6708 Federal Register / Vol. 87, No. 24 / Friday, February 4, 2022 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

21 CFR Parts 10, 12, 16, and 205 

[Docket No. FDA–2020–N–1663] 

RIN 0910–AH11 

National Standards for the Licensure 

of Wholesale Drug Distributors and 

Third-Party Logistics Providers 

AGENCY: Food and Drug Administration, 

Department of Health and Human 

Services (HHS). 

ACTION: Proposed rule. 

SUMMARY: The Food and Drug 

Administration (FDA, the Agency, or 

we) is proposing national standards for 

the licensing of prescription drug 

wholesale distributors (‘‘wholesale 

distributors’’ or ‘‘wholesale drug 

distributors’’) and third-party logistics 

providers (‘‘3PLs’’), as directed under 

the Drug Supply Chain Security Act 

(DSCSA) (Title II of the Drug Quality 

and Security Act). Pursuant to the 

Federal Food, Drug, and Cosmetic Act 

(FD&C Act), as amended by the DSCSA, 

the proposed rule would establish 

standards for all State and Federal 

licenses issued. 

DATES: Submit either electronic or 

written comments on the proposed rule 

by June 6, 2022. Submit comments on 

information collection issues under the 

Paperwork Reduction Act of 1995 by 

March 7, 2022. 

ADDRESSES: You may submit comments 

as follows. Please note that late, 

untimely filed comments will not be 

considered. The https://

www.regulations.gov electronic filing 

system will accept comments until 

11:59 p.m. Eastern Time on June 6, 

2022. Electronic comments must be 

submitted on or before that date. 

Comments received by mail/hand 

delivery/courier (for written/paper 

submissions) will be considered timely 

if they are postmarked or the delivery 

service acceptance receipt is on or 

before that date. 

Electronic Submissions 

Submit electronic comments in the 

following way: 

• Federal eRulemaking Portal: 

https://www.regulations.gov. Follow the 

instructions for submitting comments. 

Comments submitted electronically, 

including attachments, to https://

www.regulations.gov will be posted to 

the docket unchanged. Because your 

comment will be made public, you are 

solely responsible for ensuring that your 

comment does not include any 

confidential information that you or a 

third party may not wish to be posted, 

such as medical information, your or 

anyone else’s Social Security number, or 

confidential business information, such 

as a manufacturing process. Please note 

that if you include your name, contact 

information, or other information that 

identifies you in the body of your 

comments, that information will be 

posted on https://www.regulations.gov. 

• If you want to submit a comment 

with confidential information that you 

do not wish to be made available to the 

public, submit the comment as a 

written/paper submission and in the 

manner detailed (see ‘‘Written/Paper 

Submissions’’ and ‘‘Instructions’’). 

Written/Paper Submissions 

Submit written/paper submissions in 

the following ways: 

• Mail/Hand Delivery/Courier (for 

written/paper submissions): Dockets 

Management Staff (HFA–305), Food and 

Drug Administration, 5630 Fishers 

Lane, Rm. 1061, Rockville, MD 20852. 

• For written/paper comments 

submitted to the Dockets Management 

Staff, FDA will post your comment, as 

well as any attachments, except for 

information submitted, marked and 

identified, as confidential, if submitted 

as detailed in ‘‘Instructions.’’ 

Instructions: All submissions received 

must include the Docket No. FDA– 

2020–N–1663 for ‘‘National Standards 

for the Licensure of Wholesale Drug 

Distributors and Third-Party Logistics 

Providers.’’ Received comments, those 

filed in a timely manner (see 

ADDRESSES), will be placed in the docket 

and, except for those submitted as 

‘‘Confidential Submissions,’’ publicly 

viewable at https://www.regulations.gov 

or at the Dockets Management Staff 

between 9 a.m. and 4 p.m., Monday 

through Friday, 240–402–7500. 

• Confidential Submissions—To 

submit a comment with confidential 

information that you do not wish to be 

made publicly available, submit your 

comments only as a written/paper 

submission. You should submit two 

copies total. One copy will include the 

information you claim to be confidential 

with a heading or cover note that states 

‘‘THIS DOCUMENT CONTAINS 

CONFIDENTIAL INFORMATION.’’ The 

Agency will review this copy, including 

the claimed confidential information, in 

its consideration of comments. The 

second copy, which will have the 

claimed confidential information 

redacted/blacked out, will be available 

for public viewing and posted on 

https://www.regulations.gov. Submit 

both copies to the Dockets Management 

Staff. If you do not wish your name and 

contact information to be made publicly 

available, you can provide this 

information on the cover sheet and not 

in the body of your comments and you 

must identify this information as 

‘‘confidential.’’ Any information marked 

as ‘‘confidential’’ will not be disclosed 

except in accordance with 21 CFR 10.20 

and other applicable disclosure law. For 

more information about FDA’s posting 

of comments to public dockets, see 80 

FR 56469, September 18, 2015, or access 

the information at: https://

www.govinfo.gov/content/pkg/FR-2015- 

09-18/pdf/2015-23389.pdf. 

Docket: For access to the docket to 

read background documents or the 

electronic and written/paper comments 

received, go to https://

www.regulations.gov and insert the 

docket number, found in brackets in the 

heading of this document, into the 

‘‘Search’’ box and follow the prompts 

and/or go to the Dockets Management 

Staff, 5630 Fishers Lane, Rm. 1061, 

Rockville, MD 20852, 240–402–7500. 

Submit comments on information 

collection issues under the Paperwork 

Reduction Act of 1995 to the Office of 

Management and Budget (OMB) at 

https://www.reginfo.gov/public/do/ 

PRAMain. Find this particular 

information collection by selecting 

‘‘Currently under Review—Open for 

Public Comments’’ or by using the 

search function. The title of this 

proposed collection is ‘‘National 

Standards for the Licensure of 

Wholesale Drug Distributors and ThirdParty Logistics Providers.’’ 

FOR FURTHER INFORMATION CONTACT: 

Aaron Weisbuch, Center for Drug 

Evaluation and Research, Food and 

Drug Administration, 10903 New 

Hampshire Ave., Bldg. 51, Rm. 4261, 

Silver Spring, MD 20993, 301–796– 

3130. With regard to the information 

collection: Domini Bean, Office of 

Operations, Food and Drug 

Administration, Three White Flint 

North, 10A–12M, 11601 Landsdown St., 

North Bethesda, MD 20852, 301–796– 

5733, PRAStaff@fda.hhs.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Executive Summary 

A. Purpose of the Proposed Rule 

B. Summary of the Major Provisions of the 

Proposed Rule 

C. Legal Authority 

D. Costs and Benefits 

II. Table of Abbreviations/Commonly Used 

Acronyms in This Document 

III. Background 

A. Introduction 

B. Need for the Regulation: The DSCSA 

and Establishment of National Standards 

for Licensure 


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C. Changes From the Prescription Drug 

Marketing Act (PDMA) 

IV. Legal Authority 

V. Description of the Proposed Rule 

A. Scope/Applicability (Proposed §§ 205.1 

and 205.2) 

B. Definitions (Proposed § 205.3) 

C. National Standards for Third-Party 

Logistics Providers 

D. Approved Organizations for Third-Party 

Logistics Providers 

E. National Standards for Wholesale 

Distributors 

F. Approved Organizations for Wholesale 

Distributors 

VI. Proposed Effective/Compliance Dates 

VII. Preliminary Economic Analysis of 

Impacts 

VIII. Analysis of Environmental Impact 

IX. Paperwork Reduction Act of 1995 

X. Federalism 

A. Scope of Preemption 

B. Effective Date of Preemption 

XI. Consultation and Coordination With 

Indian Tribal Governments 

XII. References 

I. Executive Summary 

A. Purpose of the Proposed Rule 

The Drug Quality and Security Act 

(DQSA) was enacted on November 27, 

2013. Title II of the DQSA, the Drug 

Supply Chain Security Act (DSCSA), 

includes provisions designed to 

strengthen the integrity of the 

pharmaceutical distribution supply 

chain. Among other measures, section 

204 of the DSCSA amends section 

503(e) of the FD&C Act (21 U.S.C. 

353(e)), which requires licensure of 

prescription drug wholesale distributors 

(wholesale distributors or wholesale 

drug distributors or WDDs) and adds 

section 583 to the FD&C Act (21 U.S.C. 

360eee–2), which requires FDA to 

establish by regulation national 

standards for the licensure of 

prescription drug wholesale 

distributors. Section 205 of the DSCSA 

adds section 584 to the FD&C Act (21 

U.S.C. 360eee–3), which requires 

licensure of third-party logistics 

providers and requires FDA to establish, 

by regulation, national standards for the 

licensure of third-party logistics 

providers. 

This proposed regulation, when 

finalized, will establish the national 

standards for the licensure of wholesale 

drug distributors and 3PLs required 

under sections 583 and 584 of the FD&C 

Act, as amended by the DSCSA. As 

required by statute, the standards, terms 

and conditions for licensure established 

by this regulation will apply to both 

Federal and State licenses (503(e)(1)(B), 

583(b), and 584(a)(1)(A) of the FD&C 

Act). 

As discussed in section X 

(Federalism), section 585(b)(1) of the 

FD&C Act (21 U.S.C. 360eee–4(b)(1)) 

preempts States and localities from 

establishing or continuing requirements 

for 3PL or WDD licensure that are 

different from the national standards 

and requirements applicable under 

sections 584 and 503(e) of the FD&C 

Act. However, the statutory provisions 

themselves do not establish these 

‘‘standards and requirements’’; instead, 

this regulation, once effective, will 

establish them. Accordingly, State and 

local licensure requirements will be 

preempted only once this regulation, 

when finalized, takes effect; until such 

time, current licensing of WDDs and 

3PLs may continue. As discussed below, 

this determination will help avoid 

supply chain disruption, based on 

licensing uncertainties, during the 

period between DSCSA’s enactment and 

the effective date of this regulation. 

Avoiding such interim period supply 

chain issues accords with Congress’s 

overall intent to secure and strengthen 

the supply chain, as evidenced by other 

FD&C Act provisions added by DSCSA 

that recognize State licensure of WDDs 

and 3PLs prior to this regulation 

becoming effective. 

In addition, pursuant to section 585(c) 

of the FD&C Act (21 U.S.C. 360eee–4(c)), 

regulation of areas within the historical 

police powers of the States would be 

unaffected by this regulation, including 

prohibiting employees of WDDs and 

3PLs from engaging in criminal activity 

related to prescription drugs, provided 

that the State requirements involved are 

not related to licensure of 3PLs or 

WDDs. 

The requirements for state licensing of 

wholesale distributors are currently 

established under 21 CFR part 205, and 

FDA is now proposing the withdrawal 

of that regulation and for part 205 to be 

replaced with this proposed rule. Where 

a state from which a drug is being 

distributed has not established a 

licensing program in accordance with 

the regulation, the DSCSA establishes 

FDA as the licensing authority for 

wholesale distributor and 3PL licenses 

(sections 503(e)(1)(A)(i)(II) and 

584(a)(1)(B) of the FD&C Act). When 

finalized, the national standards set 

forth in the proposed rule will provide 

greater assurance that these supply 

chain participants are sufficiently vetted 

and qualified to distribute products, 

further strengthening the supply chain 

and the safety of prescription drugs 

provided to American consumers. 

When finalized, this proposed rule 

will also set forth the standards 

applicable to, and the requirements for 

approval of, third-party organizations 

involved in the licensure and inspection 

process (‘‘approved organizations’’ or 

‘‘AOs’’). Sections 583(c) and 

584(d)(2)(A) of the FD&C Act provide, 

respectively, that FDA may approve 

‘‘third-party accreditation’’ or 

inspection services or programs to 

conduct inspections of facilities used by 

wholesale distributors seeking licensure 

and to review the qualifications of 3PLs 

for licensure. This proposed rule will 

also address the standards and 

requirements for approving such thirdparty accreditation or inspection 

services or programs. 

Overall, this proposed rule is 

designed to ensure that the supply chain 

remains secure and that those 

prescription drugs subject to the DSCSA 

that are moving through the supply 

chain are properly stored, handled, and 

transported. These measures are 

intended to help protect American 

consumers from drugs that may be 

counterfeit, stolen, contaminated, or 

otherwise harmful. 

For purposes of this proposed rule, 

FDA has defined ‘‘entity’’ or ‘‘entities’’ 

to mean a business organization, such as 

a corporation, company, association, 

firm, partnership, society, or joint stock 

company. Unless otherwise noted, the 

term ‘‘3PL’’ or ‘‘third-party logistics 

provider’’ in this proposed rule includes 

both the 3PL entity and the individual 

3PL facilities requiring a license. 

B. Summary of the Major Provisions of 

the Proposed Rule 

FDA is proposing to replace the 

current part 205 with a new part 205 

that will implement the licensure 

requirements of the DSCSA and govern 

licensure of 3PLs and wholesale 

distributors. When finalized, the new 

part 205 will replace the existing part 

205 in its entirety. Subpart A will set 

forth the national licensing standards 

for State and Federal licenses issued to 

3PLs pursuant to section 584 of the 

FD&C Act, and subpart C will set forth 

the national licensing standards for 

State and Federal licenses issued to 

wholesale distributors pursuant to 

sections 503(e) (as amended) and 583 of 

the FD&C Act. Subparts B and D will set 

forth the applicable standards and 

processes for approved organizations to 

perform licensure reviews and conduct 

inspections. 

1. National Standards for the Licensure 

of Third-Party Logistics Providers 

The DSCSA identifies 3PLs as 

separate members of the drug supply 

chain—distinct from wholesale drug 

distributors—and specifically precludes 

States from regulating 3PLs as wholesale 

distributors (585(b)(2) of the FD&C Act). 

FDA is required by section 584 of the 

FD&C Act to establish national 

standards for the licensure of 3PLs, and 


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the Agency is proposing those standards 

in subpart A of proposed part 205. 

When finalized, each facility of an 

entity meeting the definition of a 3PL in 

section 581(22) of the FD&C Act (21 

U.S.C. 360eee(22)) will be required to be 

licensed by a State or Federal licensing 

authority in accordance with the 

standards articulated in subpart A of 

proposed part 205. 

2. National Standards for the Licensure 

of Wholesale Drug Distributors 

Prior to DSCSA’s enactment, 

wholesale distributors engaging in 

interstate commerce were required to be 

licensed by the State in which they were 

operating pursuant to section 503(e)(2) 

of the FD&C Act (as then in effect). This 

section established minimum standards, 

terms, and conditions for licensing of 

wholesale distributors pre-DSCSA. As 

required by sections 503(e)(1)(B) (as 

amended by the DSCSA) and 583 of the 

FD&C Act, FDA is proposing to establish 

national standards, terms, and 

conditions through this rulemaking for 

the licensure of wholesale distributors 

that, when final, will apply to all State 

licensing programs as well as to the new 

Federal licensing program to be 

operated by FDA. These new standards 

would replace the previous standards 

set forth in current part 205. 

3. Approval of Third Parties To Conduct 

Licensure Reviews and Inspections 

In accordance with section 

584(d)(2)(A) of the FD&C Act, FDA is 

proposing to establish a process by 

which third-party organizations will be 

approved by FDA to review a 3PL’s 

qualifications for licensure. In addition, 

in accordance with section 583(c) of the 

FD&C Act, FDA is proposing to establish 

a process by which third-party 

organizations will be approved by FDA 

to conduct inspections of wholesale 

distributors for the purpose of licensure. 

4. Conforming Changes 

The regulation also proposes to 

amend 21 CFR 10.50(c) and 12.21(a)(2), 

which list statutory authorities that 

provide the opportunity for a formal 

evidentiary public hearing under 21 

CFR part 12. Because the regulation 

proposes that wholesale distributors and 

3PLs could request a formal evidentiary 

public hearing under part 12 for review 

of decisions affecting the denial, 

suspension, or revocation of 3PL or 

wholesale distributor licenses issued by 

the Secretary of Health and Human 

Services (Secretary), sections 503(e), 

583, and 584 of the FD&C Act would be 

added to the list of statutory sections 

under which there is the opportunity for 

a hearing under §§ 10.50(c) and 

12.21(a)(2), regarding such decisions. 

We are also proposing a conforming 

change to 21 CFR 16.1(b) to describe 

procedures for regulatory hearings that 

would add actions related to approved 

organizations under proposed §§ 205.19 

and 205.33 respectively, including 

revocation or suspension of approval, to 

the list of actions for which a regulatory 

hearing under 21 CFR part 16 may be 

held. 

C. Legal Authority 

We are issuing this proposed rule 

under sections 301, 501, 502, 503(e), 

582, 583, 584, 585, 701(a), and 704 of 

the FD&C Act (21 U.S.C. 331, 351, 352, 

353(e), 360eee–1, 360eee–2, 360eee–3, 

360eee–4, 371(a), and 374). 

D. Costs and Benefits 

In this rulemaking, we propose new 

national standards for the licensing of 

prescription drug wholesale distributors 

and third-party logistics providers as 

directed under the Drug Supply Chain 

Security Act, Title II of the Drug Quality 

and Security Act. If finalized, the rule 

would also establish a Federal licensing 

system for wholesale drug distributors 

and third-party logistics providers to 

use in the absence of a state licensure 

program that is consistent with the 

proposed national standards. 

The standards for prescription drug 

wholesale distribution in the proposed 

rule would result in benefits to 

consumers and benefits to distributors 

from reducing the diversion of 

prescription drugs. Other monetized 

benefits include cost savings from 

reducing the frequency and quantity of 

licensure applications and cost savings 

from reducing state licensing standards 

in some states. We estimate that the 

annualized benefits over 10 years would 

range from $1.25 million to $31.50 

million at a 7 percent discount rate, 

with a primary estimate of $10.66 

million. We estimate that the 

annualized benefits would range from 

$1.26 million to $32.18 million at a 3 

percent discount rate, with a primary 

estimate of $10.89 million. 

We also expect that the proposed rule, 

if finalized, would impose costs on 

wholesale drug distributors, third-party 

logistics providers, states, approved 

organizations, and the Food and Drug 

Administration (FDA). Costs to 

wholesale drug distributors and thirdparty logistics providers include costs of 

learning about the rule, reporting to 

FDA, undergoing routine inspections, 

writing and revising standard operating 

procedures, and conducting background 

checks. Wholesale-drug distributors 

would also incur costs to furnish surety 

bonds to their state licensing authority 

to obtain or renew their licenses. 

Costs to states include the time spent 

reading and understanding the rule, 

passing or revising the laws and 

regulations governing their licensure 

programs, and inspecting WDD and 3PL 

facilities. Approved organizations 

would incur legal, application, and 

training costs, as well as costs to inspect 

WDD and 3PL facilities. FDA costs 

include the costs to establish and 

operate a reporting database and a 

licensure program for wholesale drug 

distributors and third-party logistics 

providers and the costs to establish and 

operate an approval program for 

approved organizations. 

We estimate that the annualized costs 

over 10 years would range from $13.21 

million to $20.63 million at a 7 percent 

discount rate, with a primary estimate of 

$16.92 million. We estimate that the 

annualized costs over 10 years at a 3 

percent discount rate would range from 

$12.83 million to $20.10 million, with a 

primary estimate of $16.47 million. 

II. Table of Abbreviations/Commonly 

Used Acronyms in This Document 

Abbreviation/ 

acronym What it means 

3PL ............... Third-Party Logistics Provider. 

AO ................. Approved Organization. 

CFR .............. Code of Federal Regulations. 

DSCSA ......... Drug Supply Chain Security Act. 

DQSA ............ Drug Quality and Security Act. 

FDA or the 

Agency.

U.S. Food and Drug Administration. 

FD&C Act ...... Federal Food, Drug, and Cosmetic 

Act. 

III. Background 

A. Introduction 

The DSCSA (Title II of Pub. L. 113– 

54) was signed into law on November 

27, 2013, to better protect the U.S. drug 

supply chain. FDA’s implementation of 

the DSCSA includes many activities, 

including this proposed rule. Once 

final, this rule will establish national 

standards for licensure of wholesale 

distributors and 3PLs, as required by the 

DSCSA. For information on additional 

FDA activities related to the DSCSA, a 

web page describing FDA’s 

implementation activities can be found 

at: https://www.fda.gov/Drugs/ 

DrugSafety/DrugIntegrityand

SupplyChainSecurity/DrugSupplyChain

SecurityAct/default.htm. 

B. Need for the Regulation: The DSCSA 

and Establishment of National 

Standards for Licensure 

The U.S. drug supply chain remains 

one of the safest in the world. However, 

the increasingly globalized nature of the 

supply chain brings with it complexities 


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that increase threats to the safety and 

security of the U.S. drug supply. A 

breach at any point in the supply chain 

carries potential for dangerous, and 

even deadly, outcomes for American 

consumers. 

In passing the DSCSA, Congress 

recognized the need for national 

standards for the storage, handling, and 

transport of prescription drugs and 

directed FDA, in sections 583(a) and 

584(d) of the FD&C Act, to establish 

such standards by regulation for WDDs 

and 3PLs, respectively. These national 

standards will help diminish 

opportunities for dangerous and 

criminal conduct affecting the supply of 

prescription drugs in the United States. 

When final, every U.S. wholesale 

distributor and 3PL facility will be held 

to these standards through the statute’s 

licensure requirements. Where a State 

does not have a licensing program in 

accordance with the regulation, FDA 

will be the licensing authority. 

This proposed rule, when finalized, 

will provide much needed certainty and 

clarity for wholesale distributors and 

3PLs seeking licensure. In passing the 

DSCSA, Congress believed the existing 

system of different regulation regarding 

supply chain security by each state 

created a patchwork system of 

governance and that a uniform national 

standard would address this concern. 

See statements of Senator Mikulski (Ref 

1), Congressmen Mathis (Ref 2) and 

Congressman Latta (Ref 3). 

Requirements for wholesale 

distributors currently vary significantly 

across State lines, and many wholesale 

distributors and 3PLs have facilities in 

multiple States. Specifically, State 

requirements and standards for 

licensure can vary on topics such as the 

length of time for which records must be 

maintained; qualifications of facility 

managers and designated 

representatives; facility requirements; 

licensure duration; renewal procedures; 

exemptions from the definition of 

wholesale distribution; and inspection 

and approval requirements by certain, 

specific organizations in order to receive 

licensure in certain States. This 

proposed rule, when finalized will be an 

important first step in harmonizing 

these requirements, thus allowing for 

greater compliance and management of 

licensure. 

Additionally, we note that 

commenters on FDA’s draft guidance 

entitled ‘‘The Effect of Section 585 of 

the FD&C Act on Drug Product Tracing 

and Wholesale Drug Distributor and 

Third-Party Logistics Provider Licensing 

Standards and Requirements: Questions 

and Answers’’ (Ref 4) agreed that 

creation of a uniform national standard 

for licensure, through the issuance of 

these regulations, should be the goal of 

FDA (see, e.g., Ref 5). Commenters 

noted that the patchwork of licensing 

standards was precisely the regulatory 

burden that the DSCSA was intended to 

eliminate. (see, e.g., Ref 6) Comments 

added that tracking and complying with 

different standards in different States on 

a continuing basis would be very time 

consuming and add unnecessary costs 

to the distribution chain (see, e.g., Ref 

7). 

We believe that the issuance of these 

regulations, when finalized, will 

provide far greater clarity to both States 

and regulated industry as to the 

requirements and expectations FDA has 

with respect to licensure. The 

publication of these regulations, when 

finalized, and the approach to 

preemption discussed in this document 

will reflect the national standard 

Congress intended, but will detail FDA’s 

expectations with respect to licensure. 

This will allow for greater certainty in 

the logistics and distribution industry, 

and in the supply chain as a whole. 

Since the passage of DSCSA, States 

have implemented disparate policies 

with respect to licensure of 3PLs. Some 

States repealed or eliminated 3PL as a 

licensure category, others are waiting for 

FDA to publish its regulations before 

determining how to proceed, some are 

licensing 3PLs under some other form of 

licensure, and some do not regulate 

3PLs at all (Ref 8). These regulations, 

when finalized, will provide certainty 

and clarity in the logistics industry. 

The Agency believes finalizing these 

proposed regulations is crucial to 

implementation of licensure of 3PLs as 

intended by DSCSA. Under section 

582(a)(7) of the FD&C Act (21 U.S.C. 

360eee–1(a)(7)), 3PLs are deemed 

licensed until the effective date of these 

regulations unless the Secretary has 

made a finding that the 3PL does not 

utilize good handling and distribution 

practices and publishes notice thereof. 

Until these regulations are issued, and 

the framework for licensure established, 

the Agency cannot institute the 

provisions and the goals of DSCSA—to 

further secure the supply chain by 

including 3PLs as an authorized 

member of the supply chain through the 

licensure provisions, which will ensure 

that they are appropriately credentialed, 

inspected, and therefore duly qualified 

to participate in the supply chain. 

Theft and diversion of prescription 

drugs continue to be major issues, 

contributing to drug shortages and 

creating significant financial losses, the 

effects of which cascade throughout the 

supply chain to consumers. FDA has 

observed that these instances often 

involve products distributed by 

unlicensed wholesale distributors. FDA 

standards, oversight, and regulations, 

including to implement the 

requirements of DSCSA, will lessen and 

hopefully eliminate product diversion 

in the legitimate supply chain. 

According to the National Association 

of Boards of Pharmacy (NABP)’s 2013 

report entitled ‘‘Wholesale Drug 

Distribution: Protecting the Integrity of 

the Nation’s Prescription Drug Supply,’’ 

drug diverters and bad actors seek out 

gaps in the distribution and regulatory 

structure, specifically seeking out States 

whose licensure framework is less 

stringent (Ref. 9). This proposed rule, 

when finalized, and the preemption of 

inconsistent State provisions will 

remedy this forum shopping for drug 

diverters who seek to take advantage of 

the lack of uniform framework. 

Additionally, NABP’s 2013 report also 

contends that the so-called ‘‘five percent 

rule’’ is a policy that has been ripe for 

exploitation due to the policy being 

inconsistently legislated, interpreted, 

and enforced from State to State. This 

was a policy under which FDA had 

previously concluded that sales of 

prescription drugs by a retail pharmacy 

to licensed practitioners for office use 

would be considered to be minimal and 

not constitute wholesale distribution, if 

the total dollar volume of these sales 

does not exceed 5 percent of the total 

dollar volume of that retail pharmacy’s 

annual prescription sales (see further 

discussion in ‘‘Definitions’’ section 

below). However, this interpretation 

was not codified. The NABP observed 

that ‘‘pharmacies acting as wholesalers 

have been found to take advantage of 

the parameters set by some States 

[regarding minimal quantities] when it 

comes to drug distribution. Rather than 

dispensing the drugs as mandated, these 

pharmacies retain them to resell to 

wholesalers at an amount exceeding the 

specified quantity of prescription 

medications as permitted in certain 

States (often times 5% of annual sales). 

Some have gone as far as to sell their 

entire inventory into the gray market’’ 

This proposed rule, when finalized, 

codifies the principle that the five 

percent rule only applies to pharmacy 

sales for office use. Sales above five 

percent for office use, or any sales to a 

wholesale distributor, require the 

pharmacy to become licensed and 

regulated as a wholesale distributor. 

This proposed rule will clarify this 

requirement and close a potential 

loophole that could lead to diversion of 

products and excessive sales from 

dispensers who are not licensed and 

registered as wholesale distributors 


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when they are engaging in wholesale 

distribution. 

Unlicensed wholesale distribution has 

been a major source of diverted 

products both leaving and reentering the 

supply chain. Significant amounts of 

drug diversion involve wholesale 

distributors, either diverting the product 

themselves from the supply chain, or 

purchasing product that was diverted by 

another actor. The DSCSA, which 

requires uniform national standards for 

licensure of wholesale distributors, will 

cut down on these types of instances of 

diversion since supply chain trading 

partners are required to transact with 

only other trading partners who meet 

the strict requirements laid out in these 

regulations. There are many examples of 

diversion and criminal action by 

wholesale distributors under the current 

regulatory scheme, which these 

regulations, when finalized, will 

discourage, or possibly even prevent, in 

the future. 

As an example, from 2007–2014, 

individuals involved with the 

Minnesota Independent Cooperative 

bought prescription drugs from a 

network of illegal and unlicensed 

sources and sold approximately $393 

million worth of diverted prescription 

drugs to wholesalers and retail 

pharmacies throughout the United 

States. These individuals falsified 

transactional documents, as well as 

licensure documents, to enter into 

fraudulent transactions with dispensers 

and other wholesalers. In a 2008 

example detailed in the indictment, the 

unlicensed individuals involved 

allegedly bought a truckload of stolen 

asthma inhalers for $662,000 and sold 

them through the Minnesota 

Independent Collective to another 

wholesaler for about $1 million (Ref 10). 

These regulations, when finalized, and 

the DSCSA requirements that trading 

partners only transact with authorized, 

licensed trading partners, and verify 

suspect and illegitimate product, will 

make these schemes far more difficult to 

achieve. Had DSCSA been the 

prevailing regulatory scheme at the 

time, other wholesale distributors and 

dispensers would have been deterred 

from doing business with the Minnesota 

Independent Collective because they 

were not an authorized trading partner. 

In 2014, two individuals pleaded 

guilty to their involvement in a drug 

diversion and distribution scheme 

through an entity called Cumberland 

Distribution. Both defendants admitted 

that Cumberland Distribution purchased 

prescription drugs from individuals and 

entities that were not licensed to engage 

in the wholesale distribution of 

prescription drugs and were not 

authorized to distribute prescription 

drugs. Cumberland Distribution then 

distributed these products to dispensers. 

The prescription drugs were acquired 

through various networks of ‘‘diverters’’ 

who obtained prescription drugs from 

other unlawful sources. As a result, 

Cumberland Distribution could not 

lawfully resell the drugs. Pharmacies 

throughout the United States purchased 

these diverted prescription drugs from 

Cumberland Distribution under the 

guise that the products had been in the 

custody of licensed wholesale 

distributors or other authorized 

distributors since being sold by the 

original manufacturer (Ref 11). Under 

DSCSA, the licensure status of these 

purported wholesale distributors is 

easily searchable and verifiable, thus 

making diversion schemes, such as this, 

far more difficult to achieve. In addition 

to requiring FDA to establish national 

licensure standards, the DSCSA outlines 

critical steps for building an electronic, 

interoperable system to identify and 

trace certain prescription drugs as they 

are distributed in the United States 

(section 582(g) of the FD&C Act). This 

system will enhance FDA’s ability to 

protect American consumers from 

exposure to drugs that may be unfit for 

distribution and will increase efficiency 

in the detection and removal of 

potentially dangerous drugs from the 

U.S. drug supply chain. 

