prevent the distribution of drugs that are unfit for
distribution.
[cir] A wholesale distributor or 3PL could potentially identify a
prescription drug as unfit for distribution through their own
examination of incoming and outgoing shipments of prescription drugs as
outlined by proposed 21 CFR 205.12(c)(1) for 3PLs and 205.26(c)(4) for
wholesale distributors, through inventory review under proposed 21 CFR
205.12(c)(4)(i) for 3PLs and 205.26(c)(5)(i)(B) for wholesale
distributors, through other internal means designed to detect product
that is unfit for distribution, or be notified of a prescription drug's
status as unfit for distribution by a trading partner or others.
Wholesale distribution:
[cir] Section 503(e)(4) of the FD&C Act defines wholesale
distribution as ``the distribution of a drug subject to [section 503(b)
of the FD&C Act] to a person other than a consumer or patient, or
receipt of a drug subject to [section 503(b) of the FD&C Act] by a
person other than the consumer or patient.'' The definition then goes
on to list 19 activities that are not considered wholesale
distribution. Of these, FDA is providing clarification about several
that may be causing some confusion for industry and the States.
[cir] Section 503(e)(4)(C) of the FD&C Act states that the
distribution of a drug or an offer to distribute a drug for emergency
medical reasons, including a public health emergency declaration
pursuant to section 319 of the Public Health Service Act, does not
constitute wholesale distribution. In addition to distribution of a
drug during a declared public health emergency pursuant to section 319
of the Public Health Service Act, FDA considers the following
circumstances to constitute emergency medical reasons and therefore be
excluded from the definition of wholesale distribution: (1) The
distribution of a drug to a first responder or other authorized
individual administering prescription drugs to acutely ill or injured
persons in an emergency situation and outside a healthcare facility,
and (2) a long-term care facility receiving an emergency kit containing
drugs for use in emergency situations to treat acutely ill or injured
persons during hours of the day when necessary drugs cannot be obtained
from a dispenser. Pursuant to 503(e)(4)(C) of the FD&C Act, this
exclusion from the definition of wholesale distribution does not
include distributing a drug during a shortage unless such shortage was
caused by a public health emergency.
[cir] The exclusion at section 503(e)(4)(E) of the FD&C Act for the
distribution of minimal quantities of prescription drugs by a licensed
retail pharmacy to a licensed practitioner for
[[Page 6716]]
office use is discussed in the description of the term ``minimal
quantities.''
[cir] Section 503(e)(4)(H) of the FD&C Act excludes ``the
distribution of a drug by the manufacturer of such drug'' from
wholesale distribution. Therefore, FDA considers the activities of a
manufacturer, as defined at section 581(10) of the FD&C Act, when
distributing its own drug, as excluded from the definition of wholesale
distribution and not subject to the requirements that apply to
wholesale distributors. FDA believes this is supported by the term
``wholesale distributor,'' which is defined at section 581(29) of the
FD&C Act, in relevant part, as ``a person (other than a manufacturer, a
manufacturer's co-licensed partner . . .) engaged in wholesale
distribution.'' The Agency notes, however, that if Manufacturer A
purchases and distributes Manufacturer B's drug, for which Manufacturer
A has no affiliation and is not a co-licensed partner, Manufacturer A
is engaged in wholesale distribution, subject to all the requirements
for wholesale distributors.
C. National Standards for Third-Party Logistics Providers
1. 3PL Licensure
3PL facilities are required to be licensed in order to conduct
activities in any State (section 584 of the FD&C Act). As such, the
proposed regulation provides that a 3PL facility may not conduct 3PL
activities unless it is licensed by the State from which it conducts
3PL activities, or by FDA if the State from which 3PL activities are
conducted has not established a licensure program in accordance with
the regulations, as set forth in section 584(a) of the FD&C Act (see
proposed Sec. 205.4(a)). In addition, the requirement in 584(a) of the
FD&C Act that each facility of the 3PL must be licensed, such that a
3PL with multiple facilities in a single State will have multiple
licenses from that State, is set forth in proposed Sec. 205.4(b).
Under FDA's proposed regulation, if a 3PL owns or leases a facility
serving as a warehouse for products, the State in which the facility is
located will be considered the State from which the 3PL ``conducts
activities'' and will be the State from which the 3PL must obtain a
license for that facility under proposed Sec. 205.4(a)(1). FDA
understands there has been some confusion about whether an entity hired
or contracted by another trading partner to provide labor, logistic, or
administrative services for that trading partner in that trading
partner's facility would be considered a 3PL. This could occur, for
example, where a wholesale distributor hires a contractor to provide
such support services from within the wholesale distributor's facility
exclusively for that wholesale distributor. In this scenario, the
contractor's activities from within the wholesale distributor's
licensed facility would be captured by the wholesale distributor's
license and obligations for compliance, and the facility would not be
considered a 3PL or required to have a 3PL license. However, an entity
that operates a facility in which it engages in wholesale distribution
and performs 3PL activities on behalf of other trading partners for
products it does not own or direct the sale or disposition of is
required to obtain both a wholesale distributor and 3PL license for
that facility.
Additionally, pursuant to section 584(a)(2) of the FD&C Act, if a
product is distributed in interstate commerce, the 3PL must be licensed
by the State into which the product is distributed if that State
requires such license; however, section 584(a)(2) of the FD&C Act also
provides that if the 3PL is licensed by FDA, as described in section
584(a)(1)(B), the 3PL is not required to obtain a license from the
State into which the product is distributed (see proposed Sec.
205.4(a)(3)). Finally, to ensure that a facility and those responsible
for its operations meet the licensing standards, FDA proposes to
require that 3PL licenses be facility- and owner-specific and not
transferable to another establishment or owner (see proposed Sec.
205.4(c)). 3PL licenses must be held at the licensed facility and must
be made available to State, Federal, or other licensing authorities
upon request (see proposed Sec. 205.4(d)).
Section 584 states that the national licensing standards for 3PLs
established by regulation take effect 1 year after the date such final
regulation is published (section 584(d)(1) and (3) of the FD&C Act).
National licensing standards for wholesale distributors established by
regulation take effect 2 years after the date such final regulation is
published (section 583(a) and (e)(3) of the FD&C Act). For several
reasons, including those discussed below, FDA does not intend to
enforce the licensing requirements for 3PLs until 2 years after the
final regulation is published.
FDA recognizes that 1 year may be insufficient time for States to
implement 3PL licensure programs, should they decide to implement such
a program, and for 3PLs to apply for licensure under these programs.
Setting up a state licensure program may require additional time. This
is especially true in States that will require State legislative action
to implement a licensure program, with some State legislatures only
meeting biennially.
Considering these factors, FDA does not intend to enforce these
requirements with respect to the national standards for licensure until
2 years after the regulation is finalized. This will help ensure there
is time for States to establish or modify their licensure programs in
accordance with the new standards and time for 3PLs to apply and obtain
a new license.
For 1 year after the effective date of the final regulation, FDA
also does not intend to enforce the requirements of section 582(b)(3),
(c)(3), (d)(3), and (e)(3) of the FD&C Act with respect to a
manufacturer, wholesale distributor, dispenser, or repackager who has
as a trading partner a 3PL that is not licensed, unless the 3PL is not
licensed because the Secretary or a state licensing body has made a
finding that the 3PL does not utilize good handling and distribution
practices and has published notice thereof.
2. General Application Requirements for Licensure
The general requirements that must be met for a State or Federal
licensing authority to issue a license to a 3PL facility are proposed
in Sec. 205.5. As proposed, Sec. 205.5(a) includes requirements
applicable to the individual who submits the application and states
that the applicant must submit all required information and pay any
applicable licensing fee to be issued a license.
The information that would be required as part of a 3PL's
application for licensure of a facility is set forth in proposed Sec.
205.5(b). FDA believes this information is necessary for the licensing
authority to assess whether the 3PL is in good standing and has the
infrastructure and capabilities to fulfill its duties and obligations
under these national standards for 3PL licensure. This includes
disclosing whether the 3PL facility manager or designated
representative has ever been convicted of a felony relating to
prescription drug distribution (see proposed Sec. 205.5(b)(7)). FDA
believes that this information is crucial to protect the integrity of
the prescription drug supply chain by ensuring that those responsible
for the daily operations of a 3PL facility do not have a history of
violating the FD&C Act. In addition, in its application for licensure
renewal, under proposed Sec. 205.7, a 3PL would be required to certify
that the 3PL facility has continually met the requirements of Sec.
205.5 and will inform the licensing authority of certain changes to
[[Page 6717]]
information if such changes have not already been submitted to the
licensing authority (see proposed Sec. 205.5(c)).
3. The Federal Licensure Process
Section 584(a)(1)(B) of the FD&C Act gives FDA the authority to
license 3PLs directly if the State from which a 3PL conducts 3PL
activities has not established a licensure requirement in accordance
with the regulations. The process that FDA will use for issuing
licenses to 3PLs is detailed in proposed Sec. 205.6. While Sec. 205.6
is only applicable to 3PLs obtaining a license from FDA, FDA suggests
that States implement similar procedures. FDA intends to help
stakeholders understand who the appropriate licensing authority is in
the 3PL's State.
The FDA licensure process begins when a 3PL seeking licensure for a
facility submits an application to FDA for review and consideration
(see proposed Sec. 205.6(a)). The DSCSA permits FDA to approve third-
party organizations, referred to as approved organizations or AOs, to
evaluate a 3PL's qualifications for licensure (section 584(d)(2)(A)-(B)
and 584(e) of the FD&C Act). If FDA has approved one or more
organizations to review a 3PL's qualifications for licensure, a 3PL
should note the AO it prefers on its application. FDA generally intends
to review a 3PL's qualifications for licensure only if the review
cannot be completed by an FDA-approved AO. The licensure review
consists of a review of all documents submitted in support of the
application and an inspection of the facility pursuant to proposed
Sec. 205.16. FDA intends for the licensure application process to be
electronic (see proposed Sec. 205.6(a)) and to leverage existing
technologies to streamline the licensure process.
While the DSCSA permits AOs to review a 3PL's qualifications for
licensure and to recommend to FDA whether a 3PL should be licensed, the
responsibility for determining whether a 3PL meets all applicable
requirements and to issue the license remains with FDA (see proposed
Sec. 205.6(b)).
So as not to delay the licensure process, when reviewing an
application, FDA intends to work with 3PLs to correct minor errors made
on the application and communicate with the 3PL about additional
information the Agency may need (see proposed Sec. 205.6(c)). When FDA
determines that a 3PL facility meets the applicable requirements and
that none of the prohibited factors listed in proposed Sec.
205.9(a)(1) are present, FDA will send the applicant an approval letter
and a licensing certificate, effective on the date it is issued (see
proposed Sec. 205.6(d)).
FDA recognizes that a 3PL may have concerns about what happens to
the status of its license if the AO that reviewed its qualifications
for licensure has disciplinary sanctions taken against it that affect
its approval status or if it is otherwise no longer considered an
approved AO. While a 3PL facility should not be penalized for the
actions of the AO that reviews its qualifications for licensure, FDA
must ensure that the AO's review and findings provide a reliable basis
for licensing decisions.
As such, FDA is proposing that the approval status of the AO that
performed the licensure review for a 3PL facility will not
automatically affect the licensure of a licensed 3PL facility that is
otherwise in good standing (see proposed Sec. 205.6(e)). Rather, in
the event that an AO has disciplinary sanctions taken against it, ends
its business, or is otherwise no longer considered an approved AO, the
license of any 3PL facility reviewed by that AO will be subject to
appropriate action in accordance with Sec. 205.9 and other applicable
statutes or regulations. FDA may verify the 3PL's compliance status and
review the facts in that situation to determine the potential effect,
if any, on the licensure of 3PL facilities reviewed by that AO.
FDA intends to publish additional guidance regarding the process
and procedures related to obtaining and maintaining a 3PL license
issued by FDA.
4. Changes to Information, Location, or Ownership of a Licensed 3PL
For the licensing authority to effectively carry out its
responsibilities, a 3PL must keep its license information current and
report any changes in information, including those that may
significantly affect operations such as changes in location or
ownership, to the licensing authority. Presently, the reporting
requirements for these types of changes vary by State. FDA is proposing
in Sec. 205.7 that changes to certain information, including, for
example, any changes in information submitted as part of an application
for licensure, be submitted electronically to the licensing authority
within 30 calendar days of the change (see proposed Sec. 205.7(a)).
Additionally, because a license is facility- and-owner specific (see
proposed Sec. 205.4(c)), the Agency is proposing that changes in the
location or the ownership of a facility will require a new license (see
proposed Sec. 205.7(b) and (c)).
5. Expiration and Renewal of Licenses
The DSCSA requires that the regulations establishing national
standards for 3PLs provide that a 3PL license expires 3 years after the
date of issuance, with the option for renewal for additional 3-year
periods (section 584(d)(2)(H) of the FD&C Act). FDA is proposing to
implement this requirement under proposed Sec. 205.8 by saying that
all 3PL licenses, whether newly issued or renewed by the licensing
authority, expire 3 years from the date of issuance or renewal. FDA
also proposes that 3PLs may not submit renewal applications more than
90 days prior to the license's date of expiration to ensure that
licenses are renewed based on current information. While we do not
anticipate lengthy administrative delays by the licensing authority, if
a 3PL files an application for a license renewal within the appropriate
time period and there is an administrative delay reviewing the license
application that causes the 3PL license to lapse, the 3PL will not be
penalized for that administrative delay. In this scenario, the 3PL's
license will be considered valid during the period of the
administrative delay (see proposed Sec. 205.8).
The Agency understands that at the time a final rule covering these
proposed national standards goes into effect, there are likely to be
3PLs with existing licenses under State law. Nevertheless, 3PLs with
existing State licenses must obtain new licenses in accordance with
section 584(a) of the FD&C Act. These national licensing standards
serve an important function of ensuring consistency across the domestic
market. However, as described above, FDA does not intend to enforce the
requirements with respect to the national standards for licensure of
3PLs until 2 years after the regulation is finalized. FDA's proposed
requirements are further detailed in proposed Sec. 205.16, which
discusses the required inspections prior to licensure.
6. Licensure Denial, Suspension, Reinstatement, and Revocation--Notice
and Opportunity To Request a Hearing
The standards for licensure denial are set forth in proposed Sec.
205.9.
Proposed Sec. 205.9(a)(1) enumerates 9 circumstances under which
the licensing authority would be required to deny a 3PL's request for
licensure or license renewal. FDA believes that this list will help
3PLs focus on good storage practices outlined by FDA that are necessary
to protect the integrity of the products in the pharmaceutical
distribution supply chain. To avoid
[[Page 6718]]
denial or delays of their applications, 3PLs should ensure that they
address the reasons for denial of a license outlined in proposed Sec.
205.9(a)(1) when they file for licensure.
Proposed Sec. 205.9(a)(2) details the process afforded to 3PLs
whose applications for licensure have been denied. FDA is proposing to
provide applicants with the opportunity to provide additional
information for reconsideration of the denial. If the licensing
authority denies a 3PL's request for licensure after reconsideration,
the 3PL will receive a notice of opportunity to request a hearing under
existing FDA hearing procedures. FDA requests comment regarding the
reconsideration and appeal process outlined in this regulation for 3PLs
whose applications for licensure have been denied.
The proposed standards for suspending a 3PL license are set forth
in Sec. 205.9(b) and (c) and are based on the severity of risk posed
to the public health. Under most circumstances, we anticipate that a
3PL would have the opportunity for a hearing before licensure
suspension. However, under certain circumstances that involve repeated
conduct detrimental to the public health or refusal to correct
significant issues that could lead to the dissemination of illegitimate
product, the Agency may suspend a license immediately while giving the
3PL an opportunity to request a hearing. Under proposed Sec. 205.9(b),
a 3PL's license may also be suspended after the 3PL receives a notice
of opportunity to request a hearing. A suspended 3PL must cease all 3PL
activities until their license is re-instated. This provision applies
when the licensing authority has a reasonable belief that the 3PL is
not in compliance with licensure requirements. FDA is proposing for
Sec. 205.9(b) to require the licensing authority to notify the 3PL in
writing of the intent to suspend its license. A 3PL will have 30 days
from the date listed on the notice of intent to suspend a license to
provide additional information to the licensing authority so it may
reconsider its decision.
If reconsideration is not sought or is denied, the licensing
authority will inform the 3PL in writing of its formal intent to
proceed with license suspension. The notice will contain a statement
informing the 3PL that it can request a hearing on the question of
whether there are sufficient grounds for suspension. The 3PL will have
10 days from the date on the notice to inform the licensing authority
of its intent to request a hearing; otherwise the opportunity for a
hearing will be waived and the license suspended. FDA believes this
process will afford 3PLs a sufficient opportunity to present
information and attempt to remedy noncompliance issues which may
threaten the safety of products in the supply chain. FDA requests
comment regarding this reconsideration and appeal process.
Proposed Sec. 205.9(c) allows for license suspension prior to
opportunity for hearing and effective immediately if the 3PL's
noncompliance poses an imminent threat to public safety. For example,
if a 3PL is warehousing or shipping illegitimate product, and once made
aware, corrective actions to protect the public health from the threat
of these products are not taken, the 3PL's license could be suspended
immediately. Another example could be a scenario where the conditions
under which drugs are held or warehoused cause the product to be
illegitimate and the 3PL refuses to correct the conditions or continues
to ship these illegitimate products. Under the proposed regulation, in
such a situation, the licensing authority will inform the 3PL in
writing that its license is suspended. The notice will also contain a
statement informing the 3PL that it may request a hearing and that a
hearing, if granted, will be afforded within 10 days upon the receipt
of the 3PL's request for hearing. The 3PL has 10 days from the date on
the notice of suspension to request a hearing; otherwise its
opportunity for a hearing will be waived. FDA believes that this limits
the amount of time a 3PL license would be suspended while providing a
reasonable amount of time both for the 3PL to review the notice of
suspension and collect the necessary information to demonstrate that
its license should not be suspended, and for FDA to consider a request
for a hearing and to schedule and prepare for a hearing, if the hearing
request is granted. FDA believes immediate suspension of a 3PL license
is crucial in cases where continued operation of the 3PL presents an
imminent threat to public safety and the pharmaceutical supply chain.
Under proposed Sec. 205.9(d), a 3PL's suspended license may be
reinstated if the 3PL can demonstrate to the licensing authority that
it is in compliance with regulation requirements.
Under the proposed rule, the process outlined at 21 CFR 10.75 is
the default for appeals regarding a denied application for a 3PL
license, and the hearing process outlined at 21 CFR part 16 is the
default for appeals regarding a suspended or revoked 3PL license.
However, the 3PL may request any of the procedures in 21 CFR parts 10
through 16. FDA believes that this proposed approach is consistent with
current practice and suggests that States develop comparable processes.
The standards for revoking a 3PL license are set forth in proposed
Sec. 205.9(e). The licensing authority will revoke a license if it
finds that a 3PL whose license has been suspended is unable or refuses
to comply with the licensing requirements. The requirements governing
the revocation of a 3PL license are set forth in proposed Sec.
205.9(e)(2) through (5) and mirror those outlined in Sec. 205.9(b)(2)
through (7) for licensure suspension, with one exception: When the
licensing authority informs the 3PL of its intent to revoke a license,
the 3PL is given no opportunity for reconsideration since it already
had an opportunity to rectify deficiencies while its license was
suspended.
In addition, where a 3PL fails to timely renew its application, the
license will be considered expired and a 3PL will need to submit an
application for new licensure because the licensing authority may be
unable to confirm that the 3PL continues to meet all necessary
licensure requirements (see proposed Sec. 205.9(f)).
FDA is also proposing to terminate a 3PL's license upon request
from the 3PL when the request includes a notice of the 3PL's intent to
discontinue its activities and a waiver of an opportunity for a
hearing. The 3PL will be required to apply for a new license should it
decide to resume 3PL activities (see proposed Sec. 205.9(g)).
7. Good Storage Practices for 3PL Facilities
The DSCSA charges FDA with creating national standards for the
licensure of 3PL facilities, including the requirement that 3PLs comply
with storage practices as determined by the Secretary (see section
584(d)(2)(C) of the FD&C Act). Those requirements are detailed in
proposed Sec. 205.10. FDA considers the requirement that ``each
facility of such [3PL]'' be licensed ``in accordance with the
regulations'' (section 584(a) of the FD&C Act) to mean that 3PLs
without a facility are not required to be licensed. Section 584 of the
FD&C Act provides that FDA will establish licensure standards that
include requirements relating to storage of product. These standards
address issues regarding access and maintenance that presuppose the
existence of a physical facility where product is maintained. As such,
the requirements apply to each 3PL facility that is owned, rented, or
leased by the 3PL. If the 3PL shares the same name and location as
another trading partner
[[Page 6719]]
(for example, a wholesale distributor), each entity must be separately
licensed and must have separate systems and processes in place for
their separate functions (see proposed Sec. 205.10(b)).
The requirements for 3PL facilities regarding how products will be
stored and adequate security maintained are set forth in proposed Sec.
205.10(c). This provision includes requirements for storage of
nonsaleable products within the 3PL facility. If the facility is in
possession of a suspect product, the facility must have clearly defined
areas in which to quarantine the suspect product until the product is
dispositioned (section 584(d)(2)(C)(i) of the FD&C Act).
FDA is also proposing to require that 3PLs keep illegitimate
product and other products unfit for distribution in a clearly defined
and designated area, separate from saleable products, until
dispositioned so the illegitimate or otherwise unfit product is not
inadvertently combined with saleable products (see proposed Sec.
205.10(c)(2)). An illegitimate product poses as great a risk to public
health, if not a greater risk, as a suspect product because a product
is illegitimate when there is credible evidence shows that the product
is counterfeit, diverted, stolen, intentionally adulterated such that
the product would result in serious adverse health consequences or
death to humans, is the subject of a fraudulent transaction, or appears
otherwise unfit for distribution such that the product would be
reasonably likely to result in serious adverse health consequences or
death to humans (section 581(8) of the FD&C Act). As such, it is
counter to public health to store products that are unfit for
distribution alongside saleable product. Furthermore, it would be
illogical to move suspect product that has been determined to be
illegitimate out of quarantine and into another area to be potentially
stored with saleable product.
8. Personnel Requirements Necessary for Good Storage Practices
Ensuring that 3PL personnel are appropriately qualified is integral
to establishing good storage practices (section 584(d)(2)(C) of the
FD&C Act). For this reason, proposed Sec. 205.10(b)(3) requires that a
3PL facility must be designed in such a manner that only personnel who
possess appropriate and verifiable experience and training will have
access to areas in which products are held. While not proposed to be
required in part 205, FDA believes that a best practice in order to
maintain the security of prescription drug products, would be for a 3PL
to screen personnel who work in areas of its facility where
prescription drug products are held for records of Federal or State
criminal convictions relating to the possession, control, or
distribution of prescription drugs. While also not proposed to be
required in part 205, FDA believes it would be a best practice for a
firm to request that employees state that they are not engaged in and
will not engage in the illegal use of controlled substances while
serving in their capacity within the 3PL.
FDA also proposes requiring that 3PLs maintain and make available
to the licensing authority certain information about their facilities'
managers and designated representatives (see proposed Sec. 205.11).
Furthermore, FDA is establishing specific employee qualifications with
respect to facility managers or designated representatives that are
necessary to effect good storage practices (see proposed Sec.
205.11(b)). Specifically, FDA is proposing to require that a facility
manager or designated representative of the facility manager serve in
either capacity for only one facility at any one time (see proposed
Sec. 205.11(b)(2)). FDA believes that a facility manager or designated
representative of the facility manager must be accountable for all
operations of a 3PL facility. That facility manager or designated
representative must be present within the facility, and must be
familiar with the day-to-day operations of that facility. FDA believes
that the best way to ensure the accountability and familiarity required
for compliance is for a designated representative or facility manager
to serve only one facility at a time. This is to ensure that the
facility manager or designated representative is actively engaged in
managing the daily operations of the facility and that they remain
aware of any non-compliance issues that may arise. To ensure the
qualified designated representative can fulfill their obligations to
manage and carry out daily operations, FDA proposes to require that a
3PL provide its designated representative with adequate authority and
the necessary resources (see proposed Sec. 205.11(c) and (d)). FDA
believes that establishing these requirements will help ensure that the
products handled by a 3PL are properly safeguarded to protect the
supply chain and the public health.
Section 584(d)(2)(E) and (F) of the FD&C Act requires mandatory
background checks for facility managers or the designated
representatives of facility managers to ensure that neither the 3PL's
facility manager nor the designated representative has engaged in the
prohibited behaviors outlined in proposed Sec. 205.11(e).
Additionally, FDA is outlining other activities which may lead to the
denial of licensure in proposed Sec. 205.11(f). They are not bars to
licensure, but they are factors that may be considered by licensure
authorities when reviewing an application for licensure to determine
whether the 3PL has storage practices sufficient to maintain adequate
security over the facility. FDA requests comment on this section of the
regulation and the scenarios outlined therein.
Requiring that individuals with significant authority over 3PL
activities be subject to a criminal background check adds an additional
layer of safety and security to the supply chain (see proposed Sec.
205.11(g)). Theft of product by personnel who have direct access to
areas where products are stored is a known problem across the
healthcare industry; the background checks required by section
584(d)(2)(F) of the FD&C Act that FDA is proposing here are necessary
precautions to prevent the potential theft, loss, or abuse of
prescription drugs.
FDA suggests an additional best practice for a 3PL to utilize when
staffing their operation. This best practice, related to staff who work
within a 3PL, is designed to ensure security within a 3PL. FDA
recommends to 3PLs that the individuals who work within their operation
and have access to prescription drugs should not have a record of
criminal activity involving violations of the FD&C Act or other laws
involving prescription drugs.
When screening personnel who work in areas of a 3PL facility where
products are held, including the facility manager or designated
representative, FDA recommends that a 3PL consider whether such
personnel have (1) engaged in a pattern of violating the requirements
of section 584 of the FD&C Act that present a threat of serious adverse
health consequences or death to humans; (2) been found to have
committed or facilitated commission of any prohibited acts under the
FD&C Act or violated or facilitated any violations of any of the
regulations in this part or analogous provisions of the State licensing
authority, as applicable; (3) been convicted of any violation of
Federal, State, or local laws relating to drug samples, wholesale or
retail drug distribution, distribution of controlled substances, or
third-party logistics services; or (4) been convicted of any felony
under Federal, State, or local laws involving or related to
prescription drugs. FDA believes that 3PLs should consider an
applicant's history of violations of the FD&C Act, or other
[[Page 6720]]
laws involving prescription drugs, when making staffing decisions.
9. Required Written Policies and Procedures
Section 584(d)(2)(C)(iii) of the FD&C Act enumerates certain types
of written policies and procedures that FDA regulations must require,
and tasks FDA with defining the content with more specificity. Those
written policies and procedures are set out in proposed Sec. 205.12.
All 3PLs would be expected to establish, maintain, and follow the
written policies and procedures set forth in these proposed subsections
for each 3PL facility, to the extent that the requirements of those
sections are relevant to the scope of their specific 3PL activities.
Under the proposed regulation, all written policies and procedures will
be made available to the licensing authority upon request, and the
licensing authority will be permitted to have access to and copy
records of the 3PL to ensure that the 3PL facility is following its
written policies and procedures (see proposed Sec. 205.12(a)). Written
policies and procedures include those that are stored and maintained
electronically.
FDA is implementing the statutory requirements listed in section
584(d)(2)(C)(iii) of the FD&C Act through proposed Sec. 205.12(c)(1)
through (6). Under these requirements, 3PLs must maintain written
policies and procedures to address a product's receipt, security,
storage, inventory, shipment, and distribution. Proposed Sec.
205.12(c)(1) through (6) details the specific elements that such
written policies and procedures must contain. Such elements are
necessary to maintain supply chain integrity and align with current
industry practices to protect the integrity of the drugs that are
distributed through the supply chain.
To ensure good storage practices, FDA is also proposing to require
that 3PLs establish written policies and procedures for handling not
only expired product as required in section 584(d)(2)(C)(iii)(VI) of
the FD&C Act, but also products that are unfit for distribution (see
proposed Sec. 205.12(f)). Furthermore, any drug unfit for distribution
should be segregated and returned or destroyed to prevent its
distribution to the patient (see proposed Sec. 205.12(f)(1)). These
requirements will ensure that drugs, the distribution of which would
violate the FD&C Act and which may not be fit for consumption by
American consumers for a variety of reasons, are not distributed into
the supply chain. FDA believes that these proposed standards align with
current industry practices.
Similarly, to further ensure the safety and efficacy of drug
products, FDA is proposing that 3PLs maintain written policies and
procedures related to the storage, inventory, and disposition of both
suspect and illegitimate products. In the case of a suspect product,
the written policies and procedures must include the procedure for
quarantine or destruction of the product if directed to do so by the
product's manufacturer, wholesale distributor, dispenser, or an
authorized government agency. In the instance of an illegitimate
product, written policies and procedures must be in place to ensure
that illegitimate product is appropriately dispositioned as directed by
the respective manufacturer, wholesale distributor, dispenser, or
authorized government agency. This may include segregation in a clearly
defined, designated area from which the product may be dispositioned.
FDA believes that these proposed standards align with current industry
practices and will give 3PLs a clear roadmap for dealing with
potentially difficult situations involving suspect and illegitimate
product.
Finally, FDA views it as a best practice for a 3PL to establish
written policies and procedures to ensure that it only engages in 3PL
activities on behalf of authorized trading partners with respect to a
product. DSCSA requires that all other entities that accept or transfer
direct possession or ownership in the supply chain are only permitted
to do business with other authorized trading partners (section 582 of
the FD&C Act). FDA believes that, to further ensure supply chain
security and integrity, it is important that 3PLs also only do business
with other authorized trading partners. 3PLs that engage in
transactions with non-authorized trading partners may expose the supply
chain to potentially harmful or substandard product. FDA notes that
3PLs are included in the wholesale distributor and third-party
logistics provider reporting public database (available at https://www.fda.gov/Drugs/DrugSafety/DrugIntegrityandSupplyChainSecurity/DrugSupplyChainSecurityAct/ucm423749.htm) which allows manufacturers,
wholesale distributors, repackagers, and dispensers to determine if the
3PL is authorized. Similarly, 3PLs should include using the publicly
available information regarding other trading partners in their written
policies and procedures to ensure they are doing business with only
authorized trading partners.
