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[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3204 Engrossed in House (EH)]

113th CONGRESS
  1st Session
                                H. R. 3204

_______________________________________________________________________

                                 AN ACT

 
To amend the Federal Food, Drug, and Cosmetic Act with respect to human 
    drug compounding and drug supply chain security, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Drug Quality and Security Act''.

SEC. 2. REFERENCES IN ACT; TABLE OF CONTENTS.

    (a) References in Act.--Except as otherwise specified, amendments 
made by this Act to a section or other provision of law are amendments 
to such section or other provision of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 301 et seq.).
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title.
Sec. 2. References in Act; table of contents.
                       TITLE I--DRUG COMPOUNDING

Sec. 101. Short title.
Sec. 102. Voluntary outsourcing facilities.
Sec. 103. Penalties.
Sec. 104. Regulations.
Sec. 105. Enhanced communication.
Sec. 106. Severability.
Sec. 107. GAO study.
                  TITLE II--DRUG SUPPLY CHAIN SECURITY

Sec. 201. Short title.
Sec. 202. Pharmaceutical distribution supply chain.
Sec. 203. Enhanced drug distribution security.
Sec. 204. National standards for prescription drug wholesale 
                            distributors.
Sec. 205. National standards for third-party logistics providers; 
                            uniform national policy.
Sec. 206. Penalties.
Sec. 207. Conforming amendment.
Sec. 208. Savings clause.

                       TITLE I--DRUG COMPOUNDING

SEC. 101. SHORT TITLE.

    This Act may be cited as the ``Compounding Quality Act''.

SEC. 102. VOLUNTARY OUTSOURCING FACILITIES.

    (a) In General.--Subchapter A of chapter V (21 U.S.C. 351 et seq.) 
is amended--
            (1) by redesignating section 503B as section 503C; and
            (2) by inserting after section 503A the following new 
        section:

``SEC. 503B. OUTSOURCING FACILITIES.

    ``(a) In General.--Sections 502(f)(1), 505, and 582 shall not apply 
to a drug compounded by or under the direct supervision of a licensed 
pharmacist in a facility that elects to register as an outsourcing 
facility if each of the following conditions is met:
            ``(1) Registration and reporting.--The drug is compounded 
        in an outsourcing facility that is in compliance with the 
        requirements of subsection (b).
            ``(2) Bulk drug substances.--The drug is compounded in an 
        outsourcing facility that does not compound using bulk drug 
        substances (as defined in section 207.3(a)(4) of title 21, Code 
        of Federal Regulations (or any successor regulation)), unless--
                    ``(A)(i) the bulk drug substance appears on a list 
                established by the Secretary identifying bulk drug 
                substances for which there is a clinical need, by--
                            ``(I) publishing a notice in the Federal 
                        Register proposing bulk drug substances to be 
                        included on the list, including the rationale 
                        for such proposal;
                            ``(II) providing a period of not less than 
                        60 calendar days for comment on the notice; and
                            ``(III) publishing a notice in the Federal 
                        Register designating bulk drug substances for 
                        inclusion on the list; or
                    ``(ii) the drug compounded from such bulk drug 
                substance appears on the drug shortage list in effect 
                under section 506E at the time of compounding, 
                distribution, and dispensing;
                    ``(B) if an applicable monograph exists under the 
                United States Pharmacopeia, the National Formulary, or 
                another compendium or pharmacopeia recognized by the 
                Secretary for purposes of this paragraph, the bulk drug 
                substances each comply with the monograph;
                    ``(C) the bulk drug substances are each 
                manufactured by an establishment that is registered 
                under section 510 (including a foreign establishment 
                that is registered under section 510(i)); and
                    ``(D) the bulk drug substances are each accompanied 
                by a valid certificate of analysis.
            ``(3) Ingredients (other than bulk drug substances).--If 
        any ingredients (other than bulk drug substances) are used in 
        compounding the drug, such ingredients comply with the 
        standards of the applicable United States Pharmacopeia or 
        National Formulary monograph, if such monograph exists, or of 
        another compendium or pharmacopeia recognized by the Secretary 
        for purposes of this paragraph if any.
            ``(4) Drugs withdrawn or removed because unsafe or not 
        effective.--The drug does not appear on a list published by the 
        Secretary of drugs that have been withdrawn or removed from the 
        market because such drugs or components of such drugs have been 
        found to be unsafe or not effective.
            ``(5) Essentially a copy of an approved drug.--The drug is 
        not essentially a copy of one or more approved drugs.
            ``(6) Drugs presenting demonstrable difficulties for 
        compounding.--The drug--
                    ``(A) is not identified (directly or as part of a 
                category of drugs) on a list published by the 
                Secretary, through the process described in subsection 
                (c), of drugs or categories of drugs that present 
                demonstrable difficulties for compounding that are 
                reasonably likely to lead to an adverse effect on the 
                safety or effectiveness of the drug or category of 
                drugs, taking into account the risks and benefits to 
                patients; or
                    ``(B) is compounded in accordance with all 
                applicable conditions identified on the list described 
                in subparagraph (A) as conditions that are necessary to 
                prevent the drug or category of drugs from presenting 
                the demonstrable difficulties described in subparagraph 
                (A).
            ``(7) Elements to assure safe use.--In the case of a drug 
        that is compounded from a drug that is the subject of a risk 
        evaluation and mitigation strategy approved with elements to 
        assure safe use pursuant to section 505-1, or from a bulk drug 
        substance that is a component of such drug, the outsourcing 
        facility demonstrates to the Secretary prior to beginning 
        compounding that such facility will utilize controls comparable 
        to the controls applicable under the relevant risk evaluation 
        and mitigation strategy.
            ``(8) Prohibition on wholesaling.--The drug will not be 
        sold or transferred by an entity other than the outsourcing 
        facility that compounded such drug. This paragraph does not 
        prohibit administration of a drug in a health care setting or 
        dispensing a drug pursuant to a prescription executed in 
        accordance with section 503(b)(1).
            ``(9) Fees.--The drug is compounded in an outsourcing 
        facility that has paid all fees owed by such facility pursuant 
        to section 744K.
            ``(10) Labeling of drugs.--
                    ``(A) Label.--The label of the drug includes--
                            ``(i) the statement `This is a compounded 
                        drug.' or a reasonable comparable alternative 
                        statement (as specified by the Secretary) that 
                        prominently identifies the drug as a compounded 
                        drug;
                            ``(ii) the name, address, and phone number 
                        of the applicable outsourcing facility; and
                            ``(iii) with respect to the drug--
                                    ``(I) the lot or batch number;
                                    ``(II) the established name of the 
                                drug;
                                    ``(III) the dosage form and 
                                strength;
                                    ``(IV) the statement of quantity or 
                                volume, as appropriate;
                                    ``(V) the date that the drug was 
                                compounded;
                                    ``(VI) the expiration date;
                                    ``(VII) storage and handling 
                                instructions;
                                    ``(VIII) the National Drug Code 
                                number, if available;
                                    ``(IX) the statement `Not for 
                                resale', and, if the drug is dispensed 
                                or distributed other than pursuant to a 
                                prescription for an individual 
                                identified patient, the statement 
                                `Office Use Only'; and
                                    ``(X) subject to subparagraph 
                                (B)(i), a list of active and inactive 
                                ingredients, identified by established 
                                name and the quantity or proportion of 
                                each ingredient.
                    ``(B) Container.--The container from which the 
                individual units of the drug are removed for dispensing 
                or for administration (such as a plastic bag containing 
                individual product syringes) shall include--
                            ``(i) the information described under 
                        subparagraph (A)(iii)(X), if there is not space 
                        on the label for such information;
                            ``(ii) the following information to 
                        facilitate adverse event reporting: 
                        www.fda.gov/medwatch and 1-800-FDA-1088 (or any 
                        successor Internet Web site or phone number); 
                        and
                            ``(iii) directions for use, including, as 
                        appropriate, dosage and administration.
                    ``(C) Additional information.--The label and 
                labeling of the drug shall include any other 
                information as determined necessary and specified in 
                regulations promulgated by the Secretary.
            ``(11) Outsourcing facility requirement.--The drug is 
        compounded in an outsourcing facility in which the compounding 
        of drugs occurs only in accordance with this section.
    ``(b) Registration of Outsourcing Facilities and Reporting of 
Drugs.--
            ``(1) Registration of outsourcing facilities.--
                    ``(A) Annual registration.--Upon electing and in 
                order to become an outsourcing facility, and during the 
                period beginning on October 1 and ending on December 31 
                of each year thereafter, a facility--
                            ``(i) shall register with the Secretary its 
                        name, place of business, and unique facility 
                        identifier (which shall conform to the 
                        requirements for the unique facility identifier 
                        established under section 510), and a point of 
                        contact email address; and
                            ``(ii) shall indicate whether the 
                        outsourcing facility intends to compound a drug 
                        that appears on the list in effect under 
                        section 506E during the subsequent calendar 
                        year.
                    ``(B) Availability of registration for inspection; 
                list.--
                            ``(i) Registrations.--The Secretary shall 
                        make available for inspection, to any person so 
                        requesting, any registration filed pursuant to 
                        this paragraph.
                            ``(ii) List.--The Secretary shall make 
                        available on the public Internet Web site of 
                        the Food and Drug Administration a list of the 
                        name of each facility registered under this 
                        subsection as an outsourcing facility, the 
                        State in which each such facility is located, 
                        whether the facility compounds from bulk drug 
                        substances, and whether any such compounding 
                        from bulk drug substances is for sterile or 
                        nonsterile drugs.
            ``(2) Drug reporting by outsourcing facilities.--
                    ``(A) In general.--Upon initially registering as an 
                outsourcing facility, once during the month of June of 
                each year, and once during the month of December of 
                each year, each outsourcing facility that registers 
                with the Secretary under paragraph (1) shall submit to 
                the Secretary a report--
                            ``(i) identifying the drugs compounded by 
                        such outsourcing facility during the previous 
                        6-month period; and
                            ``(ii) with respect to each drug identified 
                        under clause (i), providing the active 
                        ingredient, the source of such active 
                        ingredient, the National Drug Code number of 
                        the source drug or bulk active ingredient, if 
                        available, the strength of the active 
                        ingredient per unit, the dosage form and route 
                        of administration, the package description, the 
                        number of individual units produced, and the 
                        National Drug Code number of the final product, 
                        if assigned.
                    ``(B) Form.--Each report under subparagraph (A) 
                shall be prepared in such form and manner as the 
                Secretary may prescribe by regulation or guidance.
                    ``(C) Confidentiality.--Reports submitted under 
                this paragraph shall be exempt from inspection under 
                paragraph (1)(B)(i), unless the Secretary finds that 
                such an exemption would be inconsistent with the 
                protection of the public health.
            ``(3) Electronic registration and reporting.--Registrations 
        and drug reporting under this subsection (including the 
        submission of updated information) shall be submitted to the 
        Secretary by electronic means unless the Secretary grants a 
        request for waiver of such requirement because use of 
        electronic means is not reasonable for the person requesting 
        waiver.
            ``(4) Risk-based inspection frequency.--
                    ``(A) In general.--Outsourcing facilities--
                            ``(i) shall be subject to inspection 
                        pursuant to section 704; and
                            ``(ii) shall not be eligible for the 
                        exemption under section 704(a)(2)(A).
                    ``(B) Risk-based schedule.--The Secretary, acting 
                through one or more officers or employees duly 
                designated by the Secretary, shall inspect outsourcing 
                facilities in accordance with a risk-based schedule 
                established by the Secretary.
                    ``(C) Risk factors.--In establishing the risk-based 
                schedule, the Secretary shall inspect outsourcing 
                facilities according to the known safety risks of such 
                outsourcing facilities, which shall be based on the 
                following factors:
                            ``(i) The compliance history of the 
                        outsourcing facility.
                            ``(ii) The record, history, and nature of 
                        recalls linked to the outsourcing facility.
                            ``(iii) The inherent risk of the drugs 
                        compounded at the outsourcing facility.
                            ``(iv) The inspection frequency and history 
                        of the outsourcing facility, including whether 
                        the outsourcing facility has been inspected 
                        pursuant to section 704 within the last 4 
                        years.
                            ``(v) Whether the outsourcing facility has 
                        registered under this paragraph as an entity 
                        that intends to compound a drug that appears on 
                        the list in effect under section 506E.
                            ``(vi) Any other criteria deemed necessary 
                        and appropriate by the Secretary for purposes 
                        of allocating inspection resources.
            ``(5) Adverse event reporting.--Outsourcing facilities 
        shall submit adverse event reports to the Secretary in 
        accordance with the content and format requirements established 
        through guidance or regulation under section 310.305 of title 
        21, Code of Federal Regulations (or any successor regulations).
    ``(c) Regulations.--
            ``(1) In general.--The Secretary shall implement the list 
        described in subsection (a)(6) through regulations.
            ``(2) Advisory committee on compounding.--Before issuing 
        regulations to implement subsection (a)(6), the Secretary shall 
        convene and consult an advisory committee on compounding. The 
        advisory committee shall include representatives from the 
        National Association of Boards of Pharmacy, the United States 
        Pharmacopeia, pharmacists with current experience and expertise 
        in compounding, physicians with background and knowledge in 
        compounding, and patient and public health advocacy 
        organizations.
            ``(3) Interim list.--
                    ``(A) In general.--Before the effective date of the 
                regulations finalized to implement subsection (a)(6), 
                the Secretary may designate drugs, categories of drugs, 
                or conditions as described such subsection by--
                            ``(i) publishing a notice of such 
                        substances, drugs, categories of drugs, or 
                        conditions proposed for designation, including 
                        the rationale for such designation, in the 
                        Federal Register;
                            ``(ii) providing a period of not less than 
                        60 calendar days for comment on the notice; and
                            ``(iii) publishing a notice in the Federal 
                        Register designating such drugs, categories of 
                        drugs, or conditions.
                    ``(B) Sunset of notice.--Any notice provided under 
                subparagraph (A) shall not be effective after the 
                earlier of--
                            ``(i) the date that is 5 years after the 
                        date of enactment of the Compounding Quality 
                        Act; or
                            ``(ii) the effective date of the final 
                        regulations issued to implement subsection 
                        (a)(6).
            ``(4) Updates.--The Secretary shall review, and update as 
        necessary, the regulations containing the lists of drugs, 
        categories of drugs, or conditions described in subsection 
        (a)(6) regularly, but not less than once every 4 years. Nothing 
        in the previous sentence prohibits submissions to the 
        Secretary, before or during any 4-year period described in such 
        sentence, requesting updates to such lists.
    ``(d) Definitions.--In this section:
            ``(1) The term `compounding' includes the combining, 
        admixing, mixing, diluting, pooling, reconstituting, or 
        otherwise altering of a drug or bulk drug substance to create a 
        drug.
            ``(2) The term `essentially a copy of an approved drug' 
        means--
                    ``(A) a drug that is identical or nearly identical 
                to an approved drug, or a marketed drug not subject to 
                section 503(b) and not subject to approval in an 
                application submitted under section 505, unless, in the 
                case of an approved drug, the drug appears on the drug 
                shortage list in effect under section 506E at the time 
                of compounding, distribution, and dispensing; or
                    ``(B) a drug, a component of which is a bulk drug 
                substance that is a component of an approved drug or a 
                marketed drug that is not subject to section 503(b) and 
                not subject to approval in an application submitted 
                under section 505, unless there is a change that 
                produces for an individual patient a clinical 
                difference, as determined by the prescribing 
                practitioner, between the compounded drug and the 
                comparable approved drug.
            ``(3) The term `approved drug' means a drug that is 
        approved under section 505 and does not appear on the list 
        described in subsection (a)(4) of drugs that have been 
        withdrawn or removed from the market because such drugs or 
        components of such drugs have been found to be unsafe or not 
        effective.
            ``(4)(A) The term `outsourcing facility' means a facility 
        at one geographic location or address that--
                    ``(i) is engaged in the compounding of sterile 
                drugs;
                    ``(ii) has elected to register as an outsourcing 
                facility; and
                    ``(iii) complies with all of the requirements of 
                this section.
            ``(B) An outsourcing facility is not required to be a 
        licensed pharmacy.
            ``(C) An outsourcing facility may or may not obtain 
        prescriptions for identified individual patients.
            ``(5) The term `sterile drug' means a drug that is intended 
        for parenteral administration, an ophthalmic or oral inhalation 
        drug in aqueous format, or a drug that is required to be 
        sterile under Federal or State law.''.
    ``(d) Obligation to Pay Fees.--Payment of the fee under section 
744K, as described in subsection (a)(9), shall not relieve an 
outsourcing facility that is licensed as a pharmacy in any State that 
requires pharmacy licensing fees of its obligation to pay such State 
fees.''.
    (b) Fees.--Subchapter C of chapter VII (21 U.S.C. 379f et seq.) is 
amended by adding at the end the following:

           ``PART 9--FEES RELATING TO OUTSOURCING FACILITIES

``SEC. 744J. DEFINITIONS.