The FD&C Act, as amended by 

DSCSA, requires FDA to establish 

national standards for the licensure of 

two critical members of the supply 

chain: wholesale drug distributors and 

3PLs. It also requires that only those 

wholesale distributors and 3PL facilities 

licensed according to these national 

standards may engage in wholesale 

distribution or 3PL activities, 

respectively. Only licensed wholesale 

drug distributors and 3PLs whose 

facilities are so licensed will be 

considered ‘‘authorized trading 

partners’’ permitted under the FD&C 

Act, as amended by DSCSA, to engage 

in transactions related to the sale and 

distribution of certain prescription 

drugs with other members of the supply 

chain. 

To create the standards proposed in 

the regulations, FDA conducted a 

comprehensive review of existing State 

standards for licensure including 

storing, handling, and holding 

prescription drugs, as well as other 

nationally recognized standards and 

model rules for wholesale distribution 

and logistics, such as those created by 

the NABP (Ref 12), Healthcare 

Distribution Alliance (Ref 13), World 

Health Organization (Ref 14), and the 

Pharmaceutical Inspection Convention 

and Pharmaceutical Inspection Cooperation Scheme (jointly referred to as 

PIC/S) (Ref 15). The Agency believes 

that the proposed standards align with 

existing practices and will help ensure 

that 3PL and wholesale distribution 

activities are undertaken in a manner 

that minimizes diversion and threats to 

the regulated supply chain. 

C. Changes From the Prescription Drug 

Marketing Act (PDMA) 

Prior to the DSCSA’s enactment, the 

last comprehensive legislative action 

related to prescription drug distribution 

was the Prescription Drug Marketing 

Act of 1987 (PDMA) (Pub. L. 100–293). 

Among other things, the PDMA required 

wholesale distributors to obtain licenses 

from States in which they were 

operating (sec. 6 of the PDMA; also see 

FDA’s 2001 Report to Congress on the 

PDMA (Ref 16)). Under the PDMA, FDA 

promulgated regulations that 

established minimum standards, terms, 

and conditions for licensure of 

wholesale distributors. The PDMA 

provided neither a specific definition of 

3PL-type entities nor specific oversight 

over them; without a distinct regulatory 

framework for 3PLs, some States chose 

to regulate and license 3PLs as 

wholesale distributors, with some others 

choosing to license 3PLs as separate 

entities. The DSCSA requires that all 

wholesale distributor and 3PL licenses 

meet the standards established by FDA 

(sections 503(e)(1)(B) and 584(a) of the 

FD&C Act), and that 3PLs not be 

licensed as wholesale distributors 

(section 585(b)(2) of the FD&C Act). 

If an entity owns a facility in which 

it is engaging in 3PL activities and 

wholesale distribution out of the same 

facility, the entity will be required to 

hold a 3PL license and a separate 

wholesale distributor license for the 

distinct functions they perform. 

IV. Legal Authority 

The Agency is proposing this rule 

under the authority to propose national 

standards for the licensing of wholesale 

distributors and 3PLs granted to it by 

various sections of the FD&C Act, 

including sections 301, 503(e), 582, 583, 

584, 585, 701(a), and 704 (21 U.S.C. 331, 

351, 352, 353(e), 360eee–1, 360eee–2, 

360eee–3, 360eee–4, 371(a), and 374). 

Section 503(e) requires wholesale 

distributors to be licensed according to 

the standards, terms, and conditions 

established by the Secretary, and section 

583 requires FDA to establish by 

regulation national standards for the 

licensure of prescription drug wholesale 

distributors. Section 584 requires 3PLs 

to be licensed according to standards 

established in regulations promulgated 


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by FDA for the licensure of 3PLs. 

Section 301(t) prohibits the failure to 

comply with the requirements under 

sections 584 and 503(e). Section 301 

also prohibits a number of actions 

concerning adulterated and misbranded 

drugs. Section 585 provides that states 

cannot implement licensing standards, 

requirements, or regulations that are 

inconsistent with, less stringent than, 

directly related to, or covered by the 

standards applicable under sections 

503(e) and 584. Section 585 also 

precludes states from regulating 3PLs as 

wholesale distributors. To enforce these 

and other provisions of the FD&C Act, 

section 704 authorizes FDA to conduct 

inspections. Section 701(a) of the FD&C 

Act provides general authority to issue 

regulations for the efficient enforcement 

of the FD&C Act. By establishing 

national standards for the licensing of 

wholesale distributors and 3PLs, this 

rule, when finalized, is expected to aid 

in the efficient administration and 

enforcement of the FD&C Act, and in 

particular would help efficiently enforce 

the provisions relating to licensure of 

wholesale drug distributors and 3PLs. 

V. Description of the Proposed Rule 

The national standards for the 

licensure of 3PLs, required by section 

584 of the FD&C Act, as amended by 

DSCSA, are set forth in subpart A of 

proposed part 205. The national 

standards for the licensure of wholesale 

distributors, required by sections 503(e) 

and 583 of the FD&C Act, as amended 

by DSCSA, are set forth in subpart C of 

proposed part 205. The process and 

standards for third-party accreditation 

programs to become approved by the 

Federal Government to evaluate the 

qualifications of 3PLs for licensure, as 

required by section 584(d) of the FD&C 

Act, are established in subpart B of 

proposed part 205. The process and 

standards for third-party accreditation 

and inspection services to become 

approved by the Federal Government to 

conduct inspections of wholesale 

distributors, as permitted by section 

583(c) of the FD&C Act, are set forth in 

subpart D of proposed part 205. 

A. Scope/Applicability (Proposed 

§§ 205.1 and 205.2) 

In accordance with section 584 of the 

FD&C Act, FDA is proposing to establish 

the national standards for licensing by 

State and Federal licensing authorities 

set forth in subpart A of part 205 that 

would apply to 3PL facilities in any 

State (see proposed § 205.1). 

Furthermore, in accordance with section 

503(e)(1) of the FD&C Act, FDA is 

proposing to establish the national 

standards for wholesale distributors set 

forth in subpart C of part 205 that would 

apply to wholesale distributors of 

prescription drugs in any State (see 

proposed § 205.1). The standards, terms, 

and conditions for licensure established 

under part 205, subparts A and C, once 

finalized, would apply to all State and 

Federal 3PL and wholesale distributor 

licenses. 

All 3PL facilities are required to 

obtain a 3PL license for each facility of 

such 3PL. The FD&C Act, as amended 

by DSCSA, prohibits States from 

regulating 3PLs as wholesale 

distributors. A 3PL that also engages in 

wholesale distribution in the same 

facility in which it engages in 3PL 

activities must obtain a separate 

wholesale distribution license (see 

proposed § 205.1). 

An entity is considered a wholesale 

distributor if the entity is engaged in the 

distribution of a drug subject to section 

503(b) (relating to prescription drugs) of 

the FD&C Act (21 U.S.C. 353(b)), to a 

person other than a consumer or patient, 

with a few exclusions. Under section 

201(g) of the FD&C Act (21 U.S.C. 

321(g)), a drug includes a bulk drug 

substance, and under current FDA 

regulations, the term bulk drug 

substance means any substance that is 

represented for use in a drug and that, 

when used in the manufacturing, 

processing, or packaging of a drug, 

becomes an active ingredient or a 

finished dosage form of the drug. The 

term does not include intermediates 

used in the synthesis of such substances 

(21 CFR 203.3(e)). FDA believes that the 

distribution of bulk drug substances 

must have the same safeguards and 

provisions as the distribution of 

finished drug products. The same 

safeguards that prevent diversion and 

theft and secure the pharmaceutical 

distribution supply chain generally 

must include the transfer of bulk drug 

substances, as they are subject to the 

same concerns as the distribution of 

prescription drugs in finished dosage 

form. 

FDA is proposing to establish the 

process and standards that would apply 

to any third-party accreditation or 

inspection services seeking to obtain or 

maintain approval by FDA to evaluate 

qualifications of 3PLs for licensure or to 

conduct inspections of wholesale 

distributors (see proposed § 205.1). 

Once finalized, proposed subparts B and 

D of part 205 would establish the 

process and standards for third-party 

accreditation and inspection services to 

become approved by the Secretary to 

review the qualifications of 3PLs for 

licensure, as required by section 584(d) 

of the FD&C Act, and to conduct 

inspections of wholesale distributors, as 

permitted by section 583(c) of the FD&C 

Act (see proposed § 205.2) (i.e., to 

become ‘‘approved organizations’’). 

B. Definitions (Proposed § 205.3) 

By its terms, the definitions of terms 

in section 581 of the FD&C Act (21 

U.S.C. 360eee) applies in subchapter H. 

However, because those terms are also 

used throughout section 503(e) of the 

FD&C Act (as amended by the DSCSA), 

FDA considers the definitions and 

interpretations contained in section 581 

of the FD&C Act to apply to those terms 

when used in proposed part 205. 

Specifically, the definitions of the 

following terms contained in section 

581 of the FD&C Act apply when used 

in proposed part 205: Affiliate, 

authorized, dispenser, illegitimate 

product, licensed, manufacturer, 

product, repackager, return, specific 

patient need, suspect product, thirdparty logistics provider, and wholesale 

distributor. In addition, FDA is 

proposing the definition of the 

following additional terms to help 

clarify the requirements. FDA believes 

that these proposed definitions align 

with existing law and regulations, as 

well as current industry practices. 

• 3PL Activities: Includes 

warehousing and ‘‘other logistics 

services’’ that are undertaken with 

respect to a product (as defined in 

proposed § 205.3(k)). 

• Change of Entity Ownership: 

Recognizing that businesses often 

undergo changes in corporate structure 

through mergers, acquisitions, and other 

transactions, FDA proposes that 

‘‘change of entity ownership’’ be 

defined to help ensure consistency with 

regard to how such changes will affect 

licensure. The definition describes the 

events that would constitute a change in 

ownership with respect to a partnership, 

unincorporated sole proprietorship, 

corporation, or limited liability 

company. 

• Co-Licensed Partner: One of two or 

more entities that have entered into an 

agreement for the right to engage in the 

marketing of a prescription drug. The 

Agency believes this definition is in 

alignment with industry practice and 

existing laws. 

• Designated Representative: An 

individual who is designated as the 

representative of the facility manager 

and, as such, is identified by the 

licensee as responsible for managing the 

daily operation of the establishment in 

compliance with licensure requirements 

and has the authority to implement 

corrective action when necessary. This 

individual is also responsible for 

ensuring that personnel are 

appropriately qualified, assigned, and 


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trained to accomplish their duties. The 

Agency believes this definition reflects 

current practices and understanding. 

• Entity or Entities: A business 

organization, such as a corporation, 

company, association, firm, partnership, 

society, sole proprietorship, or joint 

stock company. 

• Facility: A site at one general, 

permanent, physical location used to 

store or handle prescription drugs. For 

purposes of proposed part 205, a facility 

does not include a site, such as a 

corporate office or headquarters, where 

the sole activity conducted at the site is 

one of oversight, support, or business 

administrative function. 

• Key Personnel: Any individual who 

has responsibility for managing the 

operations of the wholesale distributor, 

including any principal, owner, 

director, officer of the wholesale 

distributor, designated representatives, 

and other individuals who are 

authorized to enter areas where 

prescription drugs are held and are 

likely to handle those prescription drugs 

as a part their responsibilities within the 

operation. 

Æ Section 583(b)(5) of the FD&C Act, 

as amended by DSCSA, requires that 

FDA establish standards for the 

‘‘establishment and implementation of 

qualifications for key personnel’’ of 

wholesale distributors. These key 

personnel must be sufficiently qualified 

and screened to carry out the important 

responsibilities that come with 

positions within a wholesale 

distribution company. FDA believes 

individuals who hold these positions 

must be held to a high standard of 

qualification as they are entrusted with 

important aspects of protecting the 

pharmaceutical distribution supply 

chain. 

• Minimal Quantities: An annual 

dollar volume of prescription drugs sold 

by a retail pharmacy to licensed 

practitioners for office use that does not 

exceed 5 percent of the total dollar 

volume of that retail pharmacy’s annual 

prescription sales. 

Æ Section 503(e)(4) of the FD&C Act 

excludes a number of activities from the 

definition of wholesale distribution. 

One excluded category, listed at section 

503(e)(4)(E) of the FD&C Act, is ‘‘the 

distribution of minimal quantities of a 

drug by a licensed retail pharmacy to a 

licensed practitioner for office use.’’ 

FDA has previously considered what 

constitutes minimal quantities in 

determining when the practices of a 

retail pharmacy become wholesale drug 

distribution and thereby subject to 

licensure (see 64 FR 67720, December 3, 

1999). For example, in preamble 

discussions around codifying provisions 

related to wholesale distribution, FDA 

proposed a minimal quantities limit, 

considered comments, and ultimately 

concluded that sales of prescription 

drugs by a retail pharmacy to licensed 

practitioners for office use would be 

considered to be minimal and not 

wholesale distribution, if the total dollar 

volume of these sales does not exceed 

5 percent of the total dollar volume of 

that retail pharmacy’s annual 

prescription sales. 

Æ The Agency continues to maintain 

its position that a 5-percent limit to 

what constitutes minimal quantities is 

sufficient ‘‘to meet the needs of licensed 

practitioners who may not purchase 

enough prescription drugs to go through 

a wholesale distributor and thus may 

not otherwise be able to easily obtain 

drugs for office use’’ (64 FR 67720 at 

67748). We believe this standard is still 

relevant and is the industry standard. 

We note that in January 2013, the NABP 

passed a resolution that supports 

limiting the five percent rule to allow 

for transfer ‘‘between pharmacies, or 

from pharmacy to or from pharmacies to 

practitioners, only for the purpose of 

dispensing or administration, but not for 

resale; and to prohibit the transfer, 

distribution, or sale of prescription 

drugs from pharmacies to wholesalers 

for resale’’ (Ref 17). The transfer or sale 

from dispenser to dispenser for a 

specific patient need is already 

considered to not be wholesale 

distribution under the FD&C Act (see 

section 503(e)(4)). This NABP resolution 

accords with FDA’s proposed definition 

of minimal quantities. We request 

comment on the codification of this 5 

percent limit for office use and of the 

definition of minimal quantities. 

Æ Accordingly, a licensed retail 

pharmacy that distributes more than 5 

percent of its annual sales to licensed 

practitioners is engaging in wholesale 

distribution, subject to all the 

requirements for wholesale distributors, 

unless its activities are otherwise 

excluded from the definition of 

wholesale distribution. The exemption 

for distributing minimal quantities of 

drugs by retail pharmacies to licensed 

practitioners for office use was ‘‘not 

created to confer a special benefit on 

retail pharmacies, but to meet the 

legitimate need of licensed 

practitioners’’ (64 FR 67720 at 67748). 

For purposes of section 503(e)(4)(E) of 

the FD&C Act, FDA is proposing to 

codify its position on ‘‘minimal 

quantities’’ in the proposed § 205.3(h) to 

mean the ‘‘total annual dollar amount 

sold to licensed practitioners for office 

use does not exceed 5 percent of the 

total dollar volume of that retail 

pharmacy’s annual prescription drug 

sales.’’ 

Æ The Agency also notes that this 

exclusion only applies to sales of 

prescription drugs from licensed 

pharmacies to licensed practitioners for 

office use. FDA understands that some 

States and other entities have expanded 

the applicability of this exclusion from 

the definition of wholesale distribution 

to allow for distribution from 

pharmacies to other entities outside of 

licensed practitioners for office use, but 

FDA notes that this practice is not 

allowed under current Federal law. The 

statutory language at section 503(e)(4)(E) 

of the FD&C Act specifically limits the 

exclusion to the distribution of minimal 

quantities of a drug between a licensed 

retail pharmacy and a licensed 

practitioner for office use. Unless a 

specific sale or transfer of a drug from 

one dispenser to another dispenser is 

outside of the definition of wholesale 

distribution because it is to a consumer 

or patient (e.g., to fulfill a ‘‘specific 

patient need,’’ as defined at section 

581(19) of the FD&C Act), a pharmacy 

that sells or trades prescription drugs to 

other pharmacies or other entities falls 

within the definition of wholesale 

distribution. Such activity is considered 

wholesale distribution under section 

503(e)(4) of the FD&C Act, subject to all 

the requirements of wholesale 

distributors. 

• Other Logistics Services: Services 

provided by entities that accept or 

transfer direct possession of products 

from that entity’s facility within the 

United States and its territories on 

behalf of a trading partner (e.g., 

manufacturer, wholesale distributor, 

dispenser), but that do not take 

ownership of the product or have the 

responsibility to direct a product’s sale 

or disposition. It also includes services 

undertaken with respect to a product for 

a repackager that is acting on behalf of 

a manufacturer, wholesale distributor, 

or dispenser. 

Æ Under the DSCSA, the definition of 

3PL includes entities that conduct 

‘‘other logistics services’’ on behalf of a 

manufacturer, wholesale distributor, or 

dispenser of a product. The Agency 

recognizes that 3PLs may perform 3PL 

activities for repackagers and proposes 

to include in the definition of ‘‘other 

logistics services’’ those services 

undertaken with respect to a product for 

a repackager acting on behalf of a 

manufacturer, wholesale distributor, or 

dispenser. 

Æ Under this proposed definition, a 

common carrier that only transports a 

product, but does not take ownership of 

the product, is not conducting ‘‘other 

logistic services.’’ Similarly, an entity 


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that directs the sale or disposition of the 

product but does not take possession 

(such as a broker) would not be 

conducting ‘‘other logistics services’’ 

and does not meet the definition of a 

3PL, but may be engaged in activities 

that meet the definition of a 

manufacturer or wholesale distributor. 

• Other Than a Consumer or Patient: 

A person receiving the drug who is not 

(i) the individual identified as the 

recipient of the prescription drug, (ii) a 

dispenser fulfilling a specific patient 

need, or (iii) the clinical investigator, as 

defined in 21 CFR 312.3(b) (or any 

successor regulation). 

Æ FDA considers certain types of 

prescription drug distribution as outside 

the scope of ‘‘wholesale distribution’’ 

under section 503(e)(4) of the FD&C Act 

because they constitute ‘‘the 

distribution of a drug’’ to a ‘‘consumer 

or patient,’’ which is excluded from the 

definition of wholesale distribution. The 

first of these is the distribution to, or 

receipt by, the patient, who, for 

purposes of DSCSA, FDA considers to 

be the individual intended to take or be 

administered the prescription drug. This 

would typically be the individual whose 

name appears on the prescription. 

Æ FDA also considers the transfer or 

sale of a drug from one dispenser to 

another to fulfill a ‘‘specific patient 

need’’ to be outside the scope of 

wholesale distribution. Specific patient 

need is defined at section 581(19) of the 

FD&C Act as ‘‘the transfer of a product 

from one pharmacy to another to fill a 

prescription for an identified patient.’’ 

FDA would note, however, that a 

dispenser who transfers or sells a drug 

to a trading partner other than another 

dispenser, or to another dispenser 

where there is no specific patient need 

evidenced by a prescription, is 

distributing a drug to someone other 

than a consumer or patient, which, if 

not otherwise excluded under section 

503(e)(4) of the FD&C Act, would be 

engaging in wholesale drug distribution 

requiring a wholesale distributor 

license. 

Æ Finally, FDA considers the sale or 

transfer of a drug for investigational or 

research purposes to an investigator, as 

defined in 21 CFR 312.3 (or any 

successor regulation), under an 

investigational new drug application 

(IND) submitted to FDA to be outside 

the scope of wholesale distribution 

because the drug is used for in vitro, 

clinical, or other research purposes 

under an IND. 

Æ For these reasons, FDA is proposing 

to exclude these types of transactions 

from the scope of wholesale 

distribution. 

• Product: A prescription drug in a 

finished dosage form that is ready for 

administration to a patient without 

substantial further manufacturing (e.g., 

capsules, tablets, lyophilized products 

before reconstitution). 

Æ The definition of ‘‘product’’ 

proposed here is broader and more 

inclusive than that used for purposes of 

product tracing detailed in section 582 

of the FD&C Act as defined in section 

581(13). As used in section 584 of the 

FD&C Act for purposes of licensure of 

a 3PL, the term ‘‘product’’ excludes 

active pharmaceutical ingredients 

intended for incorporation into a 

finished drug product but have yet to 

undergo substantial further 

manufacturing to become the finished 

dosage form for administration. Of note, 

for purposes of section 582 of the FD&C 

Act (21 U.S.C. 360eee–1), the definition 

for ‘‘product’’ excludes certain types of 

prescription drugs in finished dosage 

form (section 581(13) of the FD&C Act). 

• Significant Disciplinary Action: 

Any action by a State or Federal 

licensing authority that would limit or 

prevent a 3PL from conducting 3PL 

activities, or would limit or prevent a 

wholesale distributor from distributing 

or facilitating the distribution of 

prescription drugs. This includes 

suspension or revocation of a 3PL or 

wholesale distributor license, State 

controlled substances license, or Drug 

Enforcement Administration (DEA) 

registration, and potentially includes 

other disciplinary actions such as a 

consent decree or final ruling of a State 

licensure board, depending on the 

impact on the 3PL’s or wholesale 

distributor’s legal ability to perform 

licensed activities. 

• Unfit for Distribution: A 

prescription drug that has been 

identified as a drug whose sale would 

violate the FD&C Act. This definition 

includes prescription drugs identified as 

suspect or illegitimate (582(c)(4) of the 

FD&C Act); adulterated, including drugs 

rendered nonsaleable because 

conditions (such as return, recall, 

damage, or expiry) cast doubt on the 

drug’s safety, identity, strength, quality, 

or purity (section 501 of the FD&C Act); 

or misbranded (section 502 of the FD&C 

Act (21 U.S.C. 352)). 

Æ FDA believes that prescription 

drugs unfit for distribution must be 

segregated from those that are fit for 

distribution to protect patients from 

receiving potentially defective or 

harmful prescription drugs and prevent 

the distribution of drugs that are unfit 

for distribution. 

Æ A wholesale distributor or 3PL 

could potentially identify a prescription 

drug as unfit for distribution through 

their own examination of incoming and 

outgoing shipments of prescription 

drugs as outlined by proposed 21 CFR 

205.12(c)(1) for 3PLs and 205.26(c)(4) 

for wholesale distributors, through 

inventory review under proposed 21 

CFR 205.12(c)(4)(i) for 3PLs and 

205.26(c)(5)(i)(B) for wholesale 

distributors, through other internal 

means designed to detect product that is 

unfit for distribution, or be notified of 

a prescription drug’s status as unfit for 

distribution by a trading partner or 

others. 

• Wholesale distribution: 

Æ Section 503(e)(4) of the FD&C Act 

defines wholesale distribution as ‘‘the 

distribution of a drug subject to [section 

503(b) of the FD&C Act] to a person 

other than a consumer or patient, or 

receipt of a drug subject to [section 

503(b) of the FD&C Act] by a person 

other than the consumer or patient.’’ 

The definition then goes on to list 19 

activities that are not considered 

wholesale distribution. Of these, FDA is 

providing clarification about several 

that may be causing some confusion for 

industry and the States. 

Æ Section 503(e)(4)(C) of the FD&C 

Act states that the distribution of a drug 

or an offer to distribute a drug for 

emergency medical reasons, including a 

public health emergency declaration 

pursuant to section 319 of the Public 

Health Service Act, does not constitute 

wholesale distribution. In addition to 

distribution of a drug during a declared 

public health emergency pursuant to 

section 319 of the Public Health Service 

Act, FDA considers the following 

circumstances to constitute emergency 

medical reasons and therefore be 

excluded from the definition of 

wholesale distribution: (1) The 

distribution of a drug to a first 

responder or other authorized 

individual administering prescription 

drugs to acutely ill or injured persons in 

an emergency situation and outside a 

healthcare facility, and (2) a long-term 

care facility receiving an emergency kit 

containing drugs for use in emergency 

situations to treat acutely ill or injured 

persons during hours of the day when 

necessary drugs cannot be obtained 

from a dispenser. Pursuant to 

503(e)(4)(C) of the FD&C Act, this 

exclusion from the definition of 

wholesale distribution does not include 

distributing a drug during a shortage 

unless such shortage was caused by a 

public health emergency. 

Æ The exclusion at section 

503(e)(4)(E) of the FD&C Act for the 

distribution of minimal quantities of 

prescription drugs by a licensed retail 

pharmacy to a licensed practitioner for 


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6716 Federal Register / Vol. 87, No. 24 / Friday, February 4, 2022 / Proposed Rules 

office use is discussed in the description 

of the term ‘‘minimal quantities.’’ 

Æ Section 503(e)(4)(H) of the FD&C 

Act excludes ‘‘the distribution of a drug 

by the manufacturer of such drug’’ from 

wholesale distribution. Therefore, FDA 

considers the activities of a 

manufacturer, as defined at section 

581(10) of the FD&C Act, when 

distributing its own drug, as excluded 

from the definition of wholesale 

distribution and not subject to the 

requirements that apply to wholesale 

distributors. FDA believes this is 

supported by the term ‘‘wholesale 

distributor,’’ which is defined at section 

581(29) of the FD&C Act, in relevant 

part, as ‘‘a person (other than a 

manufacturer, a manufacturer’s colicensed partner . . .) engaged in 

wholesale distribution.’’ The Agency 

notes, however, that if Manufacturer A 

purchases and distributes Manufacturer 

B’s drug, for which Manufacturer A has 

no affiliation and is not a co-licensed 

partner, Manufacturer A is engaged in 

wholesale distribution, subject to all the 

requirements for wholesale distributors. 

C. National Standards for Third-Party 

Logistics Providers 

1. 3PL Licensure 

3PL facilities are required to be 

licensed in order to conduct activities in 

any State (section 584 of the FD&C Act). 

As such, the proposed regulation 

provides that a 3PL facility may not 

conduct 3PL activities unless it is 

licensed by the State from which it 

conducts 3PL activities, or by FDA if the 

State from which 3PL activities are 

conducted has not established a 

licensure program in accordance with 

the regulations, as set forth in section 

584(a) of the FD&C Act (see proposed 

§ 205.4(a)). In addition, the requirement 

in 584(a) of the FD&C Act that each 

facility of the 3PL must be licensed, 

such that a 3PL with multiple facilities 

in a single State will have multiple 

licenses from that State, is set forth in 

proposed § 205.4(b). 

Under FDA’s proposed regulation, if a 

3PL owns or leases a facility serving as 

a warehouse for products, the State in 

which the facility is located will be 

considered the State from which the 

3PL ‘‘conducts activities’’ and will be 

the State from which the 3PL must 

obtain a license for that facility under 

proposed § 205.4(a)(1). FDA 

understands there has been some 

confusion about whether an entity hired 

or contracted by another trading partner 

to provide labor, logistic, or 

administrative services for that trading 

partner in that trading partner’s facility 

would be considered a 3PL. This could 

occur, for example, where a wholesale 

distributor hires a contractor to provide 

such support services from within the 

wholesale distributor’s facility 

exclusively for that wholesale 

distributor. In this scenario, the 

contractor’s activities from within the 

wholesale distributor’s licensed facility 

would be captured by the wholesale 

distributor’s license and obligations for 

compliance, and the facility would not 

be considered a 3PL or required to have 

a 3PL license. However, an entity that 

operates a facility in which it engages in 

wholesale distribution and performs 

3PL activities on behalf of other trading 

partners for products it does not own or 

direct the sale or disposition of is 

required to obtain both a wholesale 

distributor and 3PL license for that 

facility. 

Additionally, pursuant to section 

584(a)(2) of the FD&C Act, if a product 

is distributed in interstate commerce, 

the 3PL must be licensed by the State 

into which the product is distributed if 

that State requires such license; 

however, section 584(a)(2) of the FD&C 

Act also provides that if the 3PL is 

licensed by FDA, as described in section 

584(a)(1)(B), the 3PL is not required to 

obtain a license from the State into 

which the product is distributed (see 

proposed § 205.4(a)(3)). Finally, to 

ensure that a facility and those 

responsible for its operations meet the 

licensing standards, FDA proposes to 

require that 3PL licenses be facility- and 

owner-specific and not transferable to 

another establishment or owner (see 

proposed § 205.4(c)). 3PL licenses must 

be held at the licensed facility and must 

be made available to State, Federal, or 

other licensing authorities upon request 

(see proposed § 205.4(d)). 

Section 584 states that the national 

licensing standards for 3PLs established 

by regulation take effect 1 year after the 

date such final regulation is published 

(section 584(d)(1) and (3) of the FD&C 

Act). National licensing standards for 

wholesale distributors established by 

regulation take effect 2 years after the 

date such final regulation is published 

(section 583(a) and (e)(3) of the FD&C 

Act). For several reasons, including 

those discussed below, FDA does not 

intend to enforce the licensing 

requirements for 3PLs until 2 years after 

the final regulation is published. 

FDA recognizes that 1 year may be 

insufficient time for States to implement 

3PL licensure programs, should they 

decide to implement such a program, 

and for 3PLs to apply for licensure 

under these programs. Setting up a state 

licensure program may require 

additional time. This is especially true 

in States that will require State 

legislative action to implement a 

licensure program, with some State 

legislatures only meeting biennially. 

Considering these factors, FDA does 

not intend to enforce these requirements 

with respect to the national standards 

for licensure until 2 years after the 

regulation is finalized. This will help 

ensure there is time for States to 

establish or modify their licensure 

programs in accordance with the new 

standards and time for 3PLs to apply 

and obtain a new license. 

For 1 year after the effective date of 

the final regulation, FDA also does not 

intend to enforce the requirements of 

section 582(b)(3), (c)(3), (d)(3), and (e)(3) 

of the FD&C Act with respect to a 

manufacturer, wholesale distributor, 

dispenser, or repackager who has as a 

trading partner a 3PL that is not 

licensed, unless the 3PL is not licensed 

because the Secretary or a state 

licensing body has made a finding that 

the 3PL does not utilize good handling 

and distribution practices and has 

published notice thereof. 