10. Recordkeeping and List of Trading Partners
The maintenance, availability, and accuracy of the records made
available for inspection under section 584(d)(2)(D) of the FD&C Act is
critical to demonstrate that 3PLs are acting in compliance with
relevant laws and regulations and to ensure their records can be relied
upon to identify any potential risk to the public health. As such, FDA
is proposing to require that all records be securely stored, with
procedures in place to restrict access and protect record integrity,
and that any alterations made to records be signed and dated while
preserving the original information contained in the record (see
proposed Sec. 205.13(a)). These records can be stored and maintained
electronically. These records maintenance requirements will allow for
greater confidence in both the information that is preserved at the
facility and the information potentially disseminated to other trading
partners.
FDA is proposing that all records must be retained for a minimum of
3 years, except for records related to suspect and illegitimate
products, product quality complaints, and destroyed, returned, and
recalled products, which each must be retained for a minimum of 6 years
(see proposed Sec. 205.13(b)). Such record retention is necessary not
only to ensure 3PLs are complying with the FD&C Act, but also to ensure
that there is consistency and continuity in the access to the
information across the records required pursuant to sections 582, 583,
and 584 of the FD&C Act. The DSCSA requires that, upon the licensing
authority's request, 3PLs provide the licensing authority with a list
of the trading partners (manufacturers, wholesale distributors, and
dispensers) for which the 3PL conducts 3PL activities (section
584(d)(2)(G) of the FD&C Act). This requirement would be codified in
proposed Sec. 205.14 and would also include repackagers for which the
3PL provides services when those repackagers are acting on behalf of a
manufacturer, wholesale distributor, or dispenser of a product, as
explained in the definition of other logistics services at Sec.
205.3(i).
11. Annual and Other Reporting to FDA
Under DSCSA, 3PLs must report certain information to FDA to be
considered an authorized trading partner (sections 581(2)(C) and 584(b)
of the FD&C Act). The annual reporting requirements for 3PLs went into
effect on November 27, 2014. Proposed Sec. 205.15 clarifies the
statutorily
[[Page 6721]]
prescribed annual reporting requirements and proposes the collection of
additional information to provide complete and useful information about
3PLs that can be used by FDA, States, and trading partners.
The DSCSA requires 3PLs to report to FDA for each facility: (1) The
State by which the facility is licensed; (2) the facility's license
number; (3) the facility's name and address; and (4) all trade names
under which the facility conducts business (section 584(b) of the FD&C
Act). If a facility conducts more than one type of activity, such as
3PL activities and wholesale distribution activities, the facility must
be licensed as both a wholesale distributor and a 3PL and must report
to FDA separately as a wholesale distributor and a 3PL (section
503(e)(2) of the FD&C Act).
FDA is proposing to require that 3PLs use an electronic system
provided by FDA for reporting (see proposed Sec. 205.15(a)). This
electronic system will increase efficiency by providing uniformity in
the content and format of reports, thereby making the information
easier to process. FDA is proposing that the annual reporting schedule
require all 3PLs to report each calendar year between January 1st and
March 31st, although an entity may update information at any time (see
proposed Sec. 205.15(b)). For example, if a 3PL chooses to update a
license on December 15, 2019, that 3PL will still have to report during
the January 1, 2020 through March 31, 2020 annual reporting period.
The specific information that 3PLs must electronically report to
FDA is set forth in proposed Sec. 205.15(c). The DSCSA requires that
3PLs report the name and address of each facility (section 584(b)(2) of
the FD&C Act). In fulfilling this requirement, the 3PL must provide the
address that is associated with the State or Federal license. Licensed
entities are also required to report to FDA the State by which they are
licensed and the license number (section 584(b)(1) of the FD&C Act). In
addition, FDA is proposing to require that the reported company name be
identical to the official company name appearing on the license (see
proposed Sec. 205.15(c)(2)). Maintaining an account in FDA's
electronic system for each 3PL facility license during the reporting
period is integral to FDA's ability to provide oversight, as each
facility of a 3PL must be licensed in order for the 3PL to conduct 3PL
activities.
In addition to the requirements specified in the statute, FDA is
proposing to require an additional data element that FDA views as
important to the Agency, the States, and trading partners. This
additional information will inform other trading partners that the 3PL
is in fact an authorized trading partner with whom they can do
business. To this end, FDA is proposing to require that 3PLs provide
the date each State license expires. This information is essential for
determining that licensure status for each 3PL facility is current.
Also, in addition to the physical address, which is required to be
reported by statute, FDA believes that it would be a best practice for
3PLs to submit a unique facility identifier (UFI) that corresponds with
the facility name and facility address. The UFI for a 3PL facility is
useful to FDA when identifying and confirming certain business
information. To be most helpful to FDA and other trading partners, a
3PL should obtain a separate UFI for each physical address that the 3PL
is reporting since each 3PL facility must meet the 3PL requirements,
and licensure is facility specific. FDA also believes that it would be
a best practice for 3PLs to submit the contact information of an
individual who will interact with FDA, including that individual's
name, telephone number, and email address. FDA recommends as a best
practice that the 3PL designate a contact person who is familiar with
the daily operations of the 3PL facility, such as the designated
representative, to ensure efficient processing of inquiries and
minimize the impact inquiries may have on the daily operations of the
facility.
It is important for other trading partners and FDA to know whether
a 3PL has had a license revoked or suspended or whether a 3PL has had
any other significant disciplinary actions taken against them that
limits the ability of a facility to conduct drug-related business. As
such, 3PLs must report significant disciplinary actions to FDA. This
will involve providing a DEA registration number or State controlled
substance license number when there is a significant disciplinary
action issued by the DEA or the State controlled substance licensing
authority that would limit the ability of the 3PL facility to conduct
3PL activities related to the distribution of controlled drug
substances that meet the definition of product, as defined at Sec.
205.3(k). In such a situation, information about the DEA registration
or State controlled substance license is important because the
disciplinary action would likely be associated with that specific
license or registration.
A significant disciplinary action is defined in the proposed
regulation as an action that limits the ability of a facility to
conduct 3PL activities related to the distribution of prescription drug
products. FDA proposes that, within 30 calendar days after a
significant disciplinary action is imposed or taken by a State or
Federal government, 3PLs must report the type of disciplinary action,
the date the action was taken, and the State where the disciplinary
action occurred, as well as submit any documents associated with the
disciplinary action, including a final ruling by the relevant State or
Federal agency or board or a consent decree.
Finally, FDA is proposing to require a 3PL to report to FDA within
30 calendar days of ceasing warehousing or other logistics services
that it is going out of business or voluntarily withdrawing a 3PL
license from a State. FDA believes reporting this information is
essential for the information in the public database to be complete,
accurate, and useful for FDA, the States, and trading partners.
To ensure efficient enforcement of FD&C Act requirements and to
make public the voluntary information provided by each 3PL facility,
FDA proposes adding 3PL licensure to the public database to make
information about 3PLs available on FDA's website. Having the license
status of 3PLs in one publicly available database will help FDA,
trading partners, and other stakeholders determine whether 3PLs are
properly licensed and authorized.
12. Inspection Provisions
Section 584(d)(2)(D) of the FD&C Act requires that the regulations
provide for periodic inspections of 3PL facilities to ensure compliance
with the national standards and directs FDA to determine the intervals
at which periodic inspections of a 3PL will be conducted by the
licensing authority to ensure a facility's compliance with the law and
this regulation. To this end, FDA is proposing to require that a
physical inspection of a 3PL facility be conducted prior to issuance of
the initial license and routinely once every 3 years thereafter (see
proposed Sec. 205.16(a) and (b)). The regulation proposes allowing the
licensing authority, or an AO, as determined by the licensing
authority, to conduct physical inspections (see proposed Sec.
205.16(a)). As used in part 205, subparts A and B, licensing authority
means the State licensing authority or FDA. When developing the
timeframes for inspections, FDA sought to balance the risk to the
supply chain while considering FDA's and State agencies' resource
constraints. FDA is proposing to require that the physical inspection
of a 3PL facility warehouse space include
[[Page 6722]]
the paper and electronically stored records detailing the processes
related to all 3PL activities (see proposed Sec. 205.16(c)). FDA has
authority to require that an inspection of a 3PL warehouse include the
3PL's records, files, and processes related to product warehousing.
Section 704(a)(1) of the FD&C Act (21 U.S.C. 374(a)(1)) states that
``in the case of any . . . warehouse . . . in which prescription drugs
. . . are held, inspection shall extend to all things therein
(including records, files, papers, processes, controls, and
facilities).'' This authority directly applies to FDA's ability to
inspect a 3PL's facility warehouse space for relevant records and files
to ensure compliance with the FD&C Act. FDA also proposes to require
that 3PLs permit inspections at reasonable times and that the licensing
authority conduct its inspection in a reasonable manner (see proposed
Sec. 205.16(c) and (d)).
D. Approved Organizations for 3PLs
1. Approval and Utilization of Outside Organizations in the Licensure
Process
The DSCSA requires that regulations codified by FDA establish a
process by which a third-party organization approved by FDA shall, upon
a 3PL's request, ``issue a license'' to each 3PL facility that meets
the requirements for licensure (section 584(d)(2)(A) of the FD&C Act).
However, in situations where a State has not established a licensure
program in accordance with the regulations, the DSCSA charges FDA with
issuing 3PL licenses, provided the applicable requirements for
licensure are met (section 584(a)(1)(B) of the FD&C Act). Accordingly,
FDA interprets the language of 584(d)(2)(A) of the FD&C Act to mean
that a third-party organization approved by FDA--an AO--will conduct a
review of the 3PL's qualifications for licensure and issue a report to
FDA regarding whether the 3PL ``demonstrates that all applicable
requirements for licensure . . . are met,'' which FDA can rely on when
issuing a license per section 584(e) of the FD&C Act.
The DSCSA allows States and FDA to approve organizations for
purposes of licensure review and periodic inspection. Proposed
Sec. Sec. 205.17, 205.18, and 205.19 contain the process that FDA will
use to approve organizations and the qualifications to become an AO.
FDA suggests that States that choose to rely on AOs for licensure
reviews have in place the same or similar processes for approved
organizations to conduct licensure reviews and for decisions affecting
the approval status of those organizations.
The scope of work AOs would be tasked with performing and the
standards an AO must meet to become approved are detailed in subpart B
of proposed part 205. The proposed rules also set forth the process by
which FDA will approve organizations to review the qualifications of
3PL facilities for licensure, which we refer to as a ``licensure
review.''
A licensure review consists of performing a review of all documents
submitted to the licensing authority in support of an application for
3PL licensure and conducting an inspection of the facility as directed
by the licensing authority. If a review of documentation supports
licensure of the 3PL facility, the facility will then be inspected by
an AO, as directed by FDA. FDA is proposing that the AO's licensure
review be completed within 90 days upon receiving notice from the
Agency to conduct the licensure review. FDA believes that this 90-day
timeframe is sufficient for an AO to perform the work with which they
are tasked while also ensuring that there are no undue delays in the
licensure process. Upon completion of the licensure review, the AO
would then provide FDA with a licensure review report within 7 days
(see proposed Sec. 205.17(b)), with a copy sent to the 3PL facility.
As proposed, using the report submitted by the AO, FDA would make the
final determination as to whether a 3PL facility should be issued a
license. The process that AOs should follow when conducting routine
inspections of 3PL facilities mirrors the process for licensure review
and is detailed in proposed Sec. 205.17(c).
It is important that FDA can verify an AO's continued compliance
with the approval requirements. Therefore, to keep its approval, FDA is
proposing to require that an AO maintain certain records for a period
of at least 5 years and these records must be readily available to FDA
upon request. Unless specified by statute, we believe it is reasonable
for the required length of maintenance of records to align with the
length of the entity's licensure term. In addition, to ensure public
safety, FDA is proposing to require that AOs report potential
violations at 3PL facilities to FDA within 24 hours of discovery (see
proposed Sec. 205.17(f)). The general qualifications for approval of
AOs are set out in proposed Sec. 205.18.
To become and remain approved, FDA is proposing to require that an
organization, and those employed by the organization, abide by certain
requirements that are intended to secure against conflicts of interest,
promote professional business practices, and protect non-public
information (see proposed Sec. 205.18(a)).
FDA is proposing to allow AOs to hire outside contractors to
conduct licensure reviews or licensure review-related activities. Under
FDA's proposed regulation, AOs who decide to use outside contractors
must ensure that the contractors not only effectively carry out the
licensure review or licensure review-related activities in a manner
consistent with this proposed regulation to ensure public health, but
the AO must also ensure that the contractors properly protect all non-
public information.
For an AO to maintain approval, FDA proposes to require that the AO
ensures contractors abide by all applicable confidentiality agreements,
that the AOs have policies and procedures in place to ensure the
contractors abide by these proposed standards, and that the contractors
have the necessary training and expertise to carry out licensure
reviews (see proposed Sec. 205.18(b)(1)). Also, before a contractor
hired by an AO may perform a licensure review of a 3PL facility, the
3PL must have entered into an agreement with the AO giving the AO
permission to share with contractors the 3PL's confidential commercial
information (see proposed Sec. 205.18(b)(2)). If such consent is not
provided by the 3PL facility, the AO must perform the licensure review
itself. FDA believes that this approach is reasonable given that it is
the AO's decision to work with contractors and, under this proposed
regulation, the ultimate responsibility for the licensure review rests
with the AO.
In addition, so FDA may keep track of which organization is
responsible for each licensure review, FDA proposes that AOs must
submit to FDA a list of the contractors used by the organization each
year and the AO must certify that such contractors comply with the
applicable requirements (see proposed Sec. 205.18(b)(3)). Finally, to
ensure that the standards set forth in this regulation are followed and
that lines of responsibility are clear, FDA proposes to require that
the AOs remain responsible for all the work performed by outside
contractors (see proposed Sec. 205.18(b)).
FDA proposes to prohibit contractors from subcontracting licensure
review or licensure review-related activities (see proposed Sec.
205.18(b)(1)(ii)). Limiting the ability of contractors to further
delegate their responsibility ensures that FDA will have accurate
information about who is conducting licensure reviews, that those
responsible for the licensure reviews have the necessary
[[Page 6723]]
qualifications, and that their conduct is governed by this proposed
regulation.
The proposed process that FDA will use to approve organizations,
including the application process, as well as the process for
suspending or revoking an organization's approval, are set forth in
proposed Sec. 205.19. To ensure compliance with DSCSA, FDA is
proposing that organizations seeking approval by FDA must first
electronically submit to FDA an application demonstrating the
organization's ability to assess compliance with all 3PL requirements
detailed in proposed Sec. 205.19 (see proposed Sec. 205.19(a) and
(b)). Organizations must also provide training that their employees
must pass before they may conduct licensure reviews (see proposed Sec.
205.19(c)). To verify information contained in the application and
further ensure compliance with the proposed regulation, FDA proposes
that, before an AO may conduct its first licensing review, it must be
audited by FDA (see proposed Sec. 205.19(d)). A new approval will be
valid for 5 years (see proposed Sec. 205.19(e)).
If an organization's request for approval is denied, the
organization may issue a request for reconsideration under 21 CFR 10.75
(see proposed Sec. 205.19(f)). In addition, to ensure compliance and
protect public health, FDA proposes that an AO may have its approval
suspended if it does not maintain the standards outlined in this part
(see proposed Sec. 205.19(g)). A suspended AO must cease all 3PL
licensure review including any pending inspections of 3PL facilities. A
suspended AO must notify any 3PLs under a pending licensure review by
the AO, of the AO's suspension within 7 calendar days (see proposed
Sec. 205.19(g)(5)). While most suspensions will happen only after
notice and opportunity to request a hearing, under the proposed
regulations, FDA reserves the ability to suspend approval prior to a
hearing if there is a reasonable probability that the organization's
noncompliance will cause imminent and serious adverse health
consequences or death to humans (see proposed Sec. 205.19(h)).
Furthermore, FDA proposes that a suspended approval can be
reinstated if the issue is resolved within 1 year from the date of
suspension (see proposed Sec. 205.19(i)), though it may be revoked if
the organization fails to rectify the situation that resulted in the
suspension (see proposed Sec. 205.19(j)). FDA believes that 1 year
provides the AO enough time to remedy most situations. An AO's approval
may also be reinstated on a conditional basis. If the AO is
conditionally reinstated, they will enter a three-year probationary
period, during which if any material deficiencies arise, their license
will be subject to immediate revocation (see proposed Sec.
205.19(i)(2)).
FDA also proposes to permit an AO to voluntarily withdraw its
approval, but it must inform FDA of any facilities with pending reviews
(see proposed Sec. 205.19(l)). To further ensure that pending
licensure reviews are not overlooked, under FDA's proposed regulation,
an AO whose approval has been suspended, revoked, or voluntarily
withdrawn has the responsibility to report this information to those
3PL facilities with pending licensure reviews (see proposed Sec.
205.19(m)); this will stop the clock on the 90-day licensure review
while the 3PL applies for licensure review from another AO or FDA.
Also, to ensure that the AOs continue to meet the standards put forth
in this subpart, and part 205 generally, under the proposed
regulations, an AO must inform FDA of any changes to information that
was submitted as part of its application for approval (see proposed
Sec. 205.19(n)(1)). Since the approval of an organization is
nontransferable, changes in ownership also require an AO to submit a
new application to FDA (see proposed Sec. 205.19(n)(2)). Finally, as
an additional assurance that an AO continues to comply with the
provisions of this part, FDA proposes to require that AO's remain
subject to periodic audits by FDA (see proposed Sec. 205.19(o)).
E. National Standards for Wholesale Distributors
1. Requirement That Wholesale Distributors Be Licensed
To implement section 503(e)(1) of the FD&C Act, FDA is proposing to
codify at Sec. 205.20(a) the requirement that a wholesale distributor
be licensed by the State from which the drug is distributed, or by FDA
if the State from which the drug is distributed has not established a
licensure requirement in accordance with the standards proposed herein,
as well as by the State into which the drug is distributed if that
State requires such a license. This requirement is consistent with how
States currently license wholesale distributors.
FDA anticipates that, for the purposes of annual reporting, a
wholesale distributor who maintains multiple licenses to engage in
wholesale distribution, will be able to report their required
information aggregately for all their licenses (section 503(e)(2) of
the FD&C Act). FDA believes this approach will increase efficiency for
both wholesale distributors and the Agency, ensure that licenses for
wholesale distribution facilities will be granted to qualified firms,
and ensure records related to their facilities will be maintained in an
organized fashion.
In addition, FDA proposes to set the licensure term for wholesale
distributors at 2 years (see proposed Sec. 205.20(b)). FDA considered
current State requirements, as well as the potential impacts on State
and Agency resources, to determine the term for licensure. Ultimately,
the Agency believes that 2 years aligns with current practices, does
not place an undue burden on State or FDA resources, and provides
adequate protection to American consumers because it ensures that
renewals will be based on current information and operations.
2. Surety Bonds
Wholesale distributors are required to obtain a surety bond to be
licensed and engage in wholesale distribution (section 583(b)(3) of the
FD&C Act). FDA is proposing to establish the terms of this requirement
in proposed Sec. 205.21. To receive or renew a license, a surety bond
of $100,000, or $25,000 if applicable (for wholesale distributors with
annual gross receipts of $10,000,000 or less), must be in place at the
time the wholesale distributor's application for licensure or licensure
renewal is submitted to the licensing authority (see proposed Sec.
205.21(b)). The surety bond is intended to ensure compliance with DSCSA
and that any administrative penalties levied by the licensing
authorities are paid. DSCSA also permits the furnishing of ``other
equivalent means of security acceptable to the State'' in lieu of a
bond (section 583(b)(3)(A)(i) of the FD&C Act). It would be up to the
State licensing authority to determine what, if anything, would
constitute an equivalent means of security to a surety bond. Where FDA
is the licensor, the wholesale distributor would need to furnish a
surety bond to satisfy the bond requirement as other equivalent means
of security appear to be specifically reserved for the States.
While a bond is required before a wholesale distributor may acquire
the necessary license, section 583(b)(3)(B) of the FD&C Act provides a
set of circumstances under which the surety bond requirement will be
waived. FDA is proposing to codify at Sec. 205.21(b)(3) the DSCSA
requirement that if a wholesale distributor can prove it has the
necessary bond for the State where the facility is located (e.g., by
providing a copy of the existing security bond
[[Page 6724]]
agreement), the requirement for an additional surety bond for another
State is waived. In this situation, the wholesale distributor does not
have to acquire an additional bond to satisfy the non-resident
licensure requirements of the State into which the wholesale
distributor plans to distribute. However, it remains unclear if and how
this waiver should apply when an equivalent means of security to the
surety bond are used. FDA requests comment specifically related to the
waiver to the surety bond requirement and whether that waiver should
apply to scenarios where some other equivalent means of security is
used in lieu of a surety bond.
The terms that a surety bond must include are outlined in proposed
Sec. 205.21(c). FDA proposes to require not only that the terms cover
the liability requirements related to administrative penalties, but
also that the bond remain in full force for 1 year after the license
expires and that the surety company guarantee payment within 30 days of
receiving notice from the licensing authority. FDA also proposes
permitting licensing authorities to make claims against the surety bond
for 1 year after the wholesale distributor's license expires or within
60 days after an administrative or legal proceeding has concluded,
whichever is longer. These timeframes seek to ensure that the rights of
the different parties involved in a potential claim will be adequately
protected. This is particularly important with respect to the waiver
because it allows the affected States equal access to the surety bond
and ensures consistent standards across States.
The implications of termination or lapse in coverage of a surety
bond are detailed in proposed Sec. 205.21(d). A wholesale distributor
may cancel its surety bond, but FDA proposes to require that it give
all impacted licensing authorities 30 days' prior notice before such
cancellation take effect. Such notice is necessary because a wholesale
distributor's license will be suspended upon the cancellation of the
surety bond unless the wholesale distributor acquires a new bond before
to the old bond is cancelled. FDA proposes that a license will be
suspended if a licensing authority discovers a lapse in bond coverage.
FDA also proposes to require that the surety bond permit actions to
be brought by either a State or Federal licensing authority (see
proposed Sec. 205.21(e)), provide the contact information for the
surety company (see proposed Sec. 205.21(f)), and name the specific
parties to the surety bond (see proposed Sec. 205.21(h)).
3. General Requirements for Licensure
This section includes the requirements for the application. FDA
notes that the applicant would have to demonstrate compliance with the
requirements as set forth in subpart C, including a satisfactory
inspection, as described in proposed Sec. 205.28, and criminal
background checks for facility managers and designated representatives,
as described in proposed Sec. 205.25, to be granted a wholesale
distributor license.
The general application requirements that must be met for a State
or Federal licensing authority to issue a wholesale distributor license
are set forth in proposed Sec. 205.22. The requirements applicable to
the individual who submits the licensure application are detailed in
proposed Sec. 205.22(a). FDA proposes to require that the applicant
submit all required information and pay a licensing fee in order to be
considered for licensure. FDA believes these general requirements align
with current industry practices.
FDA is proposing at Sec. 205.22(b) to require that the applicant
provide the surety bond or other equivalent means of security
acceptable to the State, required by section 583(b)(3) of the FD&C Act
and detailed in proposed Sec. 205.21, as part of the wholesale
distributor's application for a license.
The information that the licensing authority will require as part
of a wholesale distributor's initial application for licensure and
renewal applications is set forth in proposed Sec. 205.22(c) and (d).
This information is necessary for the licensing authority to assess
whether the wholesale distributor is in good standing and has the
infrastructure and capabilities to fulfill the duties and obligations
of licensure. For example, FDA is proposing to require that a wholesale
distributor inform FDA if it has received any citations for violating
requirements for licensure or received any significant disciplinary
actions within the past 7 years (see proposed Sec. 205.22(c)(8)). FDA
believes this information is necessary to ensure the wholesale
distributor can demonstrate that it has not engaged in a pattern of
violating the standards for licensure. The DSCSA defines prohibited
persons, in part, as licensees who have ``engaged in a pattern of
violating the requirements of this section, or State requirements for
licensure, that presents a threat of serious adverse health
consequences or death to humans'' (section 583(d) of the FD&C Act).
Therefore, this information is necessary to demonstrate that a
wholesale distributor is not prohibited from receiving or maintaining
licensure for wholesale distribution.
Finally, FDA proposes to require that a wholesale distributor's
license be readily retrievable at the facility, and that the facility
permit State or Federal inspectors, or others acting on behalf of the
licensing authority, to inspect the license (see proposed Sec.
205.22(e)).
4. The Federal Licensure Process
Section 503(e) of the FD&C Act, as amended by DSCSA, requires FDA
to license wholesale distributors directly if the State in which it
engages in wholesale distribution has not established a licensing
requirement (section 503(e)(1) of the FD&C Act). Proposed Sec. 205.23
details the process that FDA will use when issuing licenses to
wholesale distributors. While this section is only applicable to
wholesale distributors obtaining a license from FDA, FDA suggests
States implement similar procedures to ensure that all wholesale
distributor licenses issued are consistent with the proposed regulation
pursuant to section 503(e)(1)(B) of the FD&C Act. FDA plans to make
information available to clarify who is the appropriate licensing
authority in the wholesale distributor's State. FDA believes this
streamlined process for application will allow for greater clarity and
harmonization across the industry.
For wholesale distributor license applications submitted to FDA,
FDA proposes that the wholesale distributor submit the application
electronically, including the information outlined in proposed
Sec. Sec. 205.21 and 205.22, along with additional supporting
documentation (see proposed Sec. 205.23(a)(1)). The DSCSA authorizes
FDA's use of third-party organizations--AOs--to conduct inspections of
wholesale distributors required under section 583(c) of the FD&C Act.
If FDA has approved one or more AOs to inspect wholesale distributors,
the wholesale distributor should note the AO it prefers to conduct its
inspection on the application submitted to FDA (see proposed Sec.
205.23(a)(2)). If no AO has been approved, FDA will conduct the
inspection (see proposed Sec. 205.23(a)(3)). Furthermore, submission
of the application to FDA will not be considered complete until FDA
receives all pertinent information and fees (see proposed Sec.
205.23(a)(5)).
While the DSCSA permits AOs to conduct inspections of wholesale
distributors applying for licensure, the responsibility of determining
whether a wholesale distributor meets all the applicable requirements
set forth in this proposed regulation remains with FDA (see proposed
Sec. 205.23(b)). To avoid
[[Page 6725]]
delays in the licensure process, FDA intends to work with wholesale
distributors to correct minor errors made on the application (e.g.,
missing written policies and procedures) and communicate with the
wholesale distributor about additional information the Agency may need
to process and review the application (see proposed Sec. 205.23(c)).
If the wholesale distributor meets the requirements outlined in this
proposed part and none of the prohibited factors listed in proposed
Sec. 205.30(a)(1) are present, FDA will approve the application and
send an approval letter and license certificate (see proposed Sec.
205.23(d)).
FDA recognizes that a wholesale distributor may have concerns about
what happens to the status of its license if disciplinary sanctions are
taken against the approval status of the AO that conducted its
inspection when applying for licensure or if the organization is
otherwise no longer considered an approved AO. While FDA believes that
a wholesale distributor should not be penalized for the actions of the
AO, FDA must ensure that the AO's review and findings provide a
reliable basis for licensing decisions. As such, FDA is proposing that,
if the wholesale distributor is otherwise in good standing, a change in
the approval status of the AO that conducted the inspection of the
wholesale distributor will not automatically affect the licensure of a
licensed wholesale distributor (see proposed Sec. 205.23(e)). Rather,
in the event that an AO has disciplinary sanctions taken against it,
ends its business, or is otherwise no longer considered an approved AO,
the license of any wholesale distributor reviewed by that AO will be
subject to appropriate action in accordance with Sec. 205.30 and other
applicable statutes or regulations. FDA may verify the wholesale
distributor's compliance status and review the facts in that situation
to determine the potential effect, if any, on the licensure of
wholesale distributors inspected by that AO.
5. Changes to Information, Ownership, or Location of Licensed Wholesale
Distributors
FDA recognizes that information about a business can change over
time. However, for the licensing authority to effectively carry out its
responsibilities, license information must remain current and changes
in information previously submitted must be reported to the licensing
authority. Currently, the reporting requirements for these types of
changes vary by State. FDA is proposing the establishment of specific
timeframes for reporting changes (see proposed Sec. 205.24) and
believes that standardizing the timeframes will help make reporting
business-related changes less burdensome for industry and licensing
authorities. FDA is proposing that the wholesale distributor submit
changes to certain information, such as the information submitted with
a surety bond or as part of an application for licensure, to the
licensing authority within 30 calendar days of the date the change
became effective (see proposed Sec. 205.24(a)). Significant changes,
such as changes in location or changes to the person engaged in
wholesale distribution, require the added scrutiny that comes with an
inspection or review of an application for a new license to ensure that
the entity will be able to continue to meet the standards for licensure
in its new location or under its new management. For this reason, FDA
is proposing that changes in location or changes to the person engaged
in wholesale distribution will require an inspection or new license
(see proposed Sec. 205.24(b) and (c)). FDA recognizes that the
ownership of a facility from which a wholesale distributor leases the
facility and conducts wholesale distribution may change without the
wholesale distribution operation changing in any meaningful way. If
that change does not impact the wholesale distribution operation, the
wholesale distributor will not need to apply for a new license. As
described in proposed Sec. 205.24(b)(1), the date the change of
location takes place is the date the new location begins receiving
prescription drugs.
6. Prohibited Persons and Qualifications for Key Personnel
The FD&C Act, as amended by DSCSA, requires FDA to establish and
implement standards for the qualifications of wholesale distributors'
key personnel (section 583(b)(5) of the FD&C Act). As discussed above
and proposed at Sec. 205.3(g), FDA considers key personnel to include
individuals with responsibility for managing the operations of the
wholesale distributor, including any principal, owner, director,
officer of the wholesale distributor, facility manager or designated
representative, or other individuals who are authorized to enter into
areas where prescription drugs are held and are likely to handle those
prescription drugs as a part of their responsibilities within the
operation. FDA believes the qualifications for key personnel proposed
in Sec. 205.25 are necessary to ensure that all the individuals who
are responsible for operating the wholesale distributor's facility are
appropriately qualified to carry out their duties and that the
wholesale distributor meets the national standards.