    ``In this part:
            ``(1) The term `affiliate' has the meaning given such term 
        in section 735(11).
            ``(2) The term `gross annual sales' means the total 
        worldwide gross annual sales, in United States dollars, for an 
        outsourcing facility, including the sales of all the affiliates 
        of the outsourcing facility.
            ``(3) The term `outsourcing facility' has the meaning given 
        to such term in section 503B(d)(4).
            ``(4) The term `reinspection' means, with respect to an 
        outsourcing facility, 1 or more inspections conducted under 
        section 704 subsequent to an inspection conducted under such 
        provision which identified noncompliance materially related to 
        an applicable requirement of this Act, specifically to 
        determine whether compliance has been achieved to the 
        Secretary's satisfaction.

``SEC. 744K. AUTHORITY TO ASSESS AND USE OUTSOURCING FACILITY FEES.

    ``(a) Establishment and Reinspection Fees.--
            ``(1) In general.--For fiscal year 2015 and each subsequent 
        fiscal year, the Secretary shall, in accordance with this 
        subsection, assess and collect--
                    ``(A) an annual establishment fee from each 
                outsourcing facility; and
                    ``(B) a reinspection fee from each outsourcing 
                facility subject to a reinspection in such fiscal year.
            ``(2) Multiple reinspections.--An outsourcing facility 
        subject to multiple reinspections in a fiscal year shall be 
        subject to a reinspection fee for each reinspection.
    ``(b) Establishment and Reinspection Fee Setting.--The Secretary 
shall--
            ``(1) establish the amount of the establishment fee and 
        reinspection fee to be collected under this section for each 
        fiscal year based on the methodology described in subsection 
        (c); and
            ``(2) publish such fee amounts in a Federal Register notice 
        not later than 60 calendar days before the start of each such 
        year.
    ``(c) Amount of Establishment Fee and Reinspection Fee.--
            ``(1) In general.--For each outsourcing facility in a 
        fiscal year--
                    ``(A) except as provided in paragraph (4), the 
                amount of the annual establishment fee under subsection 
                (b) shall be equal to the sum of--
                            ``(i) $15,000, multiplied by the inflation 
                        adjustment factor described in paragraph (2); 
                        plus
                            ``(ii) the small business adjustment factor 
                        described in paragraph (3); and
                    ``(B) the amount of any reinspection fee (if 
                applicable) under subsection (b) shall be equal to 
                $15,000, multiplied by the inflation adjustment factor 
                described in paragraph (2).
            ``(2) Inflation adjustment factor.--
                    ``(A) In general.--For fiscal year 2015 and 
                subsequent fiscal years, the fee amounts established in 
                paragraph (1) shall be adjusted by the Secretary by 
                notice, published in the Federal Register, for a fiscal 
                year by the amount equal to the sum of--
                            ``(i) 1;
                            ``(ii) the average annual percent change in 
                        the cost, per full-time equivalent position of 
                        the Food and Drug Administration, of all 
                        personnel compensation and benefits paid with 
                        respect to such positions for the first 3 years 
                        of the preceding 4 fiscal years, multiplied by 
                        the proportion of personnel compensation and 
                        benefits costs to total costs of an average 
                        full-time equivalent position of the Food and 
                        Drug Administration for the first 3 years of 
                        the preceding 4 fiscal years; plus
                            ``(iii) the average annual percent change 
                        that occurred in the Consumer Price Index for 
                        urban consumers (U.S. City Average; Not 
                        Seasonally Adjusted; All items; Annual Index) 
                        for the first 3 years of the preceding 4 years 
                        of available data multiplied by the proportion 
                        of all costs other than personnel compensation 
                        and benefits costs to total costs of an average 
                        full-time equivalent position of the Food and 
                        Drug Administration for the first 3 years of 
                        the preceding 4 fiscal years.
                    ``(B) Compounded basis.--The adjustment made each 
                fiscal year under subparagraph (A) shall be added on a 
                compounded basis to the sum of all adjustments made 
                each fiscal year after fiscal year 2014 under 
                subparagraph (A).
            ``(3) Small business adjustment factor.--The small business 
        adjustment factor described in this paragraph shall be an 
        amount established by the Secretary for each fiscal year based 
        on the Secretary's estimate of--
                    ``(A) the number of small businesses that will pay 
                a reduced establishment fee for such fiscal year; and
                    ``(B) the adjustment to the establishment fee 
                necessary to achieve total fees equaling the total fees 
                that the Secretary would have collected if no entity 
                qualified for the small business exception in paragraph 
                (4).
            ``(4) Exception for small businesses.--
                    ``(A) In general.--In the case of an outsourcing 
                facility with gross annual sales of $1,000,000 or less 
                in the 12 months ending April 1 of the fiscal year 
                immediately preceding the fiscal year in which the fees 
                under this section are assessed, the amount of the 
                establishment fee under subsection (b) for a fiscal 
                year shall be equal to \1/3\ of the amount calculated 
                under paragraph (1)(A)(i) for such fiscal year.
                    ``(B) Application.--To qualify for the exception 
                under this paragraph, a small business shall submit to 
                the Secretary a written request for such exception, in 
                a format specified by the Secretary in guidance, 
                certifying its gross annual sales for the 12 months 
                ending April 1 of the fiscal year immediately preceding 
                the fiscal year in which fees under this subsection are 
                assessed. Any such application shall be submitted to 
                the Secretary not later than April 30 of such 
                immediately preceding fiscal year.
            ``(5) Crediting of fees.--In establishing the small 
        business adjustment factor under paragraph (3) for a fiscal 
        year, the Secretary shall--
                    ``(A) provide for the crediting of fees from the 
                previous year to the next year if the Secretary 
                overestimated the amount of the small business 
                adjustment factor for such previous fiscal year; and
                    ``(B) consider the need to account for any 
                adjustment of fees and such other factors as the 
                Secretary determines appropriate.
    ``(d) Use of Fees.--The Secretary shall make all of the fees 
collected pursuant to subparagraphs (A) and (B) of subsection (a)(1) 
available solely to pay for the costs of oversight of outsourcing 
facilities.
    ``(e) Supplement Not Supplant.--Funds received by the Secretary 
pursuant to this section shall be used to supplement and not supplant 
any other Federal funds available to carry out the activities described 
in this section.
    ``(f) Crediting and Availability of Fees.--Fees authorized under 
this section shall be collected and available for obligation only to 
the extent and in the amount provided in advance in appropriations 
Acts. Such fees are authorized to remain available until expended. Such 
sums as may be necessary may be transferred from the Food and Drug 
Administration salaries and expenses appropriation account without 
fiscal year limitation to such appropriation account for salaries and 
expenses with such fiscal year limitation. The sums transferred shall 
be available solely for the purpose of paying the costs of oversight of 
outsourcing facilities.
    ``(g) Collection of Fees.--
            ``(1) Establishment fee.--An outsourcing facility shall 
        remit the establishment fee due under this section in a fiscal 
        year when submitting a registration pursuant to section 503B(b) 
        for such fiscal year.
            ``(2) Reinspection fee.--The Secretary shall specify in the 
        Federal Register notice described in subsection (b)(2) the 
        manner in which reinspection fees assessed under this section 
        shall be collected and the timeline for payment of such fees. 
        Such a fee shall be collected after the Secretary has conducted 
        a reinspection of the outsourcing facility involved.
            ``(3) Effect of failure to pay fees.--
                    ``(A) Registration.--An outsourcing facility shall 
                not be considered registered under section 503B(b) in a 
                fiscal year until the date that the outsourcing 
                facility remits the establishment fee under this 
                subsection for such fiscal year.
                    ``(B) Misbranding.--All drugs manufactured, 
                prepared, propagated, compounded, or processed by an 
                outsourcing facility for which any establishment fee or 
                reinspection fee has not been paid, as required by this 
                section, shall be deemed misbranded under section 502 
                until the fees owed for such outsourcing facility under 
                this section have been paid.
            ``(4) Collection of unpaid fees.--In any case where the 
        Secretary does not receive payment of a fee assessed under this 
        section within 30 calendar days after it is due, such fee shall 
        be treated as a claim of the United States Government subject 
        to provisions of subchapter II of chapter 37 of title 31, 
        United States Code.
    ``(h) Annual Report to Congress.--Not later than 120 calendar days 
after each fiscal year in which fees are assessed and collected under 
this section, the Secretary shall submit a report to the Committee on 
Health, Education, Labor, and Pensions of the Senate and the Committee 
on Energy and Commerce of the House of Representatives, to include a 
description of fees assessed and collected for such year, a summary 
description of entities paying the fees, a description of the hiring 
and placement of new staff, a description of the use of fee resources 
to support inspecting outsourcing facilities, and the number of 
inspections and reinspections of such facilities performed each year.
    ``(i) Authorization of Appropriations.--For fiscal year 2014 and 
each subsequent fiscal year, there is authorized to be appropriated for 
fees under this section an amount equivalent to the total amount of 
fees assessed for such fiscal year under this section.''.

SEC. 103. PENALTIES.

    (a) Prohibited Acts.--Section 301 (21 U.S.C. 331) is amended by 
adding at the end the following:
    ``(ccc)(1) The resale of a compounded drug that is labeled `not for 
resale' in accordance with section 503B.
    ``(2) With respect to a drug to be compounded pursuant to section 
503A or 503B, the intentional falsification of a prescription, as 
applicable.
    ``(3) The failure to report drugs or adverse events by an entity 
that is registered in accordance with subsection (b) of section 
503B.''.
    (b) Misbranded Drugs.--Section 502 (21 U.S.C. 352) is amended by 
adding at the end the following:
    ``(bb) If the advertising or promotion of a compounded drug is 
false or misleading in any particular.''.

SEC. 104. REGULATIONS.

    In promulgating any regulations to implement this title (and the 
amendments made by this title), the Secretary of Health and Human 
Services shall--
            (1) issue a notice of proposed rulemaking that includes the 
        proposed regulation;
            (2) provide a period of not less than 60 calendar days for 
        comments on the proposed regulation; and
            (3) publish the final regulation not more than 18 months 
        following publication of the proposed rule and not less than 30 
        calendar days before the effective date of such final 
        regulation.

SEC. 105. ENHANCED COMMUNICATION.

    (a) Submissions From State Boards of Pharmacy.--In a manner 
specified by the Secretary of Health and Human Services (referred to in 
this section as the ``Secretary''), the Secretary shall receive 
submissions from State boards of pharmacy--
            (1) describing actions taken against compounding 
        pharmacies, as described in subsection (b); or
            (2) expressing concerns that a compounding pharmacy may be 
        acting contrary to section 503A of the Federal Food, Drug, and 
        Cosmetic Act (21 U.S.C. 353a).
    (b) Content of Submissions From State Boards of Pharmacy.--An 
action referred to in subsection (a)(1) is, with respect to a pharmacy 
that compounds drugs, any of the following:
            (1) The issuance of a warning letter, or the imposition of 
        sanctions or penalties, by a State for violations of a State's 
        pharmacy regulations pertaining to compounding.
            (2) The suspension or revocation of a State-issued pharmacy 
        license or registration for violations of a State's pharmacy 
        regulations pertaining to compounding.
            (3) The recall of a compounded drug due to concerns 
        relating to the quality or purity of such drug.
    (c) Consultation.--The Secretary shall implement subsection (a) in 
consultation with the National Association of Boards of Pharmacy.
    (d) Notifying State Boards of Pharmacy.--The Secretary shall 
immediately notify State boards of pharmacy when--
            (1) the Secretary receives a submission under subsection 
        (a)(1); or
            (2) the Secretary makes a determination that a pharmacy is 
        acting contrary to section 503A of the Federal Food, Drug, and 
        Cosmetic Act.

SEC. 106. SEVERABILITY.

    (a) In General.--Section 503A (21 U.S.C. 353a) is amended --
            (1) in subsection (a), in the matter preceding paragraph 
        (1), by striking ``unsolicited'';
            (2) by striking subsection (c);
            (3) by redesignating subsections (d) through (f) as 
        subsections (c) through (e), respectively; and
            (4) in subsection (b)(1)(A)(i)(III), by striking 
        ``subsection (d)'' and inserting ``subsection (c)''.
    (b) Severability.--If any provision of this Act (including the 
amendments made by this Act) is declared unconstitutional, or the 
applicability of this Act (including the amendments made by this Act) 
to any person or circumstance is held invalid, the constitutionality of 
the remainder of this Act (including the amendments made by this Act) 
and the applicability thereof to other persons and circumstances shall 
not be affected.

SEC. 107. GAO STUDY.

    (a) Study.--Not later than 36 months after the date of the 
enactment of this Act, the Comptroller General of the United States 
shall submit to Congress a report on pharmacy compounding and the 
adequacy of State and Federal efforts to assure the safety of 
compounded drugs.
    (b) Contents.--The report required under this section shall 
include--
            (1) a review of pharmacy compounding in each State, and the 
        settings in which such compounding occurs;
            (2) a review of the State laws and policies governing 
        pharmacy compounding, including enforcement of State laws and 
        policies;
            (3) an assessment of the available tools to permit 
        purchasers of compounded drugs to determine the safety and 
        quality of such drugs;
            (4) an evaluation of the effectiveness of the communication 
        among States and between States and the Food and Drug 
        Administration regarding compounding; and
            (5) an evaluation of the Food and Drug Administration's 
        implementation of sections 503A and 503B of the Federal Food, 
        Drug, and Cosmetic Act.

                  TITLE II--DRUG SUPPLY CHAIN SECURITY

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Drug Supply Chain Security Act''.

SEC. 202. PHARMACEUTICAL DISTRIBUTION SUPPLY CHAIN.

    Chapter V (21 U.S.C. 351 et seq.) is amended by adding at the end 
the following:

        ``Subchapter H--Pharmaceutical Distribution Supply Chain

``SEC. 581. DEFINITIONS.