2. General Application Requirements for 

Licensure 

The general requirements that must be 

met for a State or Federal licensing 

authority to issue a license to a 3PL 

facility are proposed in § 205.5. As 

proposed, § 205.5(a) includes 

requirements applicable to the 

individual who submits the application 

and states that the applicant must 

submit all required information and pay 

any applicable licensing fee to be issued 

a license. 

The information that would be 

required as part of a 3PL’s application 

for licensure of a facility is set forth in 

proposed § 205.5(b). FDA believes this 

information is necessary for the 

licensing authority to assess whether the 

3PL is in good standing and has the 

infrastructure and capabilities to fulfill 

its duties and obligations under these 

national standards for 3PL licensure. 

This includes disclosing whether the 

3PL facility manager or designated 

representative has ever been convicted 

of a felony relating to prescription drug 

distribution (see proposed § 205.5(b)(7)). 

FDA believes that this information is 

crucial to protect the integrity of the 

prescription drug supply chain by 

ensuring that those responsible for the 

daily operations of a 3PL facility do not 

have a history of violating the FD&C 

Act. In addition, in its application for 

licensure renewal, under proposed 

§ 205.7, a 3PL would be required to 

certify that the 3PL facility has 

continually met the requirements of 

§ 205.5 and will inform the licensing 

authority of certain changes to 


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information if such changes have not 

already been submitted to the licensing 

authority (see proposed § 205.5(c)). 

3. The Federal Licensure Process 

Section 584(a)(1)(B) of the FD&C Act 

gives FDA the authority to license 3PLs 

directly if the State from which a 3PL 

conducts 3PL activities has not 

established a licensure requirement in 

accordance with the regulations. The 

process that FDA will use for issuing 

licenses to 3PLs is detailed in proposed 

§ 205.6. While § 205.6 is only applicable 

to 3PLs obtaining a license from FDA, 

FDA suggests that States implement 

similar procedures. FDA intends to help 

stakeholders understand who the 

appropriate licensing authority is in the 

3PL’s State. 

The FDA licensure process begins 

when a 3PL seeking licensure for a 

facility submits an application to FDA 

for review and consideration (see 

proposed § 205.6(a)). The DSCSA 

permits FDA to approve third-party 

organizations, referred to as approved 

organizations or AOs, to evaluate a 

3PL’s qualifications for licensure 

(section 584(d)(2)(A)–(B) and 584(e) of 

the FD&C Act). If FDA has approved one 

or more organizations to review a 3PL’s 

qualifications for licensure, a 3PL 

should note the AO it prefers on its 

application. FDA generally intends to 

review a 3PL’s qualifications for 

licensure only if the review cannot be 

completed by an FDA-approved AO. 

The licensure review consists of a 

review of all documents submitted in 

support of the application and an 

inspection of the facility pursuant to 

proposed § 205.16. FDA intends for the 

licensure application process to be 

electronic (see proposed § 205.6(a)) and 

to leverage existing technologies to 

streamline the licensure process. 

While the DSCSA permits AOs to 

review a 3PL’s qualifications for 

licensure and to recommend to FDA 

whether a 3PL should be licensed, the 

responsibility for determining whether a 

3PL meets all applicable requirements 

and to issue the license remains with 

FDA (see proposed § 205.6(b)). 

So as not to delay the licensure 

process, when reviewing an application, 

FDA intends to work with 3PLs to 

correct minor errors made on the 

application and communicate with the 

3PL about additional information the 

Agency may need (see proposed 

§ 205.6(c)). When FDA determines that 

a 3PL facility meets the applicable 

requirements and that none of the 

prohibited factors listed in proposed 

§ 205.9(a)(1) are present, FDA will send 

the applicant an approval letter and a 

licensing certificate, effective on the 

date it is issued (see proposed 

§ 205.6(d)). 

FDA recognizes that a 3PL may have 

concerns about what happens to the 

status of its license if the AO that 

reviewed its qualifications for licensure 

has disciplinary sanctions taken against 

it that affect its approval status or if it 

is otherwise no longer considered an 

approved AO. While a 3PL facility 

should not be penalized for the actions 

of the AO that reviews its qualifications 

for licensure, FDA must ensure that the 

AO’s review and findings provide a 

reliable basis for licensing decisions. 

As such, FDA is proposing that the 

approval status of the AO that 

performed the licensure review for a 

3PL facility will not automatically affect 

the licensure of a licensed 3PL facility 

that is otherwise in good standing (see 

proposed § 205.6(e)). Rather, in the 

event that an AO has disciplinary 

sanctions taken against it, ends its 

business, or is otherwise no longer 

considered an approved AO, the license 

of any 3PL facility reviewed by that AO 

will be subject to appropriate action in 

accordance with § 205.9 and other 

applicable statutes or regulations. FDA 

may verify the 3PL’s compliance status 

and review the facts in that situation to 

determine the potential effect, if any, on 

the licensure of 3PL facilities reviewed 

by that AO. 

FDA intends to publish additional 

guidance regarding the process and 

procedures related to obtaining and 

maintaining a 3PL license issued by 

FDA. 

4. Changes to Information, Location, or 

Ownership of a Licensed 3PL 

For the licensing authority to 

effectively carry out its responsibilities, 

a 3PL must keep its license information 

current and report any changes in 

information, including those that may 

significantly affect operations such as 

changes in location or ownership, to the 

licensing authority. Presently, the 

reporting requirements for these types of 

changes vary by State. FDA is proposing 

in § 205.7 that changes to certain 

information, including, for example, any 

changes in information submitted as 

part of an application for licensure, be 

submitted electronically to the licensing 

authority within 30 calendar days of the 

change (see proposed § 205.7(a)). 

Additionally, because a license is 

facility- and-owner specific (see 

proposed § 205.4(c)), the Agency is 

proposing that changes in the location 

or the ownership of a facility will 

require a new license (see proposed 

§ 205.7(b) and (c)). 

5. Expiration and Renewal of Licenses 

The DSCSA requires that the 

regulations establishing national 

standards for 3PLs provide that a 3PL 

license expires 3 years after the date of 

issuance, with the option for renewal for 

additional 3-year periods (section 

584(d)(2)(H) of the FD&C Act). FDA is 

proposing to implement this 

requirement under proposed § 205.8 by 

saying that all 3PL licenses, whether 

newly issued or renewed by the 

licensing authority, expire 3 years from 

the date of issuance or renewal. FDA 

also proposes that 3PLs may not submit 

renewal applications more than 90 days 

prior to the license’s date of expiration 

to ensure that licenses are renewed 

based on current information. While we 

do not anticipate lengthy administrative 

delays by the licensing authority, if a 

3PL files an application for a license 

renewal within the appropriate time 

period and there is an administrative 

delay reviewing the license application 

that causes the 3PL license to lapse, the 

3PL will not be penalized for that 

administrative delay. In this scenario, 

the 3PL’s license will be considered 

valid during the period of the 

administrative delay (see proposed 

§ 205.8). 

The Agency understands that at the 

time a final rule covering these 

proposed national standards goes into 

effect, there are likely to be 3PLs with 

existing licenses under State law. 

Nevertheless, 3PLs with existing State 

licenses must obtain new licenses in 

accordance with section 584(a) of the 

FD&C Act. These national licensing 

standards serve an important function of 

ensuring consistency across the 

domestic market. However, as described 

above, FDA does not intend to enforce 

the requirements with respect to the 

national standards for licensure of 3PLs 

until 2 years after the regulation is 

finalized. FDA’s proposed requirements 

are further detailed in proposed 

§ 205.16, which discusses the required 

inspections prior to licensure. 

6. Licensure Denial, Suspension, 

Reinstatement, and Revocation—Notice 

and Opportunity To Request a Hearing 

The standards for licensure denial are 

set forth in proposed § 205.9. 

Proposed § 205.9(a)(1) enumerates 9 

circumstances under which the 

licensing authority would be required to 

deny a 3PL’s request for licensure or 

license renewal. FDA believes that this 

list will help 3PLs focus on good storage 

practices outlined by FDA that are 

necessary to protect the integrity of the 

products in the pharmaceutical 

distribution supply chain. To avoid 


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denial or delays of their applications, 

3PLs should ensure that they address 

the reasons for denial of a license 

outlined in proposed § 205.9(a)(1) when 

they file for licensure. 

Proposed § 205.9(a)(2) details the 

process afforded to 3PLs whose 

applications for licensure have been 

denied. FDA is proposing to provide 

applicants with the opportunity to 

provide additional information for 

reconsideration of the denial. If the 

licensing authority denies a 3PL’s 

request for licensure after 

reconsideration, the 3PL will receive a 

notice of opportunity to request a 

hearing under existing FDA hearing 

procedures. FDA requests comment 

regarding the reconsideration and 

appeal process outlined in this 

regulation for 3PLs whose applications 

for licensure have been denied. 

The proposed standards for 

suspending a 3PL license are set forth in 

§ 205.9(b) and (c) and are based on the 

severity of risk posed to the public 

health. Under most circumstances, we 

anticipate that a 3PL would have the 

opportunity for a hearing before 

licensure suspension. However, under 

certain circumstances that involve 

repeated conduct detrimental to the 

public health or refusal to correct 

significant issues that could lead to the 

dissemination of illegitimate product, 

the Agency may suspend a license 

immediately while giving the 3PL an 

opportunity to request a hearing. Under 

proposed § 205.9(b), a 3PL’s license may 

also be suspended after the 3PL receives 

a notice of opportunity to request a 

hearing. A suspended 3PL must cease 

all 3PL activities until their license is reinstated. This provision applies when 

the licensing authority has a reasonable 

belief that the 3PL is not in compliance 

with licensure requirements. FDA is 

proposing for § 205.9(b) to require the 

licensing authority to notify the 3PL in 

writing of the intent to suspend its 

license. A 3PL will have 30 days from 

the date listed on the notice of intent to 

suspend a license to provide additional 

information to the licensing authority so 

it may reconsider its decision. 

If reconsideration is not sought or is 

denied, the licensing authority will 

inform the 3PL in writing of its formal 

intent to proceed with license 

suspension. The notice will contain a 

statement informing the 3PL that it can 

request a hearing on the question of 

whether there are sufficient grounds for 

suspension. The 3PL will have 10 days 

from the date on the notice to inform the 

licensing authority of its intent to 

request a hearing; otherwise the 

opportunity for a hearing will be waived 

and the license suspended. FDA 

believes this process will afford 3PLs a 

sufficient opportunity to present 

information and attempt to remedy 

noncompliance issues which may 

threaten the safety of products in the 

supply chain. FDA requests comment 

regarding this reconsideration and 

appeal process. 

Proposed § 205.9(c) allows for license 

suspension prior to opportunity for 

hearing and effective immediately if the 

3PL’s noncompliance poses an 

imminent threat to public safety. For 

example, if a 3PL is warehousing or 

shipping illegitimate product, and once 

made aware, corrective actions to 

protect the public health from the threat 

of these products are not taken, the 

3PL’s license could be suspended 

immediately. Another example could be 

a scenario where the conditions under 

which drugs are held or warehoused 

cause the product to be illegitimate and 

the 3PL refuses to correct the conditions 

or continues to ship these illegitimate 

products. Under the proposed 

regulation, in such a situation, the 

licensing authority will inform the 3PL 

in writing that its license is suspended. 

The notice will also contain a statement 

informing the 3PL that it may request a 

hearing and that a hearing, if granted, 

will be afforded within 10 days upon 

the receipt of the 3PL’s request for 

hearing. The 3PL has 10 days from the 

date on the notice of suspension to 

request a hearing; otherwise its 

opportunity for a hearing will be 

waived. FDA believes that this limits 

the amount of time a 3PL license would 

be suspended while providing a 

reasonable amount of time both for the 

3PL to review the notice of suspension 

and collect the necessary information to 

demonstrate that its license should not 

be suspended, and for FDA to consider 

a request for a hearing and to schedule 

and prepare for a hearing, if the hearing 

request is granted. FDA believes 

immediate suspension of a 3PL license 

is crucial in cases where continued 

operation of the 3PL presents an 

imminent threat to public safety and the 

pharmaceutical supply chain. 

Under proposed § 205.9(d), a 3PL’s 

suspended license may be reinstated if 

the 3PL can demonstrate to the licensing 

authority that it is in compliance with 

regulation requirements. 

Under the proposed rule, the process 

outlined at 21 CFR 10.75 is the default 

for appeals regarding a denied 

application for a 3PL license, and the 

hearing process outlined at 21 CFR part 

16 is the default for appeals regarding a 

suspended or revoked 3PL license. 

However, the 3PL may request any of 

the procedures in 21 CFR parts 10 

through 16. FDA believes that this 

proposed approach is consistent with 

current practice and suggests that States 

develop comparable processes. 

The standards for revoking a 3PL 

license are set forth in proposed 

§ 205.9(e). The licensing authority will 

revoke a license if it finds that a 3PL 

whose license has been suspended is 

unable or refuses to comply with the 

licensing requirements. The 

requirements governing the revocation 

of a 3PL license are set forth in 

proposed § 205.9(e)(2) through (5) and 

mirror those outlined in § 205.9(b)(2) 

through (7) for licensure suspension, 

with one exception: When the licensing 

authority informs the 3PL of its intent 

to revoke a license, the 3PL is given no 

opportunity for reconsideration since it 

already had an opportunity to rectify 

deficiencies while its license was 

suspended. 

In addition, where a 3PL fails to 

timely renew its application, the license 

will be considered expired and a 3PL 

will need to submit an application for 

new licensure because the licensing 

authority may be unable to confirm that 

the 3PL continues to meet all necessary 

licensure requirements (see proposed 

§ 205.9(f)). 

FDA is also proposing to terminate a 

3PL’s license upon request from the 3PL 

when the request includes a notice of 

the 3PL’s intent to discontinue its 

activities and a waiver of an opportunity 

for a hearing. The 3PL will be required 

to apply for a new license should it 

decide to resume 3PL activities (see 

proposed § 205.9(g)). 

7. Good Storage Practices for 3PL 

Facilities 

The DSCSA charges FDA with 

creating national standards for the 

licensure of 3PL facilities, including the 

requirement that 3PLs comply with 

storage practices as determined by the 

Secretary (see section 584(d)(2)(C) of the 

FD&C Act). Those requirements are 

detailed in proposed § 205.10. FDA 

considers the requirement that ‘‘each 

facility of such [3PL]’’ be licensed ‘‘in 

accordance with the regulations’’ 

(section 584(a) of the FD&C Act) to 

mean that 3PLs without a facility are not 

required to be licensed. Section 584 of 

the FD&C Act provides that FDA will 

establish licensure standards that 

include requirements relating to storage 

of product. These standards address 

issues regarding access and 

maintenance that presuppose the 

existence of a physical facility where 

product is maintained. As such, the 

requirements apply to each 3PL facility 

that is owned, rented, or leased by the 

3PL. If the 3PL shares the same name 

and location as another trading partner 


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(for example, a wholesale distributor), 

each entity must be separately licensed 

and must have separate systems and 

processes in place for their separate 

functions (see proposed § 205.10(b)). 

The requirements for 3PL facilities 

regarding how products will be stored 

and adequate security maintained are 

set forth in proposed § 205.10(c). This 

provision includes requirements for 

storage of nonsaleable products within 

the 3PL facility. If the facility is in 

possession of a suspect product, the 

facility must have clearly defined areas 

in which to quarantine the suspect 

product until the product is 

dispositioned (section 584(d)(2)(C)(i) of 

the FD&C Act). 

FDA is also proposing to require that 

3PLs keep illegitimate product and 

other products unfit for distribution in 

a clearly defined and designated area, 

separate from saleable products, until 

dispositioned so the illegitimate or 

otherwise unfit product is not 

inadvertently combined with saleable 

products (see proposed § 205.10(c)(2)). 

An illegitimate product poses as great a 

risk to public health, if not a greater 

risk, as a suspect product because a 

product is illegitimate when there is 

credible evidence shows that the 

product is counterfeit, diverted, stolen, 

intentionally adulterated such that the 

product would result in serious adverse 

health consequences or death to 

humans, is the subject of a fraudulent 

transaction, or appears otherwise unfit 

for distribution such that the product 

would be reasonably likely to result in 

serious adverse health consequences or 

death to humans (section 581(8) of the 

FD&C Act). As such, it is counter to 

public health to store products that are 

unfit for distribution alongside saleable 

product. Furthermore, it would be 

illogical to move suspect product that 

has been determined to be illegitimate 

out of quarantine and into another area 

to be potentially stored with saleable 

product. 

8. Personnel Requirements Necessary 

for Good Storage Practices 

Ensuring that 3PL personnel are 

appropriately qualified is integral to 

establishing good storage practices 

(section 584(d)(2)(C) of the FD&C Act). 

For this reason, proposed § 205.10(b)(3) 

requires that a 3PL facility must be 

designed in such a manner that only 

personnel who possess appropriate and 

verifiable experience and training will 

have access to areas in which products 

are held. While not proposed to be 

required in part 205, FDA believes that 

a best practice in order to maintain the 

security of prescription drug products, 

would be for a 3PL to screen personnel 

who work in areas of its facility where 

prescription drug products are held for 

records of Federal or State criminal 

convictions relating to the possession, 

control, or distribution of prescription 

drugs. While also not proposed to be 

required in part 205, FDA believes it 

would be a best practice for a firm to 

request that employees state that they 

are not engaged in and will not engage 

in the illegal use of controlled 

substances while serving in their 

capacity within the 3PL. 

FDA also proposes requiring that 3PLs 

maintain and make available to the 

licensing authority certain information 

about their facilities’ managers and 

designated representatives (see 

proposed § 205.11). Furthermore, FDA 

is establishing specific employee 

qualifications with respect to facility 

managers or designated representatives 

that are necessary to effect good storage 

practices (see proposed § 205.11(b)). 

Specifically, FDA is proposing to 

require that a facility manager or 

designated representative of the facility 

manager serve in either capacity for 

only one facility at any one time (see 

proposed § 205.11(b)(2)). FDA believes 

that a facility manager or designated 

representative of the facility manager 

must be accountable for all operations of 

a 3PL facility. That facility manager or 

designated representative must be 

present within the facility, and must be 

familiar with the day-to-day operations 

of that facility. FDA believes that the 

best way to ensure the accountability 

and familiarity required for compliance 

is for a designated representative or 

facility manager to serve only one 

facility at a time. This is to ensure that 

the facility manager or designated 

representative is actively engaged in 

managing the daily operations of the 

facility and that they remain aware of 

any non-compliance issues that may 

arise. To ensure the qualified designated 

representative can fulfill their 

obligations to manage and carry out 

daily operations, FDA proposes to 

require that a 3PL provide its designated 

representative with adequate authority 

and the necessary resources (see 

proposed § 205.11(c) and (d)). FDA 

believes that establishing these 

requirements will help ensure that the 

products handled by a 3PL are properly 

safeguarded to protect the supply chain 

and the public health. 

Section 584(d)(2)(E) and (F) of the 

FD&C Act requires mandatory 

background checks for facility managers 

or the designated representatives of 

facility managers to ensure that neither 

the 3PL’s facility manager nor the 

designated representative has engaged 

in the prohibited behaviors outlined in 

proposed § 205.11(e). Additionally, FDA 

is outlining other activities which may 

lead to the denial of licensure in 

proposed § 205.11(f). They are not bars 

to licensure, but they are factors that 

may be considered by licensure 

authorities when reviewing an 

application for licensure to determine 

whether the 3PL has storage practices 

sufficient to maintain adequate security 

over the facility. FDA requests comment 

on this section of the regulation and the 

scenarios outlined therein. 

Requiring that individuals with 

significant authority over 3PL activities 

be subject to a criminal background 

check adds an additional layer of safety 

and security to the supply chain (see 

proposed § 205.11(g)). Theft of product 

by personnel who have direct access to 

areas where products are stored is a 

known problem across the healthcare 

industry; the background checks 

required by section 584(d)(2)(F) of the 

FD&C Act that FDA is proposing here 

are necessary precautions to prevent the 

potential theft, loss, or abuse of 

prescription drugs. 

FDA suggests an additional best 

practice for a 3PL to utilize when 

staffing their operation. This best 

practice, related to staff who work 

within a 3PL, is designed to ensure 

security within a 3PL. FDA recommends 

to 3PLs that the individuals who work 

within their operation and have access 

to prescription drugs should not have a 

record of criminal activity involving 

violations of the FD&C Act or other laws 

involving prescription drugs. 

When screening personnel who work 

in areas of a 3PL facility where products 

are held, including the facility manager 

or designated representative, FDA 

recommends that a 3PL consider 

whether such personnel have (1) 

engaged in a pattern of violating the 

requirements of section 584 of the FD&C 

Act that present a threat of serious 

adverse health consequences or death to 

humans; (2) been found to have 

committed or facilitated commission of 

any prohibited acts under the FD&C Act 

or violated or facilitated any violations 

of any of the regulations in this part or 

analogous provisions of the State 

licensing authority, as applicable; (3) 

been convicted of any violation of 

Federal, State, or local laws relating to 

drug samples, wholesale or retail drug 

distribution, distribution of controlled 

substances, or third-party logistics 

services; or (4) been convicted of any 

felony under Federal, State, or local 

laws involving or related to prescription 

drugs. FDA believes that 3PLs should 

consider an applicant’s history of 

violations of the FD&C Act, or other 


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laws involving prescription drugs, when 

making staffing decisions. 

9. Required Written Policies and 

Procedures 

Section 584(d)(2)(C)(iii) of the FD&C 

Act enumerates certain types of written 

policies and procedures that FDA 

regulations must require, and tasks FDA 

with defining the content with more 

specificity. Those written policies and 

procedures are set out in proposed 

§ 205.12. All 3PLs would be expected to 

establish, maintain, and follow the 

written policies and procedures set forth 

in these proposed subsections for each 

3PL facility, to the extent that the 

requirements of those sections are 

relevant to the scope of their specific 

3PL activities. Under the proposed 

regulation, all written policies and 

procedures will be made available to the 

licensing authority upon request, and 

the licensing authority will be permitted 

to have access to and copy records of 

the 3PL to ensure that the 3PL facility 

is following its written policies and 

procedures (see proposed § 205.12(a)). 

Written policies and procedures include 

those that are stored and maintained 

electronically. 

FDA is implementing the statutory 

requirements listed in section 

584(d)(2)(C)(iii) of the FD&C Act 

through proposed § 205.12(c)(1) through 

(6). Under these requirements, 3PLs 

must maintain written policies and 

procedures to address a product’s 

receipt, security, storage, inventory, 

shipment, and distribution. Proposed 

§ 205.12(c)(1) through (6) details the 

specific elements that such written 

policies and procedures must contain. 

Such elements are necessary to maintain 

supply chain integrity and align with 

current industry practices to protect the 

integrity of the drugs that are distributed 

through the supply chain. 

To ensure good storage practices, FDA 

is also proposing to require that 3PLs 

establish written policies and 

procedures for handling not only 

expired product as required in section 

584(d)(2)(C)(iii)(VI) of the FD&C Act, but 

also products that are unfit for 

distribution (see proposed § 205.12(f)). 

Furthermore, any drug unfit for 

distribution should be segregated and 

returned or destroyed to prevent its 

distribution to the patient (see proposed 

§ 205.12(f)(1)). These requirements will 

ensure that drugs, the distribution of 

which would violate the FD&C Act and 

which may not be fit for consumption 

by American consumers for a variety of 

reasons, are not distributed into the 

supply chain. FDA believes that these 

proposed standards align with current 

industry practices. 

Similarly, to further ensure the safety 

and efficacy of drug products, FDA is 

proposing that 3PLs maintain written 

policies and procedures related to the 

storage, inventory, and disposition of 

both suspect and illegitimate products. 

In the case of a suspect product, the 

written policies and procedures must 

include the procedure for quarantine or 

destruction of the product if directed to 

do so by the product’s manufacturer, 

wholesale distributor, dispenser, or an 

authorized government agency. In the 

instance of an illegitimate product, 

written policies and procedures must be 

in place to ensure that illegitimate 

product is appropriately dispositioned 

as directed by the respective 

manufacturer, wholesale distributor, 

dispenser, or authorized government 

agency. This may include segregation in 

a clearly defined, designated area from 

which the product may be 

dispositioned. FDA believes that these 

proposed standards align with current 

industry practices and will give 3PLs a 

clear roadmap for dealing with 

potentially difficult situations involving 

suspect and illegitimate product. 

Finally, FDA views it as a best 

practice for a 3PL to establish written 

policies and procedures to ensure that it 

only engages in 3PL activities on behalf 

of authorized trading partners with 

respect to a product. DSCSA requires 

that all other entities that accept or 

transfer direct possession or ownership 

in the supply chain are only permitted 

to do business with other authorized 

trading partners (section 582 of the 

FD&C Act). FDA believes that, to further 

ensure supply chain security and 

integrity, it is important that 3PLs also 

only do business with other authorized 

trading partners. 3PLs that engage in 

transactions with non-authorized 

trading partners may expose the supply 

chain to potentially harmful or 

substandard product. FDA notes that 

3PLs are included in the wholesale 

distributor and third-party logistics 

provider reporting public database 

(available at https://www.fda.gov/Drugs/ 

DrugSafety/DrugIntegrityand

SupplyChainSecurity/DrugSupplyChain

SecurityAct/ucm423749.htm) which 

allows manufacturers, wholesale 

distributors, repackagers, and 

dispensers to determine if the 3PL is 

authorized. Similarly, 3PLs should 

include using the publicly available 

information regarding other trading 

partners in their written policies and 

procedures to ensure they are doing 

business with only authorized trading 

partners. 

10. Recordkeeping and List of Trading 

Partners 

The maintenance, availability, and 

accuracy of the records made available 

for inspection under section 

584(d)(2)(D) of the FD&C Act is critical 

to demonstrate that 3PLs are acting in 

compliance with relevant laws and 

regulations and to ensure their records 

can be relied upon to identify any 

potential risk to the public health. As 

such, FDA is proposing to require that 

all records be securely stored, with 

procedures in place to restrict access 

and protect record integrity, and that 

any alterations made to records be 

signed and dated while preserving the 

original information contained in the 

record (see proposed § 205.13(a)). These 

records can be stored and maintained 

electronically. These records 

maintenance requirements will allow 

for greater confidence in both the 

information that is preserved at the 

facility and the information potentially 

disseminated to other trading partners. 

FDA is proposing that all records 

must be retained for a minimum of 3 

years, except for records related to 

suspect and illegitimate products, 

product quality complaints, and 

destroyed, returned, and recalled 

products, which each must be retained 

for a minimum of 6 years (see proposed 

§ 205.13(b)). Such record retention is 

necessary not only to ensure 3PLs are 

complying with the FD&C Act, but also 

to ensure that there is consistency and 

continuity in the access to the 

information across the records required 

pursuant to sections 582, 583, and 584 

of the FD&C Act. The DSCSA requires 

that, upon the licensing authority’s 

request, 3PLs provide the licensing 

authority with a list of the trading 

partners (manufacturers, wholesale 

distributors, and dispensers) for which 

the 3PL conducts 3PL activities (section 

584(d)(2)(G) of the FD&C Act). This 

requirement would be codified in 

proposed § 205.14 and would also 

include repackagers for which the 3PL 

provides services when those 

repackagers are acting on behalf of a 

manufacturer, wholesale distributor, or 

dispenser of a product, as explained in 

the definition of other logistics services 

at § 205.3(i). 

11. Annual and Other Reporting to FDA 

Under DSCSA, 3PLs must report 

certain information to FDA to be 

considered an authorized trading 

partner (sections 581(2)(C) and 584(b) of 

the FD&C Act). The annual reporting 

requirements for 3PLs went into effect 

on November 27, 2014. Proposed 

§ 205.15 clarifies the statutorily 


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prescribed annual reporting 

requirements and proposes the 

collection of additional information to 

provide complete and useful 

information about 3PLs that can be used 

by FDA, States, and trading partners. 

The DSCSA requires 3PLs to report to 

FDA for each facility: (1) The State by 

which the facility is licensed; (2) the 

facility’s license number; (3) the 

facility’s name and address; and (4) all 

trade names under which the facility 

conducts business (section 584(b) of the 

FD&C Act). If a facility conducts more 

than one type of activity, such as 3PL 

activities and wholesale distribution 

activities, the facility must be licensed 

as both a wholesale distributor and a 

3PL and must report to FDA separately 

as a wholesale distributor and a 3PL 

(section 503(e)(2) of the FD&C Act). 

FDA is proposing to require that 3PLs 

use an electronic system provided by 

FDA for reporting (see proposed 

§ 205.15(a)). This electronic system will 

increase efficiency by providing 

uniformity in the content and format of 

reports, thereby making the information 

easier to process. FDA is proposing that 

the annual reporting schedule require 

all 3PLs to report each calendar year 

between January 1st and March 31st, 

although an entity may update 

information at any time (see proposed 

§ 205.15(b)). For example, if a 3PL 

chooses to update a license on 

December 15, 2019, that 3PL will still 

have to report during the January 1, 

2020 through March 31, 2020 annual 

reporting period. 

The specific information that 3PLs 

must electronically report to FDA is set 

forth in proposed § 205.15(c). The 

DSCSA requires that 3PLs report the 

name and address of each facility 

(section 584(b)(2) of the FD&C Act). In 

fulfilling this requirement, the 3PL must 

provide the address that is associated 

with the State or Federal license. 

Licensed entities are also required to 

report to FDA the State by which they 

are licensed and the license number 

(section 584(b)(1) of the FD&C Act). In 

addition, FDA is proposing to require 

that the reported company name be 

identical to the official company name 

appearing on the license (see proposed 

§ 205.15(c)(2)). Maintaining an account 

in FDA’s electronic system for each 3PL 

facility license during the reporting 

period is integral to FDA’s ability to 

provide oversight, as each facility of a 

3PL must be licensed in order for the 

3PL to conduct 3PL activities. 