Proposed Sec. 205.25(a) lists conduct that prohibits a wholesale
distributor from obtaining licensure. Proposed Sec. 205.25(b)
establishes the basic standards for key personnel working within a
wholesale distribution facility. Key personnel must have the
appropriate education, background, training, and experience necessary
to carry out their assigned functions within the operation. No one
within the facility should carry out the responsibilities of key
personnel without the proper training and expertise.
As a part of FDA's responsibility to establish and implement
standards for the qualifications of wholesale distributors' key
personnel, FDA is proposing that wholesale distributors and their key
personnel meet certain other qualifications. Licensure may be denied if
a wholesale distributor or any of their key personnel do not meet the
standards for qualification as outlined in proposed Sec. 205.25(c).
Key personnel working for a wholesale distributor hold critical
positions of trust for protecting the security of the prescription drug
supply chain. FDA believes it would be a best practice for a firm to
require that all employees not engage in the illegal use of controlled
substances while serving in their capacity in the wholesale
distribution operation and request that all employees so state.
FDA is proposing to require wholesale distributors to establish and
implement written policies and procedures to ensure that their key
personnel meet the qualifications contained in this proposed section
(see proposed Sec. 205.25(e)) and to maintain certain information
about their key personnel that demonstrates they are qualified to carry
out the duties assigned to them (see proposed Sec. 205.25(b)),
including having the proper education and training (see proposed Sec.
205.25(e)(3)). Proposed Sec. 205.25(f) also limits a facility manager
or designated representative to hold that position at one facility at a
time. This is to ensure that the facility manager or designated
representative is actively engaged in managing the daily operations of
the facility and that they remain aware of any non-compliance issues
that may arise.
The FD&C Act, as amended by DSCSA, specifically requires licensure
standards to include mandatory background checks and fingerprinting of
wholesale distributor facility managers and their designated
representatives
[[Page 6726]]
(section 583(b)(4) of the FD&C Act). Entrusting individuals with the
responsibility of distributing prescription drugs prior to a criminal
background check may jeopardize the integrity of the drug supply chain
and leave the public exposed to unnecessary harm posed by the possible
introduction of drugs that are unsafe. FDA is proposing to codify at
Sec. 205.25(g) the requirement for facility managers and their
designated representatives to submit a full set of fingerprints to
conduct local and national criminal background checks. The background
check, when completed, must demonstrate that the facility manager or
designated representative has no history of criminal convictions
pursuant to proposed Sec. 205.25(a).
FDA suggests, when a wholesale distributor staffs its operation, it
is a best practice that the individuals who work within their operation
and have access to prescription drugs not have a record of criminal
activity involving violations of the FD&C Act or other laws involving
prescription drugs. This best practice is recommended to help ensure
security within a wholesale distributor.
When screening personnel who work in areas of a facility where
prescription drugs are held, including the facility manager or
designated representative, FDA recommends that a wholesale distributor
consider whether such personnel have (1) engaged in a pattern of
violating the requirements of section 583 of the FD&C Act that present
a threat of serious adverse health consequences or death to humans; (2)
been found to have committed or facilitated commission of any
prohibited acts under the FD&C Act or violated or facilitated any
violations of any of the regulations in this part or analogous
provisions of the State licensing authority, as applicable; (3) been
convicted of any violation Federal, State, or local laws relating to
drug samples, wholesale or retail drug distribution, distribution of
controlled substances, or 3PL services; or (4) been convicted of any
felony under Federal, State, or local laws involving or related to
prescription drugs. FDA believes that wholesale distributors should
consider an applicant's history of violations of the FD&C Act or other
laws involving prescription drugs when making staffing decisions.
7. Wholesale Distributor Storage and Handling of Prescription Drugs,
and Required Policies and Procedures
The DSCSA charges FDA with creating national standards for the
storage and handling of prescription drugs by wholesale distributors,
including facility requirements (section 583(b)(1) of the FD&C Act). To
ensure confidence that the prescription drug delivered maintains its
quality and integrity throughout the distribution process, FDA believes
that wholesale distributors should establish and maintain quality
systems that encompass the organizational structure, account for
potential vulnerabilities or threats to the systems, and clearly
articulate the procedures and processes for all wholesale distribution
activity. A proper quality system should be fully documented, and the
effectiveness of the system should be continually monitored to ensure
the quality is maintained. This includes ensuring that facilities and
equipment are properly maintained for their purposes of storing and
distributing prescription drugs; that personnel are properly qualified,
screened, and trained for their positions; and that documentation is
comprehensive. Regular management review of all aspects of the quality
systems in place is important for maintaining these high standards. FDA
proposes Sec. 205.26, which establishes basic requirements that will
assist wholesale distributors in achieving these goals.
Although the FD&C Act permits an entity to be more than one type of
trading partner so long as it complies with all the applicable
requirements (section 582(a)(1) of the FD&C Act), FDA believes that the
processes and functions of each type of entity need to be kept separate
for the licensing authority to ensure the entity is complying with all
the applicable requirements. Accordingly, FDA is proposing that any
wholesale distributor's facility that is also licensed or registered as
another trading partner and operating from the same address must have
separate systems and processes in place for their separate functions
(see proposed Sec. 205.26(a)).
FDA believes that proper storage and handling of prescription drugs
inherently requires the establishment of standards that address
physical requirements for the facility space in which drugs are stored
and handled, along with standards that address the manner in which
drugs are to be securely stored and handled within the facility of a
wholesale distributor. In Sec. 205.26(b), FDA proposes the following
requirements with regard to standards placed on the wholesale
distributor's facility. FDA believes these facility requirements will
ensure that their establishments are appropriate for the distribution
(including storage) of prescription drugs.
The facility must be of a suitable size, configuration, and design
to ensure proper storage, maintenance, and cleanliness (see proposed
Sec. 205.26(b)(1)(ii) through (iv)). The facility must also be
equipped with clearly defined areas that separate drugs that are unfit
for distribution, from those that are saleable to avoid potential
mistakes when distributing the prescription drugs (see proposed Sec.
205.26(b)(1)(vi)).
The facility must be sufficiently secure to protect the
prescription drugs in the supply chain from possible theft or diversion
(see proposed Sec. 205.26(b)(2)). Facilities must protect against
unauthorized entry and ensure that the premises are well lit and not
vulnerable to intrusion (see proposed Sec. 205.26(b)(2)(i) through
(iii)). Entry and access to areas where prescription drugs are held
within the facility must be limited to those who have the appropriate
experience and training needed to conduct wholesale distribution (see
proposed Sec. 205.26(b)(2)(iv)). These basic security requirements
will help wholesale distributors protect and safeguard the prescription
drugs maintained in their facility.
A wholesale distributor has the responsibility of ensuring that
prescription drugs are stored under proper conditions to maintain the
safety and effectiveness of the drugs it distributes. Accordingly, a
wholesale distributor's facility must maintain appropriate equipment
(e.g., refrigeration and air conditioning equipment) in good working
order to ensure that prescription drugs are properly stored in the
facility (see proposed Sec. 205.26(b)(3)). To this end, FDA is
proposing to require that a wholesale distributor establish written
procedures to ensure that its equipment is installed and maintained by
qualified individuals (see proposed Sec. 205.26(b)(3)(i)). Written
policies and procedures include those that are stored and maintained
electronically. Upon inspection, a wholesale distributor must
demonstrate and verify that its equipment is in working order and has
been periodically assessed in accordance with the wholesale
distributor's written procedures to ensure the equipment's continued
functionality (see proposed Sec. 205.26(b)(3)(i)), which is critical
in ensuring that those drugs retain their safety and effectiveness
throughout the supply chain.
Additionally, a wholesale distributor must regularly conduct and
document facility assessments to make sure that drugs are properly
stored in accordance
[[Page 6727]]
with their labeling (see proposed Sec. 205.26(b)(4)).
FDA expects that, as a crucial part of the creation of a quality
system, wholesale distributors will establish, maintain, and follow
written policies and procedures regarding the safeguarding of the
prescription drugs within their control. Proposed Sec. 205.26(c)
outlines several requirements for maintaining written policies and
procedures to ensure that the requirements are carried out properly and
consistently. Wholesale distributors are not limited to establishing
written policies and procedures for the stated functions in proposed
Sec. 205.26(c), as a wholesale distributor may wish to establish
written policies and procedures pertaining to other aspects of
wholesale distribution and staffing of their facilities. The purpose of
requiring written policies and procedures is to assist staff and
management at a wholesale distribution facility to determine the
processes required to ensure safe storage and distribution of
prescription drugs.
Proposed Sec. 205.26(c) includes the requirement that wholesale
distributors establish and follow written policies and procedures to
ensure that a wholesale distributor: (1) Only does business with other
authorized trading partners (see proposed Sec. 205.26(c)(1)); (2)
properly maintains equipment in good working order as outlined in
proposed Sec. 205.26(b)(3) (see proposed Sec. 205.26(c)(2)); (3)
transports prescription drugs in a manner designed to avoid breakage
and exposure (see proposed Sec. 205.26(c)(3)); (4) inspects shipping
containers for suspect or illegitimate products, as well as other
quality issues that may render the prescription drug unfit for
distribution (see proposed Sec. 205.26(c)(4)); (5) stores and handles
the prescription drugs they warehouse and distribute in accordance with
the prescription drug's labeling (see proposed Sec. 205.26(c)(5)); (6)
properly retains, returns, or destroys drugs removed from the supply
chain depending on the proper disposition of the prescription drug (see
proposed Sec. 205.26(c)(6)); and (7) is prepared to protect against
reasonably foreseeable crises that could affect security or operations
at the facility (see proposed Sec. 205.26(c)(7)).
8. Recordkeeping
Proper recordkeeping is essential to the timely identification,
recording, and reporting of issues arising within the supply chain.
Section 583(b)(2) of the FD&C Act requires FDA to create national
standards for establishing and maintaining records pertaining to the
distribution of prescription drugs. FDA is proposing in Sec. 205.27(a)
that these records include documentation pertaining to the security,
storage, handling, inventory, shipping, sale, purchase, trade,
delivery, and receipt of prescription drugs, as well as policies,
procedures, instructions, contracts, data, inspection reports, and any
other documentation related to compliance with this part, such as
invoices, purchase orders, packing slips, and shipping records. These
records could be stored and maintained electronically. These records
maintenance requirements will allow for greater confidence in the
information preserved at the facility and potentially disseminated to
other trading partners.
The maintenance, availability, and accuracy of the records made
available for inspection under section 583(b)(6) of the FD&C Act are
critical to ensure that wholesale distributors are acting in compliance
with this proposed regulation and that the records can be relied upon
to identify any potential risk to the public health. As such, FDA is
proposing to require that all records be securely stored, and that any
alterations made to records be signed and dated, while preserving the
original information contained in the record (see proposed Sec.
205.27(b)). This is intended to ensure that all records related to the
distribution of prescription drugs provide transparency and accurately
reflect the activities of the wholesale distributor. FDA also believes
that reliability of the records is contingent on having processes and
procedures in place that restrict access to and protect the integrity
of the data. To this end, FDA is proposing to require in Sec.
205.27(c) that wholesale distributors implement written policies and
procedures to protect the integrity of their records.
Under proposed Sec. 205.27(d), all records would be retained for a
period of 3 years, except records related to suspect and illegitimate
products, prescription drug quality complaints, and destroyed,
returned, and recalled prescription drugs, which would need to be
retained for a period of 6 years. Such record retention is necessary to
ensure compliance and consistent enforcement of the various record
keeping requirements of sections 582, 583, and 584 of the FD&C Act.
9. Inspections
Section 583(b)(6) of the FD&C Act directs FDA to establish national
standards for a mandatory physical inspection of any facility used in
wholesale distribution within a reasonable time frame from the initial
application (section 583(b)(6) of the FD&C Act). FDA believes that it
is imperative for the mandatory physical inspection to take place prior
to issuing an initial license to a wholesale distributor to ensure that
only those wholesale distributors who have the ability to properly
store, handle, and distribute prescription drugs in accordance with the
national standards are licensed. Accordingly, in proposed Sec.
205.28(a), wholesale distributors are required to undergo a physical
inspection before the licensing authority issues the initial license.
As used in subpart C, licensing authority means the State licensing
authority or FDA. To satisfy the inspection requirement, section 583(c)
of the FD&C Act permits the licensing authority to conduct the
inspection or accept an inspection by the State in which the facility
is located or by a third-party accreditation or inspection service
approved by the licensing authority in accordance with these standards.
FDA has codified this provision at proposed Sec. 205.28(a)(1) and (2).
Additionally, FDA believes that section 583(c) can be applied to State
licensure of non-resident wholesale distributors to ship into a State
and proposes that a State into which a drug is distributed may use the
same methods to satisfy the inspection requirement for non-resident
wholesale distributors (see proposed Sec. 205.28(a)(1)(iii)). FDA
believes that requiring a satisfactory inspection prior to licensure
will ensure that only wholesale distributors with appropriate
facilities and equipment for storing and distributing prescription
drugs are granted a license to participate in the supply chain.
FDA is proposing to require that the physical inspection of
wholesale distributor facilities include the facility itself, processes
related to all wholesale distribution activities, and paper and
electronically stored records; that wholesale distributors permit
inspections at reasonable times; and that the licensing authority
conduct its inspection in a reasonable manner (see proposed Sec.
205.28(b) and (c)). FDA believes that authentication of records during
an inspection is important to maintain confidence in documentation
preserved by the wholesale distributor, which may contain information
about nonsaleable prescription drugs or be disseminated to other
trading partners.
FDA proposes that a wholesale distributor be required to make
records available during inspections, including records that are held
offsite in the normal course of business. The failure of a wholesale
distributor to produce
[[Page 6728]]
records in a timely manner during an inspection can significantly
affect the licensing authority's ability to complete the inspection.
Therefore, FDA is proposing that a wholesale distributor be required to
provide offsite records within 2 business days of a request for such
records by a State or Federal official, or sooner if necessitated by
the duration of the inspection (see proposed Sec. 205.28(b)). FDA also
proposes the requirement that a wholesale distributor cooperate with
the State or Federal licensing authority, or the AO conducting the
inspection, at reasonable times, within reasonable limits, and in a
reasonable manner to achieve the objective of the inspection (see
proposed Sec. 205.28(c)).
Finally, FDA believes routine inspections are an essential tool to
ensure that wholesale distributors continue to comply with the national
standards after obtaining their initial wholesale distributor license
and move to renew that license. Accordingly, FDA is proposing to
require that wholesale distributors undergo routine inspections at
least once every 3 years (see proposed Sec. 205.28(d)). In developing
the inspection timeframes, FDA sought to balance the risk to the supply
chain with FDA's and State licensing authorities' resource constraints.
These routine inspections allow FDA or the licensing authority to
ensure that wholesale distributors maintain the levels of quality
storage and maintenance of prescription drugs at their facilities
expected by FDA to safeguard the supply chain.
10. Annual and Other Reporting to FDA
Under DSCSA, wholesale distributors must report certain information
to FDA as part of the requirement to be considered an authorized
trading partner (sections 581(2)(B) and 503(e)(2)(A) of the FD&C Act).
The annual reporting requirements for wholesale distributors went into
effect on January 1, 2015, and FDA has published draft industry
guidance that communicates draft Agency expectations for annual
reporting while these regulations are being developed (79 FR 73083,
December 9, 2014, and 82 FR 3004, January 10, 2017). Proposed Sec.
205.29 clarifies the statutorily prescribed annual reporting
requirements.
The DSCSA requires that any wholesale distributor who owns or
operates an establishment that engages in wholesale distribution report
to FDA on an annual basis: (1) The State in which the wholesale
distributor is licensed; (2) the identification number of its wholesale
distributor's license; (3) the name, address, and contact information
for the wholesale distributor; (4) all trade names under which the
licensed wholesale distributor conducts business; and (5) any
significant disciplinary actions taken against the wholesale
distributor (section 503(e)(2)(A) of the FD&C Act).
FDA is proposing to require that wholesale distributors use an
electronic reporting system provided by FDA (see proposed Sec.
205.29(a)). This electronic system will increase efficiency by
providing uniformity in report content and format, making the
information easier to process for regularly updating the public
database (section 503(e)(2)(B) of the FD&C Act). In addition, FDA
believes having the license status of wholesale distributors in one
publicly available database would be helpful for FDA, trading partners,
and other stakeholders in determining whether wholesale distributors
are authorized, as defined in section 581(2)(B) of the FD&C Act.
Reporting information for each wholesale distributor in FDA's
electronic system during the reporting period is integral to FDA's
ability to provide oversight, as wholesale distributors are prohibited
from distributing product without a license.
FDA proposes that the annual reporting schedule will require all
wholesale distributors to report each calendar year between January 1st
and March 31st, although an entity may update information at any time
(see proposed Sec. 205.29(b)). For example, if a wholesale distributor
chooses to update a license on December 15, 2019, that wholesale
distributor will still have to report during the January 1, 2020,
through March 31, 2020, annual reporting period.
The specific information that wholesale distributors must
electronically report to FDA is set forth in proposed Sec. 205.29(c).
The DSCSA requires licensed entities to report to FDA each State by
which they are licensed and each license number (section
503(e)(2)(A)(i)(I) of the FD&C Act). FDA is proposing that the
wholesale distributor also submit the expiration date of its State
licenses (see proposed Sec. 205.29(c)). The submission of the
wholesale distributor's license expiration date is paramount to FDA's
ability to establish and maintain a public database identifying each
authorized wholesale distributor as required by section 503(e)(2)(B) of
the FD&C Act. If a wholesale distributor's license expires, it is no
longer an authorized trading partner, and FDA will remove it from the
public database until the license is renewed or a new license issued.
Similarly, FDA is proposing that a wholesale distributor be required to
report to FDA within 30 calendar days that it has gone out of business
or voluntarily withdrawn a wholesale distributor's license from a State
(see proposed Sec. 205.30(e)). Again, FDA believes that requiring a
wholesale distributor to report this information about the status of
its license is essential for FDA to comply with the requirements under
section 503(e)(2)(B) of the FD&C Act and to ensure that the database is
accurate and helpful for the States and trading partners.
The DSCSA also requires that wholesale distributors report the
name, address, and contact information for each facility at which, and
all the trade names under which, the wholesale distributor conducts
business (section 503(e)(2)(A)(i)(II) of the FD&C Act). In implementing
this requirement, FDA is proposing to require the wholesale distributor
to provide the company name that is identical to the official company
name appearing on the license, along with the full business address
that is associated with the State or Federal license (see proposed
Sec. 205.29(c)(2)).
Additionally, FDA is requesting that wholesale distributors submit
a UFI that corresponds with the facility name and facility address. The
UFI for a wholesale distributor's facility is useful to FDA in
identifying and confirming certain business information. A wholesale
distributor should obtain a separate UFI for each physical address it
reports. FDA has published guidance on annual reporting that can assist
wholesale distributors if they require additional information regarding
the UFI reporting recommendation.
In addition, FDA believes the wholesale distributor's contact
information should include someone familiar with the daily operations
of the wholesale distributor's facility and who has the authority to
act on inquiries to ensure efficient processing of inquiries and
minimize the impact inquiries may have on the facility's daily
operations. Therefore, wholesale distributors must submit the contact
information of the facility manager or designated representative,
including that individual's name, telephone number, and email address,
with its annual reporting requirements pursuant to section
503(e)(2)(A)(i)(II) of the FD&C Act.
DSCSA requires a wholesale distributor to report to FDA any
significant disciplinary action taken by a State or Federal government
against the wholesale distributor (section 503(e)(2) of FD&C Act). A
significant disciplinary action is defined in the
[[Page 6729]]
proposed regulation, in relevant part, as any action by a State or
Federal licensing authority that limits or prevents a wholesale
distributor from distributing or facilitating the distribution of
prescription drugs (see proposed Sec. 205.3(l)). FDA proposes that
wholesale distributors report during the reporting period to FDA all
significant disciplinary actions that occurred during the preceding 12-
month period (see proposed Sec. 205.29(d)(1)). After the reporting
period, FDA proposes that within 30 calendar days after a significant
disciplinary action is imposed or taken by a State or Federal
government, wholesale distributors report the type of disciplinary
action, the date the action was taken, and the State where the
disciplinary action occurred, as well as submit any documents
associated with the disciplinary action, including a final ruling by
the relevant State or Federal agency or board or a consent decree (see
proposed Sec. 205.29(c)(4) and (d)). While wholesale distributors do
not ordinarily have to report DEA registration numbers or State
controlled substances licenses to FDA for annual reporting purposes,
FDA suggests that such information be provided as part of its report
under section 503(e)(2)(A)(ii) of the FD&C Act when there is a
significant disciplinary action issued by the DEA or the State
controlled substances licensing authority that would limit the ability
of the wholesale distributor to distribute controlled drug substances.
In such a situation, information about the DEA registration or State
controlled substance license should be reported since the disciplinary
action is reported under that specific license or registration.
11. Licensure Denial, Suspension, Reinstatement and Revocation--Notice
and Opportunity To Request a Hearing
The standards for licensure denial are set forth in proposed Sec.
205.30. Proposed Sec. 205.30(a)(1) lists 10 circumstances under which
a licensing authority will be required to deny a wholesale
distributor's request for licensure or licensure renewal. FDA believes
that these reasons requiring denial will ensure wholesale distributors
focus on good storage practices outlined by FDA and are necessary to
protect the integrity of the products in the pharmaceutical
distribution supply chain. Wholesale distributors should seek to ensure
that these reasons outlined in proposed Sec. 205.30(a)(1) are
addressed when the wholesale distributor files for licensure to avoid
denial or delays of their application.
Proposed Sec. 205.30(a)(2) through (5) details the process
afforded to wholesale distributors whose applications for licensure
have been denied. FDA is proposing to give applicants the opportunity
to provide additional information for reconsideration of the denial. If
the licensing authority denies a wholesale distributor's request for
licensure after reconsideration, the wholesale distributor will receive
a notice of opportunity to request for hearing under existing FDA
hearing procedure. FDA requests comment regarding the reconsideration
and appeal process outlined in this regulation for wholesale
distributors whose applications for licensure have been denied.
The proposed standards for suspending a wholesale distributor's
license are set forth in Sec. 205.30(b) and (c). A suspended wholesale
distributor must cease all receipt and distribution of prescription
drugs until their license is re-instated. The proposed standards for
suspension are based on the severity of risk posed to the public
health. For example, under proposed Sec. 205.30(b), a wholesale
distributor's license may be suspended only after the wholesale
distributor receives a notice of opportunity for hearing. If the
licensing authority has a reasonable belief that the wholesale
distributor is not in compliance with licensure requirements and such
noncompliance threatens the quality of the product or threatens public
safety, the licensing authority is required to notify the wholesale
distributor in writing of the intent to suspend its license. A
wholesale distributor will have 30 days upon the date of the notice of
intent to suspend a license to provide additional information to the
licensing authority so it may reconsider its decision to suspend the
wholesale distributor license. If reconsideration is not sought, or if
reconsideration is denied, the licensing authority will inform the
wholesale distributor in writing of its formal intent to proceed with
license suspension. The notice will contain a statement informing the
wholesale distributor that it has an opportunity to request a hearing
on the question of whether there are sufficient grounds for suspension.
The wholesale distributor will have 10 days after the date of the
notice to inform the licensing authority of its intent to request a
hearing; otherwise the opportunity for a hearing will be waived and the
license suspended. FDA requests comment regarding this reconsideration
and appeal process.
Proposed Sec. 205.30(c) allows for suspension prior to notice and
opportunity for a hearing and for suspension to be effective
immediately if the wholesale distributor's noncompliance poses an
imminent threat to public safety. For example, if a wholesale
distributor is distributing illegitimate product, and once made aware,
does not take corrective actions to protect the public from the threat
of these products, its license could be suspended immediately. Another
example would be a scenario where the conditions under which drugs are
held cause the product to be illegitimate and the wholesale distributor
refuses to correct the conditions or continues to ship these
illegitimate products. Under the proposed regulation, if the licensing
authority proceeds with suspension in such a situation, the licensing
authority will inform the wholesale distributor in writing that its
license is suspended. The notice will also contain a statement
informing the wholesale distributor that it may request a hearing and
that hearing, if granted, will be afforded within 10 days of the
receipt of the wholesale distributor's request for hearing. The
wholesale distributor has 10 days from the date on the notice of
suspension to request a hearing; otherwise its opportunity for a
hearing will be waived. FDA believes that this limits the amount of
time a wholesale distributor's license would be suspended while
providing a reasonable amount of time both for the wholesale
distributor to review a notice of suspension and collect the necessary
information to demonstrate that its license should not be suspended,
and for FDA to consider the hearing request, and to schedule and
prepare for a hearing, if the hearing request is granted. FDA believes
immediate suspension of a wholesale distributor's license is crucial in
cases where continued operation of the wholesale distributor presents
an imminent threat to public safety and the pharmaceutical supply
chain.
Under proposed Sec. 205.30(d), a wholesale distributor's suspended
license may be reinstated if the wholesale distributor can demonstrate
to the licensing authority that it is in compliance with this proposed
regulation.
Under the proposed rule the process outlined at Sec. 10.75 is the
default for appeals related to a denied application for a wholesale
distributor license, and the hearing process outlined at 21 CFR part 16
is the default for appeals related to a suspended or revoked wholesale
distributor license. However, the wholesale distributor may request any
of the procedures contained in 21 CFR parts 10 through 16. FDA believes
that
[[Page 6730]]
this proposed approach is consistent with current practice and suggests
that States develop comparable processes.
The standards for revoking a wholesale distributor license are set
forth in proposed Sec. 205.30(e). The licensing authority will revoke
a license if it finds that a wholesale distributor whose license has
been suspended is unable or refuses to comply with the licensing
requirements. The requirements governing the revocation of a wholesale
distributor license are set forth in proposed Sec. 205.30(e)(2)
through (4) and mirror the process outlined in Sec. 205.30(b)(2)
through (7), with one exception: When the licensing authority informs
the wholesale distributor of its intent to revoke a license, the
wholesale distributor is given no opportunity for reconsideration since
it already had an opportunity to rectify deficiencies while its license
was suspended.
In addition, where a wholesale distributor fails to timely renew
its application, the license will be considered expired and the
wholesale distributor will need to submit an application for new
licensure if it seeks to resume wholesale distribution activities,
because the licensing authority may be unable to confirm that the
wholesale distributor continues to meet all necessary licensure
requirements (see proposed Sec. 205.30(f)). If a wholesale
distributor's license expires, it must cease receipt and distribution
of prescription drugs until their license has been re-instated.
FDA is also proposing that the licensing authority will terminate a
wholesale distributor's license upon request from the wholesale
distributor when the request includes a notice of the wholesale
distributor's intent to discontinue its activities and a waiver of an
opportunity for a hearing. The wholesale distributor will be required
to apply for a new license should it decide to resume wholesale
distribution activities (see proposed Sec. 205.30(g)).
F. Approved Organizations for Wholesale Distributors
1. Approval of Outside Organizations and Utilization of Such
Organizations in the Licensure Process
The FD&C Act, as amended by DSCSA, allows the Federal or State
licensing authority to accept inspections of wholesale distributors
conducted by third-party accreditation or inspection services they have
approved to be part of the licensure process (section 583(c) of FD&C
Act). Subpart D of the proposed rules defines the scope of work these
approved organizations (AOs) would be tasked with performing, as well
as the standards an AO must meet to become approved by FDA.
Additionally, this subpart will explain the circumstances in which an
inspection conducted by an AO may be used, what activities the AOs have
the authority to conduct and are expected to conduct, and the
qualifications that each third-party organization must possess to
become approved by FDA. FDA suggests that States that choose to rely on
AOs to conduct inspections have in place the same or similar
qualifications and processes for approved organizations to conduct
those inspections and for decisions affecting the approval status of
those organizations.
FDA proposes that an AO must complete an inspection no more than 90
days after receiving notice from the licensing authority to conduct an
inspection (see proposed Sec. 205.31(b)). FDA believes this allows AOs
sufficient time to perform the work with which they are tasked while
also ensuring that the wholesale distributor's activities are not
significantly delayed or otherwise impacted due to delays in the
inspection process. Upon completion of the inspection, the AO would
then provide FDA with a report based on the inspection within 7 days
(see proposed Sec. 205.31(b)(2) and (3)), with copy of the report to
the wholesale distributor facility (see proposed Sec. 205.31(b)(3)).
Using the report submitted by the AO, FDA makes the final determination
as to whether a wholesale distributor facility should be issued a
license.
It is important that FDA be able to verify an AO's continued
compliance with the requirements of the proposed regulation. Therefore,
to become an AO and keep its approval, FDA is proposing to require that
an AO maintain certain records for a period of at least 5 years and
make these records readily available to FDA upon request (see proposed
Sec. 205.31(c)). In addition, to ensure public safety, FDA is
proposing to require that AOs report certain observations at wholesale
distributor facilities to FDA immediately (see proposed Sec.
205.31(c)(4)). The general qualifications for approval are set out in
proposed Sec. 205.32.
To become and remain approved, FDA is proposing to require that an
organization, and those employed by the organization, abide by certain
guidelines intended to secure against conflicts of interest, promote
professional business practices, and protect non-public information
(see proposed Sec. 205.32(a)).
FDA is proposing to allow AOs to hire outside contractors to
conduct inspections. Under FDA's proposed regulation, AOs who decide to
use outside contractors must ensure that they effectively carry out the
inspection in a manner consistent with this proposed regulation to
protect public health, conform to conflict of interest provisions, and
properly protect all non-public information (see proposed Sec.
205.32(b)). For an AO to maintain approval, FDA proposes to require
that the AO ensure contractors abide by all applicable confidentiality
agreements, the AO has policies and procedures in place to ensure the
contractors abide by these proposed standards, and the contractors have
the necessary training and expertise to carry out inspections of
wholesale distributor facilities (see proposed Sec. 205.32(b)(1)).
Before a contractor hired by an AO may perform an inspection of a
wholesale distributor, the wholesale distributor must have entered into
an agreement with the AO giving the AO permission to share with
contractors the wholesale distributor's confidential commercial
information (see proposed Sec. 205.32(b)(2)). If such consent is not
provided by the wholesale distributor, the AO will perform the
inspection itself, without the use of contractors. FDA believes that
this approach is reasonable given that it is the AO's decision to work
with contractors and, under this proposed regulation, the ultimate
responsibility for the inspection and the protection of the wholesale
distributor's information rests with the AO.