    ``In this subchapter:
            ``(1) Affiliate.--The term `affiliate' means a business 
        entity that has a relationship with a second business entity 
        if, directly or indirectly--
                    ``(A) one business entity controls, or has the 
                power to control, the other business entity; or
                    ``(B) a third party controls, or has the power to 
                control, both of the business entities.
            ``(2) Authorized.--The term `authorized' means--
                    ``(A) in the case of a manufacturer or repackager, 
                having a valid registration in accordance with section 
                510;
                    ``(B) in the case of a wholesale distributor, 
                having a valid license under State law or section 583, 
                in accordance with section 582(a)(6), and complying 
                with the licensure reporting requirements under section 
                503(e), as amended by the Drug Supply Chain Security 
                Act;
                    ``(C) in the case of a third-party logistics 
                provider, having a valid license under State law or 
                section 584(a)(1), in accordance with section 
                582(a)(7), and complying with the licensure reporting 
                requirements under section 584(b); and
                    ``(D) in the case of a dispenser, having a valid 
                license under State law.
            ``(3) Dispenser.--The term `dispenser'--
                    ``(A) means a retail pharmacy, hospital pharmacy, a 
                group of chain pharmacies under common ownership and 
                control that do not act as a wholesale distributor, or 
                any other person authorized by law to dispense or 
                administer prescription drugs, and the affiliated 
                warehouses or distribution centers of such entities 
                under common ownership and control that do not act as a 
                wholesale distributor; and
                    ``(B) does not include a person who dispenses only 
                products to be used in animals in accordance with 
                section 512(a)(5).
            ``(4) Disposition.--The term `disposition', with respect to 
        a product within the possession or control of an entity, means 
        the removal of such product from the pharmaceutical 
        distribution supply chain, which may include disposal or return 
        of the product for disposal or other appropriate handling and 
        other actions, such as retaining a sample of the product for 
        further additional physical examination or laboratory analysis 
        of the product by a manufacturer or regulatory or law 
        enforcement agency.
            ``(5) Distribute or distribution.--The term `distribute' or 
        `distribution' means the sale, purchase, trade, delivery, 
        handling, storage, or receipt of a product, and does not 
        include the dispensing of a product pursuant to a prescription 
        executed in accordance with section 503(b)(1) or the dispensing 
        of a product approved under section 512(b).
            ``(6) Exclusive distributor.--The term `exclusive 
        distributor' means the wholesale distributor that directly 
        purchased the product from the manufacturer and is the sole 
        distributor of that manufacturer's product to a subsequent 
        repackager, wholesale distributor, or dispenser.
            ``(7) Homogeneous case.--The term `homogeneous case' means 
        a sealed case containing only product that has a single 
        National Drug Code number belonging to a single lot.
            ``(8) Illegitimate product.--The term `illegitimate 
        product' means a product for which credible evidence shows that 
        the product--
                    ``(A) is counterfeit, diverted, or stolen;
                    ``(B) is intentionally adulterated such that the 
                product would result in serious adverse health 
                consequences or death to humans;
                    ``(C) is the subject of a fraudulent transaction; 
                or
                    ``(D) appears otherwise unfit for distribution such 
                that the product would be reasonably likely to result 
                in serious adverse health consequences or death to 
                humans.
            ``(9) Licensed.--The term `licensed' means--
                    ``(A) in the case of a wholesale distributor, 
                having a valid license in accordance with section 
                503(e) or section 582(a)(6), as applicable;
                    ``(B) in the case of a third-party logistics 
                provider, having a valid license in accordance with 
                section 584(a) or section 582(a)(7), as applicable; and
                    ``(C) in the case of a dispenser, having a valid 
                license under State law.
            ``(10) Manufacturer.--The term `manufacturer' means, with 
        respect to a product--
                    ``(A) a person that holds an application approved 
                under section 505 or a license issued under section 351 
                of the Public Health Service Act for such product, or 
                if such product is not the subject of an approved 
                application or license, the person who manufactured the 
                product;
                    ``(B) a co-licensed partner of the person described 
                in subparagraph (A) that obtains the product directly 
                from a person described in this subparagraph or 
                subparagraph (A) or (C); or
                    ``(C) an affiliate of a person described in 
                subparagraph (A) or (B) that receives the product 
                directly from a person described in this subparagraph 
                or subparagraph (A) or (B).
            ``(11) Package.--
                    ``(A) In general.--The term `package' means the 
                smallest individual saleable unit of product for 
                distribution by a manufacturer or repackager that is 
                intended by the manufacturer for ultimate sale to the 
                dispenser of such product.
                    ``(B) Individual saleable unit.--For purposes of 
                this paragraph, an `individual saleable unit' is the 
                smallest container of product introduced into commerce 
                by the manufacturer or repackager that is intended by 
                the manufacturer or repackager for individual sale to a 
                dispenser.
            ``(12) Prescription drug.--The term `prescription drug' 
        means a drug for human use subject to section 503(b)(1).
            ``(13) Product.--The term `product' means a prescription 
        drug in a finished dosage form for administration to a patient 
        without substantial further manufacturing (such as capsules, 
        tablets, and lyophilized products before reconstitution), but 
        for purposes of section 582, does not include blood or blood 
        components intended for transfusion, radioactive drugs or 
        radioactive biological products (as defined in section 
        600.3(ee) of title 21, Code of Federal Regulations) that are 
        regulated by the Nuclear Regulatory Commission or by a State 
        pursuant to an agreement with such Commission under section 274 
        of the Atomic Energy Act of 1954 (42 U.S.C. 2021), imaging 
        drugs, an intravenous product described in clause (xiv), (xv), 
        or (xvi) of paragraph (24)(B), any medical gas (as defined in 
        section 575), homeopathic drugs marketed in accordance with 
        applicable guidance under this Act, or a drug compounded in 
        compliance with section 503A or 503B.
            ``(14) Product identifier.--The term `product identifier' 
        means a standardized graphic that includes, in both human-
        readable form and on a machine-readable data carrier that 
        conforms to the standards developed by a widely recognized 
        international standards development organization, the 
        standardized numerical identifier, lot number, and expiration 
        date of the product.
            ``(15) Quarantine.--The term `quarantine' means the storage 
        or identification of a product, to prevent distribution or 
        transfer of the product, in a physically separate area clearly 
        identified for such use or through other procedures.
            ``(16) Repackager.--The term `repackager' means a person 
        who owns or operates an establishment that repacks and relabels 
        a product or package for--
                    ``(A) further sale; or
                    ``(B) distribution without a further transaction.
            ``(17) Return.--The term `return' means providing product 
        to the authorized immediate trading partner from which such 
        product was purchased or received, or to a returns processor or 
        reverse logistics provider for handling of such product.
            ``(18) Returns processor or reverse logistics provider.--
        The term `returns processor' or `reverse logistics provider' 
        means a person who owns or operates an establishment that 
        dispositions or otherwise processes saleable or nonsaleable 
        product received from an authorized trading partner such that 
        the product may be processed for credit to the purchaser, 
        manufacturer, or seller or disposed of for no further 
        distribution.
            ``(19) Specific patient need.--The term `specific patient 
        need' refers to the transfer of a product from one pharmacy to 
        another to fill a prescription for an identified patient. Such 
        term does not include the transfer of a product from one 
        pharmacy to another for the purpose of increasing or 
        replenishing stock in anticipation of a potential need.
            ``(20) Standardized numerical identifier.--The term 
        `standardized numerical identifier' means a set of numbers or 
        characters used to uniquely identify each package or homogenous 
        case that is composed of the National Drug Code that 
        corresponds to the specific product (including the particular 
        package configuration) combined with a unique alphanumeric 
        serial number of up to 20 characters.
            ``(21) Suspect product.--The term `suspect product' means a 
        product for which there is reason to believe that such 
        product--
                    ``(A) is potentially counterfeit, diverted, or 
                stolen;
                    ``(B) is potentially intentionally adulterated such 
                that the product would result in serious adverse health 
                consequences or death to humans;
                    ``(C) is potentially the subject of a fraudulent 
                transaction; or
                    ``(D) appears otherwise unfit for distribution such 
                that the product would result in serious adverse health 
                consequences or death to humans.
            ``(22) Third-party logistics provider.--The term `third-
        party logistics provider' means an entity that provides or 
        coordinates warehousing, or other logistics services of a 
        product in interstate commerce on behalf of a manufacturer, 
        wholesale distributor, or dispenser of a product, but does not 
        take ownership of the product, nor have responsibility to 
        direct the sale or disposition of the product.
            ``(23) Trading partner.--The term `trading partner' means--
                    ``(A) a manufacturer, repackager, wholesale 
                distributor, or dispenser from whom a manufacturer, 
                repackager, wholesale distributor, or dispenser accepts 
                direct ownership of a product or to whom a 
                manufacturer, repackager, wholesale distributor, or 
                dispenser transfers direct ownership of a product; or
                    ``(B) a third-party logistics provider from whom a 
                manufacturer, repackager, wholesale distributor, or 
                dispenser accepts direct possession of a product or to 
                whom a manufacturer, repackager, wholesale distributor, 
                or dispenser transfers direct possession of a product.
            ``(24) Transaction.--
                    ``(A) In general.--The term `transaction' means the 
                transfer of product between persons in which a change 
                of ownership occurs.
                    ``(B) Exemptions.--The term `transaction' does not 
                include--
                            ``(i) intracompany distribution of any 
                        product between members of an affiliate or 
                        within a manufacturer;
                            ``(ii) the distribution of a product among 
                        hospitals or other health care entities that 
                        are under common control;
                            ``(iii) the distribution of a product for 
                        emergency medical reasons including a public 
                        health emergency declaration pursuant to 
                        section 319 of the Public Health Service Act, 
                        except that a drug shortage not caused by a 
                        public health emergency shall not constitute an 
                        emergency medical reason;
                            ``(iv) the dispensing of a product pursuant 
                        to a prescription executed in accordance with 
                        section 503(b)(1);
                            ``(v) the distribution of product samples 
                        by a manufacturer or a licensed wholesale 
                        distributor in accordance with section 503(d);
                            ``(vi) the distribution of blood or blood 
                        components intended for transfusion;
                            ``(vii) the distribution of minimal 
                        quantities of product by a licensed retail 
                        pharmacy to a licensed practitioner for office 
                        use;
                            ``(viii) the sale, purchase, or trade of a 
                        drug or an offer to sell, purchase, or trade a 
                        drug by a charitable organization described in 
                        section 501(c)(3) of the Internal Revenue Code 
                        of 1986 to a nonprofit affiliate of the 
                        organization to the extent otherwise permitted 
                        by law;
                            ``(ix) the distribution of a product 
                        pursuant to the sale or merger of a pharmacy or 
                        pharmacies or a wholesale distributor or 
                        wholesale distributors, except that any records 
                        required to be maintained for the product shall 
                        be transferred to the new owner of the pharmacy 
                        or pharmacies or wholesale distributor or 
                        wholesale distributors;
                            ``(x) the dispensing of a product approved 
                        under section 512(c);
                            ``(xi) products transferred to or from any 
                        facility that is licensed by the Nuclear 
                        Regulatory Commission or by a State pursuant to 
                        an agreement with such Commission under section 
                        274 of the Atomic Energy Act of 1954 (42 U.S.C. 
                        2021);
                            ``(xii) a combination product that is not 
                        subject to approval under section 505 or 
                        licensure under section 351 of the Public 
                        Health Service Act, and that is--
                                    ``(I) a product comprised of a 
                                device and 1 or more other regulated 
                                components (such as a drug/device, 
                                biologic/device, or drug/device/
                                biologic) that are physically, 
                                chemically, or otherwise combined or 
                                mixed and produced as a single entity;
                                    ``(II) 2 or more separate products 
                                packaged together in a single package 
                                or as a unit and comprised of a drug 
                                and device or device and biological 
                                product; or
                                    ``(III) 2 or more finished medical 
                                devices plus one or more drug or 
                                biological products that are packaged 
                                together in what is referred to as a 
                                `medical convenience kit' as described 
                                in clause (xiii);
                            ``(xiii) the distribution of a collection 
                        of finished medical devices, which may include 
                        a product or biological product, assembled in 
                        kit form strictly for the convenience of the 
                        purchaser or user (referred to in this clause 
                        as a `medical convenience kit') if--
                                    ``(I) the medical convenience kit 
                                is assembled in an establishment that 
                                is registered with the Food and Drug 
                                Administration as a device manufacturer 
                                in accordance with section 510(b)(2);
                                    ``(II) the medical convenience kit 
                                does not contain a controlled substance 
                                that appears in a schedule contained in 
                                the Comprehensive Drug Abuse Prevention 
                                and Control Act of 1970;
                                    ``(III) in the case of a medical 
                                convenience kit that includes a 
                                product, the person that manufacturers 
                                the kit--
                                            ``(aa) purchased such 
                                        product directly from the 
                                        pharmaceutical manufacturer or 
                                        from a wholesale distributor 
                                        that purchased the product 
                                        directly from the 
                                        pharmaceutical manufacturer; 
                                        and
                                            ``(bb) does not alter the 
                                        primary container or label of 
                                        the product as purchased from 
                                        the manufacturer or wholesale 
                                        distributor; and
                                    ``(IV) in the case of a medical 
                                convenience kit that includes a 
                                product, the product is--
                                            ``(aa) an intravenous 
                                        solution intended for the 
                                        replenishment of fluids and 
                                        electrolytes;
                                            ``(bb) a product intended 
                                        to maintain the equilibrium of 
                                        water and minerals in the body;
                                            ``(cc) a product intended 
                                        for irrigation or 
                                        reconstitution;
                                            ``(dd) an anesthetic;
                                            ``(ee) an anticoagulant;
                                            ``(ff) a vasopressor; or
                                            ``(gg) a sympathomimetic;
                            ``(xiv) the distribution of an intravenous 
                        product that, by its formulation, is intended 
                        for the replenishment of fluids and 
                        electrolytes (such as sodium, chloride, and 
                        potassium) or calories (such as dextrose and 
                        amino acids);
                            ``(xv) the distribution of an intravenous 
                        product used to maintain the equilibrium of 
                        water and minerals in the body, such as 
                        dialysis solutions;
                            ``(xvi) the distribution of a product that 
                        is intended for irrigation, or sterile water, 
                        whether intended for such purposes or for 
                        injection;
                            ``(xvii) the distribution of a medical gas 
                        (as defined in section 575); or
                            ``(xviii) the distribution or sale of any 
                        licensed product under section 351 of the 
                        Public Health Service Act that meets the 
                        definition of a device under section 201(h).
            ``(25) Transaction history.--The term `transaction history' 
        means a statement in paper or electronic form, including the 
        transaction information for each prior transaction going back 
        to the manufacturer of the product.
            ``(26) Transaction information.--The term `transaction 
        information' means--
                    ``(A) the proprietary or established name or names 
                of the product;
                    ``(B) the strength and dosage form of the product;
                    ``(C) the National Drug Code number of the product;
                    ``(D) the container size;
                    ``(E) the number of containers;
                    ``(F) the lot number of the product;
                    ``(G) the date of the transaction;
                    ``(H) the date of the shipment, if more than 24 
                hours after the date of the transaction;
                    ``(I) the business name and address of the person 
                from whom ownership is being transferred; and
                    ``(J) the business name and address of the person 
                to whom ownership is being transferred.
            ``(27) Transaction statement.--The `transaction statement' 
        is a statement, in paper or electronic form, that the entity 
        transferring ownership in a transaction--
                    ``(A) is authorized as required under the Drug 
                Supply Chain Security Act;
                    ``(B) received the product from a person that is 
                authorized as required under the Drug Supply Chain 
                Security Act;
                    ``(C) received transaction information and a 
                transaction statement from the prior owner of the 
                product, as required under section 582;
                    ``(D) did not knowingly ship a suspect or 
                illegitimate product;
                    ``(E) had systems and processes in place to comply 
                with verification requirements under section 582;
                    ``(F) did not knowingly provide false transaction 
                information; and
                    ``(G) did not knowingly alter the transaction 
                history.
            ``(28) Verification or verify.--The term `verification' or 
        `verify' means determining whether the product identifier 
        affixed to, or imprinted upon, a package or homogeneous case 
        corresponds to the standardized numerical identifier or lot 
        number and expiration date assigned to the product by the 
        manufacturer or the repackager, as applicable in accordance 
        with section 582.
            ``(29) Wholesale distributor.--The term `wholesale 
        distributor' means a person (other than a manufacturer, a 
        manufacturer's co-licensed partner, a third-party logistics 
        provider, or repackager) engaged in wholesale distribution (as 
        defined in section 503(e)(4), as amended by the Drug Supply 
        Chain Security Act).

``SEC. 582. REQUIREMENTS.