In addition to the requirements 

specified in the statute, FDA is 

proposing to require an additional data 

element that FDA views as important to 

the Agency, the States, and trading 

partners. This additional information 

will inform other trading partners that 

the 3PL is in fact an authorized trading 

partner with whom they can do 

business. To this end, FDA is proposing 

to require that 3PLs provide the date 

each State license expires. This 

information is essential for determining 

that licensure status for each 3PL 

facility is current. 

Also, in addition to the physical 

address, which is required to be 

reported by statute, FDA believes that it 

would be a best practice for 3PLs to 

submit a unique facility identifier (UFI) 

that corresponds with the facility name 

and facility address. The UFI for a 3PL 

facility is useful to FDA when 

identifying and confirming certain 

business information. To be most 

helpful to FDA and other trading 

partners, a 3PL should obtain a separate 

UFI for each physical address that the 

3PL is reporting since each 3PL facility 

must meet the 3PL requirements, and 

licensure is facility specific. FDA also 

believes that it would be a best practice 

for 3PLs to submit the contact 

information of an individual who will 

interact with FDA, including that 

individual’s name, telephone number, 

and email address. FDA recommends as 

a best practice that the 3PL designate a 

contact person who is familiar with the 

daily operations of the 3PL facility, such 

as the designated representative, to 

ensure efficient processing of inquiries 

and minimize the impact inquiries may 

have on the daily operations of the 

facility. 

It is important for other trading 

partners and FDA to know whether a 

3PL has had a license revoked or 

suspended or whether a 3PL has had 

any other significant disciplinary 

actions taken against them that limits 

the ability of a facility to conduct drugrelated business. As such, 3PLs must 

report significant disciplinary actions to 

FDA. This will involve providing a DEA 

registration number or State controlled 

substance license number when there is 

a significant disciplinary action issued 

by the DEA or the State controlled 

substance licensing authority that 

would limit the ability of the 3PL 

facility to conduct 3PL activities related 

to the distribution of controlled drug 

substances that meet the definition of 

product, as defined at § 205.3(k). In such 

a situation, information about the DEA 

registration or State controlled 

substance license is important because 

the disciplinary action would likely be 

associated with that specific license or 

registration. 

A significant disciplinary action is 

defined in the proposed regulation as an 

action that limits the ability of a facility 

to conduct 3PL activities related to the 

distribution of prescription drug 

products. FDA proposes that, within 30 

calendar days after a significant 

disciplinary action is imposed or taken 

by a State or Federal government, 3PLs 

must report the type of disciplinary 

action, the date the action was taken, 

and the State where the disciplinary 

action occurred, as well as submit any 

documents associated with the 

disciplinary action, including a final 

ruling by the relevant State or Federal 

agency or board or a consent decree. 

Finally, FDA is proposing to require 

a 3PL to report to FDA within 30 

calendar days of ceasing warehousing or 

other logistics services that it is going 

out of business or voluntarily 

withdrawing a 3PL license from a State. 

FDA believes reporting this information 

is essential for the information in the 

public database to be complete, 

accurate, and useful for FDA, the States, 

and trading partners. 

To ensure efficient enforcement of 

FD&C Act requirements and to make 

public the voluntary information 

provided by each 3PL facility, FDA 

proposes adding 3PL licensure to the 

public database to make information 

about 3PLs available on FDA’s website. 

Having the license status of 3PLs in one 

publicly available database will help 

FDA, trading partners, and other 

stakeholders determine whether 3PLs 

are properly licensed and authorized. 

12. Inspection Provisions 

Section 584(d)(2)(D) of the FD&C Act 

requires that the regulations provide for 

periodic inspections of 3PL facilities to 

ensure compliance with the national 

standards and directs FDA to determine 

the intervals at which periodic 

inspections of a 3PL will be conducted 

by the licensing authority to ensure a 

facility’s compliance with the law and 

this regulation. To this end, FDA is 

proposing to require that a physical 

inspection of a 3PL facility be 

conducted prior to issuance of the 

initial license and routinely once every 

3 years thereafter (see proposed 

§ 205.16(a) and (b)). The regulation 

proposes allowing the licensing 

authority, or an AO, as determined by 

the licensing authority, to conduct 

physical inspections (see proposed 

§ 205.16(a)). As used in part 205, 

subparts A and B, licensing authority 

means the State licensing authority or 

FDA. When developing the timeframes 

for inspections, FDA sought to balance 

the risk to the supply chain while 

considering FDA’s and State agencies’ 

resource constraints. FDA is proposing 

to require that the physical inspection of 

a 3PL facility warehouse space include 


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the paper and electronically stored 

records detailing the processes related 

to all 3PL activities (see proposed 

§ 205.16(c)). FDA has authority to 

require that an inspection of a 3PL 

warehouse include the 3PL’s records, 

files, and processes related to product 

warehousing. Section 704(a)(1) of the 

FD&C Act (21 U.S.C. 374(a)(1)) states 

that ‘‘in the case of any . . . warehouse 

. . . in which prescription drugs . . . 

are held, inspection shall extend to all 

things therein (including records, files, 

papers, processes, controls, and 

facilities).’’ This authority directly 

applies to FDA’s ability to inspect a 

3PL’s facility warehouse space for 

relevant records and files to ensure 

compliance with the FD&C Act. FDA 

also proposes to require that 3PLs 

permit inspections at reasonable times 

and that the licensing authority conduct 

its inspection in a reasonable manner 

(see proposed § 205.16(c) and (d)). 

D. Approved Organizations for 3PLs 

1. Approval and Utilization of Outside 

Organizations in the Licensure Process 

The DSCSA requires that regulations 

codified by FDA establish a process by 

which a third-party organization 

approved by FDA shall, upon a 3PL’s 

request, ‘‘issue a license’’ to each 3PL 

facility that meets the requirements for 

licensure (section 584(d)(2)(A) of the 

FD&C Act). However, in situations 

where a State has not established a 

licensure program in accordance with 

the regulations, the DSCSA charges FDA 

with issuing 3PL licenses, provided the 

applicable requirements for licensure 

are met (section 584(a)(1)(B) of the 

FD&C Act). Accordingly, FDA interprets 

the language of 584(d)(2)(A) of the FD&C 

Act to mean that a third-party 

organization approved by FDA—an 

AO—will conduct a review of the 3PL’s 

qualifications for licensure and issue a 

report to FDA regarding whether the 

3PL ‘‘demonstrates that all applicable 

requirements for licensure . . . are 

met,’’ which FDA can rely on when 

issuing a license per section 584(e) of 

the FD&C Act. 

The DSCSA allows States and FDA to 

approve organizations for purposes of 

licensure review and periodic 

inspection. Proposed §§ 205.17, 205.18, 

and 205.19 contain the process that FDA 

will use to approve organizations and 

the qualifications to become an AO. 

FDA suggests that States that choose to 

rely on AOs for licensure reviews have 

in place the same or similar processes 

for approved organizations to conduct 

licensure reviews and for decisions 

affecting the approval status of those 

organizations. 

The scope of work AOs would be 

tasked with performing and the 

standards an AO must meet to become 

approved are detailed in subpart B of 

proposed part 205. The proposed rules 

also set forth the process by which FDA 

will approve organizations to review the 

qualifications of 3PL facilities for 

licensure, which we refer to as a 

‘‘licensure review.’’ 

A licensure review consists of 

performing a review of all documents 

submitted to the licensing authority in 

support of an application for 3PL 

licensure and conducting an inspection 

of the facility as directed by the 

licensing authority. If a review of 

documentation supports licensure of the 

3PL facility, the facility will then be 

inspected by an AO, as directed by FDA. 

FDA is proposing that the AO’s 

licensure review be completed within 

90 days upon receiving notice from the 

Agency to conduct the licensure review. 

FDA believes that this 90-day timeframe 

is sufficient for an AO to perform the 

work with which they are tasked while 

also ensuring that there are no undue 

delays in the licensure process. Upon 

completion of the licensure review, the 

AO would then provide FDA with a 

licensure review report within 7 days 

(see proposed § 205.17(b)), with a copy 

sent to the 3PL facility. As proposed, 

using the report submitted by the AO, 

FDA would make the final 

determination as to whether a 3PL 

facility should be issued a license. The 

process that AOs should follow when 

conducting routine inspections of 3PL 

facilities mirrors the process for 

licensure review and is detailed in 

proposed § 205.17(c). 

It is important that FDA can verify an 

AO’s continued compliance with the 

approval requirements. Therefore, to 

keep its approval, FDA is proposing to 

require that an AO maintain certain 

records for a period of at least 5 years 

and these records must be readily 

available to FDA upon request. Unless 

specified by statute, we believe it is 

reasonable for the required length of 

maintenance of records to align with the 

length of the entity’s licensure term. In 

addition, to ensure public safety, FDA is 

proposing to require that AOs report 

potential violations at 3PL facilities to 

FDA within 24 hours of discovery (see 

proposed § 205.17(f)). The general 

qualifications for approval of AOs are 

set out in proposed § 205.18. 

To become and remain approved, 

FDA is proposing to require that an 

organization, and those employed by the 

organization, abide by certain 

requirements that are intended to secure 

against conflicts of interest, promote 

professional business practices, and 

protect non-public information (see 

proposed § 205.18(a)). 

FDA is proposing to allow AOs to hire 

outside contractors to conduct licensure 

reviews or licensure review-related 

activities. Under FDA’s proposed 

regulation, AOs who decide to use 

outside contractors must ensure that the 

contractors not only effectively carry out 

the licensure review or licensure 

review-related activities in a manner 

consistent with this proposed regulation 

to ensure public health, but the AO 

must also ensure that the contractors 

properly protect all non-public 

information. 

For an AO to maintain approval, FDA 

proposes to require that the AO ensures 

contractors abide by all applicable 

confidentiality agreements, that the AOs 

have policies and procedures in place to 

ensure the contractors abide by these 

proposed standards, and that the 

contractors have the necessary training 

and expertise to carry out licensure 

reviews (see proposed § 205.18(b)(1)). 

Also, before a contractor hired by an AO 

may perform a licensure review of a 3PL 

facility, the 3PL must have entered into 

an agreement with the AO giving the 

AO permission to share with contractors 

the 3PL’s confidential commercial 

information (see proposed 

§ 205.18(b)(2)). If such consent is not 

provided by the 3PL facility, the AO 

must perform the licensure review itself. 

FDA believes that this approach is 

reasonable given that it is the AO’s 

decision to work with contractors and, 

under this proposed regulation, the 

ultimate responsibility for the licensure 

review rests with the AO. 

In addition, so FDA may keep track of 

which organization is responsible for 

each licensure review, FDA proposes 

that AOs must submit to FDA a list of 

the contractors used by the organization 

each year and the AO must certify that 

such contractors comply with the 

applicable requirements (see proposed 

§ 205.18(b)(3)). Finally, to ensure that 

the standards set forth in this regulation 

are followed and that lines of 

responsibility are clear, FDA proposes 

to require that the AOs remain 

responsible for all the work performed 

by outside contractors (see proposed 

§ 205.18(b)). 

FDA proposes to prohibit contractors 

from subcontracting licensure review or 

licensure review-related activities (see 

proposed § 205.18(b)(1)(ii)). Limiting the 

ability of contractors to further delegate 

their responsibility ensures that FDA 

will have accurate information about 

who is conducting licensure reviews, 

that those responsible for the licensure 

reviews have the necessary 


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qualifications, and that their conduct is 

governed by this proposed regulation. 

The proposed process that FDA will 

use to approve organizations, including 

the application process, as well as the 

process for suspending or revoking an 

organization’s approval, are set forth in 

proposed § 205.19. To ensure 

compliance with DSCSA, FDA is 

proposing that organizations seeking 

approval by FDA must first 

electronically submit to FDA an 

application demonstrating the 

organization’s ability to assess 

compliance with all 3PL requirements 

detailed in proposed § 205.19 (see 

proposed § 205.19(a) and (b)). 

Organizations must also provide 

training that their employees must pass 

before they may conduct licensure 

reviews (see proposed § 205.19(c)). To 

verify information contained in the 

application and further ensure 

compliance with the proposed 

regulation, FDA proposes that, before an 

AO may conduct its first licensing 

review, it must be audited by FDA (see 

proposed § 205.19(d)). A new approval 

will be valid for 5 years (see proposed 

§ 205.19(e)). 

If an organization’s request for 

approval is denied, the organization 

may issue a request for reconsideration 

under 21 CFR 10.75 (see proposed 

§ 205.19(f)). In addition, to ensure 

compliance and protect public health, 

FDA proposes that an AO may have its 

approval suspended if it does not 

maintain the standards outlined in this 

part (see proposed § 205.19(g)). A 

suspended AO must cease all 3PL 

licensure review including any pending 

inspections of 3PL facilities. A 

suspended AO must notify any 3PLs 

under a pending licensure review by the 

AO, of the AO’s suspension within 7 

calendar days (see proposed 

§ 205.19(g)(5)). While most suspensions 

will happen only after notice and 

opportunity to request a hearing, under 

the proposed regulations, FDA reserves 

the ability to suspend approval prior to 

a hearing if there is a reasonable 

probability that the organization’s 

noncompliance will cause imminent 

and serious adverse health 

consequences or death to humans (see 

proposed § 205.19(h)). 

Furthermore, FDA proposes that a 

suspended approval can be reinstated if 

the issue is resolved within 1 year from 

the date of suspension (see proposed 

§ 205.19(i)), though it may be revoked if 

the organization fails to rectify the 

situation that resulted in the suspension 

(see proposed § 205.19(j)). FDA believes 

that 1 year provides the AO enough time 

to remedy most situations. An AO’s 

approval may also be reinstated on a 

conditional basis. If the AO is 

conditionally reinstated, they will enter 

a three-year probationary period, during 

which if any material deficiencies arise, 

their license will be subject to 

immediate revocation (see proposed 

§ 205.19(i)(2)). 

FDA also proposes to permit an AO to 

voluntarily withdraw its approval, but it 

must inform FDA of any facilities with 

pending reviews (see proposed 

§ 205.19(l)). To further ensure that 

pending licensure reviews are not 

overlooked, under FDA’s proposed 

regulation, an AO whose approval has 

been suspended, revoked, or voluntarily 

withdrawn has the responsibility to 

report this information to those 3PL 

facilities with pending licensure 

reviews (see proposed § 205.19(m)); this 

will stop the clock on the 90-day 

licensure review while the 3PL applies 

for licensure review from another AO or 

FDA. Also, to ensure that the AOs 

continue to meet the standards put forth 

in this subpart, and part 205 generally, 

under the proposed regulations, an AO 

must inform FDA of any changes to 

information that was submitted as part 

of its application for approval (see 

proposed § 205.19(n)(1)). Since the 

approval of an organization is 

nontransferable, changes in ownership 

also require an AO to submit a new 

application to FDA (see proposed 

§ 205.19(n)(2)). Finally, as an additional 

assurance that an AO continues to 

comply with the provisions of this part, 

FDA proposes to require that AO’s 

remain subject to periodic audits by 

FDA (see proposed § 205.19(o)). 

E. National Standards for Wholesale 

Distributors 

1. Requirement That Wholesale 

Distributors Be Licensed 

To implement section 503(e)(1) of the 

FD&C Act, FDA is proposing to codify 

at § 205.20(a) the requirement that a 

wholesale distributor be licensed by the 

State from which the drug is distributed, 

or by FDA if the State from which the 

drug is distributed has not established a 

licensure requirement in accordance 

with the standards proposed herein, as 

well as by the State into which the drug 

is distributed if that State requires such 

a license. This requirement is consistent 

with how States currently license 

wholesale distributors. 

FDA anticipates that, for the purposes 

of annual reporting, a wholesale 

distributor who maintains multiple 

licenses to engage in wholesale 

distribution, will be able to report their 

required information aggregately for all 

their licenses (section 503(e)(2) of the 

FD&C Act). FDA believes this approach 

will increase efficiency for both 

wholesale distributors and the Agency, 

ensure that licenses for wholesale 

distribution facilities will be granted to 

qualified firms, and ensure records 

related to their facilities will be 

maintained in an organized fashion. 

In addition, FDA proposes to set the 

licensure term for wholesale distributors 

at 2 years (see proposed § 205.20(b)). 

FDA considered current State 

requirements, as well as the potential 

impacts on State and Agency resources, 

to determine the term for licensure. 

Ultimately, the Agency believes that 2 

years aligns with current practices, does 

not place an undue burden on State or 

FDA resources, and provides adequate 

protection to American consumers 

because it ensures that renewals will be 

based on current information and 

operations. 

2. Surety Bonds 

Wholesale distributors are required to 

obtain a surety bond to be licensed and 

engage in wholesale distribution 

(section 583(b)(3) of the FD&C Act). 

FDA is proposing to establish the terms 

of this requirement in proposed 

§ 205.21. To receive or renew a license, 

a surety bond of $100,000, or $25,000 if 

applicable (for wholesale distributors 

with annual gross receipts of 

$10,000,000 or less), must be in place at 

the time the wholesale distributor’s 

application for licensure or licensure 

renewal is submitted to the licensing 

authority (see proposed § 205.21(b)). 

The surety bond is intended to ensure 

compliance with DSCSA and that any 

administrative penalties levied by the 

licensing authorities are paid. DSCSA 

also permits the furnishing of ‘‘other 

equivalent means of security acceptable 

to the State’’ in lieu of a bond (section 

583(b)(3)(A)(i) of the FD&C Act). It 

would be up to the State licensing 

authority to determine what, if 

anything, would constitute an 

equivalent means of security to a surety 

bond. Where FDA is the licensor, the 

wholesale distributor would need to 

furnish a surety bond to satisfy the bond 

requirement as other equivalent means 

of security appear to be specifically 

reserved for the States. 

While a bond is required before a 

wholesale distributor may acquire the 

necessary license, section 583(b)(3)(B) of 

the FD&C Act provides a set of 

circumstances under which the surety 

bond requirement will be waived. FDA 

is proposing to codify at § 205.21(b)(3) 

the DSCSA requirement that if a 

wholesale distributor can prove it has 

the necessary bond for the State where 

the facility is located (e.g., by providing 

a copy of the existing security bond 


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agreement), the requirement for an 

additional surety bond for another State 

is waived. In this situation, the 

wholesale distributor does not have to 

acquire an additional bond to satisfy the 

non-resident licensure requirements of 

the State into which the wholesale 

distributor plans to distribute. However, 

it remains unclear if and how this 

waiver should apply when an 

equivalent means of security to the 

surety bond are used. FDA requests 

comment specifically related to the 

waiver to the surety bond requirement 

and whether that waiver should apply 

to scenarios where some other 

equivalent means of security is used in 

lieu of a surety bond. 

The terms that a surety bond must 

include are outlined in proposed 

§ 205.21(c). FDA proposes to require not 

only that the terms cover the liability 

requirements related to administrative 

penalties, but also that the bond remain 

in full force for 1 year after the license 

expires and that the surety company 

guarantee payment within 30 days of 

receiving notice from the licensing 

authority. FDA also proposes permitting 

licensing authorities to make claims 

against the surety bond for 1 year after 

the wholesale distributor’s license 

expires or within 60 days after an 

administrative or legal proceeding has 

concluded, whichever is longer. These 

timeframes seek to ensure that the rights 

of the different parties involved in a 

potential claim will be adequately 

protected. This is particularly important 

with respect to the waiver because it 

allows the affected States equal access 

to the surety bond and ensures 

consistent standards across States. 

The implications of termination or 

lapse in coverage of a surety bond are 

detailed in proposed § 205.21(d). A 

wholesale distributor may cancel its 

surety bond, but FDA proposes to 

require that it give all impacted 

licensing authorities 30 days’ prior 

notice before such cancellation take 

effect. Such notice is necessary because 

a wholesale distributor’s license will be 

suspended upon the cancellation of the 

surety bond unless the wholesale 

distributor acquires a new bond before 

to the old bond is cancelled. FDA 

proposes that a license will be 

suspended if a licensing authority 

discovers a lapse in bond coverage. 

FDA also proposes to require that the 

surety bond permit actions to be brought 

by either a State or Federal licensing 

authority (see proposed § 205.21(e)), 

provide the contact information for the 

surety company (see proposed 

§ 205.21(f)), and name the specific 

parties to the surety bond (see proposed 

§ 205.21(h)). 

3. General Requirements for Licensure 

This section includes the 

requirements for the application. FDA 

notes that the applicant would have to 

demonstrate compliance with the 

requirements as set forth in subpart C, 

including a satisfactory inspection, as 

described in proposed § 205.28, and 

criminal background checks for facility 

managers and designated 

representatives, as described in 

proposed § 205.25, to be granted a 

wholesale distributor license. 

The general application requirements 

that must be met for a State or Federal 

licensing authority to issue a wholesale 

distributor license are set forth in 

proposed § 205.22. The requirements 

applicable to the individual who 

submits the licensure application are 

detailed in proposed § 205.22(a). FDA 

proposes to require that the applicant 

submit all required information and pay 

a licensing fee in order to be considered 

for licensure. FDA believes these 

general requirements align with current 

industry practices. 

FDA is proposing at § 205.22(b) to 

require that the applicant provide the 

surety bond or other equivalent means 

of security acceptable to the State, 

required by section 583(b)(3) of the 

FD&C Act and detailed in proposed 

§ 205.21, as part of the wholesale 

distributor’s application for a license. 

The information that the licensing 

authority will require as part of a 

wholesale distributor’s initial 

application for licensure and renewal 

applications is set forth in proposed 

§ 205.22(c) and (d). This information is 

necessary for the licensing authority to 

assess whether the wholesale distributor 

is in good standing and has the 

infrastructure and capabilities to fulfill 

the duties and obligations of licensure. 

For example, FDA is proposing to 

require that a wholesale distributor 

inform FDA if it has received any 

citations for violating requirements for 

licensure or received any significant 

disciplinary actions within the past 7 

years (see proposed § 205.22(c)(8)). FDA 

believes this information is necessary to 

ensure the wholesale distributor can 

demonstrate that it has not engaged in 

a pattern of violating the standards for 

licensure. The DSCSA defines 

prohibited persons, in part, as licensees 

who have ‘‘engaged in a pattern of 

violating the requirements of this 

section, or State requirements for 

licensure, that presents a threat of 

serious adverse health consequences or 

death to humans’’ (section 583(d) of the 

FD&C Act). Therefore, this information 

is necessary to demonstrate that a 

wholesale distributor is not prohibited 

from receiving or maintaining licensure 

for wholesale distribution. 

Finally, FDA proposes to require that 

a wholesale distributor’s license be 

readily retrievable at the facility, and 

that the facility permit State or Federal 

inspectors, or others acting on behalf of 

the licensing authority, to inspect the 

license (see proposed § 205.22(e)). 

4. The Federal Licensure Process 

Section 503(e) of the FD&C Act, as 

amended by DSCSA, requires FDA to 

license wholesale distributors directly if 

the State in which it engages in 

wholesale distribution has not 

established a licensing requirement 

(section 503(e)(1) of the FD&C Act). 

Proposed § 205.23 details the process 

that FDA will use when issuing licenses 

to wholesale distributors. While this 

section is only applicable to wholesale 

distributors obtaining a license from 

FDA, FDA suggests States implement 

similar procedures to ensure that all 

wholesale distributor licenses issued are 

consistent with the proposed regulation 

pursuant to section 503(e)(1)(B) of the 

FD&C Act. FDA plans to make 

information available to clarify who is 

the appropriate licensing authority in 

the wholesale distributor’s State. FDA 

believes this streamlined process for 

application will allow for greater clarity 

and harmonization across the industry. 

For wholesale distributor license 

applications submitted to FDA, FDA 

proposes that the wholesale distributor 

submit the application electronically, 

including the information outlined in 

proposed §§ 205.21 and 205.22, along 

with additional supporting 

documentation (see proposed 

§ 205.23(a)(1)). The DSCSA authorizes 

FDA’s use of third-party organizations— 

AOs—to conduct inspections of 

wholesale distributors required under 

section 583(c) of the FD&C Act. If FDA 

has approved one or more AOs to 

inspect wholesale distributors, the 

wholesale distributor should note the 

AO it prefers to conduct its inspection 

on the application submitted to FDA 

(see proposed § 205.23(a)(2)). If no AO 

has been approved, FDA will conduct 

the inspection (see proposed 

§ 205.23(a)(3)). Furthermore, submission 

of the application to FDA will not be 

considered complete until FDA receives 

all pertinent information and fees (see 

proposed § 205.23(a)(5)). 

While the DSCSA permits AOs to 

conduct inspections of wholesale 

distributors applying for licensure, the 

responsibility of determining whether a 

wholesale distributor meets all the 

applicable requirements set forth in this 

proposed regulation remains with FDA 

(see proposed § 205.23(b)). To avoid 


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delays in the licensure process, FDA 

intends to work with wholesale 

distributors to correct minor errors 

made on the application (e.g., missing 

written policies and procedures) and 

communicate with the wholesale 

distributor about additional information 

the Agency may need to process and 

review the application (see proposed 

§ 205.23(c)). If the wholesale distributor 

meets the requirements outlined in this 

proposed part and none of the 

prohibited factors listed in proposed 

§ 205.30(a)(1) are present, FDA will 

approve the application and send an 

approval letter and license certificate 

(see proposed § 205.23(d)). 

FDA recognizes that a wholesale 

distributor may have concerns about 

what happens to the status of its license 

if disciplinary sanctions are taken 

against the approval status of the AO 

that conducted its inspection when 

applying for licensure or if the 

organization is otherwise no longer 

considered an approved AO. While FDA 

believes that a wholesale distributor 

should not be penalized for the actions 

of the AO, FDA must ensure that the 

AO’s review and findings provide a 

reliable basis for licensing decisions. As 

such, FDA is proposing that, if the 

wholesale distributor is otherwise in 

good standing, a change in the approval 

status of the AO that conducted the 

inspection of the wholesale distributor 

will not automatically affect the 

licensure of a licensed wholesale 

distributor (see proposed § 205.23(e)). 

Rather, in the event that an AO has 

disciplinary sanctions taken against it, 

ends its business, or is otherwise no 

longer considered an approved AO, the 

license of any wholesale distributor 

reviewed by that AO will be subject to 

appropriate action in accordance with 

§ 205.30 and other applicable statutes or 

regulations. FDA may verify the 

wholesale distributor’s compliance 

status and review the facts in that 

situation to determine the potential 

effect, if any, on the licensure of 

wholesale distributors inspected by that 

AO. 

5. Changes to Information, Ownership, 

or Location of Licensed Wholesale 

Distributors 

FDA recognizes that information 

about a business can change over time. 

However, for the licensing authority to 

effectively carry out its responsibilities, 

license information must remain current 

and changes in information previously 

submitted must be reported to the 

licensing authority. Currently, the 

reporting requirements for these types of 

changes vary by State. FDA is proposing 

the establishment of specific timeframes 

for reporting changes (see proposed 

§ 205.24) and believes that 

standardizing the timeframes will help 

make reporting business-related changes 

less burdensome for industry and 

licensing authorities. FDA is proposing 

that the wholesale distributor submit 

changes to certain information, such as 

the information submitted with a surety 

bond or as part of an application for 

licensure, to the licensing authority 

within 30 calendar days of the date the 

change became effective (see proposed 

§ 205.24(a)). Significant changes, such 

as changes in location or changes to the 

person engaged in wholesale 

distribution, require the added scrutiny 

that comes with an inspection or review 

of an application for a new license to 

ensure that the entity will be able to 

continue to meet the standards for 

licensure in its new location or under its 

new management. For this reason, FDA 

is proposing that changes in location or 

changes to the person engaged in 

wholesale distribution will require an 

inspection or new license (see proposed 

§ 205.24(b) and (c)). FDA recognizes that 

the ownership of a facility from which 

a wholesale distributor leases the 

facility and conducts wholesale 

distribution may change without the 

wholesale distribution operation 

changing in any meaningful way. If that 

change does not impact the wholesale 

distribution operation, the wholesale 

distributor will not need to apply for a 

new license. As described in proposed 

§ 205.24(b)(1), the date the change of 

location takes place is the date the new 

location begins receiving prescription 

drugs. 

6. Prohibited Persons and Qualifications 

for Key Personnel 

The FD&C Act, as amended by 

DSCSA, requires FDA to establish and 

implement standards for the 

qualifications of wholesale distributors’ 

key personnel (section 583(b)(5) of the 

FD&C Act). As discussed above and 

proposed at § 205.3(g), FDA considers 

key personnel to include individuals 

with responsibility for managing the 

operations of the wholesale distributor, 

including any principal, owner, 

director, officer of the wholesale 

distributor, facility manager or 

designated representative, or other 

individuals who are authorized to enter 

into areas where prescription drugs are 

held and are likely to handle those 

prescription drugs as a part of their 

responsibilities within the operation. 

FDA believes the qualifications for key 

personnel proposed in § 205.25 are 

necessary to ensure that all the 

individuals who are responsible for 

operating the wholesale distributor’s 

facility are appropriately qualified to 

carry out their duties and that the 

wholesale distributor meets the national 

standards. 

Proposed § 205.25(a) lists conduct 

that prohibits a wholesale distributor 

from obtaining licensure. Proposed 

§ 205.25(b) establishes the basic 

standards for key personnel working 

within a wholesale distribution facility. 

Key personnel must have the 

appropriate education, background, 

training, and experience necessary to 

carry out their assigned functions 

within the operation. No one within the 

facility should carry out the 

responsibilities of key personnel 

without the proper training and 

expertise. 

As a part of FDA’s responsibility to 

establish and implement standards for 

the qualifications of wholesale 

distributors’ key personnel, FDA is 

proposing that wholesale distributors 

and their key personnel meet certain 

other qualifications. Licensure may be 

denied if a wholesale distributor or any 

of their key personnel do not meet the 

standards for qualification as outlined 

in proposed § 205.25(c). 

Key personnel working for a 

wholesale distributor hold critical 

positions of trust for protecting the 

security of the prescription drug supply 

chain. FDA believes it would be a best 

practice for a firm to require that all 

employees not engage in the illegal use 

of controlled substances while serving 

in their capacity in the wholesale 

distribution operation and request that 

all employees so state. 

