[Federal Register Volume 65, Number 86 (Wednesday, May 3, 2000)]
[Rules and Regulations]
[Pages 25639-25641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-10920]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 203 and 205

[Docket Nos. 92N-0297 and 88N-0258]
RIN 0905-AC81


Prescription Drug Marketing Act of 1987; Prescription Drug 
Amendments of 1992; Policies, Requirements, and Administrative 
Procedures; Delay of Effective Date; Reopening of Administrative Record

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule; delay of effective date; reopening of 
administrative record.

-----------------------------------------------------------------------

SUMMARY: The Food and Drug Administration (FDA) is delaying until 
October 1, 2001, the effective date and reopening the administrative 
record to receive additional comments regarding certain requirements of 
a final rule published in the Federal Register of December 3, 1999 (64 
FR 67720). The other provisions of the final rule become effective on 
December 4, 2000. The final rule implements the Prescription Drug 
Marketing Act of 1987 (PDMA), as modified by the Prescription Drug 
Amendments of 1992 (PDA) and the FDA Modernization Act of 1997 (the 
Modernization Act). FDA is delaying the effective date for certain 
requirements relating to wholesale distribution of prescription drugs 
by distributors that are not authorized distributors of record. FDA is 
also delaying the effective date of another requirement that would 
prohibit blood centers functioning as ``health care entities'' to act 
as wholesale distributors of blood derivatives. The agency is taking 
this action to address numerous concerns about the provisions raised by 
affected parties.

DATES: The effective date for Secs. 203.3(u) and 203.50, and the 
applicability of Sec. 203(q) to wholesale distribution of blood 
derivatives by health care entities, added at 64 FR 67720, December 3, 
1999, is delayed until October 1, 2001. The administrative record is 
reopened until July 3, 2000, to receive additional comments on these 
provisions.

ADDRESSES: Submit written comments to the Dockets Management Branch 
(HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, 
Rockville, MD 20857. All comments should be identified with the docket 
number found in brackets in the heading of this document.

FOR FURTHER INFORMATION CONTACT: Lee D. Korb, Center for Drug 
Evaluation and Research (HFD-7), Food and Drug Administration, 5600 
Fishers Lane, Rockville, MD 20857, 301-594-2041.

SUPPLEMENTARY INFORMATION:

I. Background

    PDMA (Public Law 100-293) was enacted on April 22, 1988, and was 
modified by the PDA (Public Law 102-353, 106 Stat. 941) on August 26, 
1992. The PDMA as modified by the PDA amended sections 301, 303, 503, 
and 801 of the Federal Food, Drug, and Cosmetic Act (the act) (21 
U.S.C. 331, 333, 353, 381) to, among other things, establish 
requirements for the wholesale distribution of prescription drugs.
    Section 503(e)(1)(A) of the act states that each person who is 
engaged in the wholesale distribution of a prescription drug who is not 
the manufacturer or an authorized distributor of record for the drug 
must, before each wholesale distribution of a drug, provide to the 
person receiving the drug a statement (in such form and containing such 
information as the Secretary may require) identifying each prior sale, 
purchase, or trade of the drug, including the date of the transaction 
and the names and addresses of all parties to the transaction. Section 
503(e)(4)(A) of the act states that, for the purposes of section 
503(e), the term ``authorized distributors of record'' means those 
distributors with whom a manufacturer has established an ``ongoing 
relationship'' to distribute the manufacturer's products.
    On December 3, 1999, the agency published final regulations in part 
203 (21 CFR part 203) implementing these and other provisions of PDMA 
(64 FR 67720). Section 203.50 requires that, before the completion of 
any wholesale distribution by a wholesale distributor of a prescription 
drug for which the seller is not an authorized distributor of record to 
another wholesale distributor or retail pharmacy, the seller must 
provide to the purchaser a statement identifying each prior sale, 
purchase, or trade of the drug. The identifying statement must include 
the proprietary and established name of the drug, its dosage, the 
container size, the number of containers, lot or control numbers of the 
drug being distributed, the business

[[Page 25640]]

name and address of all parties to each prior transaction involving the 
drug, starting with the manufacturer, and the date of each previous 
transaction. Section 203.3(b) defines ``authorized distributor of 
record'' as a distributor with whom a manufacturer has established an 
ongoing relationship to distribute the manufacturer's products. 
``Ongoing relationship'' is defined in 203.3(u) to mean an association 
that exists when a manufacturer and a distributor enter into a written 
agreement under which the distributor is authorized to distribute the 
manufacturer's products for a period of time or for a number of 
shipments. If the distributor is not authorized to distribute a 
manufacturer's entire product line, the agreement must identify the 
specific drug products that the distributor is authorized to 
distribute.
    Thus, the final rule requires unauthorized distributors (i.e., 
those distributors who do not have a written authorization agreement) 
to provide a drug origin statement to purchasers showing the entire 
prior sales history of the drug back to the first sale by the 
manufacturer. As discussed in the preamble to the final rule (64 FR 
67720 at 67747), manufacturers and authorized distributors of record 
are not required to provide an identifying statement when selling a 
drug, although the agency encouraged them to do so voluntarily to 
permit unauthorized distributors to continue to be able to purchase 
products from them.\1\
---------------------------------------------------------------------------