    ``(a) In General.--
            ``(1) Other activities.--Each manufacturer, repackager, 
        wholesale distributor, and dispenser shall comply with the 
        requirements set forth in this section with respect to the role 
        of such manufacturer, repackager, wholesale distributor, or 
        dispenser in a transaction involving product. If an entity 
        meets the definition of more than one of the entities listed in 
        the preceding sentence, such entity shall comply with all 
        applicable requirements in this section, but shall not be 
        required to duplicate requirements.
            ``(2) Initial standards.--
                    ``(A) In general.--The Secretary shall, in 
                consultation with other appropriate Federal officials, 
                manufacturers, repackagers, wholesale distributors, 
                dispensers, and other pharmaceutical distribution 
                supply chain stakeholders, issue a draft guidance 
                document that establishes standards for the 
                interoperable exchange of transaction information, 
                transaction history, and transaction statements, in 
                paper or electronic format, for compliance with this 
                subsection and subsections (b), (c), (d), and (e). In 
                establishing such standards, the Secretary shall 
                consider the feasibility of establishing standardized 
                documentation to be used by members of the 
                pharmaceutical distribution supply chain to convey the 
                transaction information, transaction history, and 
                transaction statement to the subsequent purchaser of a 
                product and to facilitate the exchange of lot level 
                data. The standards established under this paragraph 
                shall take into consideration the standards established 
                under section 505D and shall comply with a form and 
                format developed by a widely recognized international 
                standards development organization.
                    ``(B) Public input.--Prior to issuing the draft 
                guidance under subparagraph (A), the Secretary shall 
                gather comments and information from stakeholders and 
                maintain such comments and information in a public 
                docket for at least 60 days prior to issuing such 
                guidance.
                    ``(C) Publication.--The Secretary shall publish the 
                standards established under subparagraph (A) not later 
                than 1 year after the date of enactment of the Drug 
                Supply Chain Security Act.
            ``(3) Waivers, exceptions, and exemptions.--
                    ``(A) In general.--Not later than 2 years after the 
                date of enactment of the Drug Supply Chain Security 
                Act, the Secretary shall, by guidance--
                            ``(i) establish a process by which an 
                        authorized manufacturer, repackager, wholesale 
                        distributor, or dispenser may request a waiver 
                        from any of the requirements set forth in this 
                        section, which the Secretary may grant if the 
                        Secretary determines that such requirements 
                        would result in an undue economic hardship or 
                        for emergency medical reasons, including a 
                        public health emergency declaration pursuant to 
                        section 319 of the Public Health Service Act;
                            ``(ii) establish a process by which the 
                        Secretary determines exceptions, and a process 
                        through which a manufacturer or repackager may 
                        request such an exception, to the requirements 
                        relating to product identifiers if a product is 
                        packaged in a container too small or otherwise 
                        unable to accommodate a label with sufficient 
                        space to bear the information required for 
                        compliance with this section; and
                            ``(iii) establish a process by which the 
                        Secretary may determine other products or 
                        transactions that shall be exempt from the 
                        requirements of this section.
                    ``(B) Content.--The guidance issued under 
                subparagraph (A) shall include a process for the 
                biennial review and renewal of such waivers, 
                exceptions, and exemptions, as applicable.
                    ``(C) Process.--In issuing the guidance under this 
                paragraph, the Secretary shall provide an effective 
                date that is not later than 180 days prior to the date 
                on which manufacturers are required to affix or imprint 
                a product identifier to each package and homogenous 
                case of product intended to be introduced in a 
                transaction into commerce consistent with this section.
            ``(4) Self-executing requirements.--Except where otherwise 
        specified, the requirements of this section may be enforced 
        without further regulations or guidance from the Secretary.
            ``(5) Grandfathering product.--
                    ``(A) Product identifier.--Not later than 2 years 
                after the date of enactment of the Drug Supply Chain 
                Security Act, the Secretary shall finalize guidance 
                specifying whether and under what circumstances product 
                that is not labeled with a product identifier and that 
                is in the pharmaceutical distribution supply chain at 
                the time of the effective date of the requirements of 
                this section shall be exempted from the requirements of 
                this section.
                    ``(B) Tracing.--For a product that entered the 
                pharmaceutical distribution supply chain prior to 
                January 1, 2015--
                            ``(i) authorized trading partners shall be 
                        exempt from providing transaction information 
                        as required under subsections (b)(1)(A)(i), 
                        (c)(1)(A)(ii), (d)(1)(A)(ii), and 
                        (e)(1)(A)(ii);
                            ``(ii) transaction history required under 
                        this section shall begin with the owner of such 
                        product on such date; and
                            ``(iii) the owners of such product on such 
                        date shall be exempt from asserting receipt of 
                        transaction information and transaction 
                        statement from the prior owner as required 
                        under this section.
            ``(6) Wholesale distributor licenses.--Notwithstanding 
        section 581(9)(A), until the effective date of the wholesale 
        distributor licensing regulations under section 583, the term 
        `licensed' or `authorized', as it relates to a wholesale 
        distributor with respect to prescription drugs, shall mean a 
        wholesale distributor with a valid license under State law.
            ``(7) Third-party logistics provider licenses.--Until the 
        effective date of the third-party logistics provider licensing 
        regulations under section 584, a third-party logistics provider 
        shall be considered `licensed' under section 581(9)(B) unless 
        the Secretary has made a finding that the third-party logistics 
        provider does not utilize good handling and distribution 
        practices and publishes notice thereof.
            ``(8) Label changes.--Changes made to package labels solely 
        to incorporate the product identifier may be submitted to the 
        Secretary in the annual report of an establishment, in 
        accordance with section 314.70(d) of chapter 21, Code of 
        Federal Regulations (or any successor regulation).
            ``(9) Product identifiers.--With respect to any requirement 
        relating to product identifiers under this subchapter--
                    ``(A) unless the Secretary allows, through 
                guidance, the use of other technologies for data 
                instead of or in addition to the technologies described 
                in clauses (i) and (ii), the applicable data--
                            ``(i) shall be included in a 2-dimensional 
                        data matrix barcode when affixed to, or 
                        imprinted upon, a package; and
                            ``(ii) shall be included in a linear or 2-
                        dimensional data matrix barcode when affixed 
                        to, or imprinted upon, a homogeneous case; and
                    ``(B) verification of the product identifier may 
                occur by using human-readable or machine-readable 
                methods.
    ``(b) Manufacturer Requirements.--
            ``(1) Product tracing.--
                    ``(A) In general.--Beginning not later than January 
                1, 2015, a manufacturer shall--
                            ``(i) prior to, or at the time of, each 
                        transaction in which such manufacturer 
                        transfers ownership of a product, provide the 
                        subsequent owner with transaction history, 
                        transaction information, and a transaction 
                        statement, in a single document in an paper or 
                        electronic format; and
                            ``(ii) capture the transaction information 
                        (including lot level information), transaction 
                        history, and transaction statement for each 
                        transaction and maintain such information, 
                        history, and statement for not less than 6 
                        years after the date of the transaction.
                    ``(B) Requests for information.--Upon a request by 
                the Secretary or other appropriate Federal or State 
                official, in the event of a recall or for the purpose 
                of investigating a suspect product or an illegitimate 
                product, a manufacturer shall, not later than 1 
                business day, and not to exceed 48 hours, after 
                receiving the request, or in other such reasonable time 
                as determined by the Secretary, based on the 
                circumstances of the request, provide the applicable 
                transaction information, transaction history, and 
                transaction statement for the product.
                    ``(C) Electronic format.--
                            ``(i) In general.--Beginning not later than 
                        4 years after the date of enactment of the Drug 
                        Supply Chain Security Act, except as provided 
                        under clause (ii), a manufacturer shall provide 
                        the transaction information, transaction 
                        history, and transaction statement required 
                        under subparagraph (A)(i) in electronic format.
                            ``(ii) Exception.--A manufacturer may 
                        continue to provide the transaction 
                        information, transaction history, and 
                        transaction statement required under 
                        subparagraph (A)(i) in a paper format to a 
                        licensed health care practitioner authorized to 
                        prescribe medication under State law or other 
                        licensed individual under the supervision or 
                        direction of such a practitioner who dispenses 
                        product in the usual course of professional 
                        practice.
            ``(2) Product identifier.--
                    ``(A) In general.--Beginning not later than 4 years 
                after the date of enactment of the Drug Supply Chain 
                Security Act, a manufacturer shall affix or imprint a 
                product identifier to each package and homogenous case 
                of a product intended to be introduced in a transaction 
                into commerce. Such manufacturer shall maintain the 
                product identifier information for such product for not 
                less than 6 years after the date of the transaction.
                    ``(B) Exception.--A package that is required to 
                have a standardized numerical identifier is not 
                required to have a unique device identifier.
            ``(3) Authorized trading partners.--Beginning not later 
        than January 1, 2015, the trading partners of a manufacturer 
        may be only authorized trading partners.
            ``(4) Verification.--Beginning not later than January 1, 
        2015, a manufacturer shall have systems in place to enable the 
        manufacturer to comply with the following requirements:
                    ``(A) Suspect product.--
                            ``(i) In general.--Upon making a 
                        determination that a product in the possession 
                        or control of the manufacturer is a suspect 
                        product, or upon receiving a request for 
                        verification from the Secretary that has made a 
                        determination that a product within the 
                        possession or control of a manufacturer is a 
                        suspect product, a manufacturer shall--
                                    ``(I) quarantine such product 
                                within the possession or control of the 
                                manufacturer from product intended for 
                                distribution until such product is 
                                cleared or dispositioned; and
                                    ``(II) promptly conduct an 
                                investigation in coordination with 
                                trading partners, as applicable, to 
                                determine whether the product is an 
                                illegitimate product, which shall 
                                include validating any applicable 
                                transaction history and transaction 
                                information in the possession of the 
                                manufacturer and otherwise 
                                investigating to determine whether the 
                                product is an illegitimate product, 
                                and, beginning 4 years after the date 
                                of enactment of the Drug Supply Chain 
                                Security Act, verifying the product at 
                                the package level, including the 
                                standardized numerical identifier.
                            ``(ii) Cleared product.--If the 
                        manufacturer makes the determination that a 
                        suspect product is not an illegitimate product, 
                        the manufacturer shall promptly notify the 
                        Secretary, if applicable, of such determination 
                        and such product may be further distributed.
                            ``(iii) Records.--A manufacturer shall keep 
                        records of the investigation of a suspect 
                        product for not less than 6 years after the 
                        conclusion of the investigation.
                    ``(B) Illegitimate product.--
                            ``(i) In general.--Upon determining that a 
                        product in the possession or control of a 
                        manufacturer is an illegitimate product, the 
                        manufacturer shall, in a manner consistent with 
                        the systems and processes of such 
                        manufacturer--
                                    ``(I) quarantine such product 
                                within the possession or control of the 
                                manufacturer from product intended for 
                                distribution until such product is 
                                dispositioned;
                                    ``(II) disposition the illegitimate 
                                product within the possession or 
                                control of the manufacturer;
                                    ``(III) take reasonable and 
                                appropriate steps to assist a trading 
                                partner to disposition an illegitimate 
                                product not in the possession or 
                                control of the manufacturer; and
                                    ``(IV) retain a sample of the 
                                product for further physical 
                                examination or laboratory analysis of 
                                the product by the manufacturer or 
                                Secretary (or other appropriate Federal 
                                or State official) upon request by the 
                                Secretary (or other appropriate Federal 
                                or State official), as necessary and 
                                appropriate.
                            ``(ii) Making a notification.--
                                    ``(I) Illegitimate product.--Upon 
                                determining that a product in the 
                                possession or control of the 
                                manufacturer is an illegitimate 
                                product, the manufacturer shall notify 
                                the Secretary and all immediate trading 
                                partners that the manufacturer has 
                                reason to believe may have received 
                                such illegitimate product of such 
                                determination not later than 24 hours 
                                after making such determination.
                                    ``(II) High risk of illegitimacy.--
                                A manufacturer shall notify the 
                                Secretary and immediate trading 
                                partners that the manufacturer has 
                                reason to believe may have in the 
                                trading partner's possession a product 
                                manufactured by, or purported to be a 
                                product manufactured by, the 
                                manufacturer not later than 24 hours 
                                after determining or being notified by 
                                the Secretary or a trading partner that 
                                there is a high risk that such product 
                                is an illegitimate product. For 
                                purposes of this subclause, a `high 
                                risk' may include a specific high risk 
                                that could increase the likelihood that 
                                illegitimate product will enter the 
                                pharmaceutical distribution supply 
                                chain and other high risks as 
                                determined by the Secretary in guidance 
                                pursuant to subsection (h).
                            ``(iii) Responding to a notification.--Upon 
                        the receipt of a notification from the 
                        Secretary or a trading partner that a 
                        determination has been made that a product is 
                        an illegitimate product, a manufacturer shall 
                        identify all illegitimate product subject to 
                        such notification that is in the possession or 
                        control of the manufacturer, including any 
                        product that is subsequently received, and 
                        shall perform the activities described in 
                        subparagraph (A).
                            ``(iv) Terminating a notification.--Upon 
                        making a determination, in consultation with 
                        the Secretary, that a notification is no longer 
                        necessary, a manufacturer shall promptly notify 
                        immediate trading partners that the 
                        manufacturer notified pursuant to clause (ii) 
                        that such notification has been terminated.
                            ``(v) Records.--A manufacturer shall keep 
                        records of the disposition of an illegitimate 
                        product for not less than 6 years after the 
                        conclusion of the disposition.
                    ``(C) Requests for verification.--Beginning 4 years 
                after the date of enactment of the Drug Supply Chain 
                Security Act, upon receiving a request for verification 
                from an authorized repackager, wholesale distributor, 
                or dispenser that is in possession or control of a 
                product such person believes to be manufactured by such 
                manufacturer, a manufacturer shall, not later than 24 
                hours after receiving the request for verification or 
                in other such reasonable time as determined by the 
                Secretary, based on the circumstances of the request, 
                notify the person making the request whether the 
                product identifier, including the standardized 
                numerical identifier, that is the subject of the 
                request corresponds to the product identifier affixed 
                or imprinted by the manufacturer. If a manufacturer 
                responding to a request for verification identifies a 
                product identifier that does not correspond to that 
                affixed or imprinted by the manufacturer, the 
                manufacturer shall treat such product as suspect 
                product and conduct an investigation as described in 
                subparagraph (A). If the manufacturer has reason to 
                believe the product is an illegitimate product, the 
                manufacturer shall advise the person making the request 
                of such belief at the time such manufacturer responds 
                to the request for verification.
                    ``(D) Electronic database.--A manufacturer may 
                satisfy the requirements of this paragraph by 
                developing a secure electronic database or utilizing a 
                secure electronic database developed or operated by 
                another entity. The owner of such database shall 
                establish the requirements and processes to respond to 
                requests and may provide for data access to other 
                members of the pharmaceutical distribution supply 
                chain, as appropriate. The development and operation of 
                such a database shall not relieve a manufacturer of the 
                requirement under this paragraph to respond to a 
                request for verification submitted by means other than 
                a secure electronic database.
                    ``(E) Saleable returned product.--Beginning 4 years 
                after the date of enactment of the Drug Supply Chain 
                Security Act (except as provided pursuant to subsection 
                (a)(5)), upon receipt of a returned product that the 
                manufacturer intends to further distribute, before 
                further distributing such product, the manufacturer 
                shall verify the product identifier, including the 
                standardized numerical identifier, for each sealed 
                homogeneous case of such product or, if such product is 
                not in a sealed homogeneous case, verify the product 
                identifier, including the standardized numerical 
                identifier, on each package.
                    ``(F) Nonsaleable returned product.--A manufacturer 
                may return a nonsaleable product to the manufacturer or 
                repackager, to the wholesale distributor from whom such 
                product was purchased, or to a person acting on behalf 
                of such a person, including a returns processor, 
                without providing the information described in 
                paragraph (1)(A)(i).
    ``(c) Wholesale Distributor Requirements.--
            ``(1) Product tracing.--
                    ``(A) In general.--Beginning not later than January 
                1, 2015, the following requirements shall apply to 
                wholesale distributors:
                            ``(i) A wholesale distributor shall not 
                        accept ownership of a product unless the 
                        previous owner prior to, or at the time of, the 
                        transaction provides the transaction history, 
                        transaction information, and a transaction 
                        statement for the product, as applicable under 
                        this subparagraph.
                            ``(ii)(I)(aa) If the wholesale distributor 
                        purchased a product directly from the 
                        manufacturer, the exclusive distributor of the 
                        manufacturer, or a repackager that purchased 
                        directly from the manufacturer, then prior to, 
                        or at the time of, each transaction in which 
                        the wholesale distributor transfers ownership 
                        of a product, the wholesale distributor shall 
                        provide to the subsequent purchaser--
                                    ``(AA) a transaction statement, 
                                which shall state that such wholesale 
                                distributor, or a member of the 
                                affiliate of such wholesale 
                                distributor, purchased the product 
                                directly from the manufacturer, 
                                exclusive distributor of the 
                                manufacturer, or repackager that 
                                purchased the product directly from the 
                                manufacturer; and
                                    ``(BB) subject to subclause (II), 
                                the transaction history and transaction 
                                information.
                            ``(bb) The wholesale distributor shall 
                        provide the transaction history, transaction 
                        information, and transaction statement under 
                        item (aa)--
                                            ``(AA) if provided to a 
                                        dispenser, on a single document 
                                        in a paper or electronic 
                                        format; and
                                            ``(BB) if provided to a 
                                        wholesale distributor, through 
                                        any combination of self-
                                        generated paper, electronic 
                                        data, or manufacturer-provided 
                                        information on the product 
                                        package.
                            ``(II) For purposes of transactions 
                        described in subclause (I), transaction history 
                        and transaction information shall not be 
                        required to include the lot number of the 
                        product, the initial transaction date, or the 
                        initial shipment date from the manufacturer (as 
                        defined in subparagraphs (F), (G), and (H) of 
                        section 581(26)).
                            ``(iii) If the wholesale distributor did 
                        not purchase a product directly from the 
                        manufacturer, the exclusive distributor of the 
                        manufacturer, or a repackager that purchased 
                        directly from the manufacturer, as described in 
                        clause (ii), then prior to, or at the time of, 
                        each transaction or subsequent transaction, the 
                        wholesale distributor shall provide to the 
                        subsequent purchaser a transaction statement, 
                        transaction history, and transaction 
                        information, in a paper or electronic format 
                        that complies with the guidance document issued 
                        under subsection (a)(2).
                            ``(iv) For the purposes of clause (iii), 
                        the transaction history supplied shall begin 
                        only with the wholesale distributor described 
                        in clause (ii)(I), but the wholesale 
                        distributor described in clause (iii) shall 
                        inform the subsequent purchaser that such 
                        wholesale distributor received a direct 
                        purchase statement from a wholesale distributor 
                        described in clause (ii)(I).
                            ``(v) A wholesale distributor shall--
                                    ``(I) capture the transaction 
                                information (including lot level 
                                information) consistent with the 
                                requirements of this section, 
                                transaction history, and transaction 
                                statement for each transaction 
                                described in clauses (i), (ii), and 
                                (iii) and maintain such information, 
                                history, and statement for not less 
                                than 6 years after the date of the 
                                transaction; and
                                    ``(II) maintain the confidentiality 
                                of the transaction information 
                                (including any lot level information 
                                consistent with the requirements of 
                                this section), transaction history, and 
                                transaction statement for a product in 
                                a manner that prohibits disclosure to 
                                any person other than the Secretary or 
                                other appropriate Federal or State 
                                official, except to comply with clauses 
                                (ii) and (iii), and, as applicable, 
                                pursuant to an agreement under 
                                subparagraph (D).
                    ``(B) Returns.--
                            ``(i) Saleable returns.--Notwithstanding 
                        subparagraph (A)(i), the following shall apply:
                                    ``(I) Requirements.--Until the date 
                                that is 6 years after the date of 
                                enactment of the Drug Supply Chain 
                                Security Act (except as provided 
                                pursuant to subsection (a)(5)), a 
                                wholesale distributor may accept 
                                returned product from a dispenser or 
                                repackager pursuant to the terms and 
                                conditions of any agreement between the 
                                parties, and, notwithstanding 
                                subparagraph (A)(ii), may distribute 
                                such returned product without providing 
                                the transaction history. For 
                                transactions subsequent to the return, 
                                the transaction history of such product 
                                shall begin with the wholesale 
                                distributor that accepted the returned 
                                product, consistent with the 
                                requirements of this subsection.
                                    ``(II) Enhanced requirements.--
                                Beginning 6 years after the date of 
                                enactment of the Drug Supply Chain 
                                Security Act (except as provided 
                                pursuant to subsection (a)(5)), a 
                                wholesale distributor may accept 
                                returned product from a dispenser or 
                                repackager only if the wholesale 
                                distributor can associate returned 
                                product with the transaction 
                                information and transaction statement 
                                associated with that product. For all 
                                transactions after such date, the 
                                transaction history, as applicable, of 
                                such product shall begin with the 
                                wholesale distributor that accepted and 
                                verified the returned product. For 
                                purposes of this subparagraph, the 
                                transaction information and transaction 
                                history, as applicable, need not 
                                include transaction dates if it is not 
                                reasonably practicable to obtain such 
                                dates.
                            ``(ii) Nonsaleable returns.--A wholesale 
                        distributor may return a nonsaleable product to 
                        the manufacturer or repackager, to the 
                        wholesale distributor from whom such product 
                        was purchased, or to a person acting on behalf 
                        of such a person, including a returns 
                        processor, without providing the information 
                        required under subparagraph (A)(i).
                    ``(C) Requests for information.--Upon a request by 
                the Secretary or other appropriate Federal or State 
                official, in the event of a recall or for the purpose 
                of investigating a suspect product or an illegitimate 
                product, a wholesale distributor shall, not later than 
                1 business day, and not to exceed 48 hours, after 
                receiving the request or in other such reasonable time 
                as determined by the Secretary, based on the 
                circumstances of the request, provide the applicable 
                transaction information, transaction history, and 
                transaction statement for the product.
                    ``(D) Trading partner agreements.--Beginning 6 
                years after the date of enactment of the Drug Supply 
                Chain Security Act, a wholesale distributor may 
                disclose the transaction information, including lot 
                level information, transaction history, or transaction 
                statement of a product to the subsequent purchaser of 
                the product, pursuant to a written agreement between 
                such wholesale distributor and such subsequent 
                purchaser. Nothing in this subparagraph shall be 
                construed to limit the applicability of subparagraphs 
                (A) through (C).
            ``(2) Product identifier.--Beginning 6 years after the date 
        of enactment of the Drug Supply Chain Security Act, a wholesale 
        distributor may engage in transactions involving a product only 
        if such product is encoded with a product identifier (except as 
        provided pursuant to subsection (a)(5)).
            ``(3) Authorized trading partners.--Beginning not later 
        than January 1, 2015, the trading partners of a wholesale 
        distributor may be only authorized trading partners.
            ``(4) Verification.--Beginning not later than January 1, 
        2015, a wholesale distributor shall have systems in place to 
        enable the wholesale distributor to comply with the following 
        requirements:
                    ``(A) Suspect product.--
                            ``(i) In general.--Upon making a 
                        determination that a product in the possession 
                        or control of a wholesale distributor is a 
                        suspect product, or upon receiving a request 
                        for verification from the Secretary that has 
                        made a determination that a product within the 
                        possession or control of a wholesale 
                        distributor is a suspect product, a wholesale 