In addition, FDA proposes that AOs must submit to FDA a list of the
contractors used by the organization and must certify that such
contractors comply with the applicable regulations (see proposed Sec.
205.32(b)(3)). Finally, to ensure that the standards set forth in this
subpart are followed, FDA proposes to require that the AOs remain
responsible for all the work performed by outside contractors (see
proposed Sec. 205.32(b)).
FDA proposes that to maintain their approved status, AOs must
prohibit contractors from subcontracting their inspection duties (see
proposed Sec. 205.32(b)(1)(ii)). Limiting the ability of contactors to
further delegate their responsibility ensures that FDA will have
accurate information about who is conducting inspections, that those
responsible for the inspections have the necessary qualifications, and
that their conduct is governed by this proposed regulation.
The proposed process that FDA will use to approve organizations,
including the application process, as well as the process for
suspending or revoking an organization's approval, are set forth in
proposed Sec. 205.33. FDA is proposing that organizations seeking
approval by
[[Page 6731]]
FDA must electronically submit to FDA an application demonstrating the
organization's ability to assess compliance with all wholesale
distributor requirements detailed in proposed part 205 (see proposed
Sec. 205.33(a) and (b)), and employees must complete the necessary
training as directed by FDA (see proposed Sec. 205.33(c)). To verify
information contained in the application and ensure compliance with the
proposed regulation, FDA proposes that, before an AO may conduct its
first inspection, a newly approved organization must be audited by FDA
(see proposed Sec. 205.33(d)). A new approval will be valid for 5
years (see proposed Sec. 205.33(e)).
If an organization's request for approval is denied, the
organization may submit a request for reconsideration under Sec. 10.75
(see proposed Sec. 205.33(f)). In addition, FDA proposes that an AO
may have its approval suspended if it does not maintain the standards
outlined in this section (see proposed Sec. 205.33(g)). A suspended AO
must cease all inspections of wholesale distributors. A suspended AO
must notify any wholesale distributors with a pending inspection to be
performed by the AO of the AO's suspension within 7 calendar days (see
proposed Sec. 205.33(g)(5). While most suspensions will happen only
after notice and opportunity to request a hearing, under the proposed
regulations, FDA reserves the ability to suspend approval prior to a
hearing if there is a reasonable probability that the organization's
noncompliance will cause imminent and serious adverse health
consequences or death to humans (see proposed Sec. 205.33(h)).
Furthermore, FDA proposes that a suspended approval can be
reinstated if the issue is resolved within 1 year from the date of
suspension (see proposed Sec. 205.33(i)), though it may be revoked if
the organization fails to rectify the situation that resulted in the
suspension (see proposed Sec. 205.33(j)). FDA believes that 1 year
provides the AO enough time to remedy most situations. An AO's approval
may also be reinstated on a conditional basis. If the AO is
conditionally reinstated, they will enter a three-year probationary
period, during which if any material deficiencies arise, their approval
will be subject to immediate revocation (see proposed Sec.
205.33(i)(2)).
FDA also proposes to permit an AO to voluntarily withdraw its
approval or otherwise cease operations as an AO under this part, but it
must inform FDA of any facilities with pending inspections (see
proposed Sec. 205.33(l)). To further ensure that pending inspections
are not overlooked, under FDA's proposed regulation, an AO whose
approval has been suspended or revoked has the responsibility to report
this information to those wholesale distributors that have pending
inspections (see proposed Sec. 205.33(m)); this will stop the clock on
the 90-day licensure review while the wholesale distributor applies for
inspection from another AO or FDA. Also, to ensure wholesale
distributors continue to comply with the provisions of this part, and
to ensure that AOs remain able to assess compliance with the wholesale
distributor requirements, an AO must inform FDA of any changes to
information that was submitted as part of its application for approval
(see proposed Sec. 205.33(n)(1)). Since the approval of an
organization is nontransferable, changes in ownership require an AO to
submit a new application to FDA (see proposed Sec. 205.33(n)(2)).
Finally, as an additional assurance that an AO continues to comply with
the provisions of this part, FDA proposes to require that AOs remain
subject to periodic audits by FDA (see proposed Sec. 205.33(o)).
VI. Proposed Effective/Compliance Dates
Section 584 of the FD&C Act states that the national licensing
standards for 3PLs established by regulation take effect 1 year after
the date such final regulation is published (section 584(d)(1) and (3)
of the FD&C Act), and that national licensing standards for wholesale
distributors established by regulation take effect 2 years after the
date such final regulation is published (section 583(a) and (e)(3) of
the FD&C Act). For several reasons, FDA does not intend to enforce the
3PL requirements until 2 years after the final regulation is published.
FDA recognizes that 1 year may be insufficient time for States to
implement 3PL licensure programs, should they decide to implement such
programs, and for 3PLs to apply for licensure under these programs.
Setting up a state licensure program may require additional time. This
is especially true in States that will require State legislative action
to implement a licensure program, with some State legislatures only
meeting biennially.
As the DSCSA states that the national standards for prescription
drug wholesale distributors established by regulation pursuant to
section 583 of the FD&C Act will take effect 2 years after the date
such final regulation is published (section 583(a) and (e) of the FD&C
Act), the national standards for licensing wholesale distributors in
subpart C will be effective 2 years after the date the final rule is
published.
Although the DSCSA states that the national licensing standards for
3PLs established by regulation pursuant to section 584 of the FD&C Act
will take effect one year after the date such final regulation is
published (section 584(d)(1) and (3) of the FD&C Act), as noted, FDA
does not intend to enforce requirements with respect to the national
standards for licensure of 3PLs until 2 years after the regulation is
finalized, in order to provide States with the opportunity to establish
or modify their licensure programs in accordance with the new standards
and time for 3PLs to apply and obtain a new license. For 1 year after
the effective date of the final regulation, FDA also does not intend to
enforce the requirements of section 582(b)(3), (c)(3), (d)(3), and
(e)(3) of the FD&C Act with respect to a manufacturer, wholesale
distributor, dispenser, or repackager who has as a trading partner a
3PL that is not licensed, unless the 3PL is not licensed because the
Secretary or a state licensing body has made a finding that the 3PL
does not utilize good handling and distribution practices and the
Secretary has published notice thereof.
VII. Preliminary Economic Analysis of Impacts
We have examined the impacts of the proposed rule under Executive
Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5
U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4). Executive Orders 12866 and 13563 direct us to assess all costs
and benefits of available regulatory alternatives and, when regulation
is necessary, to select regulatory approaches that maximize net
benefits (including potential economic, environmental, public health
and safety, and other advantages; distributive impacts; and equity). We
believe that this proposed rule is a significant regulatory action as
defined by Executive Order 12866.
The Regulatory Flexibility Act requires us to analyze regulatory
options that would minimize any significant impact of a rule on small
entities. Because the proposed rule could impose significant, although
uncertain, new economic burdens on small entities, we find that the
proposed rule will have a significant economic impact on a substantial
number of small entities.
The Unfunded Mandates Reform Act of 1995 (section 202(a)) requires
us to prepare a written statement, which includes an assessment of
anticipated costs and benefits, before proposing
[[Page 6732]]
``any rule that includes any Federal mandate that may result in the
expenditure by State, local, and tribal governments, in the aggregate,
or by the private sector, of $100,000,000 or more (adjusted annually
for inflation) in any one year.'' The current threshold after
adjustment for inflation is $158 million, using the most current (2020)
Implicit Price Deflator for the Gross Domestic Product. This proposed
rule would not result in an expenditure in any year that meets or
exceeds this amount.
In this rulemaking, we propose new national standards for the
licensing of prescription drug wholesale distributors and third-party
logistics providers as directed under the Drug Supply Chain Security
Act, Title II of the Drug Quality and Security Act. If finalized, the
rule would also establish a Federal licensing system for wholesale drug
distributors and third-party logistics providers to use in the absence
of a state licensure program that is consistent with the proposed
national standards.
This rulemaking is being published in conjunction with the proposed
rule entitled ``Certain Requirements Regarding Prescription Drug
Marketing'' (or part 203), published elsewhere in this issue of the
Federal Register. We include the benefits and costs of part 203 in this
economic analysis and, unless otherwise specified, references to the
``proposed rule'' in this analysis encompass both proposed rules.
We summarize the benefits and costs of the proposed rule in table
1. The standards for prescription drug wholesale distribution in the
proposed rule would result in benefits to consumers and benefits to
distributors from reducing the diversion of prescription drugs. Other
monetized benefits include cost savings from reducing the frequency and
quantity of licensure applications and cost savings from reducing state
licensing standards in some states. We estimate that the annualized
benefits over 10 years would range from $1.25 million to $31.50 million
at a 7 percent discount rate, with a primary estimate of $10.66
million. We estimate that the annualized benefits would range from
$1.26 million to $32.18 million at a 3 percent discount rate, with a
primary estimate of $10.89 million.
We also expect that the proposed rule, if finalized, would impose
costs on wholesale drug distributors, third-party logistics providers,
states, approved organizations, and the Food and Drug Administration
(FDA). Costs to wholesale drug distributors and third-party logistics
providers include costs of learning about the rule, reporting to FDA,
undergoing routine inspections, writing and revising standard operating
procedures, and conducting background checks. Wholesale-drug
distributors would also incur costs to furnish surety bonds to their
state licensing authority to obtain or renew their licenses.
Costs to states include the time spent reading and understanding
the rule, passing or revising the laws and regulations governing their
licensure programs, and inspecting WDD and 3PL facilities. Approved
organizations would incur legal, application, and training costs, as
well as costs to inspect WDD and 3PL facilities. FDA costs include the
costs to establish and operate a reporting database and a licensure
program for wholesale drug distributors and third-party logistics
providers and the costs to establish and operate an approval program
for approved organizations.
We estimate that the annualized costs over 10 years would range
from $13.21 million to $20.63 million at a 7 percent discount rate,
with a primary estimate of $16.92 million. We estimate that the
annualized costs over 10 years at a 3 percent discount rate would range
from $12.83 million to $20.10 million, with a primary estimate of
$16.47 million.
Table 1--Summary of Benefits, Costs, and Distributional Effects of the Proposed Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
Units
------------------------------------
Category Primary Low High Period Notes
estimate estimate estimate Year Discount covered
dollars rate (%) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits:
Annualized Monetized ($ millions/ $10.66 $1.25 $31.50 2020 7 10 There is a high degree of uncertainty in
year). 10.89 1.26 32.18 2020 3 10 the magnitude of benefits.
Qualitative.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs:
Annualized Monetized ($ millions/ 16.92 13.21 20.63 2020 7 10
year). 16.47 12.83 20.10 2020 3 10
Qualitative.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Transfers:
Federal Annualized Monetized ($ 0.12 0.09 0.14 2020 7 10
millions/year). 0.11 0.08 0.14 2020 3 10
-----------------------------------------------------------------------------------------------------------------
From: States
To: Firms
-----------------------------------------------------------------------------------------------------------------
Other Annualized Monetized ($ .......... .......... .......... .......... .......... ..........
millions/year).
-----------------------------------------------------------------------------------------------------------------
From:
To:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Effects:
State, Local, or Tribal Government: Annualized net costs to states over 10 years ranging from $0.62 million to $1.44 million at a 7 percent discount
and from $0.58 million to $1.38 million at a 3 percent discount rate..
Small Business: Quantified effects of more than 1 percent of average annual revenues for small 3PL firms. Unquantified effects are uncertain........
Wages: No estimated effect..........................................................................................................................
Growth: No estimated effect.........................................................................................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
We have developed a comprehensive Preliminary Economic Analysis of
Impacts (PRIA) that assesses the impacts of the proposed rule. The full
preliminary analysis of economic impacts is available in the docket for
this proposed rule (Ref 18) and at https://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm.
[[Page 6733]]
VIII. Analysis of Environmental Impacts
FDA has carefully considered the potential environmental effects of
this action and has concluded, under 21 CFR 25.30(h), that this action
is of a type that does not individually or cumulatively have a
significant effect on the human environment.
IX. Paperwork Reduction Act of 1995
This proposed rule contains information collection provisions that
are subject to review by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521). A
description of these provisions is given in the Description section of
this document with an estimate of the annual reporting, recordkeeping,
and third-party disclosure burden. Included in the estimate is the time
for reviewing instructions, searching existing data sources, gathering
and maintaining the data needed, and completing and reviewing each
collection of information.
FDA invites comments on these topics: (1) Whether the proposed
collection of information is necessary for the proper performance of
FDA's functions, including whether the information will have practical
utility; (2) the accuracy of FDA's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used; (3) ways to enhance the quality,
utility, and clarity of the information to be collected; and (4) ways
to minimize the burden of the collection of information on respondents,
including through the use of automated collection techniques, when
appropriate, and other forms of information technology.
Title: Requirements to Obtain a License to Distribute Drugs, Annual
Reporting and Recordkeeping for Procedures, for Third-Party Logistics
Providers and Prescription Drug Wholesale Distributors to Obtain a
License to Distribute Drugs; 21 CFR part 205; OMB Control Number 0910-
0251--Reinstatement
Description: The proposed rule would establish standards, terms,
and conditions for the licensing of 3PLs and prescription drug
wholesale distributors by State or Federal licensing authorities,
including process for the revocation, reissuance, and renewal of such
licenses. Sections 584 and 583 of the FD&C Act (21 U.S.C. 360eee-3,
360eee-2)) as added by the DSCSA (Title II of Pub. L. 113-54) requires
FDA to issue regulations on national standards for the licensing of
3PLs and wholesale distributors. Accordingly, FDA is proposing
requirements for licensing of wholesale distributors and third-party
logistics providers. The proposed rule outlines these requirements,
including information collection provisions, that 3PLs and wholesale
distributors must meet to obtain a license. The licensing authority is
the State, from which the 3PLs distribute drug or the State from which
wholesale distributors distribute drug. However, if a State does not
establish the licensure programs for 3PLs or wholesale distributors
consistent with these regulations, FDA will issue the licenses to 3PLs
or wholesale distributors in that State. In addition, States may
require that a 3PL or a wholesale distributor obtain a license to ship
drugs into that State. The FD&C Act does not require that States issue
these types of licenses. However, if a State chooses to implement such
a licensure requirement, the State must ensure that it is consistent
with these regulations, and any wholesale distributor or 3PL wishing to
ship products into that State must have a license.
Proposed part 205, subpart A, would set forth the national
licensing standards for State and Federal licenses issued to 3PLs
pursuant to section 584 of the FD&C Act (21 U.S.C. 360eee-3). Proposed
part 205, subpart C, would set forth the national licensing standards
for State and Federal licenses issued to wholesale distributors
pursuant to sections 503(e) and 583 of the FD&C Act (21 U.S.C. 353(e)
and 21 U.S.C. 360eee-2)) and replaces the existing regulations in
proposed part 205 that outlined guidelines for State licensing of
wholesale distributors that were developed under the Prescription Drug
Marketing Act of 1987 (Pub. L. 100-293).
In addition, the FD&C Act, as amended by DSCSA, allows FDA to
approve ``third party accreditation'' entities to evaluate the
qualifications of 3PLs for licensure or inspect wholesale distributors
facilities on behalf of FDA. These organizations are referred to in
this proposed rule as approved organizations or ``AOs.'' The
application to become an AO is the same whether the AO will be
evaluating the qualifications of 3PLs for licensure, inspecting
wholesale distributors facilities, or both. Subparts B and D of the
proposed rule outline the qualifications for AOs to perform licensure
reviews/inspections for 3PL facilities and inspections of wholesale
distributors respectively.
Description of Respondents: Respondents to the information
collection are third-party logistics providers and wholesale
distributors in any State and any entity engaging in wholesale
distribution of prescription drugs in any State. We are proposing that
these respondents submit applications for licensure and maintain
records of procedures and documents pertaining to licensure review,
inspections, policies, and training.
The DSCSA establishes 3PLs as members of the drug supply chain,
which are distinct from wholesale drug distributors, and specifically
precludes States from regulating 3PLs as wholesale distributors
(section 585(b)(2) of the FD&C Act (21 U.S.C. 360eee-4(b)(2)). FDA is
required by section 584 of the FD&C Act (21 U.S.C. 360eee-3) to
establish national standards for the licensure of 3PLs and is proposing
those standards in part 205, subpart A. When the proposed rule is
finalized, we will require that each facility of an entity that meets
the definition of a 3PL in section 581(22) of the FD&C Act (21 U.S.C.
360eee(22)) be licensed by the State or FDA in accordance with the
standards articulated in proposed part 205, subpart A.
Proposed part 205, subpart C, of the proposed rule, Sec. Sec.
205.20 through 205.30, establishes the national standards for the
licensure of wholesale drug distributors. When the proposed rule is
finalized, we will require that each wholesale distributor be licensed
by the State or FDA in accordance with the standards in proposed part
205, subpart C.
Proposed part 205, subpart B (Sec. Sec. 205.17 through 205.19),
and subpart D (Sec. Sec. 205.31 through 205.33), of the proposed rule
describe the content requirements, application process, and reporting
schedules to become an approved organization to conduct licensure
review/inspections for 3PL facilities or conduct inspections of
wholesale distributors. Although the work differs among licensure
review and inspection for 3PLs and wholesale distributors, FDA believes
that the same entities will apply to conduct licensure reviews and
inspection of both types of entities. In addition, the submission of an
application to become an AO is the same in subparts B and D. Because of
this, we are combining the discussions of AOs for 3PLs and wholesale
distributors, and the resulting burden estimates.
The national licensure standards FDA is proposing are intended to
help ensure that the supply chain remains secure and that those
finished prescription drug products subject to the DSCSA moving through
the supply chain are properly stored, handled, and transported. These
measures are
[[Page 6734]]
intended to help protect U.S. consumers from drugs that may be
counterfeit, stolen, contaminated, or otherwise harmful. The required
information collection to comply with the proposed rule is necessary
for the States or FDA to assess the ability of 3PLs or wholesale
distributors to properly maintain drug quality and security while the
drug products are under their possession or control.
We estimate the burden of the information collection as follows:
Table 3--Estimated Annual Reporting Burden \1\
----------------------------------------------------------------------------------------------------------------
Number of Average burden
Proposed 21 CFR part 205 Number of responses per Total annual per response Total hours
section; IC activity respondents respondent responses (in hours)
----------------------------------------------------------------------------------------------------------------
Subpart A (3PLs):
Sec. Sec. 205.5 and 459 1 459 2 918
205.6; application and
process requirements.......
Sec. 205.7; changes to 6 1 6 1 6
licensure..................
Sec. 205.8; expiry and 149 1 149 1 149
renewal of licensure.......
Sec. 205.9; denials, 35 1 35 1 35
suspensions,
reinstatements, revocations
Sec. 205.11; personnel 459 1 459 .5 230
list.......................
Sec. 205.15; annual 459 1 459 .25 115
reports....................
Subpart B (Approved
Organizations for 3PLs):
Sec. 205.17; licensure 6 15 90 5 450
review and inspection
reports of 3PL facilities..
Sec. 205.19; applications, 3 1 3 2 6
denials, revocations,
suspensions, renewals,
reinstatements for AO
status.....................
Subpart C (WDD Standards):
Sec. Sec. 205.22 and 1,951 1 1,951 2 3,902
205.23; application and
process requirements for
licensure..................
Sec. 205.24; changes to 39 1 39 1 39
WDD information............
Sec. 205.26; confirmation 25 1 25 .5 13
of theft or loss of Rx drug
Sec. Sec. 205.29 and 38 1 38 1 38
205.30; denials,
suspensions,
reinstatements, revisions,
and terminations--requests
for hearing................
Sec. 205.29(a)--WDD annual 1,951 1 1,951 1 1,951
reports....................
Subpart D (Approved
Organizations for WDDs):
Sec. Sec. 205.32 and 6 31 186 5 930
205.33; documentation of
qualifications and
disclosures to FDA.........
-------------------------------------------------------------------------------
Total................... .............. .............. 5,890 .............. ..............
----------------------------------------------------------------------------------------------------------------
\1\ There are no capital costs or operating and maintenance costs associated with the information collection.
Table 4--Estimated Annual Recordkeeping Burden \1\
----------------------------------------------------------------------------------------------------------------
Number of Average burden
Proposed 21 CFR part 205 Number of responses per Total annual per response Total hours
section; IC activity respondents respondent responses (in hours)
----------------------------------------------------------------------------------------------------------------
Subpart A (3PLs):
205.4; general requirements 459 1 459 .5 230
(retrievable records)......
205.12; written procedures.. 459 1 459 21 9,639
205.13; record and document 459 1 459 1 459
maintenance................
205.14; list of trading 459 1 459 2 918
partners...................
Subpart B (Approved
Organizations for 3PLs):
205.17; licensure review and 6 15 90 2 180
inspection records.........
205.19; written procedures, 6 1 6 3 18
policies, training records.
Subpart C (WDD Standards):
205.21; surety bond......... 1,951 1 1,951 1 1,951
205.25; personnel records... 1,951 1 1,951 1 1,951
205.26; facility records.... 1,951 1 1,951 1 1,951
205.28; inspection records.. 1,951 1 1,951 1 1,951
Subpart D (Approved
Organizations for WDDs):
205.31; records 6 1 6 1 6
demonstrating qualification
status.....................
-------------------------------------------------------------------------------
Total................... .............. .............. 9,742 .............. 19,254
----------------------------------------------------------------------------------------------------------------
\1\ There are no capital costs or operating and maintenance costs associated with the information collection.
Reporting Burden
Among the reporting requirements found in proposed part 205 are
content and format provisions pertaining to issuance, changes, expiry,
renewal, and annual reports for 3PLs, as well as WDDs, as reflected
above in table 3. The proposed regulations also prescribe procedural
steps and reporting schedules for submitting information regarding
licensure, changes to
[[Page 6735]]
licensure, reinstatement, and annual reporting, including requisite
reporting timeframes. Consistent with our PRIA, we estimate that 459
3PL facilities and 1,951 WDDs will become subject to the reporting
requirements described in proposed part 205, where we ascribe specific
burden associated with the provisions found in table 3. Because we
currently lack specific submission data regarding the proposed
reporting requirements, we rely on our experience with similar
information collection as the primary basis for our estimates. However,
we invite specific comment from potential respondents regarding burden
estimates we ascribe to the reporting elements found in the proposed
regulations, along with a discussion of the basis for their
computation.
Recordkeeping Burden
As set forth in the proposed regulations, 3PLs and WDDs must
maintain records documenting procedures, management practice, policies,
training, and personnel, among others. Under proposed Sec. 205.4, all
records are subject to FDA inspection and must be made available upon
request in the format prescribed by the proposed regulations.
Additional specific recordkeeping practice elements are also enumerated
in the proposed regulations. Consistent with our PRIA, we estimate that
459 3PLs and 1,951 WDDs will become subject to these requirements, if
the proposed rule is finalized. These provisions are reflected above in
table 4, along with an estimated number of annual records and
recordkeeping hours we attribute to the corresponding activity. As with
the proposed reporting requirements, we currently lack specific data
regarding recordkeeping associated with the proposed regulations. We
invite specific comment from potential respondents regarding burden
estimates we ascribe to the recordkeeping activities, along with a
discussion of the basis for their computation.
To ensure that comments on information collection are received, OMB
recommends that written comments be submitted through reginfo.gov (see
ADDRESSES). All comments should be identified with the title of the
information collection.
In compliance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3407(d)), we have submitted the information collection provisions of
this proposed rule to OMB for review. These information collection
requirements will not be effective until FDA publishes a final rule,
OMB approves the information collection requirements, and the rule goes
into effect. FDA will announce OMB approval of these requirements in
the Federal Register.
X. Federalism
We have analyzed this proposed rule in accordance with the
principles set forth in Executive Order 13132, ``Federalism'' (64 FR
43255, August 10, 1999). This Executive order sets forth principles and
criteria that agencies must adhere to in formulating and implementing
policies that have federalism implications, defined in section 1(a) of
the order as including regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.'' Section 4(a)
of the Executive order requires agencies to ``construe . . . a Federal
statute to preempt State law only where the statute contains an express
preemption provision or there is some other clear evidence that the
Congress intended preemption of State law, or where the exercise of
State authority conflicts with the exercise of Federal authority under
the Federal statute.'' The DSCSA added to the FD&C Act an express
preemption provision under section 585, which addresses state licensure
of WDDs and 3PLs in section 585(b)(1).
A. Scope of Preemption
FDA interprets section 585(b)(1) of the FD&C Act as preempting
States and localities from establishing or continuing requirements for
3PL or WDD licensure that are different from the standards and
requirements applicable under sections 584 and amended 503(e) of the
FD&C Act. In other words, States and local governments may not
establish or continue licensure requirements for 3PLs or WDDs unless
those State requirements are the same as Federal requirements;
different requirements are preempted.
As noted above, a draft guidance issued in October 2014 (Ref. 4)
proposed a different preemption interpretation under which States and
localities could impose requirements on 3PL and WDD licensure that were
different from Federal requirements so long as those requirements did
not fall below the minimum Federal standards. Several stakeholders
commented that the agency's interpretation of section 585(b)(1) was too
narrow. Instead, they argued Congress intended to preempt all state
licensure laws not identical to Federal licensure standards, i.e., that
Congress wanted the Federal system to provide both a ``floor'' and a
``ceiling'' when it came to the issue of preemption.
FDA has reconsidered its earlier proposed interpretation and
determined that its current interpretation--that the Federal
requirements will establish both a ``floor'' and a ``ceiling''--is more
consistent with the language of the statute, Congressional purpose, and
policy considerations. Section 585(b)(1) provides for the preemption of
any state requirements that are, among other things, ``inconsistent
with'' or ``covered by'' Federal requirements--which suggests both a
floor and a ceiling. Furthermore, the fundamental purpose of the DSCSA
provisions was to strengthen the security and integrity of the drug
supply chain through uniform national requirements (Refs 2, 3, 18),
including with respect to licensure (see e.g., section 583(b)). In
contrast, under the interpretation proposed in our October 2014 draft
guidance, 3PLs and WDDs could be required to comply with a patchwork of
State and local licensure requirements, which would undermine the goal
of national uniformity and could create barriers to the statute's
implementation and administrability. That approach would not create the
intended uniformity in national policy because States and localities
would not be preempted from establishing unique or disparate
requirements.
Accordingly, FDA is withdrawing, as of the date of publication of
this proposed rule, that portion of the October 2014 draft guidance
addressing preemption with respect to WDD/3PL licensure.
B. Effective Date of Preemption
Section 585(b)(1) provides that it is effective ``[b]eginning on
the date of enactment of the Drug Supply Chain Security Act [November
27, 2013].'' However, that provision applies only to state requirements
that are inconsistent with the national standards and requirements
applicable under sections 584 and 503(e) of the FD&C Act. Those
national standards will be established by this regulation, once
finalized and effective. Thus, by its very terms, section 585(b)(1) has
no current application. Accordingly, State and local licensure
requirements will be preempted only once this regulation, when
finalized, takes effect; until such time, current State and local
licensing of WDDs and 3PLs may continue.
We believe that this result is dictated by the terms of the
statute. However, even if the statute were considered ambiguous, this
interpretation is consistent with the statutory framework and purposes.
Other provisions added
[[Page 6736]]
by the DSCSA recognized state licensure of WDDs and 3PLs before the
effective date of this regulation. For example, DSCSA requires both
WDDs and 3PLs to report their state licensure, beginning January 1,
2015, for WDDs and November 27, 2014, for 3PLs (see sections
503(e)(2)(A) and section 584(b)). Because these reporting requirements
apply during the period between DSCSA's enactment and the effective
date of Federal licensing standards, they suggest that Congress
intended to preserve the status quo in terms of permitting state
licensure during this interim period. Indeed, if state licensing were
viewed as preempted during this interim period, there could be no valid
state licensure for 3PLs and WDDs to report, rendering this reporting
provision meaningless. In addition, section 582(a)(6) expressly
recognizes state WDD licensure during the period between DSCSA's
enactment and the effective date of Federal licensure regulations, and
section 582(a)(7) similarly deems 3PLs to be ``licensed'' during this
time, including by acknowledging and accommodating state licensure of
3PLs.
Further, the WDD licensure rules take effect two years after
publication of the final rule, per section 583(e)(3), and the 3PL rules
take effect one year after publication of the final rule, per section
584(d)(3)(C). Thus, despite the reference to DSCSA's enactment date in
section 585(b)(1), the statute also expressly provides that the Federal
licensure standards will not be effective until several years after
DSCSA's enactment.
The interpretation is also supported by reading the provisions of a
statute as an integrated whole, consistent with its fundamental
purpose. As noted, the purpose is to strengthen the security and
integrity of the drug supply chain through uniform national
requirements, including with respect to licensure. This purpose would
be frustrated if the statute were implemented in a manner that could
lead to supply chain disruption, due to licensing uncertainties, while
the national licensure standards are pending. Thus, Congress included
in the DSCSA provisions which recognize state licensure of WDDs and
3PLs prior to the effective date of Federal licensing standards. If
preemption under section 585(b)(1) were construed to preempt states
from continuing to license WDDs and 3PLs even before Federal standards
are in place, there could be confusion whether these supply chain
entities have valid licensure, to the detriment of supply chain
operations. Accordingly, we believe that read as a whole, the statute
can be reasonably interpreted as providing for preemption to apply only
upon the effective date of this regulation, once finalized.
XI. Consultation and Coordination With Indian Tribal Governments
We have analyzed this proposed rule in accordance with the
principles set forth in Executive Order 13175. We have tentatively
determined that the rule does not contain policies that would have a
substantial direct effect on one or more Indian Tribes, on the
relationship between the Federal Government and Indian Tribes, or on
the distribution of power and responsibilities between the Federal
Government and Indian Tribes. The Agency solicits comments from tribal
officials on any potential impact on Indian Tribes from this proposed
action.
XII. References
The following references marked with an asterisk (*) are on display
at the Dockets Management Staff (see ADDRESSES) and are available for
viewing by interested persons between 9 a.m. and 4 p.m., Monday through
Friday; they also are available electronically at https://www.regulations.gov. References without asterisks are not on public
display at https://www.regulations.gov because they have copyright
restriction. Some may be available at the website address, if listed.