    \1\ An unauthorized wholesale distributor that purchases a 
product from a manufacturer or authorized distributor of record 
without an identifying statement showing the prior sales of the drug 
could not provide an identifying statement to its purchasers and, 
therefore, could not conduct further wholesale transactions of the 
drug in compliance with Sec. 203.50.
---------------------------------------------------------------------------

    The provisions in the final rule related to wholesale distribution 
of prescription drugs by unauthorized distributors (i.e., 
Secs. 203.3(u) and 203.50) were adopted from the provisions in the 
proposed rule published in the Federal Register of March 14, 1994 (59 
FR 11842), and are essentially the same as the proposed provisions, 
except the definition for ``ongoing relationship'' in the proposed rule 
was revised to eliminate certain requirements.\2\ The agency received 
two comments on the proposed definition of ongoing relationship and one 
comment on proposed Sec. 203.50, and responded in detail to those 
comments in the preamble to the final rule (see 64 FR 67720 at 67727, 
67728, and 67747).
---------------------------------------------------------------------------

    \2\ The proposed rule defined ``ongoing relationship'' to 
require a written agreement and, in addition, the following two 
requirements that were eliminated in the final rule: (1) That a sale 
be completed under the written agreement and (2) that the 
distributor be listed on the manufacturer's list of authorized 
distributors.
---------------------------------------------------------------------------

    Section 503(c)(3)(A) of the act states that no person may sell, 
purchase, or trade, or offer to sell, purchase, or trade any drug that 
was purchased by a public or private hospital or other health care 
entity. Section 503(c)(3)(B) states several exceptions to section 
503(c)(3)(A), none of which are relevant to this discussion. Section 
503(c)(3) also states that ``[f]or purposes of this paragraph, the term 
`entity' does not include a wholesale distributor of drugs or a retail 
pharmacy licensed under State law.''
    In the final rule of December 3, 1999, Sec. 203.20 provides, with 
certain exceptions, that no person may sell, purchase, or trade, or 
offer to sell, purchase, or trade any prescription drug that was 
purchased by a public or private hospital or other health care entity 
or donated or supplied at a reduced price to a charitable organization. 
In Sec. 203.3(q) of the final rule, ``Health care entity'' is defined 
as meaning any person that provides diagnostic, medical, surgical, or 
dental treatment, or chronic or rehabilitative care, but does not 
include any retail pharmacy or wholesale distributor. Under both the 
act and the final rule, a person could not simultaneously be a health 
care entity and a retail pharmacy or wholesale distributor. Thus, under 
the final rule, blood centers functioning as health care entities could 
not engage in wholesale distribution of prescription drugs, except for 
blood and blood components intended for transfusion, which are exempt 
from the PDMA under Sec. 203.1 of the final rule. Blood and blood 
components include whole blood, red blood cells, platelets and 
cryoprecipitated antihemophilic factor which are prepared by blood 
banks who collect blood from donors and separate out the components 
using physical or mechanical means. Blood derivatives are derived from 
human blood, plasma, or serum through a chemical fractionation 
manufacturing process. Examples of blood derivative products include 
albumin, antihemophilic factor, immune globulin, and alpha-1 anti-
tripsin. As discussed in the preamble to the final rule in response to 
comments (64 FR 67720 at 67725, 67726, and 67727), blood derivative 
products are not blood or blood components intended for transfusion and 
therefore could not be distributed by health care entities, including 
full service blood centers that function as health care entities, after 
the final rule goes into effect.

II. Description and Rationale for a Partial Delay of the Effective 
Date of the Final Rule

A. Wholesale Distribution by Unauthorized Distributors

    Since publication of the final rule, the agency has received 
letters and petitions and has had other communications with industry, 
industry trade associations, and members of Congress objecting to the 
provisions in Secs. 203.3(u) and 203.50. In early February 2000, the 
agency met with representatives from the wholesale industry and 
industry associations. The meeting participants discussed their 
concerns with both: (1) The requirement in Sec. 203.3(u) that there be 
a written authorization agreement between a manufacturer and 
distributor for the distributor to be considered an authorized 
distributor of record under Sec. 203.3(b), and (2) the requirement in 
Sec. 203.50 that unauthorized distributors provide an identifying 
statement showing all prior sales going back to the manufacturer.
    The meeting participants asserted that manufacturers are unwilling 
to enter into written authorization agreements with the majority of 
smaller wholesalers so that these wholesalers cannot become authorized 
distributors of record for the drugs they sell and, hence, must provide 
an identifying statement for these drugs. The meeting participants also 
said that smaller wholesalers cannot obtain an identifying statement 
showing all prior sales of the drugs they purchase for sale because a 
large portion of these drugs are purchased from authorized distributors 
who are not required to provide identifying statements and are 
unwilling to voluntarily provide them. The meeting participants 
asserted that authorized distributors will not voluntarily provide 
identifying statements when they sell drugs to unauthorized 
distributors because it would require them to change their warehouse 
and business procedures, which would entail additional effort and 
expense.
    The meeting participants asserted that implementation of the final 
rule will prevent over 4,000 smaller, unauthorized distributors from 
distributing drugs to their customers and may put them out of business, 
at least with respect to their prescription drug wholesale business. 
They also asserted that because many of their customers are smaller 
retail outlets that are not served by larger distributors, 
implementation of the final rule may leave certain markets for 
prescription drugs, and ultimately consumers for prescription drugs, 
underserved.