                        distributor shall--
                                    ``(I) quarantine such product 
                                within the possession or control of the 
                                wholesale distributor from product 
                                intended for distribution until such 
                                product is cleared or dispositioned; 
                                and
                                    ``(II) promptly conduct an 
                                investigation in coordination with 
                                trading partners, as applicable, to 
                                determine whether the product is an 
                                illegitimate product, which shall 
                                include validating any applicable 
                                transaction history and transaction 
                                information in the possession of the 
                                wholesale distributor and otherwise 
                                investigating to determine whether the 
                                product is an illegitimate product, 
                                and, beginning 6 years after the date 
                                of enactment of the Drug Supply Chain 
                                Security Act (except as provided 
                                pursuant to subsection (a)(5)), 
                                verifying the product at the package 
                                level, including the standardized 
                                numerical identifier.
                            ``(ii) Cleared product.--If the wholesale 
                        distributor determines that a suspect product 
                        is not an illegitimate product, the wholesale 
                        distributor shall promptly notify the 
                        Secretary, if applicable, of such determination 
                        and such product may be further distributed.
                            ``(iii) Records.--A wholesale distributor 
                        shall keep records of the investigation of a 
                        suspect product for not less than 6 years after 
                        the conclusion of the investigation.
                    ``(B) Illegitimate product.--
                            ``(i) In general.--Upon determining, in 
                        coordination with the manufacturer, that a 
                        product in the possession or control of a 
                        wholesale distributor is an illegitimate 
                        product, the wholesale distributor shall, in a 
                        manner that is consistent with the systems and 
                        processes of such wholesale distributor--
                                    ``(I) quarantine such product 
                                within the possession or control of the 
                                wholesale distributor from product 
                                intended for distribution until such 
                                product is dispositioned;
                                    ``(II) disposition the illegitimate 
                                product within the possession or 
                                control of the wholesale distributor;
                                    ``(III) take reasonable and 
                                appropriate steps to assist a trading 
                                partner to disposition an illegitimate 
                                product not in the possession or 
                                control of the wholesale distributor; 
                                and
                                    ``(IV) retain a sample of the 
                                product for further physical 
                                examination or laboratory analysis of 
                                the product by the manufacturer or 
                                Secretary (or other appropriate Federal 
                                or State official) upon request by the 
                                manufacturer or Secretary (or other 
                                appropriate Federal or State official), 
                                as necessary and appropriate.
                            ``(ii) Making a notification.--Upon 
                        determining that a product in the possession or 
                        control of the wholesale distributor is an 
                        illegitimate product, the wholesale distributor 
                        shall notify the Secretary and all immediate 
                        trading partners that the wholesale distributor 
                        has reason to believe may have received such 
                        illegitimate product of such determination not 
                        later than 24 hours after making such 
                        determination.
                            ``(iii) Responding to a notification.--Upon 
                        the receipt of a notification from the 
                        Secretary or a trading partner that a 
                        determination has been made that a product is 
                        an illegitimate product, a wholesale 
                        distributor shall identify all illegitimate 
                        product subject to such notification that is in 
                        the possession or control of the wholesale 
                        distributor, including any product that is 
                        subsequently received, and shall perform the 
                        activities described in subparagraph (A).
                            ``(iv) Terminating a notification.--Upon 
                        making a determination, in consultation with 
                        the Secretary, that a notification is no longer 
                        necessary, a wholesale distributor shall 
                        promptly notify immediate trading partners that 
                        the wholesale distributor notified pursuant to 
                        clause (ii) that such notification has been 
                        terminated.
                            ``(v) Records.--A wholesale distributor 
                        shall keep records of the disposition of an 
                        illegitimate product for not less than 6 years 
                        after the conclusion of the disposition.
                    ``(C) Electronic database.--A wholesale distributor 
                may satisfy the requirements of this paragraph by 
                developing a secure electronic database or utilizing a 
                secure electronic database developed or operated by 
                another entity. The owner of such database shall 
                establish the requirements and processes to respond to 
                requests and may provide for data access to other 
                members of the pharmaceutical distribution supply 
                chain, as appropriate. The development and operation of 
                such a database shall not relieve a wholesale 
                distributor of the requirement under this paragraph to 
                respond to a verification request submitted by means 
                other than a secure electronic database.
                    ``(D) Verification of saleable returned product.--
                Beginning 6 years after the date of enactment of the 
                Drug Supply Chain Security Act, upon receipt of a 
                returned product that the wholesale distributor intends 
                to further distribute, before further distributing such 
                product, the wholesale distributor shall verify the 
                product identifier, including the standardized 
                numerical identifier, for each sealed homogeneous case 
                of such product or, if such product is not in a sealed 
                homogeneous case, verify the product identifier, 
                including the standardized numerical identifier, on 
                each package.
    ``(d) Dispenser Requirements.--
            ``(1) Product tracing.--
                    ``(A) In general.--Beginning July 1, 2015, a 
                dispenser--
                            ``(i) shall not accept ownership of a 
                        product, unless the previous owner prior to, or 
                        at the time of, the transaction, provides 
                        transaction history, transaction information, 
                        and a transaction statement;
                            ``(ii) prior to, or at the time of, each 
                        transaction in which the dispenser transfers 
                        ownership of a product (but not including 
                        dispensing to a patient or returns) shall 
                        provide the subsequent owner with transaction 
                        history, transaction information, and a 
                        transaction statement for the product, except 
                        that the requirements of this clause shall not 
                        apply to sales by a dispenser to another 
                        dispenser to fulfill a specific patient need; 
                        and
                            ``(iii) shall capture transaction 
                        information (including lot level information, 
                        if provided), transaction history, and 
                        transaction statements, as necessary to 
                        investigate a suspect product, and maintain 
                        such information, history, and statements for 
                        not less than 6 years after the transaction.
                    ``(B) Agreements with third parties.--A dispenser 
                may enter into a written agreement with a third party, 
                including an authorized wholesale distributor, under 
                which the third party confidentially maintains the 
                transaction information, transaction history, and 
                transaction statements required to be maintained under 
                this subsection on behalf of the dispenser. If a 
                dispenser enters into such an agreement, the dispenser 
                shall maintain a copy of the written agreement and 
                shall not be relieved of the obligations of the 
                dispenser under this subsection.
                    ``(C) Returns.--
                            ``(i) Saleable returns.--A dispenser may 
                        return product to the trading partner from 
                        which the dispenser obtained the product 
                        without providing the information required 
                        under subparagraph (A).
                            ``(ii) Nonsaleable returns.--A dispenser 
                        may return a nonsaleable product to the 
                        manufacturer or repackager, to the wholesale 
                        distributor from whom such product was 
                        purchased, to a returns processor, or to a 
                        person acting on behalf of such a person 
                        without providing the information required 
                        under subparagraph (A).
                    ``(D) Requests for information.--Upon a request by 
                the Secretary or other appropriate Federal or State 
                official, in the event of a recall or for the purpose 
                of investigating a suspect or an illegitimate product, 
                a dispenser shall, not later than 2 business days after 
                receiving the request or in another such reasonable 
                time as determined by the Secretary, based on the 
                circumstances of the request, provide the applicable 
                transaction information, transaction statement, and 
                transaction history which the dispenser received from 
                the previous owner, which shall not include the lot 
                number of the product, the initial transaction date, or 
                the initial shipment date from the manufacturer unless 
                such information was included in the transaction 
                information, transaction statement, and transaction 
                history provided by the manufacturer or wholesale 
                distributor to the dispenser. The dispenser may respond 
                to the request by providing the applicable information 
                in either paper or electronic format. Until the date 
                that is 4 years after the date of enactment of the Drug 
                Supply Chain Security Act, the Secretary or other 
                appropriate Federal or State official shall grant a 
                dispenser additional time, as necessary, only with 
                respect to a request to provide lot level information 
                described in subparagraph (F) of section 581(26) that 
                was provided to the dispenser in paper format, limit 
                the request time period to the 6 months preceding the 
                request or other relevant date, and, in the event of a 
                recall, the Secretary, or other appropriate Federal or 
                State official may request information only if such 
                recall involves a serious adverse health consequence or 
                death to humans.
            ``(2) Product identifier.--Beginning not later than 7 years 
        after the date of enactment of the Drug Supply Chain Security 
        Act, a dispenser may engage in transactions involving a product 
        only if such product is encoded with a product identifier 
        (except as provided pursuant to subsection (a)(5)).
            ``(3) Authorized trading partners.--Beginning not later 
        than January 1, 2015, the trading partners of a dispenser may 
        be only authorized trading partners.
            ``(4) Verification.--Beginning not later than January 1, 
        2015, a dispenser shall have systems in place to enable the 
        dispenser to comply with the following requirements:
                    ``(A) Suspect product.--
                            ``(i) In general.--Upon making a 
                        determination that a product in the possession 
                        or control of the dispenser is a suspect 
                        product, or upon receiving a request for 
                        verification from the Secretary that has made a 
                        determination that a product within the 
                        possession or control of a dispenser is a 
                        suspect product, a dispenser shall--
                                    ``(I) quarantine such product 
                                within the possession or control of the 
                                dispenser from product intended for 
                                distribution until such product is 
                                cleared or dispositioned; and
                                    ``(II) promptly conduct an 
                                investigation in coordination with 
                                trading partners, as applicable, to 
                                determine whether the product is an 
                                illegitimate product.
                            ``(ii) Investigation.--An investigation 
                        conducted under clause (i)(II) shall include--
                                    ``(I) beginning 7 years after the 
                                date of enactment of the Drug Supply 
                                Chain Security Act, verifying whether 
                                the lot number of a suspect product 
                                corresponds with the lot number for 
                                such product;
                                    ``(II) beginning 7 years after the 
                                date of enactment of such Act, 
                                verifying that the product identifier, 
                                including the standardized numerical 
                                identifier, of at least 3 packages or 
                                10 percent of such suspect product, 
                                whichever is greater, or all packages, 
                                if there are fewer than 3, corresponds 
                                with the product identifier for such 
                                product;
                                    ``(III) validating any applicable 
                                transaction history and transaction 
                                information in the possession of the 
                                dispenser; and
                                    ``(IV) otherwise investigating to 
                                determine whether the product is an 
                                illegitimate product.
                            ``(iii) Cleared product.--If the dispenser 
                        makes the determination that a suspect product 
                        is not an illegitimate product, the dispenser 
                        shall promptly notify the Secretary, if 
                        applicable, of such determination and such 
                        product may be further distributed or 
                        dispensed.
                            ``(iv) Records.--A dispenser shall keep 
                        records of the investigation of a suspect 
                        product for not less than 6 years after the 
                        conclusion of the investigation.
                    ``(B) Illegitimate product.--
                            ``(i) In general.--Upon determining, in 
                        coordination with the manufacturer, that a 
                        product in the possession or control of a 
                        dispenser is an illegitimate product, the 
                        dispenser shall--
                                    ``(I) disposition the illegitimate 
                                product within the possession or 
                                control of the dispenser;
                                    ``(II) take reasonable and 
                                appropriate steps to assist a trading 
                                partner to disposition an illegitimate 
                                product not in the possession or 
                                control of the dispenser; and
                                    ``(III) retain a sample of the 
                                product for further physical 
                                examination or laboratory analysis of 
                                the product by the manufacturer or 
                                Secretary (or other appropriate Federal 
                                or State official) upon request by the 
                                manufacturer or Secretary (or other 
                                appropriate Federal or State official), 
                                as necessary and appropriate.
                            ``(ii) Making a notification.--Upon 
                        determining that a product in the possession or 
                        control of the dispenser is an illegitimate 
                        product, the dispenser shall notify the 
                        Secretary and all immediate trading partners 
                        that the dispenser has reason to believe may 
                        have received such illegitimate product of such 
                        determination not later than 24 hours after 
                        making such determination.
                            ``(iii) Responding to a notification.--Upon 
                        the receipt of a notification from the 
                        Secretary or a trading partner that a 
                        determination has been made that a product is 
                        an illegitimate product, a dispenser shall 
                        identify all illegitimate product subject to 
                        such notification that is in the possession or 
                        control of the dispenser, including any product 
                        that is subsequently received, and shall 
                        perform the activities described in 
                        subparagraph (A).
                            ``(iv) Terminating a notification.--Upon 
                        making a determination, in consultation with 
                        the Secretary, that a notification is no longer 
                        necessary, a dispenser shall promptly notify 
                        immediate trading partners that the dispenser 
                        notified pursuant to clause (ii) that such 
                        notification has been terminated.
                            ``(v) Records.--A dispenser shall keep 
                        records of the disposition of an illegitimate 
                        product for not less than 6 years after the 
                        conclusion of the disposition.
                    ``(C) Electronic database.--A dispenser may satisfy 
                the requirements of this paragraph by developing a 
                secure electronic database or utilizing a secure 
                electronic database developed or operated by another 
                entity.
            ``(5) Exception.--Notwithstanding any other provision of 
        law, the requirements under paragraphs (1) and (4) shall not 
        apply to licensed health care practitioners authorized to 
        prescribe or administer medication under State law or other 
        licensed individuals under the supervision or direction of such 
        practitioners who dispense or administer product in the usual 
        course of professional practice.
    ``(e) Repackager Requirements.--
            ``(1) Product tracing.--
                    ``(A) In general.--Beginning not later than January 
                1, 2015, a repackager described in section 581(16)(A) 
                shall--
                            ``(i) not accept ownership of a product 
                        unless the previous owner, prior to, or at the 
                        time of, the transaction, provides transaction 
                        history, transaction information, and a 
                        transaction statement for the product;
                            ``(ii) prior to, or at the time of, each 
                        transaction in which the repackager transfers 
                        ownership of a product, provide the subsequent 
                        owner with transaction history, transaction 
                        information, and a transaction statement for 
                        the product; and
                            ``(iii) capture the transaction information 
                        (including lot level information), transaction 
                        history, and transaction statement for each 
                        transaction described in clauses (i) and (ii) 
                        and maintain such information, history, and 
                        statement for not less than 6 years after the 
                        transaction.
                    ``(B) Returns.--
                            ``(i) Nonsaleable product.--A repackager 
                        described in section 581(16)(A) may return a 
                        nonsaleable product to the manufacturer or 
                        repackager, or to the wholesale distributor 
                        from whom such product was purchased, or to a 
                        person acting on behalf of such a person, 
                        including a returns processor, without 
                        providing the information required under 
                        subparagraph (A)(ii).
                            ``(ii) Saleable or nonsaleable product.--A 
                        repackager described in section 581(16)(B) may 
                        return a saleable or nonsaleable product to the 
                        manufacturer, repackager, or to the wholesale 
                        distributor from whom such product was received 
                        without providing the information required 
                        under subparagraph (A)(ii) on behalf of the 
                        hospital or other health care entity that took 
                        ownership of such product pursuant to the terms 
                        and conditions of any agreement between such 
                        repackager and the entity that owns the 
                        product.
                    ``(C) Requests for information.--Upon a request by 
                the Secretary or other appropriate Federal or State 
                official, in the event of a recall or for the purpose 
                of investigating a suspect product or an illegitimate 
                product, a repackager described in section 581(16)(A) 
                shall, not later than 1 business day, and not to exceed 
                48 hours, after receiving the request or in other such 
                reasonable time as determined by the Secretary, provide 
                the applicable transaction information, transaction 
                history, and transaction statement for the product.
            ``(2) Product identifier.--
                    ``(A) In general.--Beginning not later than 5 years 
                after the date of enactment of the Drug Supply Chain 
                Security Act, a repackager described in section 
                581(16)(A)--
                            ``(i) shall affix or imprint a product 
                        identifier to each package and homogenous case 
                        of product intended to be introduced in a 
                        transaction in commerce;
                            ``(ii) shall maintain the product 
                        identifier information for such product for not 
                        less than 6 years after the date of the 
                        transaction;
                            ``(iii) may engage in transactions 
                        involving a product only if such product is 
                        encoded with a product identifier (except as 
                        provided pursuant to subsection (a)(5)); and
                            ``(iv) shall maintain records for not less 
                        than 6 years to allow the repackager to 
                        associate the product identifier the repackager 
                        affixes or imprints with the product identifier 
                        assigned by the original manufacturer of the 
                        product.
                    ``(B) Exception.--A package that is required to 
                have a standardized numerical identifier is not 
                required to have a unique device identifier.
            ``(3) Authorized trading partners.--Beginning January 1, 
        2015, the trading partners of a repackager described in section 
        581(16) may be only authorized trading partners.
            ``(4) Verification.--Beginning not later than January 1, 
        2015, a repackager described in section 581(16)(A) shall have 
        systems in place to enable the repackager to comply with the 
        following requirements:
                    ``(A) Suspect product.--
                            ``(i) In general.--Upon making a 
                        determination that a product in the possession 
                        or control of the repackager is a suspect 
                        product, or upon receiving a request for 
                        verification from the Secretary that has made a 
                        determination that a product within the 
                        possession or control of a repackager is a 
                        suspect product, a repackager shall--
                                    ``(I) quarantine such product 
                                within the possession or control of the 
                                repackager from product intended for 
                                distribution until such product is 
                                cleared or dispositioned; and
                                    ``(II) promptly conduct an 
                                investigation in coordination with 
                                trading partners, as applicable, to 
                                determine whether the product is an 
                                illegitimate product, which shall 
                                include validating any applicable 
                                transaction history and transaction 
                                information in the possession of the 
                                repackager and otherwise investigating 
                                to determine whether the product is an 
                                illegitimate product, and, beginning 5 
                                years after the date of enactment of 
                                the Drug Supply Chain Security Act 
                                (except as provided pursuant to 
                                subsection (a)(5)), verifying the 
                                product at the package level, including 
                                the standardized numerical identifier.
                            ``(ii) Cleared product.--If the repackager 
                        makes the determination that a suspect product 
                        is not an illegitimate product, the repackager 
                        shall promptly notify the Secretary, if 
                        applicable, of such determination and such 
                        product may be further distributed.
                            ``(iii) Records.--A repackager shall keep 
                        records of the investigation of a suspect 
                        product for not less than 6 years after the 
                        conclusion of the investigation.
                    ``(B) Illegitimate product.--
                            ``(i) In general.--Upon determining, in 
                        coordination with the manufacturer, that a 
                        product in the possession or control of a 
                        repackager is an illegitimate product, the 
                        repackager shall, in a manner that is 
                        consistent with the systems and processes of 
                        such repackager--
                                    ``(I) quarantine such product 
                                within the possession or control of the 
                                repackager from product intended for 
                                distribution until such product is 
                                dispositioned;
                                    ``(II) disposition the illegitimate 
                                product within the possession or 
                                control of the repackager;
                                    ``(III) take reasonable and 
                                appropriate steps to assist a trading 
                                partner to disposition an illegitimate 
                                product not in the possession or 
                                control of the repackager; and
                                    ``(IV) retain a sample of the 
                                product for further physical 
                                examination or laboratory analysis of 
                                the product by the manufacturer or 
                                Secretary (or other appropriate Federal 
                                or State official) upon request by the 
                                manufacturer or Secretary (or other 
                                appropriate Federal or State official), 
                                as necessary and appropriate.
                            ``(ii) Making a notification.--Upon 
                        determining that a product in the possession or 
                        control of the repackager is an illegitimate 
                        product, the repackager shall notify the 
                        Secretary and all immediate trading partners 
                        that the repackager has reason to believe may 
                        have received the illegitimate product of such 
                        determination not later than 24 hours after 
                        making such determination.
                            ``(iii) Responding to a notification.--Upon 
                        the receipt of a notification from the 
                        Secretary or a trading partner, a repackager 
                        shall identify all illegitimate product subject 
                        to such notification that is in the possession 
                        or control of the repackager, including any 
                        product that is subsequently received, and 
                        shall perform the activities described in 
                        subparagraph (A).
                            ``(iv) Terminating a notification.--Upon 
                        making a determination, in consultation with 
                        the Secretary, that a notification is no longer 
                        necessary, a repackager shall promptly notify 
                        immediate trading partners that the repackager 
                        notified pursuant to clause (ii) that such 
                        notification has been terminated.
                            ``(v) Records.--A repackager shall keep 
                        records of the disposition of an illegitimate 
                        product for not less than 6 years after the 
                        conclusion of the disposition.
                    ``(C) Requests for verification.--Beginning 5 years 
                after the date of enactment of the Drug Supply Chain 
                Security Act, upon receiving a request for verification 
                from an authorized manufacturer, wholesale distributor, 
                or dispenser that is in possession or control of a 
                product they believe to be repackaged by such 
                repackager, a repackager shall, not later than 24 hours 
                after receiving the verification request or in other 
                such reasonable time as determined by the Secretary, 
                based on the circumstances of the request, notify the 
                person making the request whether the product 
                identifier, including the standardized numerical 
                identifier, that is the subject of the request 
                corresponds to the product identifier affixed or 
                imprinted by the repackager. If a repackager responding 
                to a verification request identifies a product 
                identifier that does not correspond to that affixed or 
                imprinted by the repackager, the repackager shall treat 
                such product as suspect product and conduct an 
                investigation as described in subparagraph (A). If the 
                repackager has reason to believe the product is an 
                illegitimate product, the repackager shall advise the 
                person making the request of such belief at the time 
                such repackager responds to the verification request.
                    ``(D) Electronic database.--A repackager may 
                satisfy the requirements of paragraph (4) by developing 
                a secure electronic database or utilizing a secure 
                electronic database developed or operated by another 
                entity. The owner of such database shall establish the 
                requirements and processes to respond to requests and 
                may provide for data access to other members of the 
                pharmaceutical distribution supply chain, as 
                appropriate. The development and operation of such a 
                database shall not relieve a repackager of the 
                requirement under subparagraph (C) to respond to a 
                verification request submitted by means other than a 
                secure electronic database.
                    ``(E) Verification of saleable returned product.--
                Beginning 5 years after the date of enactment of the 
                Drug Supply Chain Security Act, upon receipt of a 
                returned product that the repackager intends to further 
                distribute, before further distributing such product, 
                the repackager shall verify the product identifier for 
                each sealed homogeneous case of such product or, if 
                such product is not in a sealed homogeneous case, 
                verify the product identifier on each package.
    ``(f) Drop Shipments.--
            ``(1) In general.--A wholesale distributor that does not 
        physically handle or store product shall be exempt from the 
        provisions of this section, except the notification 
        requirements under clauses (ii), (iii), and (iv) of subsection 
        (c)(4)(B), provided that the manufacturer, repackager, or other 
        wholesale distributor that distributes the product to the 
        dispenser by means of a drop shipment for such wholesale 
        distributor includes on the transaction information and 
        transaction history to the dispenser the contact information of 
        such wholesale distributor and provides the transaction 
        information, transaction history, and transaction statement 
        directly to the dispenser.
            ``(2) Clarification.--For purposes of this subsection, 
        providing administrative services, including processing of 
        orders and payments, shall not by itself, be construed as being 
        involved in the handling, distribution, or storage of a 
        product.''.