FDA is proposing to require wholesale 

distributors to establish and implement 

written policies and procedures to 

ensure that their key personnel meet the 

qualifications contained in this 

proposed section (see proposed 

§ 205.25(e)) and to maintain certain 

information about their key personnel 

that demonstrates they are qualified to 

carry out the duties assigned to them 

(see proposed § 205.25(b)), including 

having the proper education and 

training (see proposed § 205.25(e)(3)). 

Proposed § 205.25(f) also limits a facility 

manager or designated representative to 

hold that position at one facility at a 

time. This is to ensure that the facility 

manager or designated representative is 

actively engaged in managing the daily 

operations of the facility and that they 

remain aware of any non-compliance 

issues that may arise. 

The FD&C Act, as amended by 

DSCSA, specifically requires licensure 

standards to include mandatory 

background checks and fingerprinting of 

wholesale distributor facility managers 

and their designated representatives 


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(section 583(b)(4) of the FD&C Act). 

Entrusting individuals with the 

responsibility of distributing 

prescription drugs prior to a criminal 

background check may jeopardize the 

integrity of the drug supply chain and 

leave the public exposed to unnecessary 

harm posed by the possible introduction 

of drugs that are unsafe. FDA is 

proposing to codify at § 205.25(g) the 

requirement for facility managers and 

their designated representatives to 

submit a full set of fingerprints to 

conduct local and national criminal 

background checks. The background 

check, when completed, must 

demonstrate that the facility manager or 

designated representative has no history 

of criminal convictions pursuant to 

proposed § 205.25(a). 

FDA suggests, when a wholesale 

distributor staffs its operation, it is a 

best practice that the individuals who 

work within their operation and have 

access to prescription drugs not have a 

record of criminal activity involving 

violations of the FD&C Act or other laws 

involving prescription drugs. This best 

practice is recommended to help ensure 

security within a wholesale distributor. 

When screening personnel who work 

in areas of a facility where prescription 

drugs are held, including the facility 

manager or designated representative, 

FDA recommends that a wholesale 

distributor consider whether such 

personnel have (1) engaged in a pattern 

of violating the requirements of section 

583 of the FD&C Act that present a 

threat of serious adverse health 

consequences or death to humans; (2) 

been found to have committed or 

facilitated commission of any prohibited 

acts under the FD&C Act or violated or 

facilitated any violations of any of the 

regulations in this part or analogous 

provisions of the State licensing 

authority, as applicable; (3) been 

convicted of any violation Federal, 

State, or local laws relating to drug 

samples, wholesale or retail drug 

distribution, distribution of controlled 

substances, or 3PL services; or (4) been 

convicted of any felony under Federal, 

State, or local laws involving or related 

to prescription drugs. FDA believes that 

wholesale distributors should consider 

an applicant’s history of violations of 

the FD&C Act or other laws involving 

prescription drugs when making staffing 

decisions. 

7. Wholesale Distributor Storage and 

Handling of Prescription Drugs, and 

Required Policies and Procedures 

The DSCSA charges FDA with 

creating national standards for the 

storage and handling of prescription 

drugs by wholesale distributors, 

including facility requirements (section 

583(b)(1) of the FD&C Act). To ensure 

confidence that the prescription drug 

delivered maintains its quality and 

integrity throughout the distribution 

process, FDA believes that wholesale 

distributors should establish and 

maintain quality systems that 

encompass the organizational structure, 

account for potential vulnerabilities or 

threats to the systems, and clearly 

articulate the procedures and processes 

for all wholesale distribution activity. A 

proper quality system should be fully 

documented, and the effectiveness of 

the system should be continually 

monitored to ensure the quality is 

maintained. This includes ensuring that 

facilities and equipment are properly 

maintained for their purposes of storing 

and distributing prescription drugs; that 

personnel are properly qualified, 

screened, and trained for their positions; 

and that documentation is 

comprehensive. Regular management 

review of all aspects of the quality 

systems in place is important for 

maintaining these high standards. FDA 

proposes § 205.26, which establishes 

basic requirements that will assist 

wholesale distributors in achieving 

these goals. 

Although the FD&C Act permits an 

entity to be more than one type of 

trading partner so long as it complies 

with all the applicable requirements 

(section 582(a)(1) of the FD&C Act), FDA 

believes that the processes and 

functions of each type of entity need to 

be kept separate for the licensing 

authority to ensure the entity is 

complying with all the applicable 

requirements. Accordingly, FDA is 

proposing that any wholesale 

distributor’s facility that is also licensed 

or registered as another trading partner 

and operating from the same address 

must have separate systems and 

processes in place for their separate 

functions (see proposed § 205.26(a)). 

FDA believes that proper storage and 

handling of prescription drugs 

inherently requires the establishment of 

standards that address physical 

requirements for the facility space in 

which drugs are stored and handled, 

along with standards that address the 

manner in which drugs are to be 

securely stored and handled within the 

facility of a wholesale distributor. In 

§ 205.26(b), FDA proposes the following 

requirements with regard to standards 

placed on the wholesale distributor’s 

facility. FDA believes these facility 

requirements will ensure that their 

establishments are appropriate for the 

distribution (including storage) of 

prescription drugs. 

The facility must be of a suitable size, 

configuration, and design to ensure 

proper storage, maintenance, and 

cleanliness (see proposed 

§ 205.26(b)(1)(ii) through (iv)). The 

facility must also be equipped with 

clearly defined areas that separate drugs 

that are unfit for distribution, from those 

that are saleable to avoid potential 

mistakes when distributing the 

prescription drugs (see proposed 

§ 205.26(b)(1)(vi)). 

The facility must be sufficiently 

secure to protect the prescription drugs 

in the supply chain from possible theft 

or diversion (see proposed 

§ 205.26(b)(2)). Facilities must protect 

against unauthorized entry and ensure 

that the premises are well lit and not 

vulnerable to intrusion (see proposed 

§ 205.26(b)(2)(i) through (iii)). Entry and 

access to areas where prescription drugs 

are held within the facility must be 

limited to those who have the 

appropriate experience and training 

needed to conduct wholesale 

distribution (see proposed 

§ 205.26(b)(2)(iv)). These basic security 

requirements will help wholesale 

distributors protect and safeguard the 

prescription drugs maintained in their 

facility. 

A wholesale distributor has the 

responsibility of ensuring that 

prescription drugs are stored under 

proper conditions to maintain the safety 

and effectiveness of the drugs it 

distributes. Accordingly, a wholesale 

distributor’s facility must maintain 

appropriate equipment (e.g., 

refrigeration and air conditioning 

equipment) in good working order to 

ensure that prescription drugs are 

properly stored in the facility (see 

proposed § 205.26(b)(3)). To this end, 

FDA is proposing to require that a 

wholesale distributor establish written 

procedures to ensure that its equipment 

is installed and maintained by qualified 

individuals (see proposed 

§ 205.26(b)(3)(i)). Written policies and 

procedures include those that are stored 

and maintained electronically. Upon 

inspection, a wholesale distributor must 

demonstrate and verify that its 

equipment is in working order and has 

been periodically assessed in 

accordance with the wholesale 

distributor’s written procedures to 

ensure the equipment’s continued 

functionality (see proposed 

§ 205.26(b)(3)(i)), which is critical in 

ensuring that those drugs retain their 

safety and effectiveness throughout the 

supply chain. 

Additionally, a wholesale distributor 

must regularly conduct and document 

facility assessments to make sure that 

drugs are properly stored in accordance 


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with their labeling (see proposed 

§ 205.26(b)(4)). 

FDA expects that, as a crucial part of 

the creation of a quality system, 

wholesale distributors will establish, 

maintain, and follow written policies 

and procedures regarding the 

safeguarding of the prescription drugs 

within their control. Proposed 

§ 205.26(c) outlines several 

requirements for maintaining written 

policies and procedures to ensure that 

the requirements are carried out 

properly and consistently. Wholesale 

distributors are not limited to 

establishing written policies and 

procedures for the stated functions in 

proposed § 205.26(c), as a wholesale 

distributor may wish to establish 

written policies and procedures 

pertaining to other aspects of wholesale 

distribution and staffing of their 

facilities. The purpose of requiring 

written policies and procedures is to 

assist staff and management at a 

wholesale distribution facility to 

determine the processes required to 

ensure safe storage and distribution of 

prescription drugs. 

Proposed § 205.26(c) includes the 

requirement that wholesale distributors 

establish and follow written policies 

and procedures to ensure that a 

wholesale distributor: (1) Only does 

business with other authorized trading 

partners (see proposed § 205.26(c)(1)); 

(2) properly maintains equipment in 

good working order as outlined in 

proposed § 205.26(b)(3) (see proposed 

§ 205.26(c)(2)); (3) transports 

prescription drugs in a manner designed 

to avoid breakage and exposure (see 

proposed § 205.26(c)(3)); (4) inspects 

shipping containers for suspect or 

illegitimate products, as well as other 

quality issues that may render the 

prescription drug unfit for distribution 

(see proposed § 205.26(c)(4)); (5) stores 

and handles the prescription drugs they 

warehouse and distribute in accordance 

with the prescription drug’s labeling 

(see proposed § 205.26(c)(5)); (6) 

properly retains, returns, or destroys 

drugs removed from the supply chain 

depending on the proper disposition of 

the prescription drug (see proposed 

§ 205.26(c)(6)); and (7) is prepared to 

protect against reasonably foreseeable 

crises that could affect security or 

operations at the facility (see proposed 

§ 205.26(c)(7)). 

8. Recordkeeping 

Proper recordkeeping is essential to 

the timely identification, recording, and 

reporting of issues arising within the 

supply chain. Section 583(b)(2) of the 

FD&C Act requires FDA to create 

national standards for establishing and 

maintaining records pertaining to the 

distribution of prescription drugs. FDA 

is proposing in § 205.27(a) that these 

records include documentation 

pertaining to the security, storage, 

handling, inventory, shipping, sale, 

purchase, trade, delivery, and receipt of 

prescription drugs, as well as policies, 

procedures, instructions, contracts, data, 

inspection reports, and any other 

documentation related to compliance 

with this part, such as invoices, 

purchase orders, packing slips, and 

shipping records. These records could 

be stored and maintained electronically. 

These records maintenance 

requirements will allow for greater 

confidence in the information preserved 

at the facility and potentially 

disseminated to other trading partners. 

The maintenance, availability, and 

accuracy of the records made available 

for inspection under section 583(b)(6) of 

the FD&C Act are critical to ensure that 

wholesale distributors are acting in 

compliance with this proposed 

regulation and that the records can be 

relied upon to identify any potential 

risk to the public health. As such, FDA 

is proposing to require that all records 

be securely stored, and that any 

alterations made to records be signed 

and dated, while preserving the original 

information contained in the record (see 

proposed § 205.27(b)). This is intended 

to ensure that all records related to the 

distribution of prescription drugs 

provide transparency and accurately 

reflect the activities of the wholesale 

distributor. FDA also believes that 

reliability of the records is contingent 

on having processes and procedures in 

place that restrict access to and protect 

the integrity of the data. To this end, 

FDA is proposing to require in 

§ 205.27(c) that wholesale distributors 

implement written policies and 

procedures to protect the integrity of 

their records. 

Under proposed § 205.27(d), all 

records would be retained for a period 

of 3 years, except records related to 

suspect and illegitimate products, 

prescription drug quality complaints, 

and destroyed, returned, and recalled 

prescription drugs, which would need 

to be retained for a period of 6 years. 

Such record retention is necessary to 

ensure compliance and consistent 

enforcement of the various record 

keeping requirements of sections 582, 

583, and 584 of the FD&C Act. 

9. Inspections 

Section 583(b)(6) of the FD&C Act 

directs FDA to establish national 

standards for a mandatory physical 

inspection of any facility used in 

wholesale distribution within a 

reasonable time frame from the initial 

application (section 583(b)(6) of the 

FD&C Act). FDA believes that it is 

imperative for the mandatory physical 

inspection to take place prior to issuing 

an initial license to a wholesale 

distributor to ensure that only those 

wholesale distributors who have the 

ability to properly store, handle, and 

distribute prescription drugs in 

accordance with the national standards 

are licensed. Accordingly, in proposed 

§ 205.28(a), wholesale distributors are 

required to undergo a physical 

inspection before the licensing authority 

issues the initial license. As used in 

subpart C, licensing authority means the 

State licensing authority or FDA. To 

satisfy the inspection requirement, 

section 583(c) of the FD&C Act permits 

the licensing authority to conduct the 

inspection or accept an inspection by 

the State in which the facility is located 

or by a third-party accreditation or 

inspection service approved by the 

licensing authority in accordance with 

these standards. FDA has codified this 

provision at proposed § 205.28(a)(1) and 

(2). Additionally, FDA believes that 

section 583(c) can be applied to State 

licensure of non-resident wholesale 

distributors to ship into a State and 

proposes that a State into which a drug 

is distributed may use the same 

methods to satisfy the inspection 

requirement for non-resident wholesale 

distributors (see proposed 

§ 205.28(a)(1)(iii)). FDA believes that 

requiring a satisfactory inspection prior 

to licensure will ensure that only 

wholesale distributors with appropriate 

facilities and equipment for storing and 

distributing prescription drugs are 

granted a license to participate in the 

supply chain. 

FDA is proposing to require that the 

physical inspection of wholesale 

distributor facilities include the facility 

itself, processes related to all wholesale 

distribution activities, and paper and 

electronically stored records; that 

wholesale distributors permit 

inspections at reasonable times; and that 

the licensing authority conduct its 

inspection in a reasonable manner (see 

proposed § 205.28(b) and (c)). FDA 

believes that authentication of records 

during an inspection is important to 

maintain confidence in documentation 

preserved by the wholesale distributor, 

which may contain information about 

nonsaleable prescription drugs or be 

disseminated to other trading partners. 

FDA proposes that a wholesale 

distributor be required to make records 

available during inspections, including 

records that are held offsite in the 

normal course of business. The failure 

of a wholesale distributor to produce 


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records in a timely manner during an 

inspection can significantly affect the 

licensing authority’s ability to complete 

the inspection. Therefore, FDA is 

proposing that a wholesale distributor 

be required to provide offsite records 

within 2 business days of a request for 

such records by a State or Federal 

official, or sooner if necessitated by the 

duration of the inspection (see proposed 

§ 205.28(b)). FDA also proposes the 

requirement that a wholesale distributor 

cooperate with the State or Federal 

licensing authority, or the AO 

conducting the inspection, at reasonable 

times, within reasonable limits, and in 

a reasonable manner to achieve the 

objective of the inspection (see 

proposed § 205.28(c)). 

Finally, FDA believes routine 

inspections are an essential tool to 

ensure that wholesale distributors 

continue to comply with the national 

standards after obtaining their initial 

wholesale distributor license and move 

to renew that license. Accordingly, FDA 

is proposing to require that wholesale 

distributors undergo routine inspections 

at least once every 3 years (see proposed 

§ 205.28(d)). In developing the 

inspection timeframes, FDA sought to 

balance the risk to the supply chain 

with FDA’s and State licensing 

authorities’ resource constraints. These 

routine inspections allow FDA or the 

licensing authority to ensure that 

wholesale distributors maintain the 

levels of quality storage and 

maintenance of prescription drugs at 

their facilities expected by FDA to 

safeguard the supply chain. 

10. Annual and Other Reporting to FDA 

Under DSCSA, wholesale distributors 

must report certain information to FDA 

as part of the requirement to be 

considered an authorized trading 

partner (sections 581(2)(B) and 

503(e)(2)(A) of the FD&C Act). The 

annual reporting requirements for 

wholesale distributors went into effect 

on January 1, 2015, and FDA has 

published draft industry guidance that 

communicates draft Agency 

expectations for annual reporting while 

these regulations are being developed 

(79 FR 73083, December 9, 2014, and 82 

FR 3004, January 10, 2017). Proposed 

§ 205.29 clarifies the statutorily 

prescribed annual reporting 

requirements. 

The DSCSA requires that any 

wholesale distributor who owns or 

operates an establishment that engages 

in wholesale distribution report to FDA 

on an annual basis: (1) The State in 

which the wholesale distributor is 

licensed; (2) the identification number 

of its wholesale distributor’s license; (3) 

the name, address, and contact 

information for the wholesale 

distributor; (4) all trade names under 

which the licensed wholesale 

distributor conducts business; and (5) 

any significant disciplinary actions 

taken against the wholesale distributor 

(section 503(e)(2)(A) of the FD&C Act). 

FDA is proposing to require that 

wholesale distributors use an electronic 

reporting system provided by FDA (see 

proposed § 205.29(a)). This electronic 

system will increase efficiency by 

providing uniformity in report content 

and format, making the information 

easier to process for regularly updating 

the public database (section 503(e)(2)(B) 

of the FD&C Act). In addition, FDA 

believes having the license status of 

wholesale distributors in one publicly 

available database would be helpful for 

FDA, trading partners, and other 

stakeholders in determining whether 

wholesale distributors are authorized, as 

defined in section 581(2)(B) of the FD&C 

Act. Reporting information for each 

wholesale distributor in FDA’s 

electronic system during the reporting 

period is integral to FDA’s ability to 

provide oversight, as wholesale 

distributors are prohibited from 

distributing product without a license. 

FDA proposes that the annual 

reporting schedule will require all 

wholesale distributors to report each 

calendar year between January 1st and 

March 31st, although an entity may 

update information at any time (see 

proposed § 205.29(b)). For example, if a 

wholesale distributor chooses to update 

a license on December 15, 2019, that 

wholesale distributor will still have to 

report during the January 1, 2020, 

through March 31, 2020, annual 

reporting period. 

The specific information that 

wholesale distributors must 

electronically report to FDA is set forth 

in proposed § 205.29(c). The DSCSA 

requires licensed entities to report to 

FDA each State by which they are 

licensed and each license number 

(section 503(e)(2)(A)(i)(I) of the FD&C 

Act). FDA is proposing that the 

wholesale distributor also submit the 

expiration date of its State licenses (see 

proposed § 205.29(c)). The submission 

of the wholesale distributor’s license 

expiration date is paramount to FDA’s 

ability to establish and maintain a 

public database identifying each 

authorized wholesale distributor as 

required by section 503(e)(2)(B) of the 

FD&C Act. If a wholesale distributor’s 

license expires, it is no longer an 

authorized trading partner, and FDA 

will remove it from the public database 

until the license is renewed or a new 

license issued. Similarly, FDA is 

proposing that a wholesale distributor 

be required to report to FDA within 30 

calendar days that it has gone out of 

business or voluntarily withdrawn a 

wholesale distributor’s license from a 

State (see proposed § 205.30(e)). Again, 

FDA believes that requiring a wholesale 

distributor to report this information 

about the status of its license is essential 

for FDA to comply with the 

requirements under section 503(e)(2)(B) 

of the FD&C Act and to ensure that the 

database is accurate and helpful for the 

States and trading partners. 

The DSCSA also requires that 

wholesale distributors report the name, 

address, and contact information for 

each facility at which, and all the trade 

names under which, the wholesale 

distributor conducts business (section 

503(e)(2)(A)(i)(II) of the FD&C Act). In 

implementing this requirement, FDA is 

proposing to require the wholesale 

distributor to provide the company 

name that is identical to the official 

company name appearing on the 

license, along with the full business 

address that is associated with the State 

or Federal license (see proposed 

§ 205.29(c)(2)). 

Additionally, FDA is requesting that 

wholesale distributors submit a UFI that 

corresponds with the facility name and 

facility address. The UFI for a wholesale 

distributor’s facility is useful to FDA in 

identifying and confirming certain 

business information. A wholesale 

distributor should obtain a separate UFI 

for each physical address it reports. 

FDA has published guidance on annual 

reporting that can assist wholesale 

distributors if they require additional 

information regarding the UFI reporting 

recommendation. 

In addition, FDA believes the 

wholesale distributor’s contact 

information should include someone 

familiar with the daily operations of the 

wholesale distributor’s facility and who 

has the authority to act on inquiries to 

ensure efficient processing of inquiries 

and minimize the impact inquiries may 

have on the facility’s daily operations. 

Therefore, wholesale distributors must 

submit the contact information of the 

facility manager or designated 

representative, including that 

individual’s name, telephone number, 

and email address, with its annual 

reporting requirements pursuant to 

section 503(e)(2)(A)(i)(II) of the FD&C 

Act. 

DSCSA requires a wholesale 

distributor to report to FDA any 

significant disciplinary action taken by 

a State or Federal government against 

the wholesale distributor (section 

503(e)(2) of FD&C Act). A significant 

disciplinary action is defined in the 


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proposed regulation, in relevant part, as 

any action by a State or Federal 

licensing authority that limits or 

prevents a wholesale distributor from 

distributing or facilitating the 

distribution of prescription drugs (see 

proposed § 205.3(l)). FDA proposes that 

wholesale distributors report during the 

reporting period to FDA all significant 

disciplinary actions that occurred 

during the preceding 12-month period 

(see proposed § 205.29(d)(1)). After the 

reporting period, FDA proposes that 

within 30 calendar days after a 

significant disciplinary action is 

imposed or taken by a State or Federal 

government, wholesale distributors 

report the type of disciplinary action, 

the date the action was taken, and the 

State where the disciplinary action 

occurred, as well as submit any 

documents associated with the 

disciplinary action, including a final 

ruling by the relevant State or Federal 

agency or board or a consent decree (see 

proposed § 205.29(c)(4) and (d)). While 

wholesale distributors do not ordinarily 

have to report DEA registration numbers 

or State controlled substances licenses 

to FDA for annual reporting purposes, 

FDA suggests that such information be 

provided as part of its report under 

section 503(e)(2)(A)(ii) of the FD&C Act 

when there is a significant disciplinary 

action issued by the DEA or the State 

controlled substances licensing 

authority that would limit the ability of 

the wholesale distributor to distribute 

controlled drug substances. In such a 

situation, information about the DEA 

registration or State controlled 

substance license should be reported 

since the disciplinary action is reported 

under that specific license or 

registration. 

11. Licensure Denial, Suspension, 

Reinstatement and Revocation—Notice 

and Opportunity To Request a Hearing 

The standards for licensure denial are 

set forth in proposed § 205.30. Proposed 

§ 205.30(a)(1) lists 10 circumstances 

under which a licensing authority will 

be required to deny a wholesale 

distributor’s request for licensure or 

licensure renewal. FDA believes that 

these reasons requiring denial will 

ensure wholesale distributors focus on 

good storage practices outlined by FDA 

and are necessary to protect the integrity 

of the products in the pharmaceutical 

distribution supply chain. Wholesale 

distributors should seek to ensure that 

these reasons outlined in proposed 

§ 205.30(a)(1) are addressed when the 

wholesale distributor files for licensure 

to avoid denial or delays of their 

application. 

Proposed § 205.30(a)(2) through (5) 

details the process afforded to wholesale 

distributors whose applications for 

licensure have been denied. FDA is 

proposing to give applicants the 

opportunity to provide additional 

information for reconsideration of the 

denial. If the licensing authority denies 

a wholesale distributor’s request for 

licensure after reconsideration, the 

wholesale distributor will receive a 

notice of opportunity to request for 

hearing under existing FDA hearing 

procedure. FDA requests comment 

regarding the reconsideration and 

appeal process outlined in this 

regulation for wholesale distributors 

whose applications for licensure have 

been denied. 

The proposed standards for 

suspending a wholesale distributor’s 

license are set forth in § 205.30(b) and 

(c). A suspended wholesale distributor 

must cease all receipt and distribution 

of prescription drugs until their license 

is re-instated. The proposed standards 

for suspension are based on the severity 

of risk posed to the public health. For 

example, under proposed § 205.30(b), a 

wholesale distributor’s license may be 

suspended only after the wholesale 

distributor receives a notice of 

opportunity for hearing. If the licensing 

authority has a reasonable belief that the 

wholesale distributor is not in 

compliance with licensure requirements 

and such noncompliance threatens the 

quality of the product or threatens 

public safety, the licensing authority is 

required to notify the wholesale 

distributor in writing of the intent to 

suspend its license. A wholesale 

distributor will have 30 days upon the 

date of the notice of intent to suspend 

a license to provide additional 

information to the licensing authority so 

it may reconsider its decision to 

suspend the wholesale distributor 

license. If reconsideration is not sought, 

or if reconsideration is denied, the 

licensing authority will inform the 

wholesale distributor in writing of its 

formal intent to proceed with license 

suspension. The notice will contain a 

statement informing the wholesale 

distributor that it has an opportunity to 

request a hearing on the question of 

whether there are sufficient grounds for 

suspension. The wholesale distributor 

will have 10 days after the date of the 

notice to inform the licensing authority 

of its intent to request a hearing; 

otherwise the opportunity for a hearing 

will be waived and the license 

suspended. FDA requests comment 

regarding this reconsideration and 

appeal process. 

Proposed § 205.30(c) allows for 

suspension prior to notice and 

opportunity for a hearing and for 

suspension to be effective immediately 

if the wholesale distributor’s 

noncompliance poses an imminent 

threat to public safety. For example, if 

a wholesale distributor is distributing 

illegitimate product, and once made 

aware, does not take corrective actions 

to protect the public from the threat of 

these products, its license could be 

suspended immediately. Another 

example would be a scenario where the 

conditions under which drugs are held 

cause the product to be illegitimate and 

the wholesale distributor refuses to 

correct the conditions or continues to 

ship these illegitimate products. Under 

the proposed regulation, if the licensing 

authority proceeds with suspension in 

such a situation, the licensing authority 

will inform the wholesale distributor in 

writing that its license is suspended. 

The notice will also contain a statement 

informing the wholesale distributor that 

it may request a hearing and that 

hearing, if granted, will be afforded 

within 10 days of the receipt of the 

wholesale distributor’s request for 

hearing. The wholesale distributor has 

10 days from the date on the notice of 

suspension to request a hearing; 

otherwise its opportunity for a hearing 

will be waived. FDA believes that this 

limits the amount of time a wholesale 

distributor’s license would be 

suspended while providing a reasonable 

amount of time both for the wholesale 

distributor to review a notice of 

suspension and collect the necessary 

information to demonstrate that its 

license should not be suspended, and 

for FDA to consider the hearing request, 

and to schedule and prepare for a 

hearing, if the hearing request is 

granted. FDA believes immediate 

suspension of a wholesale distributor’s 

license is crucial in cases where 

continued operation of the wholesale 

distributor presents an imminent threat 

to public safety and the pharmaceutical 

supply chain. 

Under proposed § 205.30(d), a 

wholesale distributor’s suspended 

license may be reinstated if the 

wholesale distributor can demonstrate 

to the licensing authority that it is in 

compliance with this proposed 

regulation. 

Under the proposed rule the process 

outlined at § 10.75 is the default for 

appeals related to a denied application 

for a wholesale distributor license, and 

the hearing process outlined at 21 CFR 

part 16 is the default for appeals related 

to a suspended or revoked wholesale 

distributor license. However, the 

wholesale distributor may request any 

of the procedures contained in 21 CFR 

parts 10 through 16. FDA believes that 


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this proposed approach is consistent 

with current practice and suggests that 

States develop comparable processes. 

The standards for revoking a 

wholesale distributor license are set 

forth in proposed § 205.30(e). The 

licensing authority will revoke a license 

if it finds that a wholesale distributor 

whose license has been suspended is 

unable or refuses to comply with the 

licensing requirements. The 

requirements governing the revocation 

of a wholesale distributor license are set 

forth in proposed § 205.30(e)(2) through 

(4) and mirror the process outlined in 

§ 205.30(b)(2) through (7), with one 

exception: When the licensing authority 

informs the wholesale distributor of its 

intent to revoke a license, the wholesale 

distributor is given no opportunity for 

reconsideration since it already had an 

opportunity to rectify deficiencies while 

its license was suspended. 

In addition, where a wholesale 

distributor fails to timely renew its 

application, the license will be 

considered expired and the wholesale 

distributor will need to submit an 

application for new licensure if it seeks 

to resume wholesale distribution 

activities, because the licensing 

authority may be unable to confirm that 

the wholesale distributor continues to 

meet all necessary licensure 

requirements (see proposed § 205.30(f)). 

If a wholesale distributor’s license 

expires, it must cease receipt and 

distribution of prescription drugs until 

their license has been re-instated. 

FDA is also proposing that the 

licensing authority will terminate a 

wholesale distributor’s license upon 

request from the wholesale distributor 

when the request includes a notice of 

the wholesale distributor’s intent to 

discontinue its activities and a waiver of 

an opportunity for a hearing. The 

wholesale distributor will be required to 

apply for a new license should it decide 

to resume wholesale distribution 

activities (see proposed § 205.30(g)). 

F. Approved Organizations for 

Wholesale Distributors 

1. Approval of Outside Organizations 

and Utilization of Such Organizations in 

the Licensure Process 

The FD&C Act, as amended by 

DSCSA, allows the Federal or State 

licensing authority to accept inspections 

of wholesale distributors conducted by 

third-party accreditation or inspection 

services they have approved to be part 

of the licensure process (section 583(c) 

of FD&C Act). Subpart D of the proposed 

rules defines the scope of work these 

approved organizations (AOs) would be 

tasked with performing, as well as the 

standards an AO must meet to become 

approved by FDA. Additionally, this 

subpart will explain the circumstances 

in which an inspection conducted by an 

AO may be used, what activities the 

AOs have the authority to conduct and 

are expected to conduct, and the 

qualifications that each third-party 

organization must possess to become 

approved by FDA. FDA suggests that 

States that choose to rely on AOs to 

conduct inspections have in place the 

same or similar qualifications and 

processes for approved organizations to 

conduct those inspections and for 

decisions affecting the approval status 

of those organizations. 

FDA proposes that an AO must 

complete an inspection no more than 90 

days after receiving notice from the 

licensing authority to conduct an 

inspection (see proposed § 205.31(b)). 

FDA believes this allows AOs sufficient 

time to perform the work with which 

they are tasked while also ensuring that 

the wholesale distributor’s activities are 

not significantly delayed or otherwise 

impacted due to delays in the 

inspection process. Upon completion of 

the inspection, the AO would then 

provide FDA with a report based on the 

inspection within 7 days (see proposed 

§ 205.31(b)(2) and (3)), with copy of the 

report to the wholesale distributor 

facility (see proposed § 205.31(b)(3)). 