[[Page 25641]]

    In addition to the meeting discussed above and other informal 
communications that FDA has had with industry, industry associations, 
and Congress, FDA received a petition for stay of action requesting 
that the relevant provisions of the final rule be stayed until October 
1, 2001. The agency also received a petition for reconsideration from 
the Small Business Administration (SBA) requesting that FDA reconsider 
the final rule and suspend its effective date based on the projected 
severe economic impact it would have on over 4,000 small businesses. 
The petitions argued that the requirement for a written agreement in 
Sec. 203.3(u) is unreasonable because manufacturers are not willing to 
enter such agreements with the majority of smaller distributors. The 
petitions also asserted that authorized wholesalers are not now able 
and could not provide, at a reasonable cost, an identifying statement 
to their unauthorized distributor customers that meets the requirements 
of Sec. 203.50 of the final rule. The SBA petition asserted that, if 
the effective date of the final rule is not stayed, drug products now 
in the inventory of wholesalers will have to be cleared and new orders 
will have to cease or be severely limited in order to comply with the 
final rule's December 4, 2000 effective date, with corresponding 
disruptions in the distribution of drugs possible by summer, 2000.

B. Distribution of Blood Derivatives by Health Care Entities

    Since the time of the proposed rule, FDA has received 2 letters, 
one from a large blood center and the other from an association 
representing the blood center industry, and has held several meetings 
to discuss the implications of the regulations on blood centers that 
distribute blood derivative products and provide health care as a 
service to the hospitals and patients they serve. The blood center 
industry asserts that the regulations and, particularly the definition 
of ``health care entity,'' will severely inhibit their ability to 
provide full service care to the detriment of client hospitals and the 
patients they serve, and may disrupt the distribution of these products 
to the public. The agency has also received a letter from a member of 
Congress on this issue. Although the agency was aware of this issue at 
the time the final rule was published, we believed that application of 
Sec. 203.3(q) to blood centers would not result in a disruption in the 
distribution of blood derivative products. However, comments and 
information provided by representatives of the blood center industry 
have persuaded us that the final rule could disrupt the availability of 
blood derivative products to the public.

C. Partial Delay of the Effective Date

    Based on the concerns expressed by industry, industry associations, 
and Congress about implementing Secs. 203.3(u) and 203.50 by the 
December 4, 2000, effective date, the agency has decided to delay the 
effective date for those sections of the final rule until October 1, 
2001. Additionally, the agency has decided to delay the applicability 
of Sec. 203.3(q) to wholesale distribution of blood derivatives by 
health care entities, until October 1, 2001. All other provisions of 
the rule will become effective on December 4, 2000. This action should 
not be construed to indicate that FDA necessarily agrees with or has 
made decisions about the substantive arguments made in the petitions 
and other submissions related to implementation of Secs. 203.3(u) and 
203.50 or Sec. 203.3(q), as it applies to wholesale distribution of 
blood derivatives by health care entities.

III. Reopening of the Administrative Record

    The agency believes that providing additional time before these are 
to become effective is appropriate to permit the agency to obtain more 
information about the possible consequences of implementing these 
provisions, to further evaluate the issues involved, and to seek a 
legislative resolution to these issues, if necessary. Therefore, the 
agency is reopening the administrative record to receive additional 
comments on these provisions from interested individuals. Regarding 
Secs. 203.3(u) and 203.50, the agency is especially interested in 
gaining further insight into the potential impact of the provisions on 
the wholesale distribution system generally, and on the ability of 
smaller pharmacies and other prescription drug retailers to obtain 
prescription drugs. In addition, the agency is seeking comments on the 
potential economic impact of the provisions on smaller wholesale 
distributors that are not authorized distributors of record. Regarding 
Sec. 203.3(q), the agency also invites comment on the economic and 
public health impact of including full service blood centers under the 
definition of ``health care entity,'' thereby prohibiting the wholesale 
distribution of blood derived products by such entities.
    Interested persons may submit to the Dockets Management Branch 
(HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, 
Rockville, MD 20852, written comments regarding this proposal by July 
3, 2000. Two copies of any comments are to be submitted, except that 
individuals may submit one copy. Comments are to be identified with the 
docket number found in brackets in the heading of this document. 
Received comments may be seen in the Dockets Management Branch between 
9 a.m. and 4 p.m., Monday through Friday.
    This action is being taken under FDA's authority under 21 CFR 
10.35(a). The Commissioner of Food and Drugs finds that this delay of 
the effective date is in the public interest.

    Dated: April 26, 2000.
Margaret M. Dotzel,
Acting Associate Commissioner for Policy.
[FR Doc. 00-10920 Filed 4-28-00; 12:34 pm]
BILLING CODE 4160-01-F