SEC. 203. ENHANCED DRUG DISTRIBUTION SECURITY.

    Section 582, as added by section 202, is amended by adding at the 
end the following:
    ``(g) Enhanced Drug Distribution Security.--
            ``(1) In general.--On the date that is 10 years after the 
        date of enactment of the Drug Supply Chain Security Act, the 
        following interoperable, electronic tracing of product at the 
        package level requirements shall go into effect:
                    ``(A) The transaction information and the 
                transaction statements as required under this section 
                shall be exchanged in a secure, interoperable, 
                electronic manner in accordance with the standards 
                established under the guidance issued pursuant to 
                paragraphs (3) and (4) of subsection (h), including any 
                revision of such guidance issued in accordance with 
                paragraph (5) of such subsection.
                    ``(B) The transaction information required under 
                this section shall include the product identifier at 
                the package level for each package included in the 
                transaction.
                    ``(C) Systems and processes for verification of 
                product at the package level, including the 
                standardized numerical identifier, shall be required in 
                accordance with the standards established under the 
                guidance issued pursuant to subsection (a)(2) and the 
                guidances issued pursuant to paragraphs (2), (3), and 
                (4) of subsection (h), including any revision of such 
                guidances issued in accordance with paragraph (5) of 
                such subsection, which may include the use of 
                aggregation and inference as necessary.
                    ``(D) The systems and processes necessary to 
                promptly respond with the transaction information and 
                transaction statement for a product upon a request by 
                the Secretary (or other appropriate Federal or State 
                official) in the event of a recall or for the purposes 
                of investigating a suspect product or an illegitimate 
                product shall be required.
                    ``(E) The systems and processes necessary to 
                promptly facilitate gathering the information necessary 
                to produce the transaction information for each 
                transaction going back to the manufacturer, as 
                applicable, shall be required--
                            ``(i) in the event of a request by the 
                        Secretary (or other appropriate Federal or 
                        State official), on account of a recall or for 
                        the purposes of investigating a suspect product 
                        or an illegitimate product; or
                            ``(ii) in the event of a request by an 
                        authorized trading partner, in a secure manner 
                        that ensures the protection of confidential 
                        commercial information and trade secrets, for 
                        purposes of investigating a suspect product or 
                        assisting the Secretary (or other appropriate 
                        Federal or State official) with a request 
                        described in clause (i).
                    ``(F) Each person accepting a saleable return shall 
                have systems and processes in place to allow acceptance 
                of such product and may accept saleable returns only if 
                such person can associate the saleable return product 
                with the transaction information and transaction 
                statement associated with that product.
            ``(2) Compliance.--
                    ``(A) Information maintenance agreement.--A 
                dispenser may enter into a written agreement with a 
                third party, including an authorized wholesale 
                distributor, under which the third party shall 
                confidentially maintain any information and statements 
                required to be maintained under this section. If a 
                dispenser enters into such an agreement, the dispenser 
                shall maintain a copy of the written agreement and 
                shall not be relieved of the obligations of the 
                dispenser under this subsection.
                    ``(B) Alternative methods.--The Secretary, taking 
                into consideration the assessment conducted under 
                paragraph (3), shall provide for alternative methods of 
                compliance with any of the requirements set forth in 
                paragraph (1), including--
                            ``(i) establishing timelines for compliance 
                        by small businesses (including small business 
                        dispensers with 25 or fewer full-time 
                        employees) with such requirements, in order to 
                        ensure that such requirements do not impose 
                        undue economic hardship for small businesses, 
                        including small business dispensers for whom 
                        the criteria set forth in the assessment under 
                        paragraph (3) is not met, if the Secretary 
                        determines that such requirements under 
                        paragraph (1) would result in undue economic 
                        hardship; and
                            ``(ii) establishing a process by which a 
                        dispenser may request a waiver from any of the 
                        requirements set forth in paragraph (1) if the 
                        Secretary determines that such requirements 
                        would result in an undue economic hardship, 
                        which shall include a process for the biennial 
                        review and renewal of any such waiver.
            ``(3) Assessment.--
                    ``(A) In general.--Not later than the date that is 
                18 months after the Secretary issues the final guidance 
                required under subsection (h), the Secretary shall 
                enter into a contract with a private, independent 
                consulting firm with expertise to conduct a technology 
                and software assessment that looks at the feasibility 
                of dispensers with 25 or fewer full-time employees 
                conducting interoperable, electronic tracing of 
                products at the package level. Such assessment shall be 
                completed not later than 8\1/2\ years after the date of 
                enactment of the Drug Supply Chain Security Act.
                    ``(B) Condition.--As a condition of the award of 
                the contract under subparagraph (A), the private, 
                independent consulting firm shall agree to consult with 
                dispensers with 25 or fewer full-time employees when 
                conducting the assessment under such subparagraph.
                    ``(C) Content.--The assessment under subparagraph 
                (A) shall assess whether--
                            ``(i) the necessary software and hardware 
                        is readily accessible to such dispensers;
                            ``(ii) the necessary software and hardware 
                        is prohibitively expensive to obtain, install, 
                        and maintain for such dispensers; and
                            ``(iii) the necessary hardware and software 
                        can be integrated into business practices, such 
                        as interoperability with wholesale 
                        distributors, for such dispensers.
                    ``(D) Publication.--The Secretary shall--
                            ``(i) publish the statement of work for the 
                        assessment under subparagraph (A) for public 
                        comment prior to beginning the assessment;
                            ``(ii) publish the final assessment for 
                        public comment not later than 30 calendar days 
                        after receiving such assessment; and
                            ``(iii) hold a public meeting not later 
                        than 180 calendar days after receiving the 
                        final assessment at which public stakeholders 
                        may present their views on the assessment.
            ``(4) Procedure.--Notwithstanding section 553 of title 5, 
        United States Code, the Secretary, in promulgating any 
        regulation pursuant to this section, shall--
                    ``(A) provide appropriate flexibility by--
                            ``(i) not requiring the adoption of 
                        specific business systems for the maintenance 
                        and transmission of data;
                            ``(ii) prescribing alternative methods of 
                        compliance for any of the requirements set 
                        forth in paragraph (1) or set forth in 
                        regulations implementing such requirements, 
                        including--
                                    ``(I) timelines for small 
                                businesses to comply with the 
                                requirements set forth in the 
                                regulations in order to ensure that 
                                such requirements do not impose undue 
                                economic hardship for small businesses 
                                (including small business dispensers 
                                for whom the criteria set forth in the 
                                assessment under paragraph (3) is not 
                                met), if the Secretary determines that 
                                such requirements would result in undue 
                                economic hardship; and
                                    ``(II) the establishment of a 
                                process by which a dispenser may 
                                request a waiver from any of the 
                                requirements set forth in such 
                                regulations if the Secretary determines 
                                that such requirements would result in 
                                an undue economic hardship; and
                            ``(iii) taking into consideration--
                                    ``(I) the results of pilot 
                                projects, including pilot projects 
                                pursuant to this section and private 
                                sector pilot projects, including those 
                                involving the use of aggregation and 
                                inference;
                                    ``(II) the public meetings held and 
                                related guidance documents issued under 
                                this section;
                                    ``(III) the public health benefits 
                                of any additional regulations in 
                                comparison to the cost of compliance 
                                with such requirements, including on 
                                entities of varying sizes and 
                                capabilities;
                                    ``(IV) the diversity of the 
                                pharmaceutical distribution supply 
                                chain by providing appropriate 
                                flexibility for each sector, including 
                                both large and small businesses; and
                                    ``(V) the assessment pursuant to 
                                paragraph (3) with respect to small 
                                business dispensers, including related 
                                public comment and the public meeting, 
                                and requirements under this section;
                    ``(B) issue a notice of proposed rulemaking that 
                includes a copy of the proposed regulation;
                    ``(C) provide a period of not less than 60 days for 
                comments on the proposed regulation; and
                    ``(D) publish in the Federal Register the final 
                regulation not less than 2 years prior to the effective 
                date of the regulation.
    ``(h) Guidance Documents.--
            ``(1) In general.--For the purposes of facilitating the 
        successful and efficient adoption of secure, interoperable 
        product tracing at the package level in order to enhance drug 
        distribution security and further protect the public health, 
        the Secretary shall issue the guidance documents as provided 
        for in this subsection.
            ``(2) Suspect and illegitimate product.--
                    ``(A) In general.--Not later than 180 days after 
                the date of enactment of the Drug Supply Chain Security 
                Act, the Secretary shall issue a guidance document to 
                aid trading partners in the identification of a suspect 
                product and notification termination. Such guidance 
                document shall--
                            ``(i) identify specific scenarios that 
                        could significantly increase the risk of a 
                        suspect product entering the pharmaceutical 
                        distribution supply chain;
                            ``(ii) provide recommendation on how 
                        trading partners may identify such product and 
                        make a determination on whether the product is 
                        a suspect product as soon as practicable; and
                            ``(iii) set forth the process by which 
                        manufacturers, repackagers, wholesale 
                        distributors, and dispensers shall terminate 
                        notifications in consultation with the 
                        Secretary regarding illegitimate product 
                        pursuant to subsections (b)(4)(B), (c)(4)(B), 
                        (d)(4)(B), and (e)(4)(B).
                    ``(B) Revised guidance.--If the Secretary revises 
                the guidance issued under subparagraph (A), the 
                Secretary shall follow the procedure set forth in 
                paragraph (5).
            ``(3) Unit level tracing.--
                    ``(A) In general.--In order to enhance drug 
                distribution security at the package level, not later 
                than 18 months after conducting a public meeting on the 
                system attributes necessary to enable secure tracing of 
                product at the package level, including allowing for 
                the use of verification, inference, and aggregation, as 
                necessary, the Secretary shall issue a final guidance 
                document that outlines and makes recommendations with 
                respect to the system attributes necessary to enable 
                secure tracing at the package level as required under 
                the requirements established under subsection (g). Such 
                guidance document shall--
                            ``(i) define the circumstances under which 
                        the sectors within the pharmaceutical 
                        distribution supply chain may, in the most 
                        efficient manner practicable, infer the 
                        contents of a case, pallet, tote, or other 
                        aggregate of individual packages or containers 
                        of product, from a product identifier 
                        associated with the case, pallet, tote, or 
                        other aggregate, without opening each case, 
                        pallet, tote, or other aggregate or otherwise 
                        individually scanning each package;
                            ``(ii) identify methods and processes to 
                        enhance secure tracing of product at the 
                        package level, such as secure processes to 
                        facilitate the use of inference, enhanced 
                        verification activities, the use of aggregation 
                        and inference, processes that utilize the 
                        product identifiers to enhance tracing of 
                        product at the package level, including the 
                        standardized numerical identifier, or package 
                        security features; and
                            ``(iii) ensure the protection of 
                        confidential commercial information and trade 
                        secrets.
                    ``(B) Procedure.--In issuing the guidance under 
                subparagraph (A), and in revising such guidance, if 
                applicable, the Secretary shall follow the procedure 
                set forth in paragraph (5).
            ``(4) Standards for interoperable data exchange.--
                    ``(A) In general.--In order to enhance secure 
                tracing of a product at the package level, the 
                Secretary, not later than 18 months after conducting a 
                public meeting on the interoperable standards necessary 
                to enhance the security of the pharmaceutical 
                distribution supply chain, shall update the guidance 
                issued pursuant to subsection (a)(2), as necessary and 
                appropriate, and finalize such guidance document so 
                that the guidance document--
                            ``(i) identifies and makes recommendations 
                        with respect to the standards necessary for 
                        adoption in order to support the secure, 
                        interoperable electronic data exchange among 
                        the pharmaceutical distribution supply chain 
                        that comply with a form and format developed by 
                        a widely recognized international standards 
                        development organization;
                            ``(ii) takes into consideration standards 
                        established pursuant to subsection (a)(2) and 
                        section 505D;
                            ``(iii) facilitates the creation of a 
                        uniform process or methodology for product 
                        tracing; and
                            ``(iv) ensures the protection of 
                        confidential commercial information and trade 
                        secrets.
                    ``(B) Procedure.--In issuing the guidance under 
                subparagraph (A), and in revising such guidance, if 
                applicable, the Secretary shall follow the procedure 
                set forth in paragraph (5).
            ``(5) Procedure.--In issuing or revising any guidance 
        issued pursuant to this subsection or subsection (g), except 
        the initial guidance issued under paragraph (2)(A), the 
        Secretary shall--
                    ``(A) publish a notice in the Federal Register for 
                a period not less than 30 days announcing that the 
                draft or revised draft guidance is available;
                    ``(B) post the draft guidance document on the 
                Internet Web site of the Food and Drug Administration 
                and make such draft guidance document available in hard 
                copy;
                    ``(C) provide an opportunity for comment and review 
                and take into consideration any comments received;
                    ``(D) revise the draft guidance, as appropriate;
                    ``(E) publish a notice in the Federal Register for 
                a period not less than 30 days announcing that the 
                final guidance or final revised guidance is available;
                    ``(F) post the final guidance document on the 
                Internet Web site of the Food and Drug Administration 
                and make such final guidance document available in hard 
                copy; and
                    ``(G) provide for an effective date of not earlier 
                than 1 year after such guidance becomes final.
    ``(i) Public Meetings.--
            ``(1) In general.--The Secretary shall hold not less than 5 
        public meetings to enhance the safety and security of the 
        pharmaceutical distribution supply chain and provide for 
        comment. The Secretary may hold the first such public meeting 
        not earlier than 1 year after the date of enactment of the Drug 
        Supply Chain Security Act. In carrying out the public meetings 
        described in this paragraph, the Secretary shall--
                    ``(A) prioritize topics necessary to inform the 
                issuance of the guidance described in paragraphs (3) 
                and (4) of subsection (h); and
                    ``(B) take all measures reasonable and practicable 
                to ensure the protection of confidential commercial 
                information and trade secrets.
            ``(2) Content.--Each of the following topics shall be 
        addressed in at least one of the public meetings described in 
        paragraph (1):
                    ``(A) An assessment of the steps taken under 
                subsections (b) through (e) to build capacity for a 
                unit-level system, including the impact of the 
                requirements of such subsections on--
                            ``(i) the ability of the health care system 
                        collectively to maintain patient access to 
                        medicines;
                            ``(ii) the scalability of such 
                        requirements, including as it relates to 
                        product lines; and
                            ``(iii) the capability of different sectors 
                        and subsectors, including both large and small 
                        businesses, to affix and utilize the product 
                        identifier.
                    ``(B) The system attributes necessary to support 
                the requirements set forth under subsection (g), 
                including the standards necessary for adoption in order 
                to support the secure, interoperable electronic data 
                exchange among sectors within the pharmaceutical 
                distribution supply chain.
                    ``(C) Best practices in each of the different 
                sectors within the pharmaceutical distribution supply 
                chain to implement the requirements of this section.
                    ``(D) The costs and benefits of the implementation 
                of this section, including the impact on each 
                pharmaceutical distribution supply chain sector and on 
                public health.
                    ``(E) Whether electronic tracing requirements, 
                including tracing of product at the package level, are 
                feasible, cost effective, and needed to protect the 
                public health.
                    ``(F) The systems and processes needed to utilize 
                the product identifiers to enhance tracing of product 
                at the package level, including allowing for 
                verification, aggregation, and inference, as necessary.
                    ``(G) The technical capabilities and legal 
                authorities, if any, needed to establish an 
                interoperable, electronic system that provides for 
                tracing of product at the package level.
                    ``(H) The impact that such additional requirements 
                would have on patient safety, the drug supply, cost and 
                regulatory burden, and timely patient access to 
                prescription drugs.
                    ``(I) Other topics, as determined appropriate by 
                the Secretary.
    ``(j) Pilot Projects.--
            ``(1) In general.--The Secretary shall establish 1 or more 
        pilot projects, in coordination with authorized manufacturers, 
        repackagers, wholesale distributors, and dispensers, to explore 
        and evaluate methods to enhance the safety and security of the 
        pharmaceutical distribution supply chain. Such projects shall 
        build upon efforts, in existence as of the date of enactment of 
        the Drug Supply Chain Security Act, to enhance the safety and 
        security of the pharmaceutical distribution supply chain, take 
        into consideration any pilot projects conducted prior to such 
        date of enactment, including any pilot projects that use 
        aggregation and inference, and inform the draft and final 
        guidance under paragraphs (3) and (4) of subsection (h).
            ``(2) Content.--
                    ``(A) In general.--The Secretary shall ensure that 
                the pilot projects under paragraph (1) reflect the 
                diversity of the pharmaceutical distribution supply 
                chain and that the pilot projects, when taken as a 
                whole, include participants representative of every 
                sector, including both large and small businesses.
                    ``(B) Project design.--The pilot projects under 
                paragraph (1) shall be designed to--
                            ``(i) utilize the product identifier for 
                        tracing of a product, which may include 
                        verification of the product identifier of a 
                        product, including the use of aggregation and 
                        inference;
                            ``(ii) improve the technical capabilities 
                        of each sector and subsector to comply with 
                        systems and processes needed to utilize the 
                        product identifiers to enhance tracing of a 
                        product;
                            ``(iii) identify system attributes that are 
                        necessary to implement the requirements 
                        established under this section; and
                            ``(iv) complete other activities as 
                        determined by the Secretary.
    ``(k) Sunset.--The following requirements shall have no force or 
effect beginning on the date that is 10 years after the date of 
enactment of the Drug Supply Chain Security Act:
            ``(1) The provision and receipt of transaction history 
        under this section.
            ``(2) The requirements set forth for returns under 
        subsections (b)(4)(E), (c)(1)(B)(i), (d)(1)(C)(i), and 
        (e)(4)(E).
            ``(3) The requirements set forth under subparagraphs 
        (A)(v)(II) and (D) of subsection (c)(1), as applied to lot 
        level information only.
    ``(l) Rule of Construction.--The requirements set forth in 
subsections (g)(4), (i), and (j) shall not be construed as a condition, 
prohibition, or precedent for precluding or delaying the provisions 
becoming effective pursuant to subsection (g).
    ``(m) Requests for Information.--On the date that is 10 years after 
the date of enactment of the Drug Supply Chain Security Act, the 
timeline for responses to requests for information from the Secretary, 
or other appropriate Federal or State official, as applicable, under 
subsections (b)(1)(B), (c)(1)(C), and (e)(1)(C) shall be not later than 
24 hours after receiving the request from the Secretary or other 
appropriate Federal or State official, as applicable, or in such other 
reasonable time as determined by the Secretary based on the 
circumstances of the request.''.