Using the report submitted by the AO, 

FDA makes the final determination as to 

whether a wholesale distributor facility 

should be issued a license. 

It is important that FDA be able to 

verify an AO’s continued compliance 

with the requirements of the proposed 

regulation. Therefore, to become an AO 

and keep its approval, FDA is proposing 

to require that an AO maintain certain 

records for a period of at least 5 years 

and make these records readily available 

to FDA upon request (see proposed 

§ 205.31(c)). In addition, to ensure 

public safety, FDA is proposing to 

require that AOs report certain 

observations at wholesale distributor 

facilities to FDA immediately (see 

proposed § 205.31(c)(4)). The general 

qualifications for approval are set out in 

proposed § 205.32. 

To become and remain approved, 

FDA is proposing to require that an 

organization, and those employed by the 

organization, abide by certain guidelines 

intended to secure against conflicts of 

interest, promote professional business 

practices, and protect non-public 

information (see proposed § 205.32(a)). 

FDA is proposing to allow AOs to hire 

outside contractors to conduct 

inspections. Under FDA’s proposed 

regulation, AOs who decide to use 

outside contractors must ensure that 

they effectively carry out the inspection 

in a manner consistent with this 

proposed regulation to protect public 

health, conform to conflict of interest 

provisions, and properly protect all nonpublic information (see proposed 

§ 205.32(b)). For an AO to maintain 

approval, FDA proposes to require that 

the AO ensure contractors abide by all 

applicable confidentiality agreements, 

the AO has policies and procedures in 

place to ensure the contractors abide by 

these proposed standards, and the 

contractors have the necessary training 

and expertise to carry out inspections of 

wholesale distributor facilities (see 

proposed § 205.32(b)(1)). 

Before a contractor hired by an AO 

may perform an inspection of a 

wholesale distributor, the wholesale 

distributor must have entered into an 

agreement with the AO giving the AO 

permission to share with contractors the 

wholesale distributor’s confidential 

commercial information (see proposed 

§ 205.32(b)(2)). If such consent is not 

provided by the wholesale distributor, 

the AO will perform the inspection 

itself, without the use of contractors. 

FDA believes that this approach is 

reasonable given that it is the AO’s 

decision to work with contractors and, 

under this proposed regulation, the 

ultimate responsibility for the 

inspection and the protection of the 

wholesale distributor’s information rests 

with the AO. 

In addition, FDA proposes that AOs 

must submit to FDA a list of the 

contractors used by the organization and 

must certify that such contractors 

comply with the applicable regulations 

(see proposed § 205.32(b)(3)). Finally, to 

ensure that the standards set forth in 

this subpart are followed, FDA proposes 

to require that the AOs remain 

responsible for all the work performed 

by outside contractors (see proposed 

§ 205.32(b)). 

FDA proposes that to maintain their 

approved status, AOs must prohibit 

contractors from subcontracting their 

inspection duties (see proposed 

§ 205.32(b)(1)(ii)). Limiting the ability of 

contactors to further delegate their 

responsibility ensures that FDA will 

have accurate information about who is 

conducting inspections, that those 

responsible for the inspections have the 

necessary qualifications, and that their 

conduct is governed by this proposed 

regulation. 

The proposed process that FDA will 

use to approve organizations, including 

the application process, as well as the 

process for suspending or revoking an 

organization’s approval, are set forth in 

proposed § 205.33. FDA is proposing 

that organizations seeking approval by 


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FDA must electronically submit to FDA 

an application demonstrating the 

organization’s ability to assess 

compliance with all wholesale 

distributor requirements detailed in 

proposed part 205 (see proposed 

§ 205.33(a) and (b)), and employees 

must complete the necessary training as 

directed by FDA (see proposed 

§ 205.33(c)). To verify information 

contained in the application and ensure 

compliance with the proposed 

regulation, FDA proposes that, before an 

AO may conduct its first inspection, a 

newly approved organization must be 

audited by FDA (see proposed 

§ 205.33(d)). A new approval will be 

valid for 5 years (see proposed 

§ 205.33(e)). 

If an organization’s request for 

approval is denied, the organization 

may submit a request for 

reconsideration under § 10.75 (see 

proposed § 205.33(f)). In addition, FDA 

proposes that an AO may have its 

approval suspended if it does not 

maintain the standards outlined in this 

section (see proposed § 205.33(g)). A 

suspended AO must cease all 

inspections of wholesale distributors. A 

suspended AO must notify any 

wholesale distributors with a pending 

inspection to be performed by the AO of 

the AO’s suspension within 7 calendar 

days (see proposed § 205.33(g)(5). While 

most suspensions will happen only after 

notice and opportunity to request a 

hearing, under the proposed regulations, 

FDA reserves the ability to suspend 

approval prior to a hearing if there is a 

reasonable probability that the 

organization’s noncompliance will 

cause imminent and serious adverse 

health consequences or death to humans 

(see proposed § 205.33(h)). 

Furthermore, FDA proposes that a 

suspended approval can be reinstated if 

the issue is resolved within 1 year from 

the date of suspension (see proposed 

§ 205.33(i)), though it may be revoked if 

the organization fails to rectify the 

situation that resulted in the suspension 

(see proposed § 205.33(j)). FDA believes 

that 1 year provides the AO enough time 

to remedy most situations. An AO’s 

approval may also be reinstated on a 

conditional basis. If the AO is 

conditionally reinstated, they will enter 

a three-year probationary period, during 

which if any material deficiencies arise, 

their approval will be subject to 

immediate revocation (see proposed 

§ 205.33(i)(2)). 

FDA also proposes to permit an AO to 

voluntarily withdraw its approval or 

otherwise cease operations as an AO 

under this part, but it must inform FDA 

of any facilities with pending 

inspections (see proposed § 205.33(l)). 

To further ensure that pending 

inspections are not overlooked, under 

FDA’s proposed regulation, an AO 

whose approval has been suspended or 

revoked has the responsibility to report 

this information to those wholesale 

distributors that have pending 

inspections (see proposed § 205.33(m)); 

this will stop the clock on the 90-day 

licensure review while the wholesale 

distributor applies for inspection from 

another AO or FDA. Also, to ensure 

wholesale distributors continue to 

comply with the provisions of this part, 

and to ensure that AOs remain able to 

assess compliance with the wholesale 

distributor requirements, an AO must 

inform FDA of any changes to 

information that was submitted as part 

of its application for approval (see 

proposed § 205.33(n)(1)). Since the 

approval of an organization is 

nontransferable, changes in ownership 

require an AO to submit a new 

application to FDA (see proposed 

§ 205.33(n)(2)). Finally, as an additional 

assurance that an AO continues to 

comply with the provisions of this part, 

FDA proposes to require that AOs 

remain subject to periodic audits by 

FDA (see proposed § 205.33(o)). 

VI. Proposed Effective/Compliance 

Dates 

Section 584 of the FD&C Act states 

that the national licensing standards for 

3PLs established by regulation take 

effect 1 year after the date such final 

regulation is published (section 

584(d)(1) and (3) of the FD&C Act), and 

that national licensing standards for 

wholesale distributors established by 

regulation take effect 2 years after the 

date such final regulation is published 

(section 583(a) and (e)(3) of the FD&C 

Act). For several reasons, FDA does not 

intend to enforce the 3PL requirements 

until 2 years after the final regulation is 

published. 

FDA recognizes that 1 year may be 

insufficient time for States to implement 

3PL licensure programs, should they 

decide to implement such programs, 

and for 3PLs to apply for licensure 

under these programs. Setting up a state 

licensure program may require 

additional time. This is especially true 

in States that will require State 

legislative action to implement a 

licensure program, with some State 

legislatures only meeting biennially. 

As the DSCSA states that the national 

standards for prescription drug 

wholesale distributors established by 

regulation pursuant to section 583 of the 

FD&C Act will take effect 2 years after 

the date such final regulation is 

published (section 583(a) and (e) of the 

FD&C Act), the national standards for 

licensing wholesale distributors in 

subpart C will be effective 2 years after 

the date the final rule is published. 

Although the DSCSA states that the 

national licensing standards for 3PLs 

established by regulation pursuant to 

section 584 of the FD&C Act will take 

effect one year after the date such final 

regulation is published (section 

584(d)(1) and (3) of the FD&C Act), as 

noted, FDA does not intend to enforce 

requirements with respect to the 

national standards for licensure of 3PLs 

until 2 years after the regulation is 

finalized, in order to provide States with 

the opportunity to establish or modify 

their licensure programs in accordance 

with the new standards and time for 

3PLs to apply and obtain a new license. 

For 1 year after the effective date of the 

final regulation, FDA also does not 

intend to enforce the requirements of 

section 582(b)(3), (c)(3), (d)(3), and (e)(3) 

of the FD&C Act with respect to a 

manufacturer, wholesale distributor, 

dispenser, or repackager who has as a 

trading partner a 3PL that is not 

licensed, unless the 3PL is not licensed 

because the Secretary or a state 

licensing body has made a finding that 

the 3PL does not utilize good handling 

and distribution practices and the 

Secretary has published notice thereof. 

VII. Preliminary Economic Analysis of 

Impacts 

We have examined the impacts of the 

proposed rule under Executive Order 

12866, Executive Order 13563, the 

Regulatory Flexibility Act (5 U.S.C. 

601–612), and the Unfunded Mandates 

Reform Act of 1995 (Pub. L. 104–4). 

Executive Orders 12866 and 13563 

direct us to assess all costs and benefits 

of available regulatory alternatives and, 

when regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety, and other advantages; 

distributive impacts; and equity). We 

believe that this proposed rule is a 

significant regulatory action as defined 

by Executive Order 12866. 

The Regulatory Flexibility Act 

requires us to analyze regulatory options 

that would minimize any significant 

impact of a rule on small entities. 

Because the proposed rule could impose 

significant, although uncertain, new 

economic burdens on small entities, we 

find that the proposed rule will have a 

significant economic impact on a 

substantial number of small entities. 

The Unfunded Mandates Reform Act 

of 1995 (section 202(a)) requires us to 

prepare a written statement, which 

includes an assessment of anticipated 

costs and benefits, before proposing 


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‘‘any rule that includes any Federal 

mandate that may result in the 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100,000,000 or more 

(adjusted annually for inflation) in any 

one year.’’ The current threshold after 

adjustment for inflation is $158 million, 

using the most current (2020) Implicit 

Price Deflator for the Gross Domestic 

Product. This proposed rule would not 

result in an expenditure in any year that 

meets or exceeds this amount. 

In this rulemaking, we propose new 

national standards for the licensing of 

prescription drug wholesale distributors 

and third-party logistics providers as 

directed under the Drug Supply Chain 

Security Act, Title II of the Drug Quality 

and Security Act. If finalized, the rule 

would also establish a Federal licensing 

system for wholesale drug distributors 

and third-party logistics providers to 

use in the absence of a state licensure 

program that is consistent with the 

proposed national standards. 

This rulemaking is being published in 

conjunction with the proposed rule 

entitled ‘‘Certain Requirements 

Regarding Prescription Drug Marketing’’ 

(or part 203), published elsewhere in 

this issue of the Federal Register. We 

include the benefits and costs of part 

203 in this economic analysis and, 

unless otherwise specified, references to 

the ‘‘proposed rule’’ in this analysis 

encompass both proposed rules. 

We summarize the benefits and costs 

of the proposed rule in table 1. The 

standards for prescription drug 

wholesale distribution in the proposed 

rule would result in benefits to 

consumers and benefits to distributors 

from reducing the diversion of 

prescription drugs. Other monetized 

benefits include cost savings from 

reducing the frequency and quantity of 

licensure applications and cost savings 

from reducing state licensing standards 

in some states. We estimate that the 

annualized benefits over 10 years would 

range from $1.25 million to $31.50 

million at a 7 percent discount rate, 

with a primary estimate of $10.66 

million. We estimate that the 

annualized benefits would range from 

$1.26 million to $32.18 million at a 3 

percent discount rate, with a primary 

estimate of $10.89 million. 

We also expect that the proposed rule, 

if finalized, would impose costs on 

wholesale drug distributors, third-party 

logistics providers, states, approved 

organizations, and the Food and Drug 

Administration (FDA). Costs to 

wholesale drug distributors and thirdparty logistics providers include costs of 

learning about the rule, reporting to 

FDA, undergoing routine inspections, 

writing and revising standard operating 

procedures, and conducting background 

checks. Wholesale-drug distributors 

would also incur costs to furnish surety 

bonds to their state licensing authority 

to obtain or renew their licenses. 

Costs to states include the time spent 

reading and understanding the rule, 

passing or revising the laws and 

regulations governing their licensure 

programs, and inspecting WDD and 3PL 

facilities. Approved organizations 

would incur legal, application, and 

training costs, as well as costs to inspect 

WDD and 3PL facilities. FDA costs 

include the costs to establish and 

operate a reporting database and a 

licensure program for wholesale drug 

distributors and third-party logistics 

providers and the costs to establish and 

operate an approval program for 

approved organizations. 

We estimate that the annualized costs 

over 10 years would range from $13.21 

million to $20.63 million at a 7 percent 

discount rate, with a primary estimate of 

$16.92 million. We estimate that the 

annualized costs over 10 years at a 3 

percent discount rate would range from 

$12.83 million to $20.10 million, with a 

primary estimate of $16.47 million. 

TABLE 1—SUMMARY OF BENEFITS, COSTS, AND DISTRIBUTIONAL EFFECTS OF THE PROPOSED RULE

Category Primary 

estimate 

Low 

estimate 

High 

estimate 

Units 

Notes Year 

dollars 

Discount 

rate 

(%) 

Period 

covered 

(years) 

Benefits: 

Annualized Monetized ($ millions/year) ............... $10.66 

10.89 

$1.25 

1.26 

$31.50 

32.18 

2020 

2020 

7 

3 

10 

10 

There is a high degree of 

uncertainty in the magnitude of benefits. 

Qualitative. 

Costs: 

Annualized Monetized ($ millions/year) ............... 16.92 

16.47 

13.21 

12.83 

20.63 

20.10 

2020 

2020 

7 

3 

10 

10 

Qualitative. 

Transfers: 

Federal Annualized Monetized ($ millions/year) 0.12 

0.11 

0.09 

0.08 

0.14 

0.14 

2020 

2020 

7 

3 

10 

10 

From: States To: Firms 

Other Annualized Monetized ($ millions/year) .... .................. .................. .................. .................. .................. ..................

From: To: 

Effects: 

State, Local, or Tribal Government: Annualized net costs to states over 10 years ranging from $0.62 million to $1.44 million at a 7 percent discount and from 

$0.58 million to $1.38 million at a 3 percent discount rate. 

Small Business: Quantified effects of more than 1 percent of average annual revenues for small 3PL firms. Unquantified effects are uncertain. 

Wages: No estimated effect. 

Growth: No estimated effect. 

We have developed a comprehensive 

Preliminary Economic Analysis of 

Impacts (PRIA) that assesses the impacts 

of the proposed rule. The full 

preliminary analysis of economic 

impacts is available in the docket for 

this proposed rule (Ref 18) and at 

https://www.fda.gov/AboutFDA/Reports

ManualsForms/Reports/Economic

Analyses/default.htm. 


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VIII. Analysis of Environmental 

Impacts 

FDA has carefully considered the 

potential environmental effects of this 

action and has concluded, under 21 CFR 

25.30(h), that this action is of a type that 

does not individually or cumulatively 

have a significant effect on the human 

environment. 

IX. Paperwork Reduction Act of 1995 

This proposed rule contains 

information collection provisions that 

are subject to review by the Office of 

Management and Budget (OMB) under 

the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3521). A description of 

these provisions is given in the 

Description section of this document 

with an estimate of the annual 

reporting, recordkeeping, and thirdparty disclosure burden. Included in the 

estimate is the time for reviewing 

instructions, searching existing data 

sources, gathering and maintaining the 

data needed, and completing and 

reviewing each collection of 

information. 

FDA invites comments on these 

topics: (1) Whether the proposed 

collection of information is necessary 

for the proper performance of FDA’s 

functions, including whether the 

information will have practical utility; 

(2) the accuracy of FDA’s estimate of the 

burden of the proposed collection of 

information, including the validity of 

the methodology and assumptions used; 

(3) ways to enhance the quality, utility, 

and clarity of the information to be 

collected; and (4) ways to minimize the 

burden of the collection of information 

on respondents, including through the 

use of automated collection techniques, 

when appropriate, and other forms of 

information technology. 

Title: Requirements to Obtain a 

License to Distribute Drugs, Annual 

Reporting and Recordkeeping for 

Procedures, for Third-Party Logistics 

Providers and Prescription Drug 

Wholesale Distributors to Obtain a 

License to Distribute Drugs; 21 CFR part 

205; OMB Control Number 0910–0251— 

Reinstatement 

Description: The proposed rule would 

establish standards, terms, and 

conditions for the licensing of 3PLs and 

prescription drug wholesale distributors 

by State or Federal licensing authorities, 

including process for the revocation, 

reissuance, and renewal of such 

licenses. Sections 584 and 583 of the 

FD&C Act (21 U.S.C. 360eee–3, 360eee– 

2)) as added by the DSCSA (Title II of 

Pub. L. 113–54) requires FDA to issue 

regulations on national standards for the 

licensing of 3PLs and wholesale 

distributors. Accordingly, FDA is 

proposing requirements for licensing of 

wholesale distributors and third-party 

logistics providers. The proposed rule 

outlines these requirements, including 

information collection provisions, that 

3PLs and wholesale distributors must 

meet to obtain a license. The licensing 

authority is the State, from which the 

3PLs distribute drug or the State from 

which wholesale distributors distribute 

drug. However, if a State does not 

establish the licensure programs for 

3PLs or wholesale distributors 

consistent with these regulations, FDA 

will issue the licenses to 3PLs or 

wholesale distributors in that State. In 

addition, States may require that a 3PL 

or a wholesale distributor obtain a 

license to ship drugs into that State. The 

FD&C Act does not require that States 

issue these types of licenses. However, 

if a State chooses to implement such a 

licensure requirement, the State must 

ensure that it is consistent with these 

regulations, and any wholesale 

distributor or 3PL wishing to ship 

products into that State must have a 

license. 

Proposed part 205, subpart A, would 

set forth the national licensing 

standards for State and Federal licenses 

issued to 3PLs pursuant to section 584 

of the FD&C Act (21 U.S.C. 360eee–3). 

Proposed part 205, subpart C, would set 

forth the national licensing standards 

for State and Federal licenses issued to 

wholesale distributors pursuant to 

sections 503(e) and 583 of the FD&C Act 

(21 U.S.C. 353(e) and 21 U.S.C. 360eee– 

2)) and replaces the existing regulations 

in proposed part 205 that outlined 

guidelines for State licensing of 

wholesale distributors that were 

developed under the Prescription Drug 

Marketing Act of 1987 (Pub. L. 100– 

293). 

In addition, the FD&C Act, as 

amended by DSCSA, allows FDA to 

approve ‘‘third party accreditation’’ 

entities to evaluate the qualifications of 

3PLs for licensure or inspect wholesale 

distributors facilities on behalf of FDA. 

These organizations are referred to in 

this proposed rule as approved 

organizations or ‘‘AOs.’’ The application 

to become an AO is the same whether 

the AO will be evaluating the 

qualifications of 3PLs for licensure, 

inspecting wholesale distributors 

facilities, or both. Subparts B and D of 

the proposed rule outline the 

qualifications for AOs to perform 

licensure reviews/inspections for 3PL 

facilities and inspections of wholesale 

distributors respectively. 

Description of Respondents: 

Respondents to the information 

collection are third-party logistics 

providers and wholesale distributors in 

any State and any entity engaging in 

wholesale distribution of prescription 

drugs in any State. We are proposing 

that these respondents submit 

applications for licensure and maintain 

records of procedures and documents 

pertaining to licensure review, 

inspections, policies, and training. 

The DSCSA establishes 3PLs as 

members of the drug supply chain, 

which are distinct from wholesale drug 

distributors, and specifically precludes 

States from regulating 3PLs as wholesale 

distributors (section 585(b)(2) of the 

FD&C Act (21 U.S.C. 360eee–4(b)(2)). 

FDA is required by section 584 of the 

FD&C Act (21 U.S.C. 360eee–3) to 

establish national standards for the 

licensure of 3PLs and is proposing those 

standards in part 205, subpart A. When 

the proposed rule is finalized, we will 

require that each facility of an entity 

that meets the definition of a 3PL in 

section 581(22) of the FD&C Act (21 

U.S.C. 360eee(22)) be licensed by the 

State or FDA in accordance with the 

standards articulated in proposed part 

205, subpart A. 

Proposed part 205, subpart C, of the 

proposed rule, §§ 205.20 through 

205.30, establishes the national 

standards for the licensure of wholesale 

drug distributors. When the proposed 

rule is finalized, we will require that 

each wholesale distributor be licensed 

by the State or FDA in accordance with 

the standards in proposed part 205, 

subpart C. 

Proposed part 205, subpart B 

(§§ 205.17 through 205.19), and subpart 

D (§§ 205.31 through 205.33), of the 

proposed rule describe the content 

requirements, application process, and 

reporting schedules to become an 

approved organization to conduct 

licensure review/inspections for 3PL 

facilities or conduct inspections of 

wholesale distributors. Although the 

work differs among licensure review 

and inspection for 3PLs and wholesale 

distributors, FDA believes that the same 

entities will apply to conduct licensure 

reviews and inspection of both types of 

entities. In addition, the submission of 

an application to become an AO is the 

same in subparts B and D. Because of 

this, we are combining the discussions 

of AOs for 3PLs and wholesale 

distributors, and the resulting burden 

estimates. 

The national licensure standards FDA 

is proposing are intended to help ensure 

that the supply chain remains secure 

and that those finished prescription 

drug products subject to the DSCSA 

moving through the supply chain are 

properly stored, handled, and 

transported. These measures are 


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intended to help protect U.S. consumers 

from drugs that may be counterfeit, 

stolen, contaminated, or otherwise 

harmful. The required information 

collection to comply with the proposed 

rule is necessary for the States or FDA 

to assess the ability of 3PLs or wholesale 

distributors to properly maintain drug 

quality and security while the drug 

products are under their possession or 

control. 

We estimate the burden of the 

information collection as follows: 

TABLE 3—ESTIMATED ANNUAL REPORTING BURDEN 1

Proposed 21 CFR part 205 section; IC activity Number of 

respondents 

Number of 

responses per 

respondent 

Total annual 

responses 

Average 

burden per 

response 

(in hours) 

Total hours 

Subpart A (3PLs): 

§§ 205.5 and 205.6; application and process requirements ......................................................................... 459 1 459 2 918 

§ 205.7; changes to licensure ....................................... 6 1 6 1 6 

§ 205.8; expiry and renewal of licensure ...................... 149 1 149 1 149 

§ 205.9; denials, suspensions, reinstatements, revocations ........................................................................... 35 1 35 1 35 

§ 205.11; personnel list ................................................. 459 1 459 .5 230 

§ 205.15; annual reports ............................................... 459 1 459 .25 115 

Subpart B (Approved Organizations for 3PLs): 

§ 205.17; licensure review and inspection reports of 

3PL facilities .............................................................. 6 15 90 5 450 

§ 205.19; applications, denials, revocations, suspensions, renewals, reinstatements for AO status ......... 3 1 3 2 6 

Subpart C (WDD Standards): 

§§ 205.22 and 205.23; application and process requirements for licensure ............................................ 1,951 1 1,951 2 3,902 

§ 205.24; changes to WDD information ........................ 39 1 39 1 39 

§ 205.26; confirmation of theft or loss of Rx drug ........ 25 1 25 .5 13 

§§ 205.29 and 205.30; denials, suspensions, reinstatements, revisions, and terminations—requests 

for hearing ................................................................. 38 1 38 1 38 

§ 205.29(a)—WDD annual reports ............................... 1,951 1 1,951 1 1,951 

Subpart D (Approved Organizations for WDDs): 

§§ 205.32 and 205.33; documentation of qualifications 

and disclosures to FDA ............................................. 6 31 186 5 930 

Total ....................................................................... ........................ ........................ 5,890 ........................ ........................

1There are no capital costs or operating and maintenance costs associated with the information collection. 

TABLE 4—ESTIMATED ANNUAL RECORDKEEPING BURDEN 1

Proposed 21 CFR part 205 section; IC activity Number of 

respondents 

Number of 

responses per 

respondent 

Total annual 

responses 

Average 

burden per 

response 

(in hours) 

Total hours 

Subpart A (3PLs): 

205.4; general requirements (retrievable records) ....... 459 1 459 .5 230 

205.12; written procedures ........................................... 459 1 459 21 9,639 

205.13; record and document maintenance ................. 459 1 459 1 459 

205.14; list of trading partners ...................................... 459 1 459 2 918 

Subpart B (Approved Organizations for 3PLs): 

205.17; licensure review and inspection records ......... 6 15 90 2 180 

205.19; written procedures, policies, training records .. 6 1 6 3 18 

Subpart C (WDD Standards): 

205.21; surety bond ...................................................... 1,951 1 1,951 1 1,951 

205.25; personnel records ............................................ 1,951 1 1,951 1 1,951 

205.26; facility records .................................................. 1,951 1 1,951 1 1,951 

205.28; inspection records ........................................... 1,951 1 1,951 1 1,951 

Subpart D (Approved Organizations for WDDs): 

205.31; records demonstrating qualification status ...... 6 1 6 1 6 

Total ....................................................................... ........................ ........................ 9,742 ........................ 19,254 

1There are no capital costs or operating and maintenance costs associated with the information collection. 

Reporting Burden 

Among the reporting requirements 

found in proposed part 205 are content 

and format provisions pertaining to 

issuance, changes, expiry, renewal, and 

annual reports for 3PLs, as well as 

WDDs, as reflected above in table 3. The 

proposed regulations also prescribe 

procedural steps and reporting 

schedules for submitting information 

regarding licensure, changes to 


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licensure, reinstatement, and annual 

reporting, including requisite reporting 

timeframes. Consistent with our PRIA, 

we estimate that 459 3PL facilities and 

1,951 WDDs will become subject to the 

reporting requirements described in 

proposed part 205, where we ascribe 

specific burden associated with the 

provisions found in table 3. Because we 

currently lack specific submission data 

regarding the proposed reporting 

requirements, we rely on our experience 

with similar information collection as 

the primary basis for our estimates. 

However, we invite specific comment 

from potential respondents regarding 

burden estimates we ascribe to the 

reporting elements found in the 

proposed regulations, along with a 

discussion of the basis for their 

computation. 

Recordkeeping Burden 

As set forth in the proposed 

regulations, 3PLs and WDDs must 

maintain records documenting 

procedures, management practice, 

policies, training, and personnel, among 

others. Under proposed § 205.4, all 

records are subject to FDA inspection 

and must be made available upon 

request in the format prescribed by the 

proposed regulations. Additional 

specific recordkeeping practice 

elements are also enumerated in the 

proposed regulations. Consistent with 

our PRIA, we estimate that 459 3PLs 

and 1,951 WDDs will become subject to 

these requirements, if the proposed rule 

is finalized. These provisions are 

reflected above in table 4, along with an 

estimated number of annual records and 

recordkeeping hours we attribute to the 

corresponding activity. As with the 

proposed reporting requirements, we 

currently lack specific data regarding 

recordkeeping associated with the 

proposed regulations. We invite specific 

comment from potential respondents 

regarding burden estimates we ascribe 

to the recordkeeping activities, along 

with a discussion of the basis for their 

computation. 

To ensure that comments on 

information collection are received, 

OMB recommends that written 

comments be submitted through 

reginfo.gov (see ADDRESSES). All 

comments should be identified with the 

title of the information collection. 

In compliance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

3407(d)), we have submitted the 

information collection provisions of this 

proposed rule to OMB for review. These 

information collection requirements 

will not be effective until FDA 

publishes a final rule, OMB approves 

the information collection requirements, 

and the rule goes into effect. FDA will 

announce OMB approval of these 

requirements in the Federal Register. 

X. Federalism 

We have analyzed this proposed rule 

in accordance with the principles set 

forth in Executive Order 13132, 

‘‘Federalism’’ (64 FR 43255, August 10, 

1999). This Executive order sets forth 

principles and criteria that agencies 

must adhere to in formulating and 

implementing policies that have 

federalism implications, defined in 

section 1(a) of the order as including 

regulations that have ‘‘substantial direct 

effects on the States, on the relationship 

between the national government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government.’’ Section 

4(a) of the Executive order requires 

agencies to ‘‘construe . . . a Federal 

statute to preempt State law only where 

the statute contains an express 

preemption provision or there is some 

other clear evidence that the Congress 

intended preemption of State law, or 

where the exercise of State authority 

conflicts with the exercise of Federal 

authority under the Federal statute.’’ 

The DSCSA added to the FD&C Act an 

express preemption provision under 

section 585, which addresses state 

licensure of WDDs and 3PLs in section 

585(b)(1). 

A. Scope of Preemption 

FDA interprets section 585(b)(1) of the 

FD&C Act as preempting States and 

localities from establishing or 

continuing requirements for 3PL or 

WDD licensure that are different from 

the standards and requirements 

applicable under sections 584 and 

amended 503(e) of the FD&C Act. In 

other words, States and local 

governments may not establish or 

continue licensure requirements for 

3PLs or WDDs unless those State 

requirements are the same as Federal 

requirements; different requirements are 

preempted. 

As noted above, a draft guidance 

issued in October 2014 (Ref. 4) proposed 

a different preemption interpretation 

under which States and localities could 

impose requirements on 3PL and WDD 

licensure that were different from 

Federal requirements so long as those 

requirements did not fall below the 

minimum Federal standards. Several 

stakeholders commented that the 

agency’s interpretation of section 

585(b)(1) was too narrow. Instead, they 

argued Congress intended to preempt all 

state licensure laws not identical to 

Federal licensure standards, i.e., that 

Congress wanted the Federal system to 

provide both a ‘‘floor’’ and a ‘‘ceiling’’ 

when it came to the issue of 

preemption. 

