United States: FDA’s proposed rules could be game changer for pharma supply chain
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New federal regulations have been proposed that will affect the licensing of wholesale drug distributors and third-party logistics providers (3PLs). the Drug Supply Chain Security Act became law in 2013. The United States Food and Drug Administration (FDA) proposed rules published on February 4, 2022, this would supersede state and local licensing requirements for many companies in the drug supply chain. Members of the public may submit written comments regarding the proposal. The deadline for providing comments is June 6, 2022.
The FDA acknowledges that “[a] a breach at any point in the supply chain can have dangerous, even fatal, consequences for US consumers. In the preamble to the proposed rules, the FDA stated that “[t]prescription drug weight and diversion continue to be major issues contributing to drug shortages and creating significant financial losses, the effects of which ripple through the supply chain to consumers. The rules are designed to “secure and strengthen the supply chain”. All 3PLs and wholesale distributors will be required to meet national standards for handling, storing, and transporting prescription drugs, instead of the current “patchwork” of differing standards between states. States with their own licensing programs will continue to issue permits. If a state does not have a licensing program that conforms to federal rules, the “FDA will be the licensing authority.”
The proposed rules, if finalized in their current form, could have a substantial effect on retail pharmacies selling in the wholesale market. The proposal addresses FDA policy to allow pharmacies to sell drugs to licensed practitioners for professional use without such transactions being considered wholesale distribution. Any sale to a wholesale distributor or any sale above 5% for office use by healthcare providers would require the pharmacy to obtain a wholesale distributor license, as would any sale to other pharmacies, except if necessary to meet a specific patient need.
The proposed rules would impose additional regulatory requirements in a number of areas, including:
- define 3PL activities
- describing the events that would constitute a change in ownership
- define a “designated representative”, which raises questions about whether specific state requirements for designated representatives would continue, such as Florida’s requirement that such individuals pass a state-required written exam
- exclude a head office or headquarters from the definition of “establishment” if the location does not store or handle drugs and only provides supervisory, support or business administration functions. Clarification may be needed on whether outlets, such as call centers, require a permit. The regulatory preamble indicates that entities that do not take physical possession of drugs (such as a broker) may still engage in activities that meet the definition of a wholesale distributor or manufacturer
- require supply chain entities to authenticate products suspected of being illegitimate and only do business with approved and authorized trading partners
- requiring 3PLs and wholesale distributors to report any changes to the information submitted in the authorization request to be reported within 30 calendar days of the change
- requiring all 3PLs with existing state licenses to obtain new licenses in accordance with federal standards
- impose requirements for good storage practices
- impose certain background check requirements and other requirements for staff
- Mandate written policies and procedures on many topics regarding the operation of the 3PL business or pharmaceutical wholesaler
- allow only 10 days after a permit is refused to request a hearing
- require security
- requiring satisfactory inspection prior to licensing and regularly thereafter at least once every three years
- requiring certain annual reports to the FDA
The FDA has determined that the “federal requirements will establish both a ‘floor’ and a ‘cap'” for wholesale distributors and 3PLs. In other words, states cannot impose requirements that differ from federal standards. That could mean substantial regulatory changes for companies that operate in states, like Florida, that impose stricter requirements. These state requirements will not be anticipated until the rules are finalized and come into effect. Since the final rules could have a huge impact on how wholesalers and 3PLs do business, companies should consider submitting comments on how the regulations may affect their operations. Everyone in the pharmaceutical supply chain should be aware that change is on the horizon.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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