SEC. 204. NATIONAL STANDARDS FOR PRESCRIPTION DRUG WHOLESALE 
              DISTRIBUTORS.

    (a) Amendments.--
            (1) Requirement.--Section 503(e) (21 U.S.C. 353(e)) is 
        amended by striking paragraphs (1), (2), and (3) and inserting 
        the following:
            ``(1) Requirement.--Subject to section 583:
                    ``(A) In general.--No person may engage in 
                wholesale distribution of a drug subject to subsection 
                (b)(1) in any State unless such person--
                            ``(i)(I) is licensed by the State from 
                        which the drug is distributed; or
                            ``(II) if the State from which the drug is 
                        distributed has not established a licensure 
                        requirement, is licensed by the Secretary; and
                            ``(ii) if the drug is distributed 
                        interstate, is licensed by the State into which 
                        the drug is distributed if the State into which 
                        the drug is distributed requires the licensure 
                        of a person that distributes drugs into the 
                        State.
                    ``(B) Standards.--Each Federal and State license 
                described in subparagraph (A) shall meet the standards, 
                terms, and conditions established by the Secretary 
                under section 583.
            ``(2) Reporting and database.--
                    ``(A) Reporting.--Beginning January 1, 2015, any 
                person who owns or operates an establishment that 
                engages in wholesale distribution shall--
                            ``(i) report to the Secretary, on an annual 
                        basis pursuant to a schedule determined by the 
                        Secretary--
                                    ``(I) each State by which the 
                                person is licensed and the appropriate 
                                identification number of each such 
                                license; and
                                    ``(II) the name, address, and 
                                contact information of each facility at 
                                which, and all trade names under which, 
                                the person conducts business; and
                            ``(ii) report to the Secretary within a 
                        reasonable period of time and in a reasonable 
                        manner, as determined by the Secretary, any 
                        significant disciplinary actions, such as the 
                        revocation or suspension of a wholesale 
                        distributor license, taken by a State or the 
                        Federal Government during the reporting period 
                        against the wholesale distributor.
                    ``(B) Database.--Not later than January 1, 2015, 
                the Secretary shall establish a database of authorized 
                wholesale distributors. Such database shall--
                            ``(i) identify each authorized wholesale 
                        distributor by name, contact information, and 
                        each State where such wholesale distributor is 
                        appropriately licensed to engage in wholesale 
                        distribution;
                            ``(ii) be available to the public on the 
                        Internet Web site of the Food and Drug 
                        Administration; and
                            ``(iii) be regularly updated on a schedule 
                        determined by the Secretary.
                    ``(C) Coordination.--The Secretary shall establish 
                a format and procedure for appropriate State officials 
                to access the information provided pursuant to 
                subparagraph (A) in a prompt and secure manner.
                    ``(D) Confidentiality.--Nothing in this paragraph 
                shall be construed as authorizing the Secretary to 
                disclose any information that is a trade secret or 
                confidential information subject to section 552(b)(4) 
                of title 5, United States Code, or section 1905 of 
                title 18, United States Code.
            ``(3) Costs.--
                    ``(A) Authorized fees of secretary.--If a State 
                does not establish a licensing program for persons 
                engaged in the wholesale distribution of a drug subject 
                to subsection (b), the Secretary shall license a person 
                engaged in wholesale distribution located in such State 
                and may collect a reasonable fee in such amount 
                necessary to reimburse the Secretary for costs 
                associated with establishing and administering the 
                licensure program and conducting periodic inspections 
                under this section. The Secretary shall adjust fee 
                rates as needed on an annual basis to generate only the 
                amount of revenue needed to perform this service. Fees 
                authorized under this paragraph shall be collected and 
                available for obligation only to the extent and in the 
                amount provided in advance in appropriations Acts. Such 
                fees are authorized to remain available until expended. 
                Such sums as may be necessary may be transferred from 
                the Food and Drug Administration salaries and expenses 
                appropriation account without fiscal year limitation to 
                such appropriation account for salaries and expenses 
                with such fiscal year limitation.
                    ``(B) State licensing fees.--Nothing in this Act 
                shall prohibit States from collecting fees from 
                wholesale distributors in connection with State 
                licensing of such distributors.''.
            (2) Wholesale distribution.--Section 503(e) (21 U.S.C. 
        353(e)), as amended by paragraph (1), is further amended by 
        adding at the end the following:
            ``(4) For the purposes of this subsection and subsection 
        (d), the term `wholesale distribution' means the distribution 
        of a drug subject to subsection (b) to a person other than a 
        consumer or patient, or receipt of a drug subject to subsection 
        (b) by a person other than the consumer or patient, but does 
        not include--
                    ``(A) intracompany distribution of any drug between 
                members of an affiliate or within a manufacturer;
                    ``(B) the distribution of a drug, or an offer to 
                distribute a drug among hospitals or other health care 
                entities which are under common control;
                    ``(C) 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, except that, for purposes of this paragraph, a 
                drug shortage not caused by a public health emergency 
                shall not constitute an emergency medical reason;
                    ``(D) the dispensing of a drug pursuant to a 
                prescription executed in accordance with subsection 
                (b)(1);
                    ``(E) the distribution of minimal quantities of 
                drug by a licensed retail pharmacy to a licensed 
                practitioner for office use;
                    ``(F) 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;
                    ``(G) 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;
                    ``(H) the distribution of a drug by the 
                manufacturer of such drug;
                    ``(I) the receipt or transfer of a drug by an 
                authorized third-party logistics provider provided that 
                such third-party logistics provider does not take 
                ownership of the drug;
                    ``(J) a common carrier that transports a drug, 
                provided that the common carrier does not take 
                ownership of the drug;
                    ``(K) 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);
                    ``(L) salable drug returns when conducted by a 
                dispenser;
                    ``(M) the distribution of a collection of finished 
                medical devices, which may include a product or 
                biological product, assembled in kit form strictly for 
                the convenience of the purchaser or user (referred to 
                in this subparagraph as a `medical convenience kit') 
                if--
                            ``(i) the medical convenience kit is 
                        assembled in an establishment that is 
                        registered with the Food and Drug 
                        Administration as a device manufacturer in 
                        accordance with section 510(b)(2);
                            ``(ii) the medical convenience kit does not 
                        contain a controlled substance that appears in 
                        a schedule contained in the Comprehensive Drug 
                        Abuse Prevention and Control Act of 1970;
                            ``(iii) in the case of a medical 
                        convenience kit that includes a product, the 
                        person that manufacturers the kit--
                                    ``(I) purchased such product 
                                directly from the pharmaceutical 
                                manufacturer or from a wholesale 
                                distributor that purchased the product 
                                directly from the pharmaceutical 
                                manufacturer; and
                                    ``(II) does not alter the primary 
                                container or label of the product as 
                                purchased from the manufacturer or 
                                wholesale distributor; and
                            ``(iv) in the case of a medical convenience 
                        kit that includes a product, the product is--
                                    ``(I) an intravenous solution 
                                intended for the replenishment of 
                                fluids and electrolytes;
                                    ``(II) a product intended to 
                                maintain the equilibrium of water and 
                                minerals in the body;
                                    ``(III) a product intended for 
                                irrigation or reconstitution;
                                    ``(IV) an anesthetic;
                                    ``(V) an anticoagulant;
                                    ``(VI) a vasopressor; or
                                    ``(VII) a sympathomimetic;
                    ``(N) 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);
                    ``(O) the distribution of an intravenous drug used 
                to maintain the equilibrium of water and minerals in 
                the body, such as dialysis solutions;
                    ``(P) the distribution of a drug that is intended 
                for irrigation, or sterile water, whether intended for 
                such purposes or for injection;
                    ``(Q) the distribution of medical gas, as defined 
                in section 575;
                    ``(R) facilitating the distribution of a product by 
                providing solely administrative services, including 
                processing of orders and payments; or
                    ``(S) 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 
                described in section 581(16)(B) and registered under 
                section 510 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.''.
            (3) Third-party logistics providers.--Section 503(e) (21 
        U.S.C. 353(e)), as amended by paragraph (2), is further amended 
        by adding at the end the following:
            ``(5) Third-party logistics providers.--Notwithstanding 
        paragraphs (1) through (4), each entity that meets the 
        definition of a third-party logistics provider under section 
        581(22) shall obtain a license as a third-party logistics 
        provider as described in section 584(a) and is not required to 
        obtain a license as a wholesale distributor if the entity never 
        assumes an ownership interest in the product it handles.''.
            (4) Affiliate.--Section 503(e) (21 U.S.C. 353(e)), as 
        amended by paragraph (3), is further amended by adding at the 
        end the following:
            ``(6) Affiliate.--For purposes of this subsection, the term 
        `affiliate' means a business entity that has a relationship 
        with a second business entity if, directly or indirectly--
                    ``(A) one business entity controls, or has the 
                power to control, the other business entity; or
                    ``(B) a third party controls, or has the power to 
                control, both of the business entities.''.
            (5) Standards.--Subchapter H of chapter V, as added by 
        section 202, is amended by adding at the end the following:

``SEC. 583. NATIONAL STANDARDS FOR PRESCRIPTION DRUG WHOLESALE 
              DISTRIBUTORS.