FDA has reconsidered its earlier 

proposed interpretation and determined 

that its current interpretation—that the 

Federal requirements will establish both 

a ‘‘floor’’ and a ‘‘ceiling’’—is more 

consistent with the language of the 

statute, Congressional purpose, and 

policy considerations. Section 585(b)(1) 

provides for the preemption of any state 

requirements that are, among other 

things, ‘‘inconsistent with’’ or ‘‘covered 

by’’ Federal requirements—which 

suggests both a floor and a ceiling. 

Furthermore, the fundamental purpose 

of the DSCSA provisions was to 

strengthen the security and integrity of 

the drug supply chain through uniform 

national requirements (Refs 2, 3, 18), 

including with respect to licensure (see 

e.g., section 583(b)). In contrast, under 

the interpretation proposed in our 

October 2014 draft guidance, 3PLs and 

WDDs could be required to comply with 

a patchwork of State and local licensure 

requirements, which would undermine 

the goal of national uniformity and 

could create barriers to the statute’s 

implementation and administrability. 

That approach would not create the 

intended uniformity in national policy 

because States and localities would not 

be preempted from establishing unique 

or disparate requirements. 

Accordingly, FDA is withdrawing, as 

of the date of publication of this 

proposed rule, that portion of the 

October 2014 draft guidance addressing 

preemption with respect to WDD/3PL 

licensure. 

B. Effective Date of Preemption 

Section 585(b)(1) provides that it is 

effective ‘‘[b]eginning on the date of 

enactment of the Drug Supply Chain 

Security Act [November 27, 2013].’’ 

However, that provision applies only to 

state requirements that are inconsistent 

with the national standards and 

requirements applicable under sections 

584 and 503(e) of the FD&C Act. Those 

national standards will be established 

by this regulation, once finalized and 

effective. Thus, by its very terms, 

section 585(b)(1) has no current 

application. Accordingly, State and 

local licensure requirements will be 

preempted only once this regulation, 

when finalized, takes effect; until such 

time, current State and local licensing of 

WDDs and 3PLs may continue. 

We believe that this result is dictated 

by the terms of the statute. However, 

even if the statute were considered 

ambiguous, this interpretation is 

consistent with the statutory framework 

and purposes. Other provisions added 


lotter on DSK11XQN23PROD with PROPOSALS3
6736 Federal Register / Vol. 87, No. 24 / Friday, February 4, 2022 / Proposed Rules 

by the DSCSA recognized state licensure 

of WDDs and 3PLs before the effective 

date of this regulation. For example, 

DSCSA requires both WDDs and 3PLs to 

report their state licensure, beginning 

January 1, 2015, for WDDs and 

November 27, 2014, for 3PLs (see 

sections 503(e)(2)(A) and section 

584(b)). Because these reporting 

requirements apply during the period 

between DSCSA’s enactment and the 

effective date of Federal licensing 

standards, they suggest that Congress 

intended to preserve the status quo in 

terms of permitting state licensure 

during this interim period. Indeed, if 

state licensing were viewed as 

preempted during this interim period, 

there could be no valid state licensure 

for 3PLs and WDDs to report, rendering 

this reporting provision meaningless. In 

addition, section 582(a)(6) expressly 

recognizes state WDD licensure during 

the period between DSCSA’s enactment 

and the effective date of Federal 

licensure regulations, and section 

582(a)(7) similarly deems 3PLs to be 

‘‘licensed’’ during this time, including 

by acknowledging and accommodating 

state licensure of 3PLs. 

Further, the WDD licensure rules take 

effect two years after publication of the 

final rule, per section 583(e)(3), and the 

3PL rules take effect one year after 

publication of the final rule, per section 

584(d)(3)(C). Thus, despite the reference 

to DSCSA’s enactment date in section 

585(b)(1), the statute also expressly 

provides that the Federal licensure 

standards will not be effective until 

several years after DSCSA’s enactment. 

The interpretation is also supported 

by reading the provisions of a statute as 

an integrated whole, consistent with its 

fundamental purpose. As noted, the 

purpose is to strengthen the security 

and integrity of the drug supply chain 

through uniform national requirements, 

including with respect to licensure. This 

purpose would be frustrated if the 

statute were implemented in a manner 

that could lead to supply chain 

disruption, due to licensing 

uncertainties, while the national 

licensure standards are pending. Thus, 

Congress included in the DSCSA 

provisions which recognize state 

licensure of WDDs and 3PLs prior to the 

effective date of Federal licensing 

standards. If preemption under section 

585(b)(1) were construed to preempt 

states from continuing to license WDDs 

and 3PLs even before Federal standards 

are in place, there could be confusion 

whether these supply chain entities 

have valid licensure, to the detriment of 

supply chain operations. Accordingly, 

we believe that read as a whole, the 

statute can be reasonably interpreted as 

providing for preemption to apply only 

upon the effective date of this 

regulation, once finalized. 

XI. Consultation and Coordination With

Indian Tribal Governments

We have analyzed this proposed rule 

in accordance with the principles set 

forth in Executive Order 13175. We 

have tentatively determined that the 

rule does not contain policies that 

would have a substantial direct effect on 

one or more Indian Tribes, on the 

relationship between the Federal 

Government and Indian Tribes, or on 

the distribution of power and 

responsibilities between the Federal 

Government and Indian Tribes. The 

Agency solicits comments from tribal 

officials on any potential impact on 

Indian Tribes from this proposed action. 

XII. References

The following references marked with

an asterisk (*) are on display at the 

Dockets Management Staff (see 

ADDRESSES) and are available for 

viewing by interested persons between 

9 a.m. and 4 p.m., Monday through 

Friday; they also are available 

electronically at https://

www.regulations.gov. References 

without asterisks are not on public 

display at https://www.regulations.gov 

because they have copyright restriction. 

Some may be available at the website 

address, if listed. References without 

asterisks are available for viewing only 

at the Dockets Management Staff. FDA 

has verified the website addresses, as of 

the date this document publishes in the 

Federal Register, but websites are 

subject to change over time. 

* 1. 159 Cong. Rec. S8028 (2013)

(Statement of Senator Barbara Mikulski); 

available at: https://www.congress.gov/113/ 

crec/2013/11/14/CREC-2013-11-14-pt1- 

PgS8027-6.pdf. 

* 2. 159 Cong. Rec. H5964 (2013)

(Statement of Representative James 

Matheson); available at: https://

www.congress.gov/113/crec/2013/09/28/ 

CREC-2013-09-28-pt1-PgH5946-2.pdf. 

* 3. 159 Cong. Rec. H5962 (2013)

(Statement of Representative Robert Latta); 

available at: https://www.congress.gov/113/ 

crec/2013/09/28/CREC-2013-09-28-pt1- 

PgH5946-2.pdf. 

* 4. FDA, Guidance for Industry: ‘‘Draft

Guidance for Industry on The Effect of 

Section 585 of the FD&C Act on Drug Product 

Tracing and Wholesale Drug Distributor and 

Third-Party Logistics Provider Licensing 

Standards and Requirements: Questions and 

Answers’’ October 2014, (available at https:// 

www.fda.gov/media/89954/download), 

accessed December 14, 2021. 

* 5. Ducca, A., Healthcare Distribution

Management Association, Public comment 

letter Document ID: FDA–2014–D–1411– 

0012, submitted on December 24, 2014, to 

Docket No. FDA–2014–D–1411 pertaining to 

the ‘‘Draft Guidance for Industry on The 

Effect of Section 585 of the FD&C Act on 

Drug Product Tracing and Wholesale Drug 

Distributor and Third-Party Logistics 

Provider Licensing Standards and 

Requirements: Questions and Answers; 

Availability,’’ October 8, 2014 (available at 

https://www.regulations.gov/ 

document?D=FDA-2014-D-1411-0012), 

accessed December 14, 2021. 

* 6. Ventimiglia, V., Pharmaceutical

Distribution Security Alliance, Public 

comment letter Document ID: FDA–2014–D– 

1411–0007, submitted on December 24, 2014, 

to Docket No. FDA–2014–D–1411 pertaining 

to the ‘‘Draft Guidance for Industry on The 

Effect of Section 585 of the FD&C Act on 

Drug Product Tracing and Wholesale Drug 

Distributor and Third-Party Logistics 

Provider Licensing Standards and 

Requirements: Questions and Answers; 

Availability,’’ October 8, 2014 (available at 

https://www.regulations.gov/document?

D=FDA-2014-D-1411-0007), accessed 

December 14, 2021. 

* 7. Rouse O’Neill, L., Health Industry

Distributors Alliance, Public comment letter 

Document ID: FDA–2014–D–1411–0013, 

submitted on December 24, 2014, to Docket 

No. FDA–2014–D–1411 pertaining to the 

‘‘Draft Guidance for Industry on The Effect of 

Section 585 of the FD&C Act on Drug Product 

Tracing and Wholesale Drug Distributor and 

Third-Party Logistics Provider Licensing 

Standards and Requirements: Questions and 

Answers; Availability,’’ October 8, 2014 

(available at https://www.regulations.gov/ 

document?D=FDA-2014-D-1411-0013), 

accessed December 14, 2021. 

8. Gallenagh, E.A, L.F. Hirsch, and K.L.

Palmer, ‘‘Title II—Licensure of Wholesale 

Distributors and 3PLs,’’ presented at Food 

and Drug Law Institute’s Drug Quality 

Security Act Conference, November 15, 2017 

(available at https://www.fdli.org/wp-content/ 

uploads/2017/11/DQSA-Hrisch-B.pdf), 

accessed December 14, 2021. 

9. National Association of Boards of

Pharmacy, ‘‘Wholesale Drug Distribution: 

Protecting the Integrity of the Nation’s 

Prescription Drug Supply,’’ August 2013 

(available at https://nabp.pharmacy/wpcontent/uploads/2016/07/wholesale-drugdistribution-protecting-the-integrity-of-thenations-prescription-drug-supply.pdf), 

accessed December 14, 2021. 

10. United States Department of Justice,

‘‘Three California Men and Minnesota 

Corporation Indicted in Nationwide 

Prescription Drug Diversion Scheme,’’ May 

2015 (available at https://www.justice.gov/ 

opa/pr/three-california-men-and-minnesotacorporation-indicted-nationwideprescription-drug), accessed December 14, 

2021. 

* 11. United States Department of Justice,

‘‘Two Plead Guilty In Prescription Drug 

Diversion Scheme,’’ May 2014 (available at 

https://www.justice.gov/usao-mdtn/pr/twoplead-guilty-prescription-drug-diversionscheme), accessed December 14, 2021. 

12. National Association of Boards of

Pharmacy, ‘‘Model State Pharmacy Act and 

Model Rules of the National Association of 

Boards of Pharmacy’’ (available at https:// 


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Federal Register / Vol. 87, No. 24 / Friday, February 4, 2022 / Proposed Rules 6737 

nabp.pharmacy/publications-reports/ 

resource-documents/model-pharmacy-actrules/), accessed December 14, 2021. 

13. Healthcare Distributors Alliance, ‘‘HDA 

Model Licensure Standards for Third-Party 

Logistics Providers for FDA Consideration,’’ 

February 2015 (available at https://

www.hda.org/∼/media/pdfs/governmentaffairs/2015-02-10-traceability-resource-3pllicensure-model.ashx), accessed December 

14, 2021. 

* 14. World Health Organization, ‘‘Annex 

5: WHO good distribution practices for 

pharmaceutical products,’’ 2010 (available at 

https://www.who.int/medicines/areas/ 

quality_safety/quality_assurance/ 

GoodDistributionPracticesTRS

957Annex5.pdf)), accessed December 14, 

2021. 

15. National Association of Boards of 

Pharmacy and the Pharmaceutical Inspection 

Convention and Pharmaceutical Inspection 

Co-operation Scheme (jointly referred to as 

PIC/S) (available at https://

www.picscheme.org/), accessed December 14, 

2021. 

* 16. U.S. Food and Drug Administration, 

‘‘Prescription Drug Marketing Act, Report to 

Congress,’’ June 2001 (available at https://

wayback.archive-it.org/7993/ 

20170405002846/https://www.fda.gov/ 

RegulatoryInformation/LawsEnforcedbyFDA/ 

SignificantAmendmentstotheFDCAct/ 

PrescriptionDrugMarketingActof1987/ 

ucm203148.htm), accessed December 14, 

2021. 

17. National Association of Boards of 

Pharmacy, ‘‘Prescription Medication 

Distribution—The Five Percent Rule for 

Resale (Resolution 109–2–13),’’ June 2013 

(available at https://nabp.pharmacy/news/ 

news-releases/prescription-medicationdistribution-the-five-percent-rule-for-resaleresolution-109-2-13/), accessed December 14, 

2021. 

18. FDA, ‘‘National Standards for the 

Licensure of Wholesale Drug Distributors and 

Third-Party Logistics Providers; Preliminary 

Regulatory Impacts Analysis,’’ (available at 

http://www.fda.gov/AboutFDA/Reports

ManualsForms/Reports/EconomicAnalyses/ 

default.htm). 

List of Subjects 

21 CFR Part 10 

Administrative practice and 

procedure, News media. 

21 CFR Parts 12 and 16 

Administrative practice and 

procedure. 

21 CFR Part 205 

Intergovernmental relations, 

Prescription drugs, Reporting and 

recordkeeping requirements, Security 

measures, Warehouses. 

Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs, we propose that 21 

CFR parts 10, 12, 16, and 205 be 

amended as follows: 

PART 10—ADMINISTRATIVE 

PRACTICES AND PROCEDURES 

■ 1. The authority citation for part 10 

continues to read as follows: 

Authority: 5 U.S.C. 551–558, 701–706; 15 

U.S.C. 1451–1461; 21 U.S.C. 141–149, 321– 

397, 467f, 679, 821, 1034; 28 U.S.C. 2112; 42 

U.S.C. 201, 262, 263b, 264. 

■ 2. In § 10.50, add paragraph (c)(21) to 

read as follows: 

§ 10.50 Promulgation of regulations and 

orders after an opportunity for a formal 

evidentiary public hearing. 

* * * * * 

(c) * * * 

(21) Sections 503(e), 583, and 584 on 

denial, suspension, or revocation of 

third-party logistics provider licenses or 

wholesale distributor licenses. 

PART 12—FORMAL EVIDENTIARY 

PUBLIC HEARING 

■ 3. The authority citation for part 12 

continues to read as follows: 

Authority: 21 U.S.C. 141–149, 321–393, 

467f, 679, 821, 1034; 42 U.S.C. 201, 262, 

263b–263n, 264; 15 U.S.C. 1451–1461; 5 

U.S.C. 551–558, 701–721; 28 U.S.C. 2112. 

■ 4. In § 12.21, revise paragraphs (a) 

introductory text and (a)(2) to read as 

follows: 

§ 12.21 Initiation of a hearing involving the 

issuance, amendment, or revocation of an 

order. 

(a) A proceeding under section 503(e); 

505(d) or (e); 512(d), (e), (m)(3) or (4); 

515(g)(1); 583; or 584 of the Federal 

Food, Drug, and Cosmetic Act, or 

section 351(a) of the Public Health 

Service Act, may be initiated— 

* * * * * 

(2) By a petition in the form specified 

elsewhere in this chapter, e.g., § 205.9 

for licenses for third-party logistics 

providers, § 205.30 for licenses for 

wholesale distributors, § 314.50 for new 

drug applications, § 514.1 for new 

animal drug applications, § 514.2 for 

applications for animal feeds, or § 601.3 

for licenses for biologic products; or 

* * * * * 

PART 16—REGULATORY HEARING 

BEFORE THE FOOD AND DRUG 

ADMINISTRATION 

■ 5. The authority citation for part 16 

continues to read as follows: 

Authority: 15 U.S.C. 1451–1461; 21 U.S.C. 

141–149, 321–394, 467f, 679, 821, 1034; 28 

U.S.C. 2112; 42 U.S.C. 201–262, 263b, 364. 

■ 6. In § 16.1: 

■ a. Designate the 16 undesignated 

paragraphs immediately following 

paragraph (b)(1) as paragraphs (b)(1)(i) 

through (xvi). 

■ b. In paragraph (b)(2): 

■ i. Remove ‘‘§§ ’’ and ‘‘§ ’’ everywhere 

they appear and add ‘‘Sections’’ and 

‘‘Section’’ in their places, respectively; 

■ ii. Designate the first 14 undesignated 

paragraphs immediately following 

paragraph (b)(2) as paragraphs (b)(2)(i) 

through (xiv); 

■ iii. Add paragraphs (b)(2)(xv) and 

(xvi); and 

■ iv. Designate the last 23 undesignated 

paragraphs as paragraphs (b)(2)(xvii) 

through (xxxix). 

The additions read as follows: 

§ 16.1 Scope. 

* * * * * 

(b) * * * 

(2) * * * 

(xv) Section 205.19, relating to 

revocation or suspension of approval for 

an approved organization to conduct 

licensure reviews for third-party 

logistics provider applicants. 

(xvi) Section 205.33, relating to 

revocation or suspension of approval for 

an approved organization to conduct 

inspections of wholesale distributors. 

* * * * * 

■ 7. Revise part 205 to read as follows: 

PART 205—NATIONAL STANDARDS 

FOR THIRD-PARTY LOGISTICS 

PROVIDERS AND PRESCRIPTION 

DRUG WHOLESALE DISTRIBUTORS 

Sec. 

205.1 Scope. 

205.2 Purpose. 

205.3 Definitions. 

Subpart A—Third-Party Logistics Providers 

Licensure Standards 

205.4 Requirement that third-party logistics 

providers be licensed. 

205.5 General application requirements for 

licensure. 

205.6 Federal licensure process. 

205.7 Changes to information, location, or 

ownership of a licensed 3PL. 

205.8 Expiry and renewal. 

205.9 Licensure denial, suspension, 

reinstatement, revocation, and voluntary 

termination: notice and opportunity to 

request a hearing. 

205.10 Good storage practices for 3PL 

facilities. 

205.11 Personnel requirements necessary 

for good storage practices. 

205.12 Required written policies and 

procedures. 

205.13 Recordkeeping and document 

maintenance. 

205.14 3PLs must provide upon request a 

list of trading partners. 

205.15 Requirements for initial and annual 

reporting to the Food and Drug 

Administration. 

205.16 Inspections. 

Subpart B—Approved Organizations for 

3PLS 

205.17 Use of approved third-party 

organizations. 


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205.18 General qualifications of approved 

organizations. 

205.19 Process and procedures for approval 

by the Food and Drug Administration. 

Subpart C—Wholesale Distributors 

Licensure Standards 

205.20 Requirement that prescription drug 

wholesale distributors be licensed. 

205.21 Surety bond requirement. 

205.22 General application requirements for 

licensure. 

205.23 Federal licensure process. 

205.24 Changes to information, operation, 

location, or ownership of a wholesale 

distributor. 

205.25 Prohibited persons and 

qualifications for key personnel. 

205.26 National standards for the storage 

and handling of prescription drugs for 

wholesale distribution. 

205.27 Standards for the establishment and 

maintenance of records of the 

distribution of prescription drugs. 

205.28 Inspections. 

205.29 Requirements for initial and annual 

reporting to the Food and Drug 

Administration. 

205.30 Licensure denial, suspension, 

reinstatement, revocation, and voluntary 

termination—notice and opportunity to 

request a hearing. 

Subpart D—Approved Organizations for 

Wholesale Distributors 

205.31 Use of approved third-party 

organizations. 

205.32 General qualifications of approved 

organizations. 

205.33 Process and procedures for approval 

by the Food and Drug Administration. 

Authority: 21 U.S.C. 351, 352, 353, 

360eee–2, 360eee–3, 360eee–4, 371, 374. 

§ 205.1 Scope. 

(a) This part applies to the licensure 

of third-party logistics providers (3PLs) 

in any State and to any entity engaging 

in wholesale distribution of prescription 

drugs in any State. The standards 

established under subpart A of this part 

will apply to all State and Federal 

licenses described under sections 

503(e)(5) and 584 of the Federal Food, 

Drug, and Cosmetic Act (21 U.S.C. 

353(e)(5) and 360eee–3). The standards 

established under subpart C of this part 

will apply to all State and Federal 

licenses described under sections 

503(e)(1) and 583 of the Federal Food, 

Drug, and Cosmetic Act (21 U.S.C. 

353(e)(1) and 360eee–2). 

(b) A facility or entity that conducts 

3PL activities must obtain a 3PL license 

for each facility as described in this part 

and is not required to obtain a license 

as a wholesale distributor unless it is 

also conducting wholesale distribution 

activities, in which case, the entity or 

facility must obtain both a 3PL license 

as described in subpart A of this part 

and a wholesale distributor license as 

described in subpart C of this part. 

Unless otherwise noted, the term ‘‘3PL’’ 

or ‘‘third-party logistics provider’’ in 

this part applies to both the entity and 

the individual facilities requiring a 

license. 

(c) Subpart B of this part applies to 

any third-party organization seeking to 

obtain or maintain approval by the Food 

and Drug Administration (FDA or the 

Agency) to evaluate the qualifications of 

3PLs for licensure. Subpart D of this 

part applies to any third-party 

organization seeking to obtain or 

maintain approval by the Food and Drug 

Administration to conduct inspections 

of wholesale distributors. 

§ 205.2 Purpose. 

The purpose of this part is to establish 

standards, terms, and conditions for the 

licensing of 3PLs and prescription drug 

wholesale distributors by State or 

Federal licensing authorities, including 

a process for the revocation, reissuance, 

and renewal of such licenses. This part 

also establishes the process and 

standards the Food and Drug 

Administration will use to approve 

third-party organizations to evaluate the 

qualifications of 3PLs for licensure and 

conduct inspections of wholesale 

distributor facilities. 

§ 205.3 Definitions. 

The definitions and interpretations of 

terms contained in section 581 of the 

Federal Food, Drug, and Cosmetic Act 

(21 U.S.C. 360eee) apply to those terms 

when used in this part. The following 

terms are also defined for purposes of 

this part: 

(a) 3PL activities means the provision 

or coordination of warehousing, or other 

logistics services of a product in 

interstate commerce on behalf of a 

manufacturer, wholesale distributor, or 

dispenser of a product, while not taking 

ownership of the product, nor having 

the responsibility to direct the sale or 

disposition of the product. 

(b) Change of entity ownership means: 

(1) Partnership. In the case of a 

partnership, the removal, addition, or 

substitution of a partner. 

(2) Unincorporated sole 

proprietorship. In the case of an 

unincorporated sole proprietorship, the 

transfer of title and property to another 

party. 

(3) Corporation. In the case of a 

corporation, the merger of the licensed 

corporation into another corporation or 

the consolidation of two or more 

corporations, resulting in the creation of 

a new corporation. Transfer of corporate 

stock or the merger of another 

corporation into the licensed 

corporation does not constitute change 

of entity ownership. 

(4) Limited liability company (LLC). In 

the case of an LLC, the merger of the 

licensed LLC into another LLC or the 

consolidation of two or more LLCs, 

resulting in the creation of a new LLC. 

Transfer of company stock or the merger 

of another LLC into the licensed LLC 

does not constitute change of 

ownership. 

(c) Co-licensed partner means one of 

two or more entities that have entered 

a written agreement for the right to 

engage in the marketing of a 

prescription drug. 

(d) Designated representative means 

an individual who is designated as the 

representative of the facility manager 

and is responsible for managing the 

daily operations of the wholesale 

distributor or 3PL facility. 

(e) Entity or entities means a business 

organization, such as a corporation, 

company, association, firm, partnership, 

society, sole proprietorship, or joint 

stock company. 

(f) Facility means an establishment, 

warehouse, structure, or structures 

under common ownership at one 

general, permanent, physical location 

used for distribution, including storage 

and handling, of prescription drugs. 

(g) Key personnel means any 

individual who has responsibility for 

managing the operations of the 

wholesale distributor, including any 

principal, owner, director, officer of the 

wholesale distributor, facility manager, 

or designated representative, or other 

individuals who are authorized to enter 

areas where prescription drugs are held 

and are likely to handle those 

prescription drugs as a part their 

responsibilities within the operation. 

(h) Minimal quantities means the total 

annual dollar volume of prescription 

drugs sold by a retail pharmacy to 

licensed practitioners for office use does 

not exceed 5 percent of the total dollar 

volume of that retail pharmacy’s annual 

prescription drug sales. 

(i) Other logistics services include 

services provided by entities that accept 

or transfer direct possession of products 

from that entity’s facility within the 

United States and its territories on 

behalf of a trading partner (e.g., 

manufacturer, wholesale distributor, 

dispenser) but that do not take 

ownership of the product nor have the 

responsibility to direct a product’s sale 

or disposition. ‘‘Other logistics services’’ 

also means services undertaken with 

respect to a product for a repackager 

acting on behalf of a manufacturer, 

wholesale distributor, or dispenser. 

(j) Other than a consumer or patient 

means the person receiving the drug is 

not: 


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(1) The individual identified as the 

recipient of the prescription drug; 

(2) A dispenser fulfilling a specific 

patient need as defined in section 

581(19) of the Federal Food, Drug, and 

Cosmetic Act; or 

(3) The clinical investigator, as 

defined in § 312.3(b) of this chapter. 

(k) Product means a prescription drug 

in a finished dosage form for 

administration to a patient without 

substantial further manufacturing (e.g., 

capsules, tablets, lyophilized products 

before reconstitution). 

(l) Significant disciplinary action 

means any action by a State or Federal 

licensing authority that limits or 

prevents a 3PL from conducting 3PL 

activities related to the distribution of 

prescription drugs, or limits or prevents 

a wholesale distributor from 

distributing, as that term is defined in 

section 581(5) of the Federal Food, Drug 

and Cosmetic Act, or facilitating the 

distribution of prescription drugs. This 

includes the revocation or suspension of 

a 3PL or wholesale distributor license, 

or of a registration with the Drug 

Enforcement Administration. 

(m) Unfit for distribution means a 

prescription drug that has been 

identified as a drug whose sale would 

violate the Federal Food, Drug, and 

Cosmetic Act. This includes 

prescription drugs identified as suspect 

or illegitimate pursuant to section 582(c) 

of the Federal Food, Drug, and Cosmetic 

Act (21 U.S.C. 360eee–1(c)); adulterated 

pursuant to section 501 of the Federal 

Food, Drug, and Cosmetic Act (21 U.S.C. 

351), including drugs rendered 

nonsaleable because conditions such as 

return, recall, damage, or expiry cast 

doubt on the drug’s safety, identity, 

strength, quality, or purity; or 

misbranded pursuant to section 502 of 

the Federal Food, Drug, and Cosmetic 

Act (21 U.S.C. 352). 

(n) Wholesale distribution means the 

distribution of a drug subject to section 

503(b) of the Federal Food, Drug, and 

Cosmetic Act (21 U.S.C. 353(b)) to a 

person other than a consumer or patient, 

or receipt of a drug subject to section 

503(b) of the Federal Food, Drug, and 

Cosmetic Act by a person other than the 

consumer or patient, but does not 

include: 

(1) Intracompany distribution of any 

drug between members of an affiliate or 

within a manufacturer; 

(2) The distribution of a drug or an 

offer to distribute a drug among 

hospitals or other health care entities 

that are under common control; 

(3) The distribution of a drug or an 

offer to distribute a drug for emergency 

medical reasons, including a public 

health emergency declaration pursuant 

to section 319 of the Public Health 

Service Act (42 U.S.C. 247d), except 

that, for purposes of this paragraph 

(n)(3), a drug shortage not caused by a 

public health emergency will not 

constitute an emergency medical reason; 

(4) The dispensing of a drug pursuant 

to a prescription executed in accordance 

with section 503(b) of the Federal Food, 

Drug, and Cosmetic Act; 

(5) The distribution of minimal 

quantities of a drug by a licensed retail 

pharmacy to a licensed practitioner for 

office use; 

(6) The distribution of a drug or an 

offer to distribute a drug by a charitable 

organization to a nonprofit affiliate of 

the organization to the extent otherwise 

permitted by law; 

(7) The purchase or other acquisition 

by a dispenser, hospital, or other health 

care entity of a drug for use by such 

dispenser, hospital, or other health care 

entity; 

(8) The distribution of a drug by the 

manufacturer of such drug; 

(9) The receipt or transfer of a drug by 

an authorized 3PL, provided that such 

3PL does not take ownership of the 

drug; 

(10) A common carrier that transports 

a drug, provided that the common 

carrier does not take ownership of the 

drug; 

(11) The distribution of a drug, or an 

offer to distribute a drug by an 

authorized repackager that has taken 

ownership or possession of the drug and 

repacks it in accordance with section 

582(e) of the Federal Food, Drug, and 

Cosmetic Act; 

(12) Saleable drug returns when 

conducted by a dispenser; 

(13) The distribution of a collection of 

finished medical devices, which may 

include a product or biological product, 

assembled in kit form strictly for the 

convenience of the purchaser or user 

(referred to in paragraphs (n)(13)(i) 

through (iv) of this section as a medical 

convenience kit) if: 

(i) The medical convenience kit is 

assembled in an establishment that is 

registered with the Food and Drug 

Administration as a device 

manufacturer in accordance with 

section 510(b)(2) of the Federal Food, 

Drug, and Cosmetic Act (21 U.S.C. 

360(b)(2)); 

(ii) The medical convenience kit does 

not contain a controlled substance that 

appears in a schedule contained in the 

Controlled Substances Act; 

(iii) In the case of a medical 

convenience kit that includes a product, 

the person that manufactures the kit: 

(A) Purchased such product directly 

from the pharmaceutical manufacturer 

or from a wholesale distributor that 

purchased the product directly from the 

pharmaceutical manufacturer; and 

(B) Did not alter the product’s primary 

container or label as purchased from the 

manufacturer or wholesale distributor; 

(iv) In the case of a medical 

convenience kit that includes a product, 

the product is: 

(A) An intravenous solution intended 

for the replenishment of fluids and 

electrolytes; 

(B) A product intended to maintain 

the equilibrium of water and minerals in 

the body; 

(C) A product intended for irrigation 

or reconstitution; 

(D) An anesthetic; 

(E) An anticoagulant; 

(F) A vasopressor; or 

(G) A sympathomimetic; 

(14) The distribution of an 

intravenous drug that, by its 

formulation, is intended for the 

replenishment of fluids and electrolytes 

(such as sodium, chloride, and 

potassium) or calories (such as dextrose 

and amino acids); 

(15) The distribution of an 

intravenous drug used to maintain the 

equilibrium of water and minerals in the 

body (such as dialysis solutions); 

(16) The distribution of a drug that is 

intended for irrigation, or sterile water, 

whether intended for such purposes or 

for injection; 

(17) The distribution of medical gas, 

as defined in section 575 of the Federal 

Food, Drug, and Cosmetic Act (21 U.S.C. 