References without asterisks are available for viewing only at the
Dockets Management Staff. FDA has verified the website addresses, as of
the date this document publishes in the Federal Register, but websites
are subject to change over time.
* 1. 159 Cong. Rec. S8028 (2013) (Statement of Senator Barbara
Mikulski); available at: https://www.congress.gov/113/crec/2013/11/14/CREC-2013-11-14-pt1-PgS8027-6.pdf.
* 2. 159 Cong. Rec. H5964 (2013) (Statement of Representative
James Matheson); available at: https://www.congress.gov/113/crec/2013/09/28/CREC-2013-09-28-pt1-PgH5946-2.pdf.
* 3. 159 Cong. Rec. H5962 (2013) (Statement of Representative
Robert Latta); available at: https://www.congress.gov/113/crec/2013/09/28/CREC-2013-09-28-pt1-PgH5946-2.pdf.
* 4. FDA, Guidance for Industry: ``Draft Guidance for Industry
on The Effect of Section 585 of the FD&C Act on Drug Product Tracing
and Wholesale Drug Distributor and Third-Party Logistics Provider
Licensing Standards and Requirements: Questions and Answers''
October 2014, (available at https://www.fda.gov/media/89954/download), accessed December 14, 2021.
* 5. Ducca, A., Healthcare Distribution Management Association,
Public comment letter Document ID: FDA-2014-D-1411-0012, submitted
on December 24, 2014, to Docket No. FDA-2014-D-1411 pertaining to
the ``Draft Guidance for Industry on The Effect of Section 585 of
the FD&C Act on Drug Product Tracing and Wholesale Drug Distributor
and Third-Party Logistics Provider Licensing Standards and
Requirements: Questions and Answers; Availability,'' October 8, 2014
(available at https://www.regulations.gov/document?D=FDA-2014-D-1411-0012), accessed December 14, 2021.
* 6. Ventimiglia, V., Pharmaceutical Distribution Security
Alliance, Public comment letter Document ID: FDA-2014-D-1411-0007,
submitted on December 24, 2014, to Docket No. FDA-2014-D-1411
pertaining to the ``Draft Guidance for Industry on The Effect of
Section 585 of the FD&C Act on Drug Product Tracing and Wholesale
Drug Distributor and Third-Party Logistics Provider Licensing
Standards and Requirements: Questions and Answers; Availability,''
October 8, 2014 (available at https://www.regulations.gov/document?D=FDA-2014-D-1411-0007), accessed December 14, 2021.
* 7. Rouse O'Neill, L., Health Industry Distributors Alliance,
Public comment letter Document ID: FDA-2014-D-1411-0013, submitted
on December 24, 2014, to Docket No. FDA-2014-D-1411 pertaining to
the ``Draft Guidance for Industry on The Effect of Section 585 of
the FD&C Act on Drug Product Tracing and Wholesale Drug Distributor
and Third-Party Logistics Provider Licensing Standards and
Requirements: Questions and Answers; Availability,'' October 8, 2014
(available at https://www.regulations.gov/document?D=FDA-2014-D-1411-0013), accessed December 14, 2021.
8. Gallenagh, E.A, L.F. Hirsch, and K.L. Palmer, ``Title II--
Licensure of Wholesale Distributors and 3PLs,'' presented at Food
and Drug Law Institute's Drug Quality Security Act Conference,
November 15, 2017 (available at https://www.fdli.org/wp-content/uploads/2017/11/DQSA-Hrisch-B.pdf), accessed December 14, 2021.
9. National Association of Boards of Pharmacy, ``Wholesale Drug
Distribution: Protecting the Integrity of the Nation's Prescription
Drug Supply,'' August 2013 (available at https://nabp.pharmacy/wp-content/uploads/2016/07/wholesale-drug-distribution-protecting-the-integrity-of-the-nations-prescription-drug-supply.pdf), accessed
December 14, 2021.
10. United States Department of Justice, ``Three California Men
and Minnesota Corporation Indicted in Nationwide Prescription Drug
Diversion Scheme,'' May 2015 (available at https://www.justice.gov/opa/pr/three-california-men-and-minnesota-corporation-indicted-nationwide-prescription-drug), accessed December 14, 2021.
* 11. United States Department of Justice, ``Two Plead Guilty In
Prescription Drug Diversion Scheme,'' May 2014 (available at https://www.justice.gov/usao-mdtn/pr/two-plead-guilty-prescription-drug-diversion-scheme), accessed December 14, 2021.
12. National Association of Boards of Pharmacy, ``Model State
Pharmacy Act and Model Rules of the National Association of Boards
of Pharmacy'' (available at https://
[[Page 6737]]
nabp.pharmacy/publications-reports/resource-documents/model-
pharmacy-act-rules/), accessed December 14, 2021.
13. Healthcare Distributors Alliance, ``HDA Model Licensure
Standards for Third-Party Logistics Providers for FDA
Consideration,'' February 2015 (available at https://www.hda.org/~/
media/pdfs/government-affairs/2015-02-10-traceability-resource-3pl-
licensure-model.ashx), accessed December 14, 2021.
* 14. World Health Organization, ``Annex 5: WHO good
distribution practices for pharmaceutical products,'' 2010
(available at https://www.who.int/medicines/areas/quality_safety/quality_assurance/GoodDistributionPracticesTRS957Annex5.pdf)),
accessed December 14, 2021.
15. National Association of Boards of Pharmacy and the
Pharmaceutical Inspection Convention and Pharmaceutical Inspection
Co-operation Scheme (jointly referred to as PIC/S) (available at
https://www.picscheme.org/), accessed December 14, 2021.
* 16. U.S. Food and Drug Administration, ``Prescription Drug
Marketing Act, Report to Congress,'' June 2001 (available at https://wayback.archive-it.org/7993/20170405002846/https://www.fda.gov/RegulatoryInformation/LawsEnforcedbyFDA/SignificantAmendmentstotheFDCAct/PrescriptionDrugMarketingActof1987/ucm203148.htm), accessed December 14, 2021.
17. National Association of Boards of Pharmacy, ``Prescription
Medication Distribution--The Five Percent Rule for Resale
(Resolution 109-2-13),'' June 2013 (available at https://nabp.pharmacy/news/news-releases/prescription-medication-distribution-the-five-percent-rule-for-resale-resolution-109-2-13/),
accessed December 14, 2021.
18. FDA, ``National Standards for the Licensure of Wholesale
Drug Distributors and Third-Party Logistics Providers; Preliminary
Regulatory Impacts Analysis,'' (available at https://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm).
List of Subjects
21 CFR Part 10
Administrative practice and procedure, News media.
21 CFR Parts 12 and 16
Administrative practice and procedure.
21 CFR Part 205
Intergovernmental relations, Prescription drugs, Reporting and
recordkeeping requirements, Security measures, Warehouses.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs, we propose
that 21 CFR parts 10, 12, 16, and 205 be amended as follows:
PART 10--ADMINISTRATIVE PRACTICES AND PROCEDURES
0
1. The authority citation for part 10 continues to read as follows:
Authority: 5 U.S.C. 551-558, 701-706; 15 U.S.C. 1451-1461; 21
U.S.C. 141-149, 321-397, 467f, 679, 821, 1034; 28 U.S.C. 2112; 42
U.S.C. 201, 262, 263b, 264.
0
2. In Sec. 10.50, add paragraph (c)(21) to read as follows:
Sec. 10.50 Promulgation of regulations and orders after an
opportunity for a formal evidentiary public hearing.
* * * * *
(c) * * *
(21) Sections 503(e), 583, and 584 on denial, suspension, or
revocation of third-party logistics provider licenses or wholesale
distributor licenses.
PART 12--FORMAL EVIDENTIARY PUBLIC HEARING
0
3. The authority citation for part 12 continues to read as follows:
Authority: 21 U.S.C. 141-149, 321-393, 467f, 679, 821, 1034; 42
U.S.C. 201, 262, 263b-263n, 264; 15 U.S.C. 1451-1461; 5 U.S.C. 551-
558, 701-721; 28 U.S.C. 2112.
0
4. In Sec. 12.21, revise paragraphs (a) introductory text and (a)(2)
to read as follows:
Sec. 12.21 Initiation of a hearing involving the issuance, amendment,
or revocation of an order.
(a) A proceeding under section 503(e); 505(d) or (e); 512(d), (e),
(m)(3) or (4); 515(g)(1); 583; or 584 of the Federal Food, Drug, and
Cosmetic Act, or section 351(a) of the Public Health Service Act, may
be initiated--
* * * * *
(2) By a petition in the form specified elsewhere in this chapter,
e.g., Sec. 205.9 for licenses for third-party logistics providers,
Sec. 205.30 for licenses for wholesale distributors, Sec. 314.50 for
new drug applications, Sec. 514.1 for new animal drug applications,
Sec. 514.2 for applications for animal feeds, or Sec. 601.3 for
licenses for biologic products; or
* * * * *
PART 16--REGULATORY HEARING BEFORE THE FOOD AND DRUG ADMINISTRATION
0
5. The authority citation for part 16 continues to read as follows:
Authority: 15 U.S.C. 1451-1461; 21 U.S.C. 141-149, 321-394,
467f, 679, 821, 1034; 28 U.S.C. 2112; 42 U.S.C. 201-262, 263b, 364.
0
6. In Sec. 16.1:
0
a. Designate the 16 undesignated paragraphs immediately following
paragraph (b)(1) as paragraphs (b)(1)(i) through (xvi).
0
b. In paragraph (b)(2):
0
i. Remove ``Sec. Sec. '' and ``Sec. '' everywhere they appear and add
``Sections'' and ``Section'' in their places, respectively;
0
ii. Designate the first 14 undesignated paragraphs immediately
following paragraph (b)(2) as paragraphs (b)(2)(i) through (xiv);
0
iii. Add paragraphs (b)(2)(xv) and (xvi); and
0
iv. Designate the last 23 undesignated paragraphs as paragraphs
(b)(2)(xvii) through (xxxix).
The additions read as follows:
Sec. 16.1 Scope.
* * * * *
(b) * * *
(2) * * *
(xv) Section 205.19, relating to revocation or suspension of
approval for an approved organization to conduct licensure reviews for
third-party logistics provider applicants.
(xvi) Section 205.33, relating to revocation or suspension of
approval for an approved organization to conduct inspections of
wholesale distributors.
* * * * *
0
7. Revise part 205 to read as follows:
PART 205--NATIONAL STANDARDS FOR THIRD-PARTY LOGISTICS PROVIDERS
AND PRESCRIPTION DRUG WHOLESALE DISTRIBUTORS
Sec.
205.1 Scope.
205.2 Purpose.
205.3 Definitions.
Subpart A--Third-Party Logistics Providers Licensure Standards
205.4 Requirement that third-party logistics providers be licensed.
205.5 General application requirements for licensure.
205.6 Federal licensure process.
205.7 Changes to information, location, or ownership of a licensed
3PL.
205.8 Expiry and renewal.
205.9 Licensure denial, suspension, reinstatement, revocation, and
voluntary termination: notice and opportunity to request a hearing.
205.10 Good storage practices for 3PL facilities.
205.11 Personnel requirements necessary for good storage practices.
205.12 Required written policies and procedures.
205.13 Recordkeeping and document maintenance.
205.14 3PLs must provide upon request a list of trading partners.
205.15 Requirements for initial and annual reporting to the Food and
Drug Administration.
205.16 Inspections.
Subpart B--Approved Organizations for 3PLS
205.17 Use of approved third-party organizations.
[[Page 6738]]
205.18 General qualifications of approved organizations.
205.19 Process and procedures for approval by the Food and Drug
Administration.
Subpart C--Wholesale Distributors Licensure Standards
205.20 Requirement that prescription drug wholesale distributors be
licensed.
205.21 Surety bond requirement.
205.22 General application requirements for licensure.
205.23 Federal licensure process.
205.24 Changes to information, operation, location, or ownership of
a wholesale distributor.
205.25 Prohibited persons and qualifications for key personnel.
205.26 National standards for the storage and handling of
prescription drugs for wholesale distribution.
205.27 Standards for the establishment and maintenance of records of
the distribution of prescription drugs.
205.28 Inspections.
205.29 Requirements for initial and annual reporting to the Food and
Drug Administration.
205.30 Licensure denial, suspension, reinstatement, revocation, and
voluntary termination--notice and opportunity to request a hearing.
Subpart D--Approved Organizations for Wholesale Distributors
205.31 Use of approved third-party organizations.
205.32 General qualifications of approved organizations.
205.33 Process and procedures for approval by the Food and Drug
Administration.
Authority: 21 U.S.C. 351, 352, 353, 360eee-2, 360eee-3, 360eee-
4, 371, 374.
Sec. 205.1 Scope.
(a) This part applies to the licensure of third-party logistics
providers (3PLs) in any State and to any entity engaging in wholesale
distribution of prescription drugs in any State. The standards
established under subpart A of this part will apply to all State and
Federal licenses described under sections 503(e)(5) and 584 of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353(e)(5) and 360eee-
3). The standards established under subpart C of this part will apply
to all State and Federal licenses described under sections 503(e)(1)
and 583 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
353(e)(1) and 360eee-2).
(b) A facility or entity that conducts 3PL activities must obtain a
3PL license for each facility as described in this part and is not
required to obtain a license as a wholesale distributor unless it is
also conducting wholesale distribution activities, in which case, the
entity or facility must obtain both a 3PL license as described in
subpart A of this part and a wholesale distributor license as described
in subpart C of this part. Unless otherwise noted, the term ``3PL'' or
``third-party logistics provider'' in this part applies to both the
entity and the individual facilities requiring a license.
(c) Subpart B of this part applies to any third-party organization
seeking to obtain or maintain approval by the Food and Drug
Administration (FDA or the Agency) to evaluate the qualifications of
3PLs for licensure. Subpart D of this part applies to any third-party
organization seeking to obtain or maintain approval by the Food and
Drug Administration to conduct inspections of wholesale distributors.
Sec. 205.2 Purpose.
The purpose of this part is to establish standards, terms, and
conditions for the licensing of 3PLs and prescription drug wholesale
distributors by State or Federal licensing authorities, including a
process for the revocation, reissuance, and renewal of such licenses.
This part also establishes the process and standards the Food and Drug
Administration will use to approve third-party organizations to
evaluate the qualifications of 3PLs for licensure and conduct
inspections of wholesale distributor facilities.
Sec. 205.3 Definitions.
The definitions and interpretations of terms contained in section
581 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360eee)
apply to those terms when used in this part. The following terms are
also defined for purposes of this part:
(a) 3PL activities means the provision or coordination of
warehousing, or other logistics services of a product in interstate
commerce on behalf of a manufacturer, wholesale distributor, or
dispenser of a product, while not taking ownership of the product, nor
having the responsibility to direct the sale or disposition of the
product.
(b) Change of entity ownership means:
(1) Partnership. In the case of a partnership, the removal,
addition, or substitution of a partner.
(2) Unincorporated sole proprietorship. In the case of an
unincorporated sole proprietorship, the transfer of title and property
to another party.
(3) Corporation. In the case of a corporation, the merger of the
licensed corporation into another corporation or the consolidation of
two or more corporations, resulting in the creation of a new
corporation. Transfer of corporate stock or the merger of another
corporation into the licensed corporation does not constitute change of
entity ownership.
(4) Limited liability company (LLC). In the case of an LLC, the
merger of the licensed LLC into another LLC or the consolidation of two
or more LLCs, resulting in the creation of a new LLC. Transfer of
company stock or the merger of another LLC into the licensed LLC does
not constitute change of ownership.
(c) Co-licensed partner means one of two or more entities that have
entered a written agreement for the right to engage in the marketing of
a prescription drug.
(d) Designated representative means an individual who is designated
as the representative of the facility manager and is responsible for
managing the daily operations of the wholesale distributor or 3PL
facility.
(e) Entity or entities means a business organization, such as a
corporation, company, association, firm, partnership, society, sole
proprietorship, or joint stock company.
(f) Facility means an establishment, warehouse, structure, or
structures under common ownership at one general, permanent, physical
location used for distribution, including storage and handling, of
prescription drugs.
(g) Key personnel means any individual who has responsibility for
managing the operations of the wholesale distributor, including any
principal, owner, director, officer of the wholesale distributor,
facility manager, or designated representative, or other individuals
who are authorized to enter areas where prescription drugs are held and
are likely to handle those prescription drugs as a part their
responsibilities within the operation.
(h) Minimal quantities means the total annual dollar volume of
prescription drugs sold by a retail pharmacy to licensed practitioners
for office use does not exceed 5 percent of the total dollar volume of
that retail pharmacy's annual prescription drug sales.
(i) Other logistics services include services provided by entities
that accept or transfer direct possession of products from that
entity's facility within the United States and its territories on
behalf of a trading partner (e.g., manufacturer, wholesale distributor,
dispenser) but that do not take ownership of the product nor have the
responsibility to direct a product's sale or disposition. ``Other
logistics services'' also means services undertaken with respect to a
product for a repackager acting on behalf of a manufacturer, wholesale
distributor, or dispenser.
(j) Other than a consumer or patient means the person receiving the
drug is not:
[[Page 6739]]
(1) The individual identified as the recipient of the prescription
drug;
(2) A dispenser fulfilling a specific patient need as defined in
section 581(19) of the Federal Food, Drug, and Cosmetic Act; or
(3) The clinical investigator, as defined in Sec. 312.3(b) of this
chapter.
(k) Product means a prescription drug in a finished dosage form for
administration to a patient without substantial further manufacturing
(e.g., capsules, tablets, lyophilized products before reconstitution).
(l) Significant disciplinary action means any action by a State or
Federal licensing authority that limits or prevents a 3PL from
conducting 3PL activities related to the distribution of prescription
drugs, or limits or prevents a wholesale distributor from distributing,
as that term is defined in section 581(5) of the Federal Food, Drug and
Cosmetic Act, or facilitating the distribution of prescription drugs.
This includes the revocation or suspension of a 3PL or wholesale
distributor license, or of a registration with the Drug Enforcement
Administration.
(m) Unfit for distribution means a prescription drug that has been
identified as a drug whose sale would violate the Federal Food, Drug,
and Cosmetic Act. This includes prescription drugs identified as
suspect or illegitimate pursuant to section 582(c) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 360eee-1(c)); adulterated pursuant to
section 501 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
351), including drugs rendered nonsaleable because conditions such as
return, recall, damage, or expiry cast doubt on the drug's safety,
identity, strength, quality, or purity; or misbranded pursuant to
section 502 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
352).
(n) Wholesale distribution means the distribution of a drug subject
to section 503(b) of the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 353(b)) to a person other than a consumer or patient, or receipt
of a drug subject to section 503(b) of the Federal Food, Drug, and
Cosmetic Act by a person other than the consumer or patient, but does
not include:
(1) Intracompany distribution of any drug between members of an
affiliate or within a manufacturer;
(2) The distribution of a drug or an offer to distribute a drug
among hospitals or other health care entities that are under common
control;
(3) The distribution of a drug or an offer to distribute a drug for
emergency medical reasons, including a public health emergency
declaration pursuant to section 319 of the Public Health Service Act
(42 U.S.C. 247d), except that, for purposes of this paragraph (n)(3), a
drug shortage not caused by a public health emergency will not
constitute an emergency medical reason;
(4) The dispensing of a drug pursuant to a prescription executed in
accordance with section 503(b) of the Federal Food, Drug, and Cosmetic
Act;
(5) The distribution of minimal quantities of a drug by a licensed
retail pharmacy to a licensed practitioner for office use;
(6) The distribution of a drug or an offer to distribute a drug by
a charitable organization to a nonprofit affiliate of the organization
to the extent otherwise permitted by law;
(7) The purchase or other acquisition by a dispenser, hospital, or
other health care entity of a drug for use by such dispenser, hospital,
or other health care entity;
(8) The distribution of a drug by the manufacturer of such drug;
(9) The receipt or transfer of a drug by an authorized 3PL,
provided that such 3PL does not take ownership of the drug;
(10) A common carrier that transports a drug, provided that the
common carrier does not take ownership of the drug;
(11) The distribution of a drug, or an offer to distribute a drug
by an authorized repackager that has taken ownership or possession of
the drug and repacks it in accordance with section 582(e) of the
Federal Food, Drug, and Cosmetic Act;
(12) Saleable drug returns when conducted by a dispenser;
(13) 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 paragraphs (n)(13)(i) through (iv) of this section 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) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 360(b)(2));
(ii) The medical convenience kit does not contain a controlled
substance that appears in a schedule contained in the Controlled
Substances Act;
(iii) In the case of a medical convenience kit that includes a
product, the person that manufactures the kit:
(A) Purchased such product directly from the pharmaceutical
manufacturer or from a wholesale distributor that purchased the product
directly from the pharmaceutical manufacturer; and
(B) Did not alter the product's primary container or label as
purchased from the manufacturer or wholesale distributor;
(iv) In the case of a medical convenience kit that includes a
product, the product is:
(A) An intravenous solution intended for the replenishment of
fluids and electrolytes;
(B) A product intended to maintain the equilibrium of water and
minerals in the body;
(C) A product intended for irrigation or reconstitution;
(D) An anesthetic;
(E) An anticoagulant;
(F) A vasopressor; or
(G) A sympathomimetic;
(14) The distribution of an intravenous drug 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);
(15) The distribution of an intravenous drug used to maintain the
equilibrium of water and minerals in the body (such as dialysis
solutions);
(16) The distribution of a drug that is intended for irrigation, or
sterile water, whether intended for such purposes or for injection;
(17) The distribution of medical gas, as defined in section 575 of
the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360ddd);
(18) Facilitating the distribution of a product by providing solely
administrative services, including processing of orders and payments;
or
(19) The transfer of a product by a hospital or other health care
entity, or by a wholesale distributor or manufacturer operating at the
direction of the hospital or other health care entity, to a repackager
as described in section 581(16)(B) of the Federal Food, Drug, and
Cosmetic Act and registered under section 510 of the Federal Food,
Drug, and Cosmetic Act for the purpose of repackaging the drug for use
by that hospital or other health care entity, and other health care
entities that are under common control, if ownership of the drug
remains with the hospital or other health care entity at all times.
Subpart A--Third-Party Logistics Providers Licensure Standards
Sec. 205.4 Requirement that third-party logistics providers be
licensed.
(a) No 3PL may conduct 3PL activities unless each facility of the
3PL is licensed:
(1) By the State from which the 3PL conducts 3PL activities; or
[[Page 6740]]
(2) If the State from which the 3PL conducts 3PL activities has not
established a licensure requirement in accordance with the standards
set forth in this part, by the Food and Drug Administration; and
(3) If the product is distributed interstate, by the State into
which the 3PL distributes the product if such licensure is required by
that State, and the 3PL is not licensed by the Food and Drug
Administration under Sec. 205.6.
(b) Each facility owned, leased, or rented by a 3PL must have a
separate license.
(c) Licenses are facility- and owner-specific and are not
transferable.
(d) The 3PL must maintain its license at the licensed facility in a
readily retrievable manner and must permit inspection of the license by
any official, agent, or employee of the licensing authority or of any
Federal, State, or local agency engaged in enforcement of laws relating
to the distribution of prescription drugs.
Sec. 205.5 General application requirements for licensure.
(a) Applicant requirements. An individual who submits an
application on behalf of a 3PL for a license issued pursuant to this
subpart must:
(1) Be 18 years of age or older;
(2) Submit an affidavit that such individual's ownership or
management of or employment by the 3PL would not preclude the 3PL from
receiving or maintaining a license under Sec. 205.11(f);
(3) Submit all application information required in the form
required by the licensing authority; and
(4) Pay any licensing fees that are required by the licensing
authority pursuant to section 584(c) of the Federal Food, Drug, and
Cosmetic Act.
(b) General requirements for licensure application. The State or
Federal licensing authority will require the following information from
each 3PL facility as part of the initial application for the license
described in Sec. 205.4 and as part of any renewal of such license:
(1) The name and title of the individual who submits the
application for licensure on behalf of the 3PL;
(2) The name of the 3PL as it should appear on the license, full
business address of the facility, and telephone number;
(3) All trade or business names used by the 3PL, including prior
trade or business names, within the past 7 years;
(4) Name, email address, and telephone number of the 3PL's facility
manager or designated representative;
(5) The type of ownership or operation of the business entity, such
as a partnership, corporation, limited liability company, or sole
proprietorship;
(6) The name of any owners or operators of the 3PL, including:
(i) If a sole proprietorship, the full name of the sole proprietor
and the name of the business entity;
(ii) If a partnership, the name of each partner and the name of the
partnership;
(iii) If a corporation, the corporate names, the names of any
subsidiaries and affiliates, the name and title of each corporate
officer and director, and the State of incorporation; and
(iv) If a limited liability company, the name of the limited
liability company, including any subsidiaries and affiliates, the name
of each member, and the State in which the limited liability company
was organized; and
(7) Whether the 3PL facility manager or designated representative
has ever been convicted of a felony relating to prescription drug
distribution, including a conviction under section 301(i) or (k) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 331(i) or (k)) or 18
U.S.C. 1365, relating to product tampering, together with details
concerning any such events.
(c) General requirements for renewal applications. On the renewal
application provided by the State or Federal licensing authority, the
3PL must:
(1) Certify that the 3PL has continued to meet all the standards
and complied with the requirements in this subpart since the previous
license was issued; and
(2) Inform the applicable licensing authority of any changes to
information previously submitted pursuant to paragraph (b) of this
section or Sec. 205.6(a)(2) for which a notification was not already
submitted to the licensing authority under Sec. 205.7.
Sec. 205.6 Federal licensure process.
(a) Procedures for filing an FDA application for a 3PL license. (1)
Each 3PL facility must electronically submit an application to the Food
and Drug Administration for a license to conduct 3PL activities in a
State if the State does not have a 3PL licensure program consistent
with the standards set forth in this section. The application must
include the information specified in Sec. 205.5, along with supporting
documentation that demonstrates the applicant's storage practices are
sufficient to ensure the continued safety, identity, strength, quality,
and purity of the products in the facility.
(2) If one or more organizations have been approved by the Food and
Drug Administration to conduct a review of a 3PL's qualifications for
licensure pursuant to Sec. 205.17, the 3PL will indicate in its
application to the Food and Drug Administration which approved
organization (AO) it prefers to conduct its licensure review. If there
is no organization approved by the Food and Drug Administration to
conduct licensure review, the Food and Drug Administration will conduct
the review, as described in Sec. 205.17(b). Licensure review must
consist of:
(i) Review of all documents submitted in support of the application
for 3PL licensure; and
(ii) Inspection of the facility, as directed by the licensing
authority pursuant to Sec. 205.16(a) or (b).
(3) The applicant, or the applicant's agent or other authorized
official, must sign the application.
(4) An application for a 3PL license will not be considered as
filed until the Food and Drug Administration has received all pertinent
information and fees.
(b) Determination that licensing requirements have been met. The
Food and Drug Administration, not an AO, will determine whether the 3PL
meets all the applicable requirements set forth in this part.
(c) Notification of easily correctable deficiencies. The Food and
Drug Administration will make every reasonable effort to promptly
communicate to applicants easily correctable deficiencies found in an
application when those deficiencies are discovered, particularly
deficiencies concerning storage, handling, distribution, or
recordkeeping issues. The Food and Drug Administration will also
promptly inform applicants of its need for more data or information or
for changes in the application needed to facilitate the Agency's
review.
(d) Issuance of 3PL license by FDA. Approval of a 3PL license
application or issuance of a 3PL license constitutes a determination by
the Food and Drug Administration that, based upon the information
provided and reviewed, the 3PL meets the applicable requirements to be
licensed under section 584 of the Federal Food, Drug, and Cosmetic Act.
The Food and Drug Administration will approve an application and send
the applicant an approval letter and license certificate if none of the
reasons in Sec. 205.9(a)(1) for refusing to approve the application
applies. Applicable requirements for the maintenance of 3PL facilities
to conduct 3PL activities will include but not be limited to the good
storage practices set forth under Sec. 205.10. A license is effective
on the date of issuance of the license certificate.
[[Page 6741]]
(e) Validity of 3PL license. Licenses issued to 3PL facilities will
remain valid until the date of expiration, unless suspended or revoked.
Sec. 205.7 Changes to information, location, or ownership of a
licensed 3PL.
(a) Any change to any information required in this subpart,
including changes to any information required pursuant to Sec. Sec.
205.5, 205.6, 205.11, and 205.15, must be submitted electronically to
the licensing authority within 30 calendar days after such change is
effective, except where otherwise provided in this subpart.
(b) Any change in the location of a facility at which 3PL
activities are conducted will require a new license and inspection of
the new facility prior to its beginning operations.
(1) The application for a new license required by Sec. 205.5 must
be submitted no later than 90 calendar days prior to beginning
operations at the new location.
(2) On the date the change of location takes place, the license for
the original facility is void.
(c) Any change in the entity engaged in 3PL activities in a
facility will require a new license prior to beginning operations.
(1) The application for a new license required by Sec. 205.5 must
be submitted no later than 30 calendar days prior to the change in
ownership.
(2) A new inspection of the facility may also be required at the
licensing authority's discretion.
(3) A 3PL can continue to operate under the original license for 30
calendar days after the change of ownership occurs or until the license
application of the new owner is approved, whichever is sooner.
Sec. 205.8 Expiry and renewal.
Any license issued or renewed pursuant to Sec. 205.5 or Sec.
205.6 will expire 3 years after the date issued. A 3PL renewal
application will not be accepted more than 90 calendar days before the
date of expiration. A 3PL will not be penalized for administrative
delay on the part of the licensing authority in issuing a new license.
A license will be considered valid during the period of the
administrative delay if the 3PL timely submitted the renewal
application.
Sec. 205.9 Licensure denial, suspension, reinstatement, revocation,
and voluntary termination: notice and opportunity to request a hearing.
(a) Denial of application for licensure. (1) The licensing
authority will refuse to approve or renew a 3PL license application for
any of the following reasons:
(i) The facilities and controls used for the receipt, security,
storage, inventory, shipment, or distribution of the product are
inadequate to facilitate safe operations pursuant to Sec. 205.10(b).
(ii) The methods or procedures to be used in the receipt, security,
storage, inventory, shipment, or distribution of the product do not
comply with the requirements for good storage practices in Sec.