    ``(a) In General.--The Secretary shall, not later than 2 years 
after the date of enactment of the Drug Supply Chain Security Act, 
establish by regulation standards for the licensing of persons under 
section 503(e)(1) (as amended by the Drug Supply Chain Security Act), 
including the revocation, reissuance, and renewal of such license.
    ``(b) Content.--For the purpose of ensuring uniformity with respect 
to standards set forth in this section, the standards established under 
subsection (a) shall apply to all State and Federal licenses described 
under section 503(e)(1) (as amended by the Drug Supply Chain Security 
Act) and shall include standards for the following:
            ``(1) The storage and handling of prescription drugs, 
        including facility requirements.
            ``(2) The establishment and maintenance of records of the 
        distributions of such drugs.
            ``(3) The furnishing of a bond or other equivalent means of 
        security, as follows:
                    ``(A)(i) For the issuance or renewal of a wholesale 
                distributor license, an applicant that is not a 
                government owned and operated wholesale distributor 
                shall submit a surety bond of $100,000 or other 
                equivalent means of security acceptable to the State.
                    ``(ii) For purposes of clause (i), the State or 
                other applicable authority may accept a surety bond in 
                the amount of $25,000 if the annual gross receipts of 
                the previous tax year for the wholesaler is $10,000,000 
                or less.
                    ``(B) If a wholesale distributor can provide 
                evidence that it possesses the required bond in a 
                State, the requirement for a bond in another State 
                shall be waived.
            ``(4) Mandatory background checks and fingerprinting of 
        facility managers or designated representatives.
            ``(5) The establishment and implementation of 
        qualifications for key personnel.
            ``(6) The mandatory physical inspection of any facility to 
        be used in wholesale distribution within a reasonable time 
        frame from the initial application of the facility and to be 
        conducted by the licensing authority or by the State, 
        consistent with subsection (c).
            ``(7) In accordance with subsection (d), the prohibition of 
        certain persons from receiving or maintaining licensure for 
        wholesale distribution.
    ``(c) Inspections.--To satisfy the inspection requirement under 
subsection (b)(6), the Federal or State licensing authority may conduct 
the inspection or may accept an inspection by the State in which the 
facility is located, or by a third-party accreditation or inspection 
service approved by the Secretary or the State licensing such wholesale 
distributor.
    ``(d) Prohibited Persons.--The standards established under 
subsection (a) shall include requirements to prohibit a person from 
receiving or maintaining licensure for wholesale distribution if the 
person--
            ``(1) has been convicted of any felony for conduct relating 
        to wholesale distribution, any felony violation of subsection 
        (i) or (k) of section 301, or any felony violation of section 
        1365 of title 18, United States Code, relating to product 
        tampering; or
            ``(2) has 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.
    ``(e) Requirements.--The Secretary, in promulgating any regulation 
pursuant to this section, shall, notwithstanding section 553 of title 
5, United States Code--
            ``(1) issue a notice of proposed rulemaking that includes a 
        copy of the proposed regulation;
            ``(2) provide a period of not less than 60 days for 
        comments on the proposed regulation; and
            ``(3) provide that the final regulation take effect on the 
        date that is 2 years after the date such final regulation is 
        published.''.
    (b) Authorized Distributors of Record.--Section 503(d) (21 U.S.C. 
353(d)) is amended by adding at the end the following:
            ``(4) In this subsection, the term `authorized distributors 
        of record' means those distributors with whom a manufacturer 
        has established an ongoing relationship to distribute such 
        manufacturer's products.''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall take effect on January 1, 2015.

SEC. 205. NATIONAL STANDARDS FOR THIRD-PARTY LOGISTICS PROVIDERS; 
              UNIFORM NATIONAL POLICY.

    Subchapter H of chapter V, as amended by section 204, is further 
amended by adding at the end the following:

``SEC. 584. NATIONAL STANDARDS FOR THIRD-PARTY LOGISTICS PROVIDERS.

    ``(a) Requirements.--No third-party logistics provider in any State 
may conduct activities in any State unless each facility of such third-
party logistics provider--
            ``(1)(A) is licensed by the State from which the drug is 
        distributed by the third-party logistics provider, in 
        accordance with the regulations promulgated under subsection 
        (d); or
            ``(B) if the State from which the drug distributed by the 
        third-party logistics provider has not established a licensure 
        requirement, is licensed by the Secretary, in accordance with 
        the regulations promulgated under subsection (d); and
            ``(2) if the drug is distributed interstate, is licensed by 
        the State into which the drug is distributed by the third-party 
        logistics provider if such State licenses third-party logistics 
        providers that distribute drugs into the State and the third-
        party logistics provider is not licensed by the Secretary as 
        described in paragraph (1)(B).
    ``(b) Reporting.--Beginning 1 year after the date of enactment of 
the Drug Supply Chain Security Act, a facility of a third-party 
logistics provider shall report to the Secretary, on an annual basis 
pursuant to a schedule determined by the Secretary--
            ``(1) the State by which the facility is licensed and the 
        appropriate identification number of such license; and
            ``(2) the name and address of the facility and all trade 
        names under which such facility conducts business.
    ``(c) Costs.--
            ``(1) Authorized fees of secretary.--If a State does not 
        establish a licensing program for a third-party logistics 
        provider, the Secretary shall license the third-party logistics 
        provider located in such State and may collect a reasonable fee 
        in such amount necessary to reimburse the Secretary for costs 
        associated with establishing and administering the licensure 
        program and conducting periodic inspections under this section. 
        The Secretary shall adjust fee rates as needed on an annual 
        basis to generate only the amount of revenue needed to perform 
        this service. Fees authorized under this paragraph shall be 
        collected and available for obligation only to the extent and 
        in the amount provided in advance in appropriations Acts. Such 
        fees are authorized to remain available until expended. Such 
        sums as may be necessary may be transferred from the Food and 
        Drug Administration salaries and expenses appropriation account 
        without fiscal year limitation to such appropriation account 
        for salaries and expenses with such fiscal year limitation.
            ``(2) State licensing fees.--
                    ``(A) State established program.--Nothing in this 
                Act shall prohibit a State that has established a 
                program to license a third-party logistics provider 
                from collecting fees from a third-party logistics 
                provider for such a license.
                    ``(B) No state established program.--A State that 
                does not establish a program to license a third-party 
                logistics provider in accordance with this section 
                shall be prohibited from collecting a State licensing 
                fee from a third-party logistics provider.
    ``(d) Regulations.--
            ``(1) In general.--Not later than 2 years after the date of 
        enactment of the Drug Supply Chain Security Act, the Secretary 
        shall issue regulations regarding the standards for licensing 
        under subsection (a), including the revocation and reissuance 
        of such license, to third-party logistics providers under this 
        section.
            ``(2) Content.--Such regulations shall--
                    ``(A) establish a process by which a third-party 
                accreditation program approved by the Secretary shall, 
                upon request by a third-party logistics provider, issue 
                a license to each third-party logistics provider that 
                meets the requirements set forth in this section;
                    ``(B) establish a process by which the Secretary 
                shall issue a license to each third-party logistics 
                provider that meets the requirements set forth in this 
                section if the Secretary is not able to approve a 
                third-party accreditation program because no such 
                program meets the Secretary's requirements necessary 
                for approval of such a third-party accreditation 
                program;
                    ``(C) require that the entity complies with storage 
                practices, as determined by the Secretary for such 
                facility, including--
                            ``(i) maintaining access to warehouse space 
                        of suitable size to facilitate safe operations, 
                        including a suitable area to quarantine suspect 
                        product;
                            ``(ii) maintaining adequate security; and
                            ``(iii) having written policies and 
                        procedures to--
                                    ``(I) address receipt, security, 
                                storage, inventory, shipment, and 
                                distribution of a product;
                                    ``(II) identify, record, and report 
                                confirmed losses or thefts in the 
                                United States;
                                    ``(III) correct errors and 
                                inaccuracies in inventories;
                                    ``(IV) provide support for 
                                manufacturer recalls;
                                    ``(V) prepare for, protect against, 
                                and address any reasonably foreseeable 
                                crisis that affects security or 
                                operation at the facility, such as a 
                                strike, fire, or flood;
                                    ``(VI) ensure that any expired 
                                product is segregated from other 
                                products and returned to the 
                                manufacturer or repackager or 
                                destroyed;
                                    ``(VII) maintain the capability to 
                                trace the receipt and outbound 
                                distribution of a product, and supplies 
                                and records of inventory; and
                                    ``(VIII) quarantine or destroy a 
                                suspect product if directed to do so by 
                                the respective manufacturer, wholesale 
                                distributor, dispenser, or an 
                                authorized government agency;
                    ``(D) provide for periodic inspection by the 
                licensing authority, as determined by the Secretary, of 
                such facility warehouse space to ensure compliance with 
                this section;
                    ``(E) prohibit a facility from having as a manager 
                or designated representative anyone convicted of any 
                felony violation of subsection (i) or (k) of section 
                301 or any violation of section 1365 of title 18, 
                United States Code relating to product tampering;
                    ``(F) provide for mandatory background checks of a 
                facility manager or a designated representative of such 
                manager;
                    ``(G) require a third-party logistics provider to 
                provide the applicable licensing authority, upon a 
                request by such authority, a list of all product 
                manufacturers, wholesale distributors, and dispensers 
                for whom the third-party logistics provider provides 
                services at such facility; and
                    ``(H) include procedures under which any third-
                party logistics provider license--
                            ``(i) expires on the date that is 3 years 
                        after issuance of the license; and
                            ``(ii) may be renewed for additional 3-year 
                        periods.
            ``(3) Procedure.--In promulgating the regulations under 
        this subsection, the Secretary shall, notwithstanding section 
        553 of title 5, United States Code--
                    ``(A) issue a notice of proposed rulemaking that 
                includes a copy of the proposed regulation;
                    ``(B) provide a period of not less than 60 days for 
                comments on the proposed regulation; and
                    ``(C) provide that the final regulation takes 
                effect upon the expiration of 1 year after the date 
                that such final regulation is issued.
    ``(e) Validity.--A license issued under this section shall remain 
valid as long as such third-party logistics provider remains licensed 
consistent with this section. If the Secretary finds that the third-
party accreditation program demonstrates that all applicable 
requirements for licensure under this section are met, the Secretary 
shall issue a license under this section to a third-party logistics 
provider receiving accreditation, pursuant to subsection (d)(2)(A).

``SEC. 585. UNIFORM NATIONAL POLICY.

    ``(a) Product Tracing and Other Requirements.--Beginning on the 
date of enactment of the Drug Supply Chain Security Act, no State or 
political subdivision of a State may establish or continue in effect 
any requirements for tracing products through the distribution system 
(including any requirements with respect to statements of distribution 
history, transaction history, transaction information, or transaction 
statement of a product as such product changes ownership in the supply 
chain, or verification, investigation, disposition, notification, or 
recordkeeping relating to such systems, including paper or electronic 
pedigree systems or for tracking and tracing drugs throughout the 
distribution system) which are inconsistent with, more stringent than, 
or in addition to, any requirements applicable under section 503(e) (as 
amended by such Act) or this subchapter (or regulations issued 
thereunder), or which are inconsistent with--
            ``(1) any waiver, exception, or exemption pursuant to 
        section 581 or 582; or
            ``(2) any restrictions specified in section 582.
    ``(b) Wholesale Distributor and Third-Party Logistics Provider 
Standards.--
            ``(1) In general.--Beginning on the date of enactment of 
        the Drug Supply Chain Security Act, no State or political 
        subdivision of a State may establish or continue any standards, 
        requirements, or regulations with respect to wholesale 
        prescription drug distributor or third-party logistics provider 
        licensure that are inconsistent with, less stringent than, 
        directly related to, or covered by the standards and 
        requirements applicable under section 503(e) (as amended by 
        such Act), in the case of a wholesale distributor, or section 
        584, in the case of a third-party logistics provider.
            ``(2) State regulation of third-party logistics 
        providers.--No State shall regulate third-party logistics 
        providers as wholesale distributors.
            ``(3) Administration fees.--Notwithstanding paragraph (1), 
        a State may administer fee collections for effectuating the 
        wholesale drug distributor and third-party logistics provider 
        licensure requirements under sections 503(e) (as amended by the 
        Drug Supply Chain Security Act), 583, and 584.
            ``(4) Enforcement, suspension, and revocation.--
        Notwithstanding paragraph (1), a State--
                    ``(A) may take administrative action, including 
                fines, to enforce a requirement promulgated by the 
                State in accordance with section 503(e) (as amended by 
                the Drug Supply Chain Security Act) or this subchapter;
                    ``(B) may provide for the suspension or revocation 
                of licenses issued by the State for violations of the 
                laws of such State;
                    ``(C) upon conviction of violations of Federal, 
                State, or local drug laws or regulations, may provide 
                for fines, imprisonment, or civil penalties; and
                    ``(D) may regulate activities of licensed entities 
                in a manner that is consistent with product tracing 
                requirements under section 582.
    ``(c) Exception.--Nothing in this section shall be construed to 
preempt State requirements related to the distribution of prescription 
drugs if such requirements are not related to product tracing as 
described in subsection (a) or wholesale distributor and third-party 
logistics provider licensure as described in subsection (b) applicable 
under section 503(e) (as amended by the Drug Supply Chain Security Act) 
or this subchapter (or regulations issued thereunder).''.

SEC. 206. PENALTIES.

    (a) Prohibited Act.--Section 301(t) (21 U.S.C. 331(t)), is 
amended--
            (1) by striking ``or'' after ``the requirements of section 
        503(d),''; and
            (2) by inserting ``, failure to comply with the 
        requirements under section 582, the failure to comply with the 
        requirements under section 584, as applicable,'' after ``in 
        violation of section 503(e)''.
    (b) Misbranding.--Section 502 (21 U.S.C. 352), as amended by 
section 103, is further amended by adding at the end the following:
    ``(cc) If it is a drug and it fails to bear the product identifier 
as required by section 582.''.

SEC. 207. CONFORMING AMENDMENT.

    (a) In General.--Section 303(b)(1)(D) (21 U.S.C. 333(b)(1)(D)) is 
amended by striking ``503(e)(2)(A)'' and inserting ``503(e)(1)''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on January 1, 2015.

SEC. 208. SAVINGS CLAUSE.

    Except as provided in the amendments made by paragraphs (1), (2), 
and (3) of section 204(a) and by section 206(a), nothing in this title 
(including the amendments made by this title) shall be construed as 
altering any authority of the Secretary of Health and Human Services 
with respect to a drug subject to section 503(b)(1) of the Federal 
Food, Drug, and Cosmetic Act (21 U.S.C. 353(b)(1)) under any other 
provision of such Act or the Public Health Service Act (42 U.S.C. 201 
et seq.).

            Passed the House of Representatives September 28, 2013.

            Attest:

                                                                 Clerk.
113th CONGRESS

  1st Session

                               H. R. 3204

_______________________________________________________________________

                                 AN ACT

To amend the Federal Food, Drug, and Cosmetic Act with respect to human 
    drug compounding and drug supply chain security, and for other 
                               purposes.
```