360ddd); 

(18) Facilitating the distribution of a 

product by providing solely 

administrative services, including 

processing of orders and payments; or 

(19) The transfer of a product by a 

hospital or other health care entity, or 

by a wholesale distributor or 

manufacturer operating at the direction 

of the hospital or other health care 

entity, to a repackager as described in 

section 581(16)(B) of the Federal Food, 

Drug, and Cosmetic Act and registered 

under section 510 of the Federal Food, 

Drug, and Cosmetic Act for the purpose 

of repackaging the drug for use by that 

hospital or other health care entity, and 

other health care entities that are under 

common control, if ownership of the 

drug remains with the hospital or other 

health care entity at all times. 

Subpart A—Third-Party Logistics 

Providers Licensure Standards 

§ 205.4 Requirement that third-party 

logistics providers be licensed. 

(a) No 3PL may conduct 3PL activities 

unless each facility of the 3PL is 

licensed: 

(1) By the State from which the 3PL 

conducts 3PL activities; or 


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(2) If the State from which the 3PL 

conducts 3PL activities has not 

established a licensure requirement in 

accordance with the standards set forth 

in this part, by the Food and Drug 

Administration; and 

(3) If the product is distributed 

interstate, by the State into which the 

3PL distributes the product if such 

licensure is required by that State, and 

the 3PL is not licensed by the Food and 

Drug Administration under § 205.6. 

(b) Each facility owned, leased, or 

rented by a 3PL must have a separate 

license. 

(c) Licenses are facility- and ownerspecific and are not transferable. 

(d) The 3PL must maintain its license 

at the licensed facility in a readily 

retrievable manner and must permit 

inspection of the license by any official, 

agent, or employee of the licensing 

authority or of any Federal, State, or 

local agency engaged in enforcement of 

laws relating to the distribution of 

prescription drugs. 

§ 205.5 General application requirements 

for licensure. 

(a) Applicant requirements. An 

individual who submits an application 

on behalf of a 3PL for a license issued 

pursuant to this subpart must: 

(1) Be 18 years of age or older; 

(2) Submit an affidavit that such 

individual’s ownership or management 

of or employment by the 3PL would not 

preclude the 3PL from receiving or 

maintaining a license under § 205.11(f); 

(3) Submit all application information 

required in the form required by the 

licensing authority; and 

(4) Pay any licensing fees that are 

required by the licensing authority 

pursuant to section 584(c) of the Federal 

Food, Drug, and Cosmetic Act. 

(b) General requirements for licensure 

application. The State or Federal 

licensing authority will require the 

following information from each 3PL 

facility as part of the initial application 

for the license described in § 205.4 and 

as part of any renewal of such license: 

(1) The name and title of the 

individual who submits the application 

for licensure on behalf of the 3PL; 

(2) The name of the 3PL as it should 

appear on the license, full business 

address of the facility, and telephone 

number; 

(3) All trade or business names used 

by the 3PL, including prior trade or 

business names, within the past 7 years; 

(4) Name, email address, and 

telephone number of the 3PL’s facility 

manager or designated representative; 

(5) The type of ownership or 

operation of the business entity, such as 

a partnership, corporation, limited 

liability company, or sole 

proprietorship; 

(6) The name of any owners or 

operators of the 3PL, including: 

(i) If a sole proprietorship, the full 

name of the sole proprietor and the 

name of the business entity; 

(ii) If a partnership, the name of each 

partner and the name of the partnership; 

(iii) If a corporation, the corporate 

names, the names of any subsidiaries 

and affiliates, the name and title of each 

corporate officer and director, and the 

State of incorporation; and 

(iv) If a limited liability company, the 

name of the limited liability company, 

including any subsidiaries and affiliates, 

the name of each member, and the State 

in which the limited liability company 

was organized; and 

(7) Whether the 3PL facility manager 

or designated representative has ever 

been convicted of a felony relating to 

prescription drug distribution, 

including a conviction under section 

301(i) or (k) of the Federal Food, Drug, 

and Cosmetic Act (21 U.S.C. 331(i) or 

(k)) or 18 U.S.C. 1365, relating to 

product tampering, together with details 

concerning any such events. 

(c) General requirements for renewal 

applications. On the renewal 

application provided by the State or 

Federal licensing authority, the 3PL 

must: 

(1) Certify that the 3PL has continued 

to meet all the standards and complied 

with the requirements in this subpart 

since the previous license was issued; 

and 

(2) Inform the applicable licensing 

authority of any changes to information 

previously submitted pursuant to 

paragraph (b) of this section or 

§ 205.6(a)(2) for which a notification 

was not already submitted to the 

licensing authority under § 205.7. 

§ 205.6 Federal licensure process. 

(a) Procedures for filing an FDA 

application for a 3PL license. (1) Each 

3PL facility must electronically submit 

an application to the Food and Drug 

Administration for a license to conduct 

3PL activities in a State if the State does 

not have a 3PL licensure program 

consistent with the standards set forth 

in this section. The application must 

include the information specified in 

§ 205.5, along with supporting 

documentation that demonstrates the 

applicant’s storage practices are 

sufficient to ensure the continued 

safety, identity, strength, quality, and 

purity of the products in the facility. 

(2) If one or more organizations have 

been approved by the Food and Drug 

Administration to conduct a review of a 

3PL’s qualifications for licensure 

pursuant to § 205.17, the 3PL will 

indicate in its application to the Food 

and Drug Administration which 

approved organization (AO) it prefers to 

conduct its licensure review. If there is 

no organization approved by the Food 

and Drug Administration to conduct 

licensure review, the Food and Drug 

Administration will conduct the review, 

as described in § 205.17(b). Licensure 

review must consist of: 

(i) Review of all documents submitted 

in support of the application for 3PL 

licensure; and 

(ii) Inspection of the facility, as 

directed by the licensing authority 

pursuant to § 205.16(a) or (b). 

(3) The applicant, or the applicant’s 

agent or other authorized official, must 

sign the application. 

(4) An application for a 3PL license 

will not be considered as filed until the 

Food and Drug Administration has 

received all pertinent information and 

fees. 

(b) Determination that licensing 

requirements have been met. The Food 

and Drug Administration, not an AO, 

will determine whether the 3PL meets 

all the applicable requirements set forth 

in this part. 

(c) Notification of easily correctable 

deficiencies. The Food and Drug 

Administration will make every 

reasonable effort to promptly 

communicate to applicants easily 

correctable deficiencies found in an 

application when those deficiencies are 

discovered, particularly deficiencies 

concerning storage, handling, 

distribution, or recordkeeping issues. 

The Food and Drug Administration will 

also promptly inform applicants of its 

need for more data or information or for 

changes in the application needed to 

facilitate the Agency’s review. 

(d) Issuance of 3PL license by FDA. 

Approval of a 3PL license application or 

issuance of a 3PL license constitutes a 

determination by the Food and Drug 

Administration that, based upon the 

information provided and reviewed, the 

3PL meets the applicable requirements 

to be licensed under section 584 of the 

Federal Food, Drug, and Cosmetic Act. 

The Food and Drug Administration will 

approve an application and send the 

applicant an approval letter and license 

certificate if none of the reasons in 

§ 205.9(a)(1) for refusing to approve the 

application applies. Applicable 

requirements for the maintenance of 

3PL facilities to conduct 3PL activities 

will include but not be limited to the 

good storage practices set forth under 

§ 205.10. A license is effective on the 

date of issuance of the license 

certificate. 


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(e) Validity of 3PL license. Licenses 

issued to 3PL facilities will remain valid 

until the date of expiration, unless 

suspended or revoked. 

§ 205.7 Changes to information, location, 

or ownership of a licensed 3PL. 

(a) Any change to any information 

required in this subpart, including 

changes to any information required 

pursuant to §§ 205.5, 205.6, 205.11, and 

205.15, must be submitted electronically 

to the licensing authority within 30 

calendar days after such change is 

effective, except where otherwise 

provided in this subpart. 

(b) Any change in the location of a 

facility at which 3PL activities are 

conducted will require a new license 

and inspection of the new facility prior 

to its beginning operations. 

(1) The application for a new license 

required by § 205.5 must be submitted 

no later than 90 calendar days prior to 

beginning operations at the new 

location. 

(2) On the date the change of location 

takes place, the license for the original 

facility is void. 

(c) Any change in the entity engaged 

in 3PL activities in a facility will require 

a new license prior to beginning 

operations. 

(1) The application for a new license 

required by § 205.5 must be submitted 

no later than 30 calendar days prior to 

the change in ownership. 

(2) A new inspection of the facility 

may also be required at the licensing 

authority’s discretion. 

(3) A 3PL can continue to operate 

under the original license for 30 

calendar days after the change of 

ownership occurs or until the license 

application of the new owner is 

approved, whichever is sooner. 

§ 205.8 Expiry and renewal. 

Any license issued or renewed 

pursuant to § 205.5 or § 205.6 will 

expire 3 years after the date issued. A 

3PL renewal application will not be 

accepted more than 90 calendar days 

before the date of expiration. A 3PL will 

not be penalized for administrative 

delay on the part of the licensing 

authority in issuing a new license. A 

license will be considered valid during 

the period of the administrative delay if 

the 3PL timely submitted the renewal 

application. 

§ 205.9 Licensure denial, suspension, 

reinstatement, revocation, and voluntary 

termination: notice and opportunity to 

request a hearing. 

(a) Denial of application for licensure. 

(1) The licensing authority will refuse to 

approve or renew a 3PL license 

application for any of the following 

reasons: 

(i) The facilities and controls used for 

the receipt, security, storage, inventory, 

shipment, or distribution of the product 

are inadequate to facilitate safe 

operations pursuant to § 205.10(b). 

(ii) The methods or procedures to be 

used in the receipt, security, storage, 

inventory, shipment, or distribution of 

the product do not comply with the 

requirements for good storage practices 

in § 205.10. 

(iii) The personnel employed by the 

applicant do not meet the requirements 

necessary for good storage practices in 

§ 205.11. 

(iv) There is insufficient information 

in the written policies and procedures 

required in § 205.12 to determine 

whether the methods or procedures to 

be used in the receipt, security, storage, 

inventory, shipment, or distribution of 

the product comply with the 

requirements for good storage practices 

in § 205.10, or to determine whether the 

facilities and controls to be used in the 

receipt, security, storage, inventory, 

shipment, or distribution of the product 

facilitate safe operations. 

(v) The methods or procedures to be 

used in the receipt, storage, handling, or 

distribution of the product do not 

comply with the requirements for 

adequate recordkeeping in § 205.10 or 

§ 205.13. 

(vi) The application contains an 

untrue statement of material fact. 

(vii) The applicant does not permit a 

properly authorized officer or employee 

of FDA, a State licensing authority, or 

an organization approved by the Food 

and Drug Administration pursuant to 

§ 205.17 an adequate opportunity to 

inspect the facilities, controls, and any 

records relevant to the application. 

(viii) For renewal applications, failure 

to report to the licensing authority any 

pertinent change of information 

required in § 205.5 or § 205.7. 

(ix) For renewal applications, failure 

to comply with any of the requirements 

for annual reporting in § 205.15. 

(2) If a 3PL’s application fails to 

demonstrate that the 3PL meets the 

requirements for licensure set forth in 

this part, the licensing authority will 

provide written notice to the applicant 

that its license application may be 

denied, setting forth the grounds for the 

denial and an opportunity to 

demonstrate that the 3PL meets the 

requirements for licensure. 

(3) The notice will inform the 

applicant of its right to provide 

additional information and request 

reconsideration of the denial by the 

licensing authority within 14 calendar 

days of the date of the licensing 

authority’s written notice. 

(4) If no reconsideration is sought or 

if, upon reconsideration, the licensing 

authority denies the applicant’s request 

for licensure, the licensing authority 

will provide the applicant written 

notice of the denial and will provide the 

applicant notice of the opportunity to 

request a hearing. 

(5) The applicant who wishes to 

request a hearing has 10 calendar days 

after the date of the notice of denial to 

submit a written notice of participation 

and request for a hearing. The applicant 

who fails to submit a written notice of 

participation and request for a hearing 

within 10 calendar days waives the 

opportunity for a hearing. 

(6) Parts 10 through 16 of this chapter 

apply to 3PL licenses issued by the 

Food and Drug Administration under 

section 584 of the Federal Food, Drug, 

and Cosmetic Act. 

(b) Suspension of license after notice 

and opportunity to request a hearing. (1) 

The licensing authority may move to 

suspend a license if the licensing 

authority has a reasonable belief that the 

licensee has failed to comply with any 

of the standards for receiving and 

maintaining licensure described in this 

subpart. 

(2) The licensing authority will 

provide written notice of intent to 

suspend a 3PL license setting forth the 

grounds for the suspension pursuant to 

this part, including what information 

would be required to demonstrate or 

achieve compliance. The notice will 

inform the applicant of its right to 

provide additional information, request 

reconsideration of the suspension by the 

licensing authority, and demonstrate or 

achieve compliance before suspension. 

(3) Each 3PL license holder has 30 

calendar days from the date of the 

notice of intent to suspend to present, 

in writing, comments and information 

bearing on the initial decision. 

(4) If no comments or information are 

received within 30 calendar days or if, 

upon reconsideration, the licensing 

authority believes the 3PL license 

should still be suspended, the licensing 

authority will provide the 3PL a second 

written notice of the intent to suspend, 

informing the 3PL of the opportunity to 

request a hearing on the question of 

whether there are grounds for 

suspension. 

(5) The written notice will contain a 

statement that the 3PL will be afforded 

an opportunity to request a hearing. 

(6) The 3PL must submit a written 

notice of participation and request a 

hearing in writing within 10 calendar 

days after the date of notice of the intent 

to suspend. A 3PL that fails to submit 


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a written notice of participation and 

request for hearing within 10 calendar 

days waives the opportunity for a 

hearing and the license will be 

suspended. 

(7) Parts 10 through 16 of this chapter 

apply to 3PL licenses issued by the 

Food and Drug Administration under 

section 584 of the Federal Food, Drug, 

and Cosmetic Act. 

(8) If a 3PL’s license is suspended and 

the 3PL does not demonstrate or achieve 

compliance to the licensing authority’s 

satisfaction within the time period 

indicated in the notice of suspension, 

the licensing authority will move to 

revoke the 3PL’s license. 

(c) Immediate suspension of license. 

(1) The licensing authority may suspend 

a license effective immediately if the 

licensing authority reasonably believes 

that the licensee has failed to comply 

with any of the standards for receiving 

and maintaining licensure described in 

this subpart and that the nature of the 

noncompliance at issue would 

reasonably be expected to cause an 

imminent threat to public health. 

(2) The licensing authority will 

provide the 3PL with written notice of 

immediate suspension of its license 

setting forth the grounds for the 

immediate suspension pursuant to this 

part, including what information would 

be required to demonstrate compliance, 

and the opportunity to request a hearing 

within 10 calendar days of the 3PL’s 

request for such hearing. 

(3) The 3PL must submit a written 

notice of participation and request a 

hearing in writing within 10 calendar 

days after the date of the written notice 

of immediate suspension. A 3PL that 

fails to submit a written notice of 

participation and request for hearing 

within 10 calendar days after the date of 

the written notice waives the 

opportunity for a hearing. 

(4) Parts 10 through 16 of this chapter 

apply to 3PL licenses issued by the 

Food and Drug Administration under 

section 584 of the Federal Food, Drug, 

and Cosmetic Act. 

(5) If a 3PL’s license is suspended and 

the 3PL does not demonstrate or achieve 

compliance to the licensing authority’s 

satisfaction within the time period 

indicated in the notice of suspension, 

the licensing authority will move to 

revoke the 3PL’s license. 

(d) Reinstatement of suspended 

licenses. The licensing authority may 

reinstate a previously suspended license 

upon a 3PL’s showing of compliance 

with requirements in this part and upon 

such inspection and examination as the 

licensing authority may require. 

(e) Revocation. (1) If compliance is 

not demonstrated or achieved to the 

licensing authority’s satisfaction within 

the time period indicated in the notice 

of suspension, the licensing authority 

will move to revoke the 3PL’s license. 

(2) The licensing authority will notify 

the 3PL of the intent to revoke the 3PL’s 

license, setting forth the grounds for the 

revocation and offering an opportunity 

to request a hearing on the proposed 

revocation. 

(3) The written notice will contain a 

statement that the 3PL may request a 

hearing. 

(4) The 3PL must submit a written 

notice of participation and request a 

hearing within 10 calendar days after 

the date of the notice of revocation. A 

3PL that fails to submit a written notice 

of participation and request for hearing 

within 10 calendar days waives the 

opportunity for a hearing. 

(5) Parts 10 through 16 of this chapter 

apply to 3PL licenses issued by the 

Food and Drug Administration under 

section 584 of the Federal Food, Drug, 

and Cosmetic Act. 

(f) Nonrenewal. If a license is 

suspended and the 3PL does not submit 

a renewal application by the date of 

expiration of the suspended license, the 

license will be considered expired. A 

3PL may not conduct 3PL activities with 

an expired license and must submit a 

new application for licensure if it 

wishes to conduct 3PL activities. 

(g) Voluntary termination of licensure 

upon request by the 3PL. The licensing 

authority will terminate a 3PL facility’s 

license upon the 3PL’s request, which 

includes a notice of intent to 

discontinue its 3PL activities and waive 

opportunity for a hearing. A 3PL facility 

that voluntarily terminates licensure 

must obtain a new license before 

resuming 3PL activities. 

(1) If a 3PL facility that has had its 

license revoked wishes to apply for a 

new license, that facility must submit a 

new license application, which may 

include an inspection if required by the 

licensing authority under § 205.16. 

(2) [Reserved] 

§ 205.10 Good storage practices for 3PL 

facilities. 

(a) A facility owned, rented, or leased 

by a 3PL for the purpose of conducting 

3PL activities must meet the storage 

practices for facilities required in 

paragraphs (b) through (d) of this 

section. 

(b) A facility to which a 3PL license 

has been issued in the same name and 

at the same address as another trading 

partner, such as a wholesale distributor, 

must maintain separate systems and 

processes for products that are specific 

to the 3PL. 

(c) A facility owned, leased, or rented 

by a 3PL in which 3PL activities are 

conducted must have suitable storage 

practices in place for such facility, as 

demonstrated by the following: 

(1) General requirements. The facility 

is: 

(i) Not a personal residence; 

(ii) Of a suitable size, construction, 

and configuration to ensure proper 

storage and distribution of all products 

warehoused at the facility, including 

lighting, ventilation, temperature, 

sanitation, humidity, space, equipment, 

and secure conditions where products 

are stored; 

(iii) Of a suitable size, construction, 

and configuration to facilitate cleaning, 

maintenance, proper logistics, and 

distribution operations, and to provide 

protection from intrusion; and 

(iv) Maintained in a clean and orderly 

condition, free from infestation of any 

kind. 

(A) A cleaning program schedule 

must be maintained, documented, and 

followed. 

(B) A pest control program, which is 

designed to ensure that the facility is 

free from infestation, must be in place, 

and pest control records must be kept. 

(2) Areas to handle separation of 

products that are unfit for distribution. 

The facility has: 

(i) Clearly defined, designated areas 

separate from saleable products to 

quarantine suspect product, illegitimate 

product, and other products that are 

unfit for distribution until 

dispositioned. 

(ii) Clearly defined, designated areas 

to handle separation of products that are 

returned, recalled, or expired. 

(iii) For returned or recalled products, 

clearly defined, designated areas 

separate from saleable products to 

handle returned or recalled product. 

(iv) For expired products, clearly 

defined, designated areas separate from 

saleable products from which expired 

product may be returned to the 

manufacturer or repackager or 

destroyed. 

(3) Security of premises. The facility 

is: 

(i) Designed so that designated areas 

of the facility where products are held 

are accessible only to personnel, 

regardless of employee or contractor 

status, position title, or ownership 

interest, who possess appropriate and 

verifiable experience and training 

necessary to safely and lawfully engage 

in 3PL activities; and 

(ii) Equipped with adequate security 

to protect from vulnerabilities and 

potential breaches. Adequate security 

must include precautions taken to 

ensure that: 


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(A) The facility is secure from 

unauthorized entry; 

(B) Access from outside the premises 

is limited, well controlled, and 

documented; 

(C) The outside perimeter of the 

premises is well lit; 

(D) The facility is equipped with an 

alarm system to detect and notify 

appropriate personnel of entry after 

hours; and 

(E) The facility is equipped with a 

security system that provides suitable 

protection against theft and diversion of 

products. 

(4) Facility assessments. Facility 

assessments, including temperature 

mapping and other assessments 

designed to ensure products are 

properly stored in accordance with their 

labeling, must be regularly conducted 

and documented. 

(5) Equipment. Equipment must be 

utilized and maintained in good repair 

and must be suitable for 3PL activities, 

as demonstrated by the following: 

(i) The 3PL must be able to 

demonstrate that all equipment has been 

calibrated, as applicable, and validated 

at regular intervals to achieve the 

intended results accurately, 

consistently, and in a manner that can 

be reproduced by qualified individuals 

following approved procedures; 

(ii) The 3PL must use appropriate 

manual, electromechanical, or 

electronic temperature and humidity 

recording equipment or logs to 

document proper storage of products; 

and 

(iii) The monitoring equipment must 

alert appropriate personnel in a timely 

manner of any deviations from the 

intended storage conditions. 

(d) In addition to the requirements set 

forth in this subpart, products must be 

handled and stored in accordance with 

all applicable Federal and State laws. 

§ 205.11 Personnel requirements 

necessary for good storage practices. 

(a) The 3PL must maintain a list of 

officers, directors, managers, and 

designated representatives; a 

description of their duties; and a 

summary of their qualifications. This 

list must be available for review by the 

State or Federal licensing authority. 

(b) Qualifications for the 3PL’s facility 

manager or designated representative of 

such facility manager must include that 

the individual: 

(1) Has the education, background, 

training, and experience necessary to 

perform such individual’s assigned 

functions; 

(2) Serves as the facility manager or 

designated representative of such 

facility manager for only one facility at 

a time; and 

(3) Is actively involved in and 

responsible for managing the daily 

operations of the 3PL facility. 

(c) The 3PL must provide the facility 

manager or designated representative 

adequate authorities and resources to 

effectively manage the 3PL’s daily 

operations in accordance with the 

standards in this part. 

(d) The facility manager or designated 

representative is responsible for 

managing all the daily operations of the 

3PL facility, including those duties 

delegated to other personnel. 

(e) A 3PL is prohibited from obtaining 

or maintaining licensure if the 3PL 

employs a facility manager or 

designated representative who has been: 

(1) Convicted of any felony violation 

of section 301(i) or (k) of the Federal 

Food, Drug, and Cosmetic Act; or 

(2) Convicted of any violation of 18 

U.S.C. 1365, relating to product 

tampering. 

(f) Licensure may also be denied 

when storage practices are not sufficient 

to maintain adequate security because a 

facility manager or designated 

representative of such facility manager 

has been: 

(1) Found to have delayed or 

otherwise impeded an inspection by the 

Federal or State licensing authority or 

an approved third-party inspector, or if 

an inspector, after reasonable efforts, 

was unable to gain access to an 

establishment or a location to carry out 

the inspection required under § 205.16 

as permitted by section 704(a) of the 

Federal Food, Drug, and Cosmetic Act 

(21 U.S.C. 374(a)); 

(2) Found to have omitted material 

information or furnished false or 

fraudulent information in an application 

made in connection with the 

distribution of prescription drugs; or 

(3) Subject to licensure suspension or 

revocation by Federal, State, or local 

government for any license currently or 

previously held by the applicant for the 

manufacture or distribution of any 

drugs, including controlled substances. 

(g) Any facility manager or designated 

representative will be subject to 

criminal background checks. The results 

of the background checks must 

demonstrate no history of criminal 

convictions pursuant to paragraph (e) of 

this section. 

§ 205.12 Required written policies and 

procedures. 

(a) General requirements for written 

policies and procedures. Every 3PL 

must establish, maintain, and follow 

written policies and procedures as 

described in this section and relevant to 

the scope of their 3PL activities. The 

written policies and procedures must 

clearly delineate the responsibilities of 

the 3PL and any contractors used to 

fulfill any of the 3PL’s duties. The 

written policies and procedures must 

also describe a system by which the 3PL 

will monitor all processes and, if 

deviations occur, document and 

investigate to determine the root cause 

of the deviation in a timely manner. 

Such written policies and procedures 

must be made available to the licensing 

authority upon request, and the 

licensing authority may copy records to 

ensure the 3PL is following written 

policies and procedures. 

(1) Written policies and procedures 

must include, but are not limited to, the 

following: 

(i) Documentation pertaining to 

receipt, security, storage, handling, 

inventory, shipment, and distribution of 

products, including written policies and 

procedures for identifying, recording, 

and reporting confirmed losses, thefts, 

diversions, and products unfit for 

distribution; and 

(ii) Documentation pertaining to all 

policies, procedures, instructions, 

contracts, data, inspection reports, and 

any other documentation related to 

compliance with this part. 

(b) Personnel. The 3PL must establish, 

maintain, and follow written policies 

and procedures that ensure the 

qualifications of personnel are met, 

maintained, and documented as 

required in § 205.11. These written 

policies and procedures must be 

available for review by the State or 

Federal licensing authority, as provided 

in § 205.13. 

(c) Written policies and procedures. 

The 3PL must maintain written policies 

and procedures to address receipt, 

security, storage, inventory, shipment, 

and distribution of the product. 

(1) Receipt. The 3PL must establish, 

maintain, and follow written policies 

and procedures providing for the 

inspection of all shipping containers in 

accordance with the following 

standards: 

(i) Incoming shipments. Upon receipt, 

each shipping container must be 

visually examined for identity and for 

conditions that would suggest the 

product may be unfit for distribution. 

(ii) Outgoing shipments. Each 

outgoing shipment must be properly 

inspected for identity of the product and 

to ensure that there is no shipment of 

product that is unfit for distribution. 

(2) Security. The 3PL must establish, 

maintain, and follow written policies 

and procedures that provide for the 

secured storage of products and 

preserve the integrity of the 3PL’s data 

and records. 


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(3) Storage. The 3PL must establish, 

maintain, and follow written policies 

and procedures that ensure products are 

stored at appropriate temperatures and 

under appropriate conditions, in 

accordance with the requirements in the 

products’ labeling, to preserve their 

identity, strength, quality, and purity. 

(4) Inventory. The 3PL must establish, 

maintain, and follow written policies 

and procedures related to inventory 

controls that: 

(i) Ensure the facility’s stock is 

inventoried regularly to protect against 

diversion and against distribution of 

product that may be unfit for 

distribution; 

(ii) Contain procedures to identify, 

investigate, document, and correct stock 

errors, inaccuracies, and irregularities, 

including product theft, loss, or 

diversion; 

(iii) Identify, record, and report 

confirmed product losses or theft 

immediately to the owner of the 

products and relevant authorities; and 

(iv) Ensure that the 3PL can trace the 

receipt and outbound distribution of a 

product, as well as maintain supply and 

inventory records. 

(5) Shipment. The 3PL must establish, 

maintain, and follow written policies 

and procedures providing for the 

transportation of products in accordance 

with the following standards: 

(i) Products must be transported in a 

manner that will: 

(A) Protect against breakage, 

contamination, adulteration, and theft; 

(B) Prevent exposure to conditions 

that may compromise their quality and 

integrity; and 

(C) Ensure that deviations from 

storage requirements during transport 

are promptly identified, investigated, 

documented, and reported to the trading 

partner from whom the product was 

received and to the manufacturer to 

determine if further commercial 

distribution is appropriate. 

(ii) A 3PL that outsources 

transportation of products to a 

transportation provider, such as a 

common carrier, remains responsible for 

compliance with this part while the 

products are in transit to the intended 

trading partner. Arrangements for 

transportation by a transportation 

provider must be documented and 

carried out in accordance with the 

requirements in this section. 

(6) Distribution. The 3PL must 

establish, maintain, and follow written 

policies and procedures related to the 

distribution of products that: 

(i) Ensure products are distributed at 

appropriate temperatures and under 

appropriate conditions in accordance 

with the requirements in the products’ 

labeling to preserve their identity, 

strength, quality, and purity; and 

(ii) Protect against diversion and 

against distribution of products that 

may be unfit for distribution. 

(d) Recalled products. The 3PL must 

establish, maintain, and follow written 

policies and procedures to support 

manufacturer recalls. 

(e) Preparing for foreseeable crises. 

The 3PL must establish, maintain, and 

follow written policies and procedures 

to prepare for, protect against, and 

address any reasonably foreseeable 

crises that could affect security or 

operations (such as strike, fire, or flood). 

(f) Products that are unfit for 

distribution. The 3PL must establish, 

maintain, and follow written policies 

and procedures for handling products 

that are adulterated, misbranded, or 

otherwise unfit for distribution, as well 

as returned products, that: 

(1) Require such products to be 

physically segregated from other 

products and dispositioned as directed 

by the applicable manufacturer, 

wholesale distributor, dispenser, or an 

authorized government agency and in 

accordance with all applicable State and 

Federal laws; 

(2) Identify a contact person 

responsible for communicating with the 

manufacturer, wholesale distributor, 

dispenser, or an authorized government 

agency regarding nonsaleable and 

returned products; 

(3) Include procedures to prevent 

products unfit for distribution from 

entering the supply chain through the 

3PL’s disposition of nonsaleable 

products; and 

(4) Require the 3PL to document the 

disposition of all nonsaleable and 

returned products, and maintain such 

records for inventory accountability. 

(g) Suspect product. The 3PL must 

establish, maintain, and follow written 

policies and procedures to quarantine or 

destroy a suspect product if directed to 

do so by the product’s manufacturer, 

wholesale distributor