205.10.
(iii) The personnel employed by the applicant do not meet the
requirements necessary for good storage practices in Sec. 205.11.
(iv) There is insufficient information in the written policies and
procedures required in Sec. 205.12 to determine whether the methods or
procedures to be used in the receipt, security, storage, inventory,
shipment, or distribution of the product comply with the requirements
for good storage practices in Sec. 205.10, or to determine whether the
facilities and controls to be used in the receipt, security, storage,
inventory, shipment, or distribution of the product facilitate safe
operations.
(v) The methods or procedures to be used in the receipt, storage,
handling, or distribution of the product do not comply with the
requirements for adequate recordkeeping in Sec. 205.10 or Sec.
205.13.
(vi) The application contains an untrue statement of material fact.
(vii) The applicant does not permit a properly authorized officer
or employee of FDA, a State licensing authority, or an organization
approved by the Food and Drug Administration pursuant to Sec. 205.17
an adequate opportunity to inspect the facilities, controls, and any
records relevant to the application.
(viii) For renewal applications, failure to report to the licensing
authority any pertinent change of information required in Sec. 205.5
or Sec. 205.7.
(ix) For renewal applications, failure to comply with any of the
requirements for annual reporting in Sec. 205.15.
(2) If a 3PL's application fails to demonstrate that the 3PL meets
the requirements for licensure set forth in this part, the licensing
authority will provide written notice to the applicant that its license
application may be denied, setting forth the grounds for the denial and
an opportunity to demonstrate that the 3PL meets the requirements for
licensure.
(3) The notice will inform the applicant of its right to provide
additional information and request reconsideration of the denial by the
licensing authority within 14 calendar days of the date of the
licensing authority's written notice.
(4) If no reconsideration is sought or if, upon reconsideration,
the licensing authority denies the applicant's request for licensure,
the licensing authority will provide the applicant written notice of
the denial and will provide the applicant notice of the opportunity to
request a hearing.
(5) The applicant who wishes to request a hearing has 10 calendar
days after the date of the notice of denial to submit a written notice
of participation and request for a hearing. The applicant who fails to
submit a written notice of participation and request for a hearing
within 10 calendar days waives the opportunity for a hearing.
(6) Parts 10 through 16 of this chapter apply to 3PL licenses
issued by the Food and Drug Administration under section 584 of the
Federal Food, Drug, and Cosmetic Act.
(b) Suspension of license after notice and opportunity to request a
hearing. (1) The licensing authority may move to suspend a license if
the licensing authority has a reasonable belief that the licensee has
failed to comply with any of the standards for receiving and
maintaining licensure described in this subpart.
(2) The licensing authority will provide written notice of intent
to suspend a 3PL license setting forth the grounds for the suspension
pursuant to this part, including what information would be required to
demonstrate or achieve compliance. The notice will inform the applicant
of its right to provide additional information, request reconsideration
of the suspension by the licensing authority, and demonstrate or
achieve compliance before suspension.
(3) Each 3PL license holder has 30 calendar days from the date of
the notice of intent to suspend to present, in writing, comments and
information bearing on the initial decision.
(4) If no comments or information are received within 30 calendar
days or if, upon reconsideration, the licensing authority believes the
3PL license should still be suspended, the licensing authority will
provide the 3PL a second written notice of the intent to suspend,
informing the 3PL of the opportunity to request a hearing on the
question of whether there are grounds for suspension.
(5) The written notice will contain a statement that the 3PL will
be afforded an opportunity to request a hearing.
(6) The 3PL must submit a written notice of participation and
request a hearing in writing within 10 calendar days after the date of
notice of the intent to suspend. A 3PL that fails to submit
[[Page 6742]]
a written notice of participation and request for hearing within 10
calendar days waives the opportunity for a hearing and the license will
be suspended.
(7) Parts 10 through 16 of this chapter apply to 3PL licenses
issued by the Food and Drug Administration under section 584 of the
Federal Food, Drug, and Cosmetic Act.
(8) If a 3PL's license is suspended and the 3PL does not
demonstrate or achieve compliance to the licensing authority's
satisfaction within the time period indicated in the notice of
suspension, the licensing authority will move to revoke the 3PL's
license.
(c) Immediate suspension of license. (1) The licensing authority
may suspend a license effective immediately if the licensing authority
reasonably believes that the licensee has failed to comply with any of
the standards for receiving and maintaining licensure described in this
subpart and that the nature of the noncompliance at issue would
reasonably be expected to cause an imminent threat to public health.
(2) The licensing authority will provide the 3PL with written
notice of immediate suspension of its license setting forth the grounds
for the immediate suspension pursuant to this part, including what
information would be required to demonstrate compliance, and the
opportunity to request a hearing within 10 calendar days of the 3PL's
request for such hearing.
(3) The 3PL must submit a written notice of participation and
request a hearing in writing within 10 calendar days after the date of
the written notice of immediate suspension. A 3PL that fails to submit
a written notice of participation and request for hearing within 10
calendar days after the date of the written notice waives the
opportunity for a hearing.
(4) Parts 10 through 16 of this chapter apply to 3PL licenses
issued by the Food and Drug Administration under section 584 of the
Federal Food, Drug, and Cosmetic Act.
(5) If a 3PL's license is suspended and the 3PL does not
demonstrate or achieve compliance to the licensing authority's
satisfaction within the time period indicated in the notice of
suspension, the licensing authority will move to revoke the 3PL's
license.
(d) Reinstatement of suspended licenses. The licensing authority
may reinstate a previously suspended license upon a 3PL's showing of
compliance with requirements in this part and upon such inspection and
examination as the licensing authority may require.
(e) Revocation. (1) If compliance is not demonstrated or achieved
to the licensing authority's satisfaction within the time period
indicated in the notice of suspension, the licensing authority will
move to revoke the 3PL's license.
(2) The licensing authority will notify the 3PL of the intent to
revoke the 3PL's license, setting forth the grounds for the revocation
and offering an opportunity to request a hearing on the proposed
revocation.
(3) The written notice will contain a statement that the 3PL may
request a hearing.
(4) The 3PL must submit a written notice of participation and
request a hearing within 10 calendar days after the date of the notice
of revocation. A 3PL that fails to submit a written notice of
participation and request for hearing within 10 calendar days waives
the opportunity for a hearing.
(5) Parts 10 through 16 of this chapter apply to 3PL licenses
issued by the Food and Drug Administration under section 584 of the
Federal Food, Drug, and Cosmetic Act.
(f) Nonrenewal. If a license is suspended and the 3PL does not
submit a renewal application by the date of expiration of the suspended
license, the license will be considered expired. A 3PL may not conduct
3PL activities with an expired license and must submit a new
application for licensure if it wishes to conduct 3PL activities.
(g) Voluntary termination of licensure upon request by the 3PL. The
licensing authority will terminate a 3PL facility's license upon the
3PL's request, which includes a notice of intent to discontinue its 3PL
activities and waive opportunity for a hearing. A 3PL facility that
voluntarily terminates licensure must obtain a new license before
resuming 3PL activities.
(1) If a 3PL facility that has had its license revoked wishes to
apply for a new license, that facility must submit a new license
application, which may include an inspection if required by the
licensing authority under Sec. 205.16.
(2) [Reserved]
Sec. 205.10 Good storage practices for 3PL facilities.
(a) A facility owned, rented, or leased by a 3PL for the purpose of
conducting 3PL activities must meet the storage practices for
facilities required in paragraphs (b) through (d) of this section.
(b) A facility to which a 3PL license has been issued in the same
name and at the same address as another trading partner, such as a
wholesale distributor, must maintain separate systems and processes for
products that are specific to the 3PL.
(c) A facility owned, leased, or rented by a 3PL in which 3PL
activities are conducted must have suitable storage practices in place
for such facility, as demonstrated by the following:
(1) General requirements. The facility is:
(i) Not a personal residence;
(ii) Of a suitable size, construction, and configuration to ensure
proper storage and distribution of all products warehoused at the
facility, including lighting, ventilation, temperature, sanitation,
humidity, space, equipment, and secure conditions where products are
stored;
(iii) Of a suitable size, construction, and configuration to
facilitate cleaning, maintenance, proper logistics, and distribution
operations, and to provide protection from intrusion; and
(iv) Maintained in a clean and orderly condition, free from
infestation of any kind.
(A) A cleaning program schedule must be maintained, documented, and
followed.
(B) A pest control program, which is designed to ensure that the
facility is free from infestation, must be in place, and pest control
records must be kept.
(2) Areas to handle separation of products that are unfit for
distribution. The facility has:
(i) Clearly defined, designated areas separate from saleable
products to quarantine suspect product, illegitimate product, and other
products that are unfit for distribution until dispositioned.
(ii) Clearly defined, designated areas to handle separation of
products that are returned, recalled, or expired.
(iii) For returned or recalled products, clearly defined,
designated areas separate from saleable products to handle returned or
recalled product.
(iv) For expired products, clearly defined, designated areas
separate from saleable products from which expired product may be
returned to the manufacturer or repackager or destroyed.
(3) Security of premises. The facility is:
(i) Designed so that designated areas of the facility where
products are held are accessible only to personnel, regardless of
employee or contractor status, position title, or ownership interest,
who possess appropriate and verifiable experience and training
necessary to safely and lawfully engage in 3PL activities; and
(ii) Equipped with adequate security to protect from
vulnerabilities and potential breaches. Adequate security must include
precautions taken to ensure that:
[[Page 6743]]
(A) The facility is secure from unauthorized entry;
(B) Access from outside the premises is limited, well controlled,
and documented;
(C) The outside perimeter of the premises is well lit;
(D) The facility is equipped with an alarm system to detect and
notify appropriate personnel of entry after hours; and
(E) The facility is equipped with a security system that provides
suitable protection against theft and diversion of products.
(4) Facility assessments. Facility assessments, including
temperature mapping and other assessments designed to ensure products
are properly stored in accordance with their labeling, must be
regularly conducted and documented.
(5) Equipment. Equipment must be utilized and maintained in good
repair and must be suitable for 3PL activities, as demonstrated by the
following:
(i) The 3PL must be able to demonstrate that all equipment has been
calibrated, as applicable, and validated at regular intervals to
achieve the intended results accurately, consistently, and in a manner
that can be reproduced by qualified individuals following approved
procedures;
(ii) The 3PL must use appropriate manual, electromechanical, or
electronic temperature and humidity recording equipment or logs to
document proper storage of products; and
(iii) The monitoring equipment must alert appropriate personnel in
a timely manner of any deviations from the intended storage conditions.
(d) In addition to the requirements set forth in this subpart,
products must be handled and stored in accordance with all applicable
Federal and State laws.
Sec. 205.11 Personnel requirements necessary for good storage
practices.
(a) The 3PL must maintain a list of officers, directors, managers,
and designated representatives; a description of their duties; and a
summary of their qualifications. This list must be available for review
by the State or Federal licensing authority.
(b) Qualifications for the 3PL's facility manager or designated
representative of such facility manager must include that the
individual:
(1) Has the education, background, training, and experience
necessary to perform such individual's assigned functions;
(2) Serves as the facility manager or designated representative of
such facility manager for only one facility at a time; and
(3) Is actively involved in and responsible for managing the daily
operations of the 3PL facility.
(c) The 3PL must provide the facility manager or designated
representative adequate authorities and resources to effectively manage
the 3PL's daily operations in accordance with the standards in this
part.
(d) The facility manager or designated representative is
responsible for managing all the daily operations of the 3PL facility,
including those duties delegated to other personnel.
(e) A 3PL is prohibited from obtaining or maintaining licensure if
the 3PL employs a facility manager or designated representative who has
been:
(1) Convicted of any felony violation of section 301(i) or (k) of
the Federal Food, Drug, and Cosmetic Act; or
(2) Convicted of any violation of 18 U.S.C. 1365, relating to
product tampering.
(f) Licensure may also be denied when storage practices are not
sufficient to maintain adequate security because a facility manager or
designated representative of such facility manager has been:
(1) Found to have delayed or otherwise impeded an inspection by the
Federal or State licensing authority or an approved third-party
inspector, or if an inspector, after reasonable efforts, was unable to
gain access to an establishment or a location to carry out the
inspection required under Sec. 205.16 as permitted by section 704(a)
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 374(a));
(2) Found to have omitted material information or furnished false
or fraudulent information in an application made in connection with the
distribution of prescription drugs; or
(3) Subject to licensure suspension or revocation by Federal,
State, or local government for any license currently or previously held
by the applicant for the manufacture or distribution of any drugs,
including controlled substances.
(g) Any facility manager or designated representative will be
subject to criminal background checks. The results of the background
checks must demonstrate no history of criminal convictions pursuant to
paragraph (e) of this section.
Sec. 205.12 Required written policies and procedures.
(a) General requirements for written policies and procedures. Every
3PL must establish, maintain, and follow written policies and
procedures as described in this section and relevant to the scope of
their 3PL activities. The written policies and procedures must clearly
delineate the responsibilities of the 3PL and any contractors used to
fulfill any of the 3PL's duties. The written policies and procedures
must also describe a system by which the 3PL will monitor all processes
and, if deviations occur, document and investigate to determine the
root cause of the deviation in a timely manner. Such written policies
and procedures must be made available to the licensing authority upon
request, and the licensing authority may copy records to ensure the 3PL
is following written policies and procedures.
(1) Written policies and procedures must include, but are not
limited to, the following:
(i) Documentation pertaining to receipt, security, storage,
handling, inventory, shipment, and distribution of products, including
written policies and procedures for identifying, recording, and
reporting confirmed losses, thefts, diversions, and products unfit for
distribution; and
(ii) Documentation pertaining to all policies, procedures,
instructions, contracts, data, inspection reports, and any other
documentation related to compliance with this part.
(b) Personnel. The 3PL must establish, maintain, and follow written
policies and procedures that ensure the qualifications of personnel are
met, maintained, and documented as required in Sec. 205.11. These
written policies and procedures must be available for review by the
State or Federal licensing authority, as provided in Sec. 205.13.
(c) Written policies and procedures. The 3PL must maintain written
policies and procedures to address receipt, security, storage,
inventory, shipment, and distribution of the product.
(1) Receipt. The 3PL must establish, maintain, and follow written
policies and procedures providing for the inspection of all shipping
containers in accordance with the following standards:
(i) Incoming shipments. Upon receipt, each shipping container must
be visually examined for identity and for conditions that would suggest
the product may be unfit for distribution.
(ii) Outgoing shipments. Each outgoing shipment must be properly
inspected for identity of the product and to ensure that there is no
shipment of product that is unfit for distribution.
(2) Security. The 3PL must establish, maintain, and follow written
policies and procedures that provide for the secured storage of
products and preserve the integrity of the 3PL's data and records.
[[Page 6744]]
(3) Storage. The 3PL must establish, maintain, and follow written
policies and procedures that ensure products are stored at appropriate
temperatures and under appropriate conditions, in accordance with the
requirements in the products' labeling, to preserve their identity,
strength, quality, and purity.
(4) Inventory. The 3PL must establish, maintain, and follow written
policies and procedures related to inventory controls that:
(i) Ensure the facility's stock is inventoried regularly to protect
against diversion and against distribution of product that may be unfit
for distribution;
(ii) Contain procedures to identify, investigate, document, and
correct stock errors, inaccuracies, and irregularities, including
product theft, loss, or diversion;
(iii) Identify, record, and report confirmed product losses or
theft immediately to the owner of the products and relevant
authorities; and
(iv) Ensure that the 3PL can trace the receipt and outbound
distribution of a product, as well as maintain supply and inventory
records.
(5) Shipment. The 3PL must establish, maintain, and follow written
policies and procedures providing for the transportation of products in
accordance with the following standards:
(i) Products must be transported in a manner that will:
(A) Protect against breakage, contamination, adulteration, and
theft;
(B) Prevent exposure to conditions that may compromise their
quality and integrity; and
(C) Ensure that deviations from storage requirements during
transport are promptly identified, investigated, documented, and
reported to the trading partner from whom the product was received and
to the manufacturer to determine if further commercial distribution is
appropriate.
(ii) A 3PL that outsources transportation of products to a
transportation provider, such as a common carrier, remains responsible
for compliance with this part while the products are in transit to the
intended trading partner. Arrangements for transportation by a
transportation provider must be documented and carried out in
accordance with the requirements in this section.
(6) Distribution. The 3PL must establish, maintain, and follow
written policies and procedures related to the distribution of products
that:
(i) Ensure products are distributed at appropriate temperatures and
under appropriate conditions in accordance with the requirements in the
products' labeling to preserve their identity, strength, quality, and
purity; and
(ii) Protect against diversion and against distribution of products
that may be unfit for distribution.
(d) Recalled products. The 3PL must establish, maintain, and follow
written policies and procedures to support manufacturer recalls.
(e) Preparing for foreseeable crises. The 3PL must establish,
maintain, and follow written policies and procedures to prepare for,
protect against, and address any reasonably foreseeable crises that
could affect security or operations (such as strike, fire, or flood).
(f) Products that are unfit for distribution. The 3PL must
establish, maintain, and follow written policies and procedures for
handling products that are adulterated, misbranded, or otherwise unfit
for distribution, as well as returned products, that:
(1) Require such products to be physically segregated from other
products and dispositioned as directed by the applicable manufacturer,
wholesale distributor, dispenser, or an authorized government agency
and in accordance with all applicable State and Federal laws;
(2) Identify a contact person responsible for communicating with
the manufacturer, wholesale distributor, dispenser, or an authorized
government agency regarding nonsaleable and returned products;
(3) Include procedures to prevent products unfit for distribution
from entering the supply chain through the 3PL's disposition of
nonsaleable products; and
(4) Require the 3PL to document the disposition of all nonsaleable
and returned products, and maintain such records for inventory
accountability.
(g) Suspect product. The 3PL must establish, maintain, and follow
written policies and procedures to quarantine or destroy a suspect
product if directed to do so by the product's manufacturer, wholesale
distributor, dispenser, or an authorized government agency.
(h) Illegitimate product. The 3PL must establish, maintain, and
follow written policies and procedures to store illegitimate product in
a clearly defined, designated area from which the product may be
dispositioned as directed by the respective manufacturer, wholesale
distributor, dispenser, or an authorized government agency.
Sec. 205.13 Recordkeeping and document maintenance.
(a) Maintenance, availability, and accuracy of records and written
policies and procedures. All required records and written policies and
procedures outlined in Sec. 205.12 must:
(1) Be readily retrievable and made available to licensing
authorities upon request;
(2) Be securely stored from unauthorized access or modifications;
(3) Contain only alterations signed and dated by the individual who
made the alteration. Such alteration must preserve the original
information and document the reason for the alteration; and
(4) Accurately reflect the name of the 3PL as it appears on the 3PL
facility's license, which must match the information that is reported
to the Food and Drug Administration pursuant to the Food and Drug
Administration reporting requirements at Sec. 205.15.
(b) Record and document retention. (1) Except for the records
listed in paragraph (b)(2) of this section, all records and written
policies and procedures required to be maintained by this part must be
retained for a period of 3 years.
(2) Records of suspect and illegitimate products and destroyed,
returned, and recalled products must be retained for a period of 6
years.
Sec. 205.14 3PLs must provide upon request a list of trading
partners.
A list of all manufacturers, wholesale distributors, repackagers,
and dispensers for which the 3PL conducts 3PL activities must be
readily retrievable and made available to regulatory authorities upon
request.
Sec. 205.15 Requirements for initial and annual reporting to the Food
and Drug Administration.
(a) Electronic reporting requirement. The 3PL must report
electronically to the Food and Drug Administration using a secure
mechanism in a format the Food and Drug Administration can review,
process, and archive. Information reported will be included in the Food
and Drug Administration's public database for 3PLs to the extent
allowable by law.
(b) Reporting periods--(1) Initial reporting. Any entity that owns
or operates a facility that conducts 3PL activities must report to the
Food and Drug Administration within 30 calendar days of obtaining an
initial State or Federal 3PL license.
(2) Annual reporting. Any entity that owns or operates a facility
that is licensed to engage in 3PL activities must report to the Food
and Drug Administration each calendar year between January 1 and March
31.
(c) Required information. Information reported for each 3PL
facility separately
[[Page 6745]]
licensed by the licensing authority must include:
(1) A complete list of States by which the 3PL facility is
licensed, including the corresponding identification number and the
expiration date of each such license;
(2) Name of company as it appears on the license and full business
address; and
(3) All trade names or business names under which the 3PL conducts
business.
(d) Timing for significant disciplinary action reporting--(1)
Initial reporting. The 3PL must report to the Food and Drug
Administration any significant disciplinary actions that occurred in
the previous 12 months.
(2) Subsequent reporting. The 3PL must, within 30 calendar days of
a final action taken by a State or Federal licensing authority, report
significant disciplinary actions to the Food and Drug Administration.
(e) Reporting voluntary withdrawal of a State license. The 3PL must
report to the Food and Drug Administration that it has withdrawn its
license in a State within 30 calendar days after such withdrawal,
including the reasons for the voluntary withdrawal of licensure.
Sec. 205.16 Inspections.
(a) A physical inspection of a facility owned, rented, or leased by
a 3PL for conducting 3PL activities must be conducted prior to issuance
of the initial license by the licensing authority.
(1) Where the State is the licensing authority, the State may
conduct the inspection or may accept an inspection by a third-party
accreditation or inspection service approved by the State licensing
authority. If the facility is out of state, the State may conduct the
inspection or may accept an inspection by the State in which the
facility is located.
(2) Where the Food and Drug Administration is the licensing
authority, the Food and Drug Administration may conduct the inspection
or may accept an inspection by an organization approved by the Food and
Drug Administration under Sec. 205.18.
(b) Routine inspections must be conducted thereafter once every 3
years by the licensing authority, a third-party approved organization
or inspection service approved by the Food and Drug Administration
under Sec. 205.18, or the State licensing the 3PL.
(c) Records described in Sec. 205.12(a)(1) that are kept at the
inspection site or that can be immediately retrieved by computer or
other electronic means must be readily available for inspection during
the retention period. Records kept at a central location apart from the
inspection site and not electronically retrievable must be made
available for inspection within 2 business days of a request by a State
or Federal official, or sooner if necessitated by the duration of the
inspection.
(d) The 3PLs must permit the Federal or State licensing authority
and third-party approved organizations or inspection services approved
by the Food and Drug Administration or the State to enter and inspect
their facilities and to audit their records and written operating
procedures.
Subpart B--Approved Organizations for 3PLS
Sec. 205.17 Use of approved third-party organizations.
(a) A third-party organization that has been approved by the Food
and Drug Administration pursuant to Sec. 205.18 (or ``approved
organization'' (AO)) may conduct licensure review of a 3PL's
qualifications for licensure and may conduct inspections of 3PLs at the
periodic intervals specified in Sec. 205.16, as directed by the Food
and Drug Administration.
(b) If an organization has been approved by the Food and Drug
Administration to conduct licensure review, the AO will:
(1) Conduct the licensure review, which consists of:
(i) Reviewing all documents submitted in support of the application
for 3PL licensure; and
(ii) Inspecting the facility, as directed by the licensing
authority;
(2) Complete the licensure review within a timeframe not to exceed
90 calendar days after receiving notice to conduct a licensure review
from the Food and Drug Administration;
(3) Based on the licensure review, write a detailed document
including any findings and observations in support of the AO's
recommendation to the Food and Drug Administration to grant or deny
licensure; and
(4) Send the original document to the Food and Drug Administration,
with a copy to the 3PL, within 7 calendar days of completing the
licensure review.
(c) When conducting routine inspections at periodic intervals, the
AO will:
(1) Complete the inspection within a timeframe not to exceed 90
calendar days after receiving notice to conduct an inspection from the
Food and Drug Administration;
(2) Based on the inspection, write a detailed document including
any findings and observations in support of the AO's recommendation to
the Food and Drug Administration regarding a 3PL's licensure; and
(3) Send the original document to the Food and Drug Administration,
with a copy to the 3PL, within 7 calendar days of completing the
inspection.
(d) To maintain approval, an organization approved by the Food and
Drug Administration must:
(1) Maintain records that support the AO's initial and continuing
qualifications for approval for a minimum of 5 years;
(2) Maintain the following records related to licensure reviews for
a minimum of 5 years:
(i) Supporting documentation reviewed as part of a licensure
review;
(ii) Licensure review and inspection reports;
(iii) Correspondence with the Food and Drug Administration and the
3PL associated with a licensure review; and
(iv) Information on the identity and qualifications of all AO
personnel who contributed to the licensure review, including a
certification that such personnel have complied with all applicable
requirements set forth in subpart A of this part and are free of any
conflicts of interest, as set forth at 5 CFR part 2635 and 18 U.S.C.
208.
(e) Records maintained by the AO must:
(1) Be readily retrievable and made available to Federal licensing
authorities upon request;
(2) Be maintained and protected in accordance with all applicable
laws, including those regarding protection of personal identifying
information and confidential commercial information;
(3) Be secure from unauthorized access or modifications; and
(4) Contain only alterations signed and dated by the individual who
made the alteration. Such alteration must preserve the original
information and document the reason for the alteration.
(f) An AO must report to the Food and Drug Administration within 24
hours of discovering any evidence or observations of potential
violations found at a 3PL facility during an inspection of the facility
that could pose an imminent threat to the public health. Reports must
be made in the manner prescribed by the Food and Drug Administration.
Sec. 205.18 General qualifications of approved organizations.
(a) To become and remain an AO, the organization and anyone
employed by the organization, including contractors used by the
organization:
(1) Must not be a current Federal or State government employee;
(2) Must not engage in prescription drug-related activities,
excluding
[[Page 6746]]
participation in the Agency's AO program and related activities, but
including and not limited to manufacturing, wholesale distribution,
repackaging, relabeling, dispensing, or 3PL activities;
(3) Must disclose to the Food and Drug Administration any
participation or financial interest in entities that participate in the
design, manufacture, promotion, or sale of articles or activities that
are predominantly FDA-regulated or are expected to result in FDA-
regulated articles;
(4) Must not be owned or controlled by, or have any organizational,
material, or financial affiliation with, any of the entities engaged in
manufacturing, wholesale distribution, repackaging, relabeling,
dispensing, 3PL activities, or the design, manufacture, promotion, or
sale of prescription drugs as defined in section 581(12) of the Federal
Food, Drug, and Cosmetic Act;
(5) Must enter and abide by a written agreement with the applicant
before data and information otherwise exempt from public disclosure may
be disclosed to the AO or a contractor;
(6) Must operate in accordance with professional and ethical
business practices and applicable legal requirements, which include,
but are not limited to:
(i) Protecting against conflicts of interest as set forth in 5 CFR
part 2635 and 18 U.S.C. 208;
(ii) Ensuring that the personnel employed or contracted by the AO
who are working on licensure reviews have sufficient education,
training, knowledge, and experience to conduct licensure reviews of
3PLs;
(iii) Treating received information, records, and reports that
qualify as confidential commercial information as described at 5 U.S.C.
552(b)(4) according to applicable requirements for such information;
(iv) Maintaining appropriate security and protection, physical and
electronic, of any information received in relation to licensure
reviews to preserve confidentiality and ensure that the release of any
information is limited to authorized disclosures to either the Food and
Drug Administration or the 3PL facility;
(v) Reporting information to the Food and Drug Administration and
entities for which licensure reviews were conducted that accurately
reflects data reviewed, inspectional observations made, and other
matters that relate to compliance with the Federal Food, Drug, and
Cosmetic Act; and
(vi) Promptly responding to and attempting to resolve any
complaints regarding activities for which it is approved by the Food
and Drug Administration; and
(7) Must establish and maintain policies, procedures, and
documentation to demonstrate that, at the time of application and
throughout their tenure as an AO, the applicant has satisfied and can
continue to satisfy the requirements to qualify as an AO capable of
assessing compliance with all 3PL requirements. Such policies,
procedures, and documentation must include, but are not limited to:
(i) AO program administration;
(ii) Disciplinary actions and corrective measures;
(iii) Recordkeeping and confidentiality;
(iv) Use of contractors; and
(v) Personnel qualifications and ongoing training.
(b) If an AO elects to use contractors for licensure reviews or
licensure review-related activities, the AO remains responsible for the
work of the contractors at all times.
(1) AOs that use contractors to conduct licensure reviews must
abide by the confidentiality agreements between the Food and Drug
Administration and the AO and have policies and procedures in place to
ensure the contractor's continuing compliance with this part, as well
as competence and qualifications to conduct licensure reviews. Such
policies and procedures must ensure that contractors:
(i) Meet the qualifications set forth in paragraph (a) of this
section;
(ii) Do not subcontract their licensure review duties, and that
contractors are removed if such requirement is violated;
(iii) Abide by the policies and procedures of the AO, as set forth
in Sec. 205.19(b); and
(iv) Complete and pass the same training required by the AO, as set
forth in Sec. 205.19(c).
(2) If an AO elects to use contractors to conduct licensure
reviews, the AO must receive and keep a record of written consent from
the 3PL to share confidential commercial information with contractors
by which a licensure review is being conducted.
(3) AOs that elect to use contractors must submit to the Food and
Drug Administration a list of contractors used by the organization,
accompanied by a statement from the organization certifying that such
contractors meet the requirements of this subpart.
Sec. 205.19 Process and procedures for approval by the Food and Drug
Administration.
(a) Application. An application to become an AO must be completed
and submitted electronically to the Food and Drug Administration in a
format the Food and Drug Administration can review, process, and
archive.
(b) Required application information. Policies, procedures, and
documentation as required by Sec. 205.18(a)(7) must accompany the
application.
(c) Training. Organizations must provide training as prescribed by
the Food and Drug Administration, and any individual who conducts
licensure reviews or supervises individuals who conduct licensure
reviews is required to undergo and pass the prescribed training.
(1) If an individual does not pass training, that person must wait
30 days before retaking the training and may be required to show proof
of additional education or experiential learning to demonstrate
competence before retaking the training evaluation.
(2) To maintain approval, individuals employed by the AO and
conducting licensure reviews or supervising those who conduct licensure
reviews must undergo and pass annual training as prescribed by the Food
and Drug Administration. Failure to complete and pass annual training
may result in suspension of approval of the AO.
(3) The Food and Drug Administration may require additional
training. If such additional training is required, AOs will be given a
set time period during which training must be completed and passed to
maintain approval.
(d) Auditing. Prior to conducting licensure reviews, an AO must
undergo an onsite audit by the Food and Drug Administration. The Food
and Drug Administration may also conduct random, periodic audits, as
well as for-cause audits, of an AO, as set forth in paragraph (o) of
this section.
(e) Duration of approval and renewal process. (1) The Food and Drug
Administration approval to conduct licensure reviews is valid for a
period of 5 years.
(2) AOs may submit a renewal application to the Food and Drug
Administration 6 months prior to the expiration date, but no later than
3 months prior to the expiration date, to renew the approval.
(i) If a renewal application is submitted less than 3 months before
the date of expiration, the AO's approval will expire if approval is
not renewed prior to the date of expiration.
(ii) Upon expiration of the AO's approval, the AO must cease
conducting any licensure review or inspection-related activities.
[[Page 6747]]
(f) Denial of approval. If an organization does not meet all of the
Food and Drug Administration's standards detailed in Sec. Sec. 205.17
and 205.18 for becoming an AO, the Food and Drug Administration will
deny approval of the application in writing. Requests for review and
reconsideration of a denial of approval must be submitted to the Food
and Drug Administration within 30 calendar days of the date of the Food
and Drug Administration's decision to deny the application. If, upon
reconsideration, the Food and Drug Administration denies the
applicant's request for approval, the Food and Drug Administration will
provide the applicant written notice of the denial and an opportunity
to appeal pursuant to Sec. 10.75 of this chapter.
(g) Suspension of approval after notice and opportunity to request
a hearing. (1) The Food and Drug Administration may suspend approval of
an organization after an opportunity to request a hearing when there is
a reasonable probability that the organization's noncompliance will
negatively impact public health.
(2) If an AO fails to maintain the Food and Drug Administration's
standards pursuant to Sec. Sec. 205.17 and 205.18, the Food and Drug
Administration will give written notice of the intent to suspend the
organization's approval, including the grounds for the suspension, and
the AO will have 30 days to provide additional information to the Food
and Drug Administration for reconsideration.
(3) If, upon reconsideration, the Food and Drug Administration
still believes the AO's approval should be suspended, the Food and Drug
Administration will issue the AO a written formal notice of intent to
suspend, along with notice of the opportunity to request a hearing
pursuant to part 16 of this chapter.
(4) An AO that wishes to request a hearing has 10 calendar days
after the date of the formal notice of intent to suspend to submit a
written notice of participation and request for a hearing. An AO that
fails to submit a written notice of participation and request for a
hearing within 10 calendar days from the date of the notice waives the
opportunity for a hearing.
(5) A suspended AO must notify any 3PLs under a pending licensure
review by the AO of the AO's suspension within 7 calendar days.
(h) Immediate suspension of approval. (1) When there is a
reasonable probability that the organization's noncompliance will cause
imminent and serious adverse health consequences or death to humans,
the Food and Drug Administration will suspend an AO's approval
effective immediately.
(2) In such a situation, the Food and Drug Administration will
provide the AO a written notice of immediate suspension, along with
notice and opportunity to request a hearing pursuant to part 16 of this
chapter within 14 calendar days of the AO's request for such hearing.
(3) An AO that wishes to request a hearing has 10 calendar days
after the date of the formal notice of suspension to submit a written
notice of participation and request for a hearing. An AO that fails to
submit a written notice of participation and request for a hearing
within 10 calendar days waives the opportunity for a hearing.
(i) Reinstatement of approval. (1) An organization's approval may
be reinstated if the Food and Drug Administration determines that the
suspended organization has rectified the issues leading to the
suspension and can meet the standards set forth in this subpart. The
organization must rectify the issues and come into compliance with the
standards set forth in this subpart within 1 year from the date of
suspension. If the issues have not been rectified within 1 year, or if
the organization otherwise has failed to come into compliance with the
standards set forth in this subpart within such time period, the Food
and Drug Administration may revoke the AO's approval subject to the
provisions of this part.
(2) An organization whose approval has been reinstated on a
conditional basis will be subject to a 3-year probationary period, and
if any material deficiencies arise during that period, the
organization's approval will be revoked.
(j) Revocation of approval. (1) The Food and Drug Administration
may revoke approval of an organization whose approval has been
suspended pursuant to paragraphs (g) and (h) of this section:
(i) If an organization fails to demonstrate its intent to rectify
the issues leading to the suspension within 6 months from the date of
suspension; or
(ii) If the Food and Drug Administration determines that the
organization failed to rectify the issues leading to the suspension to
the Agency's satisfaction within 1 year of the date of suspension.
(2) The Food and Drug Administration will give written notice of
the intent to revoke the organization's approval, including the grounds
for the revocation, and an opportunity to request a hearing pursuant to
part 16 of this chapter.
(3) The AO must submit a written notice of participation and
request a hearing within 10 calendar days after the date of the notice
of revocation. An AO that fails to submit a written notice of
participation and request for hearing within 10 calendar days waives
the opportunity for a hearing.
(4) An organization whose approval has been revoked that wishes to
reapply to be an AO must submit a new application to the Food and Drug
Administration.
(k) Requests for reconsideration of Agency decision. (1) The Food
and Drug Administration will follow the process outlined at Sec. 10.75
of this chapter to review matters relating to denial of approval,
including review of the organization's application.
(2) The Food and Drug Administration will follow the process
outlined at part 16 of this chapter to review matters relating to a
suspension or revocation action, including review of the organization's
application and administrative file.
(3) The Food and Drug Administration's decision after a request for
reconsideration of denial, suspension, or revocation constitutes a
final Agency action under 5 U.S.C. 702.
(l) Voluntary withdrawal of approval. (1) An organization wishing
to voluntarily withdraw its approval, including but not limited to when
an AO goes out of business, must notify the Food and Drug
Administration in writing at least 6 months prior to the date the
organization intends for the withdrawal to become effective.
(i) If an AO determines it will be withdrawing its approval with
the Food and Drug Administration in less than 6 months, it must notify
the Food and Drug Administration immediately of its intent to withdraw,
and such notification must inform the Food and Drug Administration of
the date the organization will cease business operations.
(ii) [Reserved]
(2) No later than 7 calendar days after notifying FDA, the
organization must notify any facilities with pending reviews that it
intends to withdraw its approval with the Food and Drug Administration
and must provide the date on which the withdrawal is effective.
(m) AO-required notifications to 3PLs. The AO must, within 7
calendar days of the date of suspension, revocation, or voluntary
withdrawal of approval, notify those 3PL facilities that have pending
licensure reviews of the AO's suspension or revocation. This
[[Page 6748]]
notification must inform the 3PL facility that it must apply for
licensure review with another AO, or the Food and Drug Administration
if no other AO is available to conduct the licensure review.
(n) Change of operation or ownership. (1) The AO must report to the
Food and Drug Administration within 30 calendar days any changes to the
information submitted in the application for approval.
(2) Approval is not transferable.
(i) Changes in ownership of an AO require the organization to
submit a new application to the Food and Drug Administration.
(ii) Such application must be submitted to the Food and Drug
Administration no later than 30 calendar days prior to the date of the
change of ownership.
(iii) No later than 30 calendar days before the date of the change
of ownership, the AO must notify any 3PL facilities with pending
applications of the pending change in ownership.
(iv) On the date the change of ownership takes place, the original
approval is void.
(o) Monitoring by the Food and Drug Administration. (1) AOs are
subject to audits by the Food and Drug Administration to ensure
compliance with the Food and Drug Administration's requirements for
approval.
(2) If an AO refuses to cooperate with the Food and Drug
Administration's audit, the organization's approval may be suspended
pursuant to paragraph (g)(1) of this section.
Subpart C--Wholesale Distributors Licensure Standards
Sec. 205.20 Requirement that prescription drug wholesale distributors
be licensed.
(a) No wholesale distributor may engage in wholesale distribution
of a prescription drug unless the person is licensed:
(1) By the State from which the drug is distributed; or
(2) If the State from which the drug is distributed has not
established a licensure requirement in accordance with the standards
set forth in this part, by the Food and Drug Administration; and
(3) If the drug is distributed interstate, by the State into which
the drug is distributed if such licensure is required by that State.
(b) Any license issued or renewed pursuant to this section will
expire 2 years after the date on which the license was issued. A
wholesale distributor may submit a renewal application up to 90
calendar days before the date of expiration. A license will be
considered valid during any period of the administrative delay on the
part of the licensing authority, if the wholesale distributor timely
submitted the renewal application.
Sec. 205.21 Surety bond requirement.
(a) Surety bond compliance. No wholesale distributor will be
licensed under this section unless the wholesale distributor has
furnished a bond, or other equivalent means of security acceptable to
the State if the State is the licensing authority, that complies with
the requirements of this section.
(b) Surety bond requirements. (1) For the issuance or renewal of a
wholesale distributor license, an applicant that is not a government-
owned and -operated wholesale distributor must submit to the licensing
authority a surety bond from an authorized surety company of $100,000
or other equivalent means of security acceptable to the State. The term
of the initial surety bond must be effective on the date that the
application is submitted to the licensing authority.
(2) The licensing authority may accept a surety bond from an
authorized surety company in the amount of $25,000 if the annual gross
receipts of the previous tax year for the wholesale distributor are
$10,000,000 or less.
(3) If a wholesale distributor can provide evidence that it
possesses the required bond in the State where the wholesale
distributor is located, the requirement for a bond in another State for
a non-resident wholesale distributor license will be waived.
(c) Terms of the surety bond. (1) The terms of the bond submitted
by a wholesale distributor must on its face reflect the requirements of
this section, including meeting the requirements of liability coverage
($100,000 or $25,000, as applicable), as well as the responsibilities
of the surety company and wholesale distributor as set forth in this
section.
(2) The bond must be continuous and remain in full force and
effect, running concurrently with the license period and for every
succeeding licensing period for which the wholesale distributor may be
licensed. The bond must remain in full force and effect until 1 year
after the license expires, after which liability for license
administrative fees ceases except as to any liability or indebtedness
incurred or accrued before the termination date.
(3) The bond must guarantee that after receiving written notice
from the licensing authority containing sufficient evidence to
establish the surety's liability under the bond, the surety company
will pay within 30 calendar days any administrative fines or penalties
imposed by the licensing authority on the wholesale distributor holding
the surety bond in that State. This includes any fees and costs
incurred by the licensing authority regarding that license authorized
by law and which the wholesale distributor fails to pay within 30
calendar days after the fine or costs become final. Any such claim may
be made directly to the surety company and need not be preceded by the
filing of any action in a proper court.
(4) The licensing authority may make a claim against the surety
bond until 1 year after the date of expiration on the wholesale
distributor's license or until 60 calendar days after any
administrative or legal proceeding, which involved the wholesale
distributor, is concluded, including any appeal, whichever occurs
later.
(d) Cancellation of a bond and lapse of surety bond coverage. (1) A
wholesale distributor may cancel its surety bond and must provide
written notice 30 calendar days before the effective date of the
cancellation to all applicable licensing authorities and the surety
company.
(2) Cancellation of a surety bond is grounds for suspension of the
wholesale distributor's license unless the wholesale distributor
provides a new bond before the effective date of the bond's
cancellation. If a new surety bond is provided before the effective
date of the bond's cancellation, the liability of the surety company
continues until the cancellation date. Otherwise, the liability of the
surety company continues for 1 year after the date of cancellation,
after which liability ceases except as to any liability or indebtedness
incurred or accrued before the cancellation date.
(3) The wholesale distributor must immediately notify the licensing
authority if there is a lapse in the wholesale distributor's surety
coverage.
(4) If the licensing authority discovers a lapse in bond coverage
that has not been previously disclosed by the wholesale distributor,
the wholesale distributor's license will be suspended pursuant to Sec.
205.30.
(e) Actions under the surety bond. The bond must provide that
actions under the bond may be brought by a State or Federal licensing
authority.
(f) Required surety company information on the surety bond. The
bond must provide the surety company's name, street address or post
office box number, city, State, and zip code.
[[Page 6749]]
(g) Change of surety company. A wholesale distributor that obtains
a replacement surety bond from a different surety company to cover the
remaining term of a previously obtained bond must submit the new surety
bond to the licensing authority 30 calendar days prior to the
expiration of the previous surety bond. There must be no gap in the
coverage of the surety bond periods.
(h) Parties to the surety bond. The surety bond must name the
wholesale distributor as Principal, the licensing authority as obligee,
and the surety company (and its heirs, executors, administrators,
successors, and assignees, jointly and severally) as surety.
Sec. 205.22 General application requirements for licensure.
(a) Applicant requirements. An individual who submits an
application on behalf of a wholesale distributor for a license issued
pursuant to this subpart must:
(1) Be 18 years of age or older;
(2) Submit an affidavit that their ownership or management of or
employment by the entity would not preclude the entity from receiving
or maintaining a license under Sec. 205.25(a);
(3) Submit all application information required in the form
required by the licensing authority; and
(4) Pay any licensing fees that are required by the licensing
authority pursuant to section 503(e)(3) of the Federal Food, Drug, and
Cosmetic Act.
(b) Surety bond requirement. The wholesale distributor must furnish
a bond, or other equivalent means of security acceptable to the State,
with the application for licensure in accordance with the surety bond
requirements in Sec. 205.21.
(c) General requirements for licensure application. The State or
Federal licensing authority will require the following information from
each wholesale distributor as part of the initial application for the
license described in this section and as part of any renewal of such
license:
(1) The name and title of the individual who submits the
application for licensure on behalf of the wholesale distributor;
(2) The name of the wholesale distributor as it should appear on
the license and the full business address and telephone number of the
wholesale distributor;
(3) All trade or business names used by the wholesale distributor,
including prior trade or business names, within the past 7 years;
(4) Name, email address, and telephone number of the designated
representative or facility manager for the wholesale distributor;
(5) The type of ownership or operation of the business entity, such
as a partnership, corporation, limited liability company, or sole
proprietorship;
(6) The name of any owners or operators of the wholesale
distributor, including:
(i) If a sole proprietorship, the full name of the sole proprietor
and the name of the business entity;
(ii) If a partnership, the name of each partner and the name of the
partnership;
(iii) If a corporation, the corporate names, the names of any
subsidiaries and affiliates, the name and title of each corporate
officer and director, and the State of incorporation; and
(iv) If a limited liability company, the name of the limited
liability company, including any subsidiaries and affiliates, the name
of each member, and the State in which the limited liability company
was organized;
(7) Whether the wholesale distributor has ever been convicted of a
felony relating to wholesale drug distribution, a felony conviction of
section 301(i) or (k) of the Federal Food, Drug, and Cosmetic Act, or a
felony conviction of 18 U.S.C. 1365, relating to product tampering,
together with details concerning any such events; and
(8) Whether the wholesale distributor has received any citations
for violating requirements for licensure within the past 7 years or has
received any significant disciplinary actions within the past 7 years
that presented a threat of serious adverse health consequences or death
to humans, together with details concerning any such events.
(d) General requirements for licensure renewal. To renew a license,
the wholesale distributor must submit the following to the renewing
licensing authority:
(1) Certification that the wholesale distributor has continued to
meet all the standards and complied with the requirements in this
subpart since the previous license was issued; and
(2) Information about any changes to information previously
submitted under this section, or Sec. 205.21, or Sec. 205.23(c) for
which a notification was not already submitted to the licensing
authority under Sec. 205.24.
(e) License availability requirement. The wholesale distributor
must maintain its license in a readily retrievable manner and must
permit inspection of the license by any official, agent, or employee of
the licensing authority or of any Federal, State, or local agency
engaged in enforcement of laws relating to the distribution of
prescription drugs.
Sec. 205.23 Federal licensure process.
(a) Procedures for filing an FDA application for a wholesale
distributor license. (1) All wholesale distributors must electronically
submit an application to the Food and Drug Administration for a license
to engage in wholesale distribution if the State does not have a
licensing program for wholesale distributors consistent with the
standards set forth in this section. The application must include the
information in Sec. Sec. 205.21 and 205.22, along with a surety bond
and supporting documentation that demonstrates the applicant's ability
to comply with requirements intended to ensure the continued safety,
identity, strength, quality, and purity of the prescription drugs.
(2) If one or more organizations have been approved by the Food and
Drug Administration under Sec. 205.32 to conduct inspections of
wholesale distributors, the wholesale distributor will indicate in its
application to the Food and Drug Administration which AO it prefers to
conduct its inspection.
(3) If there is no organization approved by the Food and Drug
Administration to conduct inspections for wholesale distributors, the
Food and Drug Administration will conduct the inspection, as described
in Sec. 205.28(b).
(4) The applicant, or the applicant's agent or other authorized
official, must sign the application.
(5) An application for a wholesale distributor license will not be
considered as filed until the Food and Drug Administration has received
all required information and fees.
(b) Determination that licensing requirements have been met. The
Food and Drug Administration, not an AO, will determine whether the
wholesale distributor meets all the applicable requirements set forth
in this part.
(c) Notification of easily correctable deficiencies. The Food and
Drug Administration will make reasonable efforts to promptly
communicate to applicants easily correctable deficiencies found in an
application when those deficiencies are discovered. The Food and Drug
Administration will also promptly inform applicants if more data or
information is needed to facilitate the Agency's review.
(d) Issuance of wholesale distributor license by FDA. Approval of a
wholesale distributor license application or issuance of a wholesale
distributor license constitutes a determination by the Food and Drug
Administration that, based upon information received, the
[[Page 6750]]
wholesale distributor meets the applicable requirements to be licensed
under sections 503(e)(1) and 583 of the Federal Food, Drug, and
Cosmetic Act. The Food and Drug Administration will approve an
application and send the applicant an approval letter and license
certificate if none of the reasons in Sec. 205.30(a)(1) for refusing
to approve the application applies. Applicable requirements for
wholesale distributors to engage in wholesale distribution must include
but not be limited to the good storage practices set forth under Sec.
205.26. A license is effective on the date of issuance of the license
certificate.
(e) Validity of a wholesale distributor license. Licenses issued to
a wholesale distributor will remain valid until the date of expiration,
unless suspended or revoked.
Sec. 205.24 Changes to information, operation, location, or ownership
of a wholesale distributor.
(a) Any change to any information required in this subpart,
including changes to any information required pursuant to Sec. Sec.
205.21, 205.22, and 205.25, must be submitted electronically to the
licensing authority within 30 calendar days after such change is
effective, except where otherwise provided in this subpart.
(b) Any change in the location of a wholesale distributor at which
wholesale distribution occurs will require an inspection of the new
facility prior to the wholesale distributor beginning operations at the
new facility.
(1) On the date the change of location takes place, the wholesale
distributor may not engage in wholesale distribution at the original
facility.
(2) [Reserved]
(c) Any change in the person engaged in wholesale distribution will
require a new license prior to beginning operations.
(1) The application for a new license required by Sec. 205.23 must
be submitted no later than 30 calendar days prior to the change in
ownership.
(2) A new inspection of the wholesale distributor will be performed
within a reasonable time.
(3) A wholesale distributor can continue to operate under the
original license for 30 calendar days after the change of ownership
occurs or until the license application of the new owner is approved,
whichever is sooner.
Sec. 205.25 Prohibited persons and qualifications for key personnel.
(a) A wholesale distributor is prohibited from obtaining or
maintaining licensure if the wholesale distributor has been:
(1) Convicted of any felony for violation of section 301(i) or (k)
of the Federal Food, Drug, and Cosmetic Act;
(2) Convicted of any felony violation of 18 U.S.C. 1365 relating to
product tampering; or
(3) Cited on two or more occasions within the previous 7 years for
violating one or more of the requirements of section 583 or section
503(e) of the Federal Food, Drug, and Cosmetic Act or State
requirements for licensure in such a way that presents a threat of
serious adverse health consequences or death to humans.
(b) All key personnel must have the education, background,
training, and experience necessary to perform his or her assigned
functions.
(c) Licensure may also be denied when an applicant wholesale
distributor or any of their key personnel has been:
(1) Found to have delayed or otherwise impeded an inspection by the
Federal or State licensing authority or an approved third-party
inspector, or an inspector, after reasonable efforts, was unable to
gain access to an establishment or a location to carry out the
inspection required under Sec. 205.28, as permitted by section 704(a)
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 374(a));
(2) Found to have omitted material information or furnished false
or fraudulent information in an application made about the distribution
of prescription drugs; or
(3) Subject to licensure suspension or revocation by Federal,
State, or local government for any license currently or previously held
by the applicant for the manufacture or distribution of any drugs,
including controlled substances.
(d) The wholesale distributor must maintain a list of officers,
directors, facility managers, designated representatives, and other key
personnel in charge of wholesale distribution, including storage and
handling, and include a description of their duties and a summary of
their qualifications. This list must be available for review by the
State or Federal licensing authority.
(e) The wholesale distributor must establish and implement written
policies and procedures designed to ensure that the qualifications of
key personnel as required in this section are met, maintained, and
documented. These written policies and procedures must be available for
review by the State or Federal licensing authority, as provided in
Sec. 205.27. These policies and procedures must identify the personnel
at the wholesale distributor's facility who are responsible for the
following actions:
(1) Implementing and maintaining all facility and personnel
requirements;
(2) Ensuring that the facility complies with all licensure and
reporting requirements; and
(3) Ensuring that key personnel receive initial and regular
training to ensure competence relevant to their job functions.
(f) In addition to the qualifications for key personnel in
paragraphs (a) through (e) of this section, a facility manager or
designated representative must have the following qualifications to
carry out those responsibilities:
(1) Serves as the facility manager or designated representative of
such facility manager for only one facility at any one time;
(2) Is actively involved in and responsible for managing the daily
operations of the wholesale distributor facility; and
(3) Remains responsible for all facility manager or designated
representative duties that are delegated to other personnel at the
facility.
(g) Any facility manager or designated representative, prior to
their association, employment, or contracting with the wholesale
distributor as a facility manager or designated representative, must
submit a full set of fingerprints for purposes of conducting local and
national criminal background checks. The results of the background
checks must demonstrate no history of criminal convictions pursuant to
paragraph (a) of this section.
Sec. 205.26 National standards for the storage and handling of
prescription drugs for wholesale distribution.
Any facility owned, rented, or leased by a wholesale distributor
for engaging in wholesale distribution must meet the facility
requirements in paragraphs (a) and (b) of this section, and the
wholesale distributor must establish, maintain, and follow policies and
procedures as set forth in paragraph (c) of this section.
(a) A wholesale distributor to which a license has been issued in
the same name and at the same address as another authorized trading
partner, such as a 3PL, must maintain separate systems and processes
for the distribution of drugs that are specific to the wholesale
distributor.
(b) The facility the wholesale distributor owns, leases, or rents
for purposes of engaging in wholesale distribution must be suitable for
the storage and handling of prescription drugs, as demonstrated by the
following:
(1) General requirements. The facility is:
(i) Not a personal residence;
[[Page 6751]]
(ii) Of a suitable size, construction, and configuration designed
to ensure proper distribution, including storage and handing, of all
prescription drugs stored at or distributed from the facility;
(iii) Of a suitable size, construction, and configuration to
facilitate cleaning, maintenance, and proper wholesale distribution
operations;
(iv) Maintained in a clean and orderly condition, free from
infestation of any kind;
(v) Equipped with sufficient lighting, ventilation, temperature,
sanitation, humidity, space, equipment, and secure conditions for
prescription drug storage; and
(vi) Equipped with clearly defined designated areas that separate
saleable prescription drugs from prescription drugs that are unfit for
distribution.
(2) Security of premises. The facility must be equipped with
adequate security to prevent breaches. Adequate security includes
ensuring that:
(i) The facility is secure from unauthorized entry;
(ii) Access from outside the premises is limited, well controlled,
and documented;
(iii) The outside perimeter of the premises is well lit;
(iv) Entry into areas where prescription drugs are held is limited
to key personnel who possess appropriate and verifiable experience and
training necessary to safely and lawfully engage in the distribution of
prescription drugs, as described in Sec. 205.25, and to staff for
purposes of maintenance and cleaning; and
(v) The facility is equipped with a security system that protects
against theft and diversion of prescription drugs and accidental or
unsanctioned modifications to data, including an alarm system to detect
and notify appropriate personnel of any unauthorized entry.
(3) Equipment. The facility must have equipment that ensures
prescription drugs are properly stored, including cold storage,
refrigerators, temperature and humidity devices, and air handling
units. All equipment utilized must be maintained in good repair and
must be suitable for the distribution, including receipt, storing, and
handling, warehousing, holding, displaying, or transporting of
prescription drugs, as demonstrated by the following:
(i) All equipment must be installed, maintained, and repaired by
qualified individuals following written procedures established by the
wholesale distributor. The wholesale distributor must be able to
demonstrate that all equipment has been calibrated, as applicable, and
validated at regular intervals to achieve the intended results
accurately, consistently, and in a manner that can be reproduced by
qualified individuals following the wholesale distributor's written
procedures. Such actions must be documented;
(ii) Appropriate manual, electromechanical, or electronic
temperature and humidity recording equipment or logs must be used to
document proper storage of prescription drugs; and
(iii) Monitoring equipment must immediately alert appropriate
personnel of any deviations from the required storage conditions.
(4) Facility assessments. Facility assessments, including
temperature mapping and other assessments designed to ensure
prescription drugs are properly stored in accordance with their
labeling, must be regularly conducted and documented.
(c) Every wholesale distributor must establish, maintain, and
follow written policies and procedures for each of the requirements
described in this section that are relevant to the scope of the
wholesale distributor's activities involving prescription drugs at the
facility. The written policies and procedures must describe a system by
which the wholesale distributor will monitor all processes, and, if
deviations occur, promptly document and investigate to determine the
root cause of the deviation. If a wholesale distributor uses a
contractor to carry out any of its duties, the wholesale distributor
remains responsible for compliance with this subpart and must ensure
that the contractor abides by the applicable written policies and
procedures. The written policies and procedures must clearly describe
the responsibilities of the wholesale distributor and any contractors
used to fulfill the wholesale distributor's duties. Such arrangements
must be documented and carried out in accordance with the requirements
of this section.
(1) Authorized trading partners. The wholesale distributor must
ensure that it conducts business only with other authorized trading
partners as defined in section 581(2) and (23) of the Federal Food,
Drug, and Cosmetic Act.
(2) Facility and equipment maintenance management. The wholesale
distributor must ensure that the facility requirements in paragraph (b)
of this section are met.
(3) Transportation. The wholesale distributor must ensure
prescription drugs are transported in a manner that:
(i) Protects against breakage, contamination, adulteration, and
theft;
(ii) Prevents exposure to conditions that may compromise
prescription drug identity, strength, quality, or purity; and
(iii) Ensures that deviations from storage requirements during
transport are identified, investigated, documented, corrected, and
reported no later than 24 hours after discovery to the authorized
trading partner from which the prescription drug was received, and to
the manufacturer to determine if further commercial distribution is
appropriate.
(4) Examination of shipping containers. The wholesale distributor
must ensure that all shipping containers are examined in accordance
with the following standards:
(i) Incoming shipments. Upon receipt, each shipping container must
be visually examined for identity and to prevent the acceptance of
prescription drugs that are unfit for distribution. This examination
must be adequate to detect conditions that would suggest that the
prescription drug may be unfit for distribution, such as alterations
made or damage to the shipping container.
(ii) Outgoing shipments. Each outgoing shipment must be properly
inspected for identity of the prescription drug to ensure that there is
no shipment of a prescription drug that has been damaged in storage or
held under improper conditions and to prevent the introduction or
further shipment of any prescription drug that is unfit for
distribution, including through the wholesale distributor's processing
of returned or recalled drugs.
(5) Storage and handling. The wholesale distributor must ensure
that prescription drugs are stored at appropriate temperatures and
under appropriate conditions in accordance with the drugs' labeling,
except that if no storage requirements are established in the drug's
labeling, the drug may be held at controlled room temperature to
preserve the drug's identity, strength, quality, and purity.
(i) Inventory management. The wholesale distributor must:
(A) Ensure compliance with the requirements of section 582(c) of
the Federal Food, Drug, and Cosmetic Act;
(B) Ensure that the facility's stock is inspected regularly to
protect against drug diversion and distribution of prescription drugs
that are unfit for distribution;
(C) Investigate, document, and correct any stock irregularities,
including theft, loss, or diversion of prescription drugs, in
accordance with section 582(c) of the Federal Food, Drug, and Cosmetic
Act, as applicable;
(D) Ensure that any prescription drug that appears to be unfit for
distribution
[[Page 6752]]
is removed from saleable stock and handled appropriately according to
the requirements in paragraphs (c)(5)(ii) through (iv) of this section;
(E) Immediately report any confirmed losses or theft of
prescription drugs to the manufacturer of the drug and the Food and
Drug Administration; and
(F) Ensure that records related to the actions required in
paragraphs (c)(5)(i) through (iv) of this section are kept according to
Sec. 205.27.
(ii) Handling of prescription drugs. The wholesale distributor must
ensure that only prescription drugs fit for distribution are further
distributed or transferred.
(A) Any prescription drug that appears to be unfit for distribution
must be stored in a secure area clearly defined for such use and
physically segregated from saleable drugs, or electronically
segregated, if appropriate, until the wholesale distributor determines
by thorough examination that such drugs are fit for human use or
nonsaleable.
(B) Any prescription drug found to be adulterated, misbranded, or
otherwise unfit for distribution must be stored in a secure area
clearly defined for such use and physically or electronically
segregated from saleable drugs until they are returned to the supplier
or destroyed in accordance with the standards in paragraph (c)(6) of
this section.
(C) If a prescription drug is determined to be a suspect or
illegitimate product, those suspect or illegitimate products must be
handled according to the requirements of section 582(c)(4) of the
Federal Food, Drug, and Cosmetic Act.
(iii) Returned prescription drugs. All returned prescription drugs
must be stored in a secure area clearly defined for such use and
physically segregated from saleable prescription drugs, until the
wholesale distributor determines by thorough examination that such
drugs are saleable or nonsaleable.
(A) Saleable returns. Prescription drugs may be returned to
saleable stock only if the conditions under which the drug has been
returned do not cast doubt on the drug's safety, identity, strength,
quality, or purity. In determining whether the conditions under which a
drug has been returned cast doubt on the drug's safety, identity,
strength, quality, or purity, the wholesale distributor must consider,
among other things, the conditions under which the drug has been held,
stored, or shipped.
(B) Nonsaleable returns. If the conditions under which the
prescription drug has been returned cast doubt on the drug's safety,
identity, strength, quality, or purity, drugs may be returned to the
manufacturer or repackager, to the wholesale distributor from which
such drug was purchased, or to an individual acting on behalf of such
an entity, including a returns processor, or may be destroyed in a
timely manner and in accordance with paragraph (c)(6) of this section
and all applicable Federal and State laws.
(iv) Recalled drugs. Recalled prescription drugs must be handled as
instructed by the manufacturer in the recall notice, which may require
that the recalled drugs be stored in a secure area clearly defined for
such purpose and physically segregated from saleable drugs until they
are returned to the manufacturer or repackager, to the wholesale
distributor from which such drug was purchased, or to an individual
acting on behalf of such an entity, including a returns processor, or
destroyed in accordance with the standards in paragraph (c)(6) of this
section.
(6) Disposition of drugs. The wholesale distributor must establish,
maintain, and follow written policies and procedures that ensure that
prescription drugs removed from the pharmaceutical distribution supply
chain because they are determined to be unfit for distribution are
retained for further examination, returned to the manufacturer or
repackager, returned to the wholesale distributor from which such drug
was purchased, or returned to an individual acting on behalf of such an
entity, including a returns processor, or destroyed in accordance with
all applicable Federal and State laws and the following standards:
(i) Quarantine and transfer for further examination. The wholesale
distributor must establish and maintain records for prescription drugs
retained in quarantine and subsequently transferred to a manufacturer
or regulatory or law enforcement agency for further additional physical
examination or laboratory analysis.
(ii) Return the drugs. The wholesale distributor must establish and
maintain records for the return of prescription drugs to the
manufacturer, repackager, or wholesale distributor from which the
wholesale distributor acquired the drugs, including when returned using
a returns processor or reverse logistics provider to return the drugs.
(iii) Destroy. When prescription drugs are authorized for
destruction, the wholesale distributor must:
(A) Destroy all containers, labels, and packaging to ensure that
such items cannot be used in counterfeiting activities;
(B) Ensure that the destruction of prescription drugs, containers,
labels, and packaging are witnessed; and
(C) Establish and maintain records for destroyed drugs and the
witnessing thereof.
(7) Preparation for foreseeable crises. The wholesale distributor
must prepare for, protect against, and address any reasonably
foreseeable crises that could affect security or operation of the
facility such as strike, fire, flood, or other natural disaster, or
other situations of local, State, or national emergency.
Sec. 205.27 Standards for the establishment and maintenance of
records of the distribution of prescription drugs.
(a) Required records. Required records include, but are not limited
to, the following:
(1) Documentation pertaining to distribution, including storage and
handling, security, inventory, transport, and shipping of prescription
drugs, including written policies and procedures for identifying,
recording, and reporting confirmed losses, thefts, and diversions, and
prescription drugs that are unfit for distribution;
(2) All policies, procedures, instructions, contracts, data,
inspection reports, and any documentation related to compliance with
this subpart; and
(3) Invoices, purchase orders, packing slips, shipping records, and
any other records of the distribution of prescription drugs.
(b) Maintenance, availability, and accuracy of records. Records
must:
(1) Accurately reflect the name of the wholesale distributor as it
appears on the wholesale distributor license and must match the
information that is reported to the Food and Drug Administration
pursuant to the Food and Drug Administration reporting requirements at
Sec. 205.29;
(2) Be readily retrievable and made available to regulatory
authorities upon request;
(3) Be securely stored and protected from unauthorized access or
modifications; and
(4) Contain only alterations signed and dated by the individual who
made the alteration. Such alteration must preserve the original
information and document the reason for the alteration.
(c) Written policies and procedures. Written policies and
procedures must be implemented by the wholesale distributor to protect
the integrity of records.
(d) Record retention. (1) Except for the records listed in
paragraph (d)(2) of this section, all records required to be maintained
by this subpart must be retained for a period of 3 years.
[[Page 6753]]
(2) Records of investigation of suspect and illegitimate products
and of destroyed, nonsaleable returned, and recalled prescription drugs
must be retained for a period of 6 years.
Sec. 205.28 Inspections.
(a) A facility to be used in wholesale distribution must undergo a
physical inspection prior to issuance of the initial license by the
Federal or State licensing authority.
(1) Where the State is the licensing authority, such inspection may
be conducted by:
(i) The State in which the facility to be licensed is located; or
(ii) A third-party accreditation or inspection service approved by
the State licensing the wholesale distributor; or
(iii) If the facility is located out of State, the State issuing
the license may conduct the inspection or may accept an inspection by
the State in which the facility is located or by a third party, as
described in paragraph (a)(1)(ii) of this section.
(2) Where the Food and Drug Administration is the licensing
authority, the Food and Drug Administration may conduct the inspection
or may accept an inspection conducted by an organization approved by
the Food and Drug Administration under Sec. 205.32.
(b) Records described in Sec. 205.27 that are kept at the
inspection site or that can be immediately retrieved by computer or
other electronic means must be readily available for inspection during
the retention period. Records kept at a central location apart from the
inspection site and not electronically retrievable must be made
available for inspection within 2 business days of a request by a State
or Federal official, or sooner if necessitated by the duration of the
inspection.
(c) Wholesale distributors must permit the appropriate Federal, or
State licensing authority and State- or FDA-approved third-party
inspection services to enter and inspect their premises and to audit
their records and written operating procedures.
(d) To ensure compliance with this subpart, routine inspections
will be conducted once every 3 years by the licensing authority, or a
third-party accreditation or inspection service approved by the Food
and Drug Administration or the State licensing the wholesale
distributor.
Sec. 205.29 Requirements for initial and annual reporting to the Food
and Drug Administration.
(a) Electronic reporting requirement. The wholesale distributor
must report electronically to the Food and Drug Administration using a
secure mechanism in a format the Food and Drug Administration can
review, process, and archive pursuant to section 503(e)(2)(A) of the
Federal Food, Drug, and Cosmetic Act. Information reported will be
included in the Food and Drug Administration's public database for
wholesale distributors pursuant to section 503(e)(2)(B) of the Federal
Food, Drug, and Cosmetic Act.
(b) Reporting periods--(1) Initial reporting. Any entity that owns
or operates an establishment that engages in wholesale distribution
must report within 30 calendar days of obtaining an initial State or
Federal wholesale distributor license.
(2) Annual reporting. Any entity that is licensed to engage in
wholesale distribution must report to the Food and Drug Administration
each calendar year between January 1 and March 31.
(c) Required information. Information to be reported for each
wholesale distributor must include:
(1) A complete list of States where the wholesale distributor is
licensed, including the corresponding identification number and the
expiration date of each such license;
(2) Name of company as it appears on the license, full business
address, and contact information for the facility manager or designated
representative of the wholesale distributor;
(3) All trade names or business names under which the wholesale
distributor conducts business; and
(4) Any significant disciplinary actions by any State or Federal
Agency taken against the wholesale distributor license related to the
distribution of prescription drugs, including the State where the
disciplinary action occurred, date of final action, type of
disciplinary action, description of the violation, and documents
associated with the disciplinary action.
(d) Timing of significant disciplinary action reporting--(1)
Initial reporting. The wholesale distributor must report to the Food
and Drug Administration any significant disciplinary actions, including
but not limited to revocation or suspension of a wholesale distributor
license by a State or Federal licensing authority, which occurred in
the 12 months prior to obtaining licensure.
(2) Subsequent reporting. The wholesale distributor must, within 30
calendar days after a final action taken by a State or Federal
licensing authority, report significant disciplinary actions to the
Food and Drug Administration.
(e) Other reports--(1) Closure of a facility. The wholesale
distributor must report to the Food and Drug Administration that a
facility has ceased operations within 30 calendar days after it has
stopped operating as a wholesale distributor.
(2) Voluntary withdrawal of a State license. The wholesale
distributor must report to the Food and Drug Administration that it has
withdrawn its license in a State within 30 calendar days after such
withdrawal, including any reasons for the voluntary withdrawal of
licensure.
Sec. 205.30 Licensure denial, suspension, reinstatement, revocation,
and voluntary termination--notice and opportunity to request a hearing.
(a) Denial of application for licensure. (1) The licensing
authority will refuse to approve a wholesale distributor license
application for any of the following reasons:
(i) The methods or procedures to be used in the distribution of the
prescription drug, including receipt, storage, and handling, are
inadequate to preserve its safety, identity, strength, quality, or
purity.
(ii) The facilities and controls used for the distribution of the
prescription drug, including receipt, storage, and handling, are
inadequate to preserve its safety, identity, strength, quality, or
purity.
(iii) The methods or procedures to be used in the distribution of
the prescription drug, including receipt, storage, and handling, do not
comply with the requirements for good storage practices in Sec.
205.26.
(iv) The personnel employed by the applicant do not meet the
requirements necessary for good storage practices in Sec. 205.25.
(v) There is insufficient information in the written policies and
procedures required under Sec. 205.26(c) to determine whether the
methods or procedures to be used in the distribution of the
prescription drug, including receipt, storage, and handling, comply
with the requirements for good storage practices in Sec. 205.26 and
preserve the safety, identity, strength, quality, or purity of the
prescription drug.
(vi) The methods or procedures to be used in the distribution of
the prescription drug, including receipt, storage, and handling, do not
comply with the requirements for adequate recordkeeping in Sec.
205.27.
(vii) The application contains an untrue statement of material
fact.
(viii) The applicant does not permit a properly authorized officer
or employee of the Food and Drug Administration, a State licensing
authority, or an AO approved by the Food and Drug Administration
pursuant to Sec. 205.32 an adequate opportunity to inspect the
[[Page 6754]]
facilities, controls, and any records relevant to the application.
(ix) For renewal applications, the applicant fails to report to the
licensing authority any pertinent change of information required in
Sec. 205.21, Sec. 205.22, or Sec. 205.24.
(x) For renewal applications, the applicant fails to report to the
Food and Drug Administration any of the requirements for annual
reporting in Sec. 205.29.
(2) If review of a wholesale distributor's application fails to
demonstrate that the wholesale distributor meets the requirements for
licensure set forth in Sec. 205.22 and paragraph (a)(1) of this
section, the licensing authority will provide written notice to the
applicant that its license application may be denied, setting forth the
grounds for the denial and providing an opportunity to demonstrate that
the wholesale distributor meets the requirements for licensure.
(3) The notice will inform the applicant of its right to provide
additional information and request reconsideration of the denial by the
licensing authority within 14 calendar days of the date of the
licensing authority's written notice.
(4) If no reconsideration is sought, or, if upon reconsideration,
the licensing authority denies the applicant's request for licensure,
the licensing authority will provide the applicant written notice of
the denial and will provide the applicant notice of the opportunity to
request a hearing.
(5) The applicant who wishes to request a hearing has 10 calendar
days after the date of the notice of denial to submit a written notice
of participation and request for a hearing. The applicant who fails to
submit a written notice of participation and request for a hearing
within 10 calendar days waives the opportunity for a hearing.
(6) Parts 10 through 16 of this chapter apply to wholesale
distributor licenses issued by the Food and Drug Administration under
sections 503(e) and 583 of the Federal Food, Drug, and Cosmetic Act.
(b) Suspension of license after notice and opportunity to request a
hearing. (1) The licensing authority may move to suspend a license if
the licensing authority has a reasonable belief that the licensee has
failed to comply with any of the standards for receiving and
maintaining licensure described in this subpart and that the nature of
the noncompliance at issue would likely compromise the quality of
product or threaten public safety.
(2) The licensing authority will provide written notice of the
intent to suspend a wholesale distributor license setting forth the
grounds for the suspension pursuant to this part, including what
information would be required to demonstrate or achieve compliance. The
notice will inform the applicant of its right to provide additional
information, request reconsideration of the suspension by the licensing
authority, and demonstrate or achieve compliance before suspension.
(3) Each wholesale distributor license holder has 30 calendar days
from the date of the notice of intent to suspend to present, in
writing, comments and information bearing on the initial decision.
(4) If no comments or information is received within 30 calendar
days or, if upon reconsideration, the licensing authority believes the
wholesale distributor license should still be suspended, the licensing
authority will provide the wholesale distributor a second written
notice of the intent to suspend, informing the wholesale distributor of
the opportunity to request a hearing on the question of whether there
are grounds for suspension.
(5) The wholesale distributor must submit a written notice of
participation and request a hearing in writing within 10 calendar days
after the date of the notice of the intent to suspend. A wholesale
distributor that fails to submit a written notice of participation and
request for hearing within 10 calendar days waives the opportunity for
a hearing.
(6) Parts 10 through 16 of this chapter apply to wholesale
distributor licenses issued by the Food and Drug Administration under
sections 503(e) and 583 of the Federal Food, Drug, and Cosmetic Act.
(7) If a wholesale distributor's license is suspended and the
wholesale distributor does not demonstrate or achieve compliance to the
licensing authority's satisfaction within the time period indicated in
the notice of suspension, the licensing authority will move to revoke
the wholesale distributor's license.
(c) Immediate suspension of license. (1) The licensing authority
may suspend a license effective immediately if the licensing authority
reasonably believes that the licensee has failed to comply with any of
the standards for receiving and maintaining licensure described in this
subpart and that the nature of the noncompliance at issue would
reasonably be expected to cause an imminent threat to public health.
(2) The licensing authority will provide the wholesale distributor
with written notice of immediate suspension of its license setting
forth the grounds for the suspension pursuant to this part, including
what information would be required to demonstrate compliance, and the
opportunity to request a hearing within 10 calendar days of the
wholesale distributor's request for such hearing.
(3) The wholesale distributor must submit a written notice of
participation and request a hearing in writing within 10 calendar days
after the date of the written notice of immediate suspension. A
wholesale distributor that fails to submit a written notice of
participation and request for hearing within 10 calendar days from the
date of the written notice waives the opportunity for a hearing.
(4) Parts 10 through 16 of this chapter apply to wholesale
distributor licenses issued by the Food and Drug Administration under
sections 503(e) and 583 of the Federal Food, Drug, and Cosmetic Act.
(5) If a wholesale distributor's license is suspended and the
wholesale distributor does not demonstrate or achieve compliance to the
licensing authority's satisfaction within the time period indicated in
the notice of suspension, the licensing authority will move to revoke
the wholesale distributor's license.
(d) Reinstatement of suspended licenses. The licensing authority
may reinstate a previously suspended license upon a wholesale
distributor's showing of compliance with requirements in this part and
upon such inspection and examination as the licensing authority may
require.
(e) Revocation. (1) If compliance is not demonstrated or achieved
to the licensing authority's satisfaction within the time period
indicated in the notice of suspension, the licensing authority will
move to revoke the wholesale distributor's license.
(2) The licensing authority will notify the wholesale distributor
of the intent to revoke the wholesale distributor's license, setting
forth the grounds for the revocation and offering an opportunity to
request a hearing on the proposed revocation.
(3) The wholesale distributor must submit a written notice of
participation and request a hearing within 10 calendar days after the
date of the notice of revocation. A wholesale distributor that fails to
submit a written notice of participation and request for hearing within
10 calendar days waives the opportunity for a hearing.
(4) Parts 10 through 16 of this chapter apply to wholesale
distributor licenses issued by the Food and Drug Administration under
sections 503(e)
[[Page 6755]]
and 583 of the Federal Food, Drug, and Cosmetic Act.
(f) Nonrenewal. If a license renewal application is not submitted
by the date of expiration of the license, the license will be
considered expired. A wholesale distributor may not engage in wholesale
distribution with an expired license and must submit a new application
for licensure.
(g) Voluntary termination of licensure upon request by the
wholesale distributor. The licensing authority will terminate a
wholesale distributor's license upon the wholesale distributor's
request, which will include a notice of intent to discontinue
prescription drug wholesale distribution and waive opportunity for a
hearing. A wholesale distributor that voluntarily terminates licensure
must obtain a new license before resuming wholesale distribution.
(1) If a wholesale distributor that has had its license revoked
wishes to apply for a new license, the wholesale distributor must
submit a new license application, which may include an inspection if
required by the licensing authority under Sec. 205.28(a).
(2) [Reserved]
Subpart D--Approved Organizations for Wholesale Distributors
Sec. 205.31 Use of approved third-party organizations.
(a) A third-party organization that has been approved by the Food
and Drug Administration pursuant to Sec. 205.32 (``approved
organization'' (AO)) may be used to conduct initial and routine
inspections of the wholesale distributor's facility, as directed by the
Food and Drug Administration.
(b) If an organization has been approved by the Food and Drug
Administration to conduct inspections, the AO must:
(1) Complete inspections within a timeframe not to exceed 90
calendar days after receiving notice from the Food and Drug
Administration to conduct an inspection;
(2) Based on the inspection, write a detailed document including a
summary of the AO's findings; and
(3) Send the original document to the Food and Drug Administration,
with a copy to the wholesale distributor, within 7 calendar days of
completing the inspection.
(c) To become an AO, and to maintain its approval, an organization
seeking the Food and Drug Administration's approval and current AOs
must:
(1) Maintain records, including those that support the AO's initial
and continuing qualifications for approval, for a minimum of 5 years.
(2) Maintain the following records of inspections submitted to the
licensing authority for a minimum of 5 years:
(i) Copies of the records and supporting documentation reviewed as
part of an inspection;
(ii) Inspection reports;
(iii) Correspondence with the Food and Drug Administration and the
wholesale distributor associated with an inspection; and
(iv) Information on the identity, conflict of interest
certification/compliance statement, and qualifications of all AO
personnel who contributed to the inspection.
(3) Records maintained by the AO must:
(i) Be readily retrievable and made available to Federal licensing
authorities upon request;
(ii) Be secure from unauthorized access or modifications; and
(iii) Contain only alterations signed and dated by the individual
who made the alteration. Such alteration must preserve the original
information and document the reason for the alteration.
(4) An AO must immediately report to the Food and Drug
Administration the discovery of any evidence or observations of
potential violations found at a wholesale distributor facility during
an inspection of the facility that could pose imminent and serious
adverse health consequences or death to humans. Reports must be made in
the manner prescribed by the Food and Drug Administration.
Sec. 205.32 General qualifications of approved organizations.
(a) To become and remain an AO, the organization and anyone
employed by the organization, including contractors used by the
organization:
(1) Must not be a current Federal or State government employee;
(2) Must not engage in prescription drug-related activities,
excluding participation in the Agency's AO program and related
activities, but including and not limited to manufacturing, wholesale
distribution, repackaging, relabeling, dispensing, or 3PL activities;
(3) Must disclose to the Food and Drug Administration any
participation or financial interest in entities that participate in the
design, manufacture, promotion, or sale of articles or activities that
are predominantly Food and Drug Administration-regulated or are
expected to result in Food and Drug Administration-regulated articles;
(4) Must not be owned or controlled by, or have any organizational,
material, or financial affiliation with, any of the entities engaged in
manufacturing, wholesale distribution, repackaging, relabeling,
dispensing, 3PL activities, or the design, manufacture, promotion, or
sale of prescription drugs as defined in section 581(12) of the Federal
Food, Drug, and Cosmetic Act;
(5) Must enter and abide by a written agreement with the applicant
before data and information otherwise exempt from public disclosure may
be disclosed to the AO or the contractor;
(6) Must operate in accordance with professional and ethical
business practices, which include:
(i) Protecting against conflicts of interest as set forth in 5 CFR
part 2635 and 18 U.S.C. 208;
(ii) Ensuring that the personnel employed or contracted by the AO
who are working on inspections have sufficient education, training,
knowledge, and experience to conduct inspections of wholesale
distributors;
(iii) Protecting against unauthorized disclosure of nonpublic
information received, records, reports, and recommendations and
maintaining appropriate security and protection of such information;
(iv) Maintaining appropriate security and protection, physical and
electronic, of any information received in relation to inspections;
(v) Reporting information to the Food and Drug Administration and
entities for which licensure reviews were conducted that accurately
reflects data reviewed, inspectional observations made, and other
matters that relate to or may influence compliance with the Federal
Food, Drug, and Cosmetic Act; and
(vi) Promptly responding to and attempting to resolve any
complaints regarding activities for which it is approved by the Food
and Drug Administration; and
(7) Must establish and maintain policies, procedures, and
documentation to demonstrate that, at the time of application, and
throughout their tenure as an AO, the applicant has and can continue to
satisfy the requirements to qualify as an AO capable of assessing
compliance with all wholesale distributor requirements. Such policies,
procedures, and documentation must include, but are not limited to:
(i) AO program administration;
(ii) Disciplinary actions and corrective measures;
(iii) Recordkeeping and confidentiality;
(iv) Use of contractors; and
(v) Personnel qualifications and ongoing training.
(b) If an AO elects to use contractors for inspections, the AO
remains
[[Page 6756]]
responsible for the work of the contractors at all times.
(1) AOs that use contractors to conduct inspections must have
policies and procedures in place to ensure the contractor's continuing
compliance with this part, as well as competence and qualifications to
conduct inspections. Such policies and procedures must ensure that
contractors:
(i) Meet the qualifications set forth in paragraph (a) of this
section;
(ii) Do not subcontract their inspection duties, and that
contractors are removed if such requirement is violated;
(iii) Abide by the policies and procedures of the AO, as set forth
in Sec. 205.33(b); and
(iv) Complete and pass the same training required by the AO, as set
forth in Sec. 205.33(c).
(2) If an AO elects to use contractors to conduct inspections, the
AO must receive and keep a record of written consent from the wholesale
distributor to share confidential commercial information with
contractors for which an inspection is being conducted.
(3) AOs that elect to use contractors must submit to the Food and
Drug Administration a list of contractors used by the organization,
accompanied by a statement from the organization certifying that such
contractors meet the requirements of this subpart.
Sec. 205.33 Process and procedures for approval by the Food and Drug
Administration.
(a) Application. An application to become an AO must be completed
and submitted electronically to the Food and Drug Administration in a
format the Food and Drug Administration can renew, process, and
archive.
(b) Required application information. Policies, procedures, and
documentation as required by Sec. 205.32(a)(7) must accompany the
application.
(c) Training. Organizations must provide training and any
individual who conducts inspections or supervises individuals who
conduct inspections is required to undergo and pass the prescribed
training.
(1) If an individual does not pass training, that person must wait
30 days before retaking the training, and may be required to show proof
of additional education or experiential learning to demonstrate
competence before retaking the training evaluation.
(2) To maintain approval, individuals employed by the AO and
conducting inspections or supervising those who conduct inspections
must undergo and pass annual training as prescribed by the Food and
Drug Administration. Failure to complete and pass annual training may
result in suspension of approval.
(3) The Food and Drug Administration may require additional
training. If such additional training is required, AOs will be given a
set time period during which training must be completed and passed to
maintain approval.
(d) Auditing. Prior to conducting its first inspection, an AO must
undergo an onsite audit by the Food and Drug Administration. The Food
and Drug Administration may also conduct random, periodic audits, as
well as for-cause audits, of an AO, as set forth in paragraph (o) of
this section.
(e) Duration of approval and renewal process. (1) The Food and Drug
Administration approval to conduct inspections is valid for a period of
5 years.
(2) AOs must submit a renewal application to the Food and Drug
Administration no later than 6 months prior to the expiration date to
renew its approval.
(i) If a renewal application is submitted less than 6 months before
the date of expiration, the AO's approval will expire if approval is
not renewed prior to the date of expiration.
(ii) Upon expiration of the AO's approval, the AO must cease
conducting any inspection-related activities.
(f) Denial of approval. If an organization does not meet all of the
Food and Drug Administration's standards detailed in Sec. Sec. 205.31
and 205.32 for becoming an AO, the Food and Drug Administration will
deny the application in writing. Requests for review and
reconsideration of a denial of an application must be submitted to the
Food and Drug Administration within 30 calendar days of the date of the
Food and Drug Administration's decision. If, upon reconsideration, the
licensing authority denies the applicant's request for approval, the
licensing authority will provide the applicant written notice of the
denial and an opportunity to appeal pursuant to Sec. 10.75 of this
chapter.
(g) Suspension of approval after notice and opportunity to request
a hearing. (1) The Food and Drug Administration may suspend approval of
an organization after opportunity to request a hearing when there is a
reasonable probability that the organization's noncompliance will
negatively impact public health.
(2) If an AO fails to maintain the Food and Drug Administration's
standards pursuant to Sec. Sec. 205.31 and 205.32, the Food and Drug
Administration will give written notice of the intent to suspend the
organization's approval, including the grounds for the suspension, and
the AO will have 30 days after the date of the notice to provide
additional information to the Food and Drug Administration for
reconsideration.
(3) If no additional information is provided or, if upon
reconsideration, the Food and Drug Administration still believes the
AO's approval should be suspended, the Food and Drug Administration
will issue the AO a formal written notice of intent to suspend, along
with notice of the opportunity to request a hearing pursuant to part 16
of this chapter.
(4) An AO that wishes to request a hearing has 10 calendar days
after the date of the formal notice of intent to suspend to submit a
written notice of participation and request for a hearing. An AO that
fails to submit a written notice of participation and request for a
hearing within 10 calendar days from the date of the notice waives the
opportunity for a hearing.
(5) A suspended AO must notify any wholesale distributors with a
pending inspection to be performed by the AO of the AO's suspension
within 7 calendar days.
(h) Immediate suspension of approval. (1) When there is a
reasonable probability that the organization's noncompliance will cause
imminent and serious adverse health consequences or death to humans,
the Food and Drug Administration will suspend an AO's approval
effective immediately.
(2) In such a situation, the Food and Drug Administration will
provide the AO a written notice of immediate suspension, along with
notice and opportunity to request a hearing pursuant to part 16 of this
chapter within 14 calendar days of the AO's request for such hearing.
(3) An AO that wishes to request a hearing has 10 calendar days
after the date of the formal notice of suspension to submit a written
notice of participation and request for a hearing. An AO that fails to
submit a written notice of participation and request for a hearing
within 10 calendar days waives the opportunity for a hearing.
(i) Reinstatement of approval. (1) An organization's approval may
be reinstated if the Food and Drug Administration determines that the
suspended organization has rectified the issues leading to the
suspension and can meet the standards set forth in this subpart.
Pursuant to this paragraph (i), the organization must rectify the
issues and come into compliance with the Food and Drug Administration's
[[Page 6757]]
standards within 1 year from the date of suspension. If the issues have
not been rectified within 1 year, the Food and Drug Administration may
revoke the AO's approval subject to the provisions of this part.
(2) An organization whose approval has been reinstated on a
conditional basis will be subject to a 3-year probationary period, and
if any material deficiencies arise during that period, the
organization's approval may be revoked.
(j) Revocation of approval. (1) The Food and Drug Administration
may revoke approval of an organization whose approval has been
suspended pursuant to paragraphs (g) and (h) of this section:
(i) If an organization fails to demonstrate intent to comply with
the issues leading to the suspension within 6 months from the date of
suspension; or
(ii) If the Food and Drug Administration determines that the
organization failed to rectify the issues leading to the suspension to
the Agency's satisfaction within 1 year of the date of suspension.
(2) The Food and Drug Administration will give written notice of
the intent to revoke the organization's approval, including the grounds
for the revocation, and an opportunity to request a hearing pursuant to
part 16 of this chapter.
(3) The AO must submit a written notice of participation and
request a hearing within 10 calendar days after the date of the notice
of revocation. An AO that fails to submit a written notice of
participation and request for hearing within 10 calendar days waives
the opportunity for a hearing.
(4) An organization whose approval is revoked that wishes to
reapply to be an AO must submit a new application to the Food and Drug
Administration.
(k) Requests for reconsideration of Agency decision. (1) The Food
and Drug Administration will follow the process outlined at Sec. 10.75
of this chapter to review matters relating to denial of approval,
including review of the organization's application.
(2) The Food and Drug Administration will follow the process
outlined at part 16 of this chapter to review matters relating to a
suspension or revocation action, including review of the organization's
application and administrative file.
(3) The Food and Drug Administration's decision after request for
reconsideration of denial, suspension, or revocation constitutes a
final Agency action under 5 U.S.C. 702.
(l) Voluntary withdrawal of approval. (1) An organization wishing
to voluntarily withdraw its approval, including but not limited to when
an AO goes out of business, must notify the Food and Drug
Administration in writing at least 6 months prior to the date the
organization intends for the withdrawal to become effective.
(i) If an AO determines it will be withdrawing its approval with
the Food and Drug Administration in less than 6 months, it must notify
the Food and Drug Administration immediately of its intent to withdraw,
and such notification must inform the Food and Drug Administration of
the date the organization will cease business operations.
(ii) [Reserved]
(2) No later than 7 calendar days after notifying the Food and Drug
Administration, the organization must notify any facilities with
pending inspections that it intends to withdraw its approval with the
Food and Drug Administration and must provide the date on which the
withdrawal is effective.
(m) AO-required notifications to wholesale distributors. The AO
must, within 7 calendar days of the date of suspension, revocation, or
voluntary withdrawal of approval, notify those wholesale distributor
facilities that have pending inspections of the AO's suspension or
revocation. This notification must inform the wholesale distributor
facility that it must apply for inspection with another AO, or the Food
and Drug Administration if no other organization is approved.
(n) Change of operation or ownership. (1) The AO must report to the
Food and Drug Administration within 30 calendar days any changes to the
information submitted with its application for approval.
(2) Approval is not transferable.
(i) Changes in ownership of an AO require the organization to
submit a new application to the Food and Drug Administration.
(ii) Such application must be submitted to the Food and Drug
Administration no later than 30 calendar days prior to the date of the
change of ownership.
(iii) No later than 30 calendar days before the date of the change
of ownership, the AO must notify any wholesale distributor facilities
with pending applications of the pending change in ownership.
(iv) On the date the change of ownership takes place, the original
approval is void.
(o) Monitoring by the Food and Drug Administration. (1) AOs are
subject to both periodic and for-cause audits by the Food and Drug
Administration to ensure compliance with the Food and Drug
Administration's requirements for approval in this part.
(2) If an AO refuses to cooperate with the Food and Drug
Administration's audit, the organization's approval may be suspended.
Dated: January 24, 2022.
Janet Woodcock,
Acting Commissioner of Food and Drugs.
[FR Doc. 2022-01929 Filed 2-3-22; 8:45 am]
BILLING CODE 4164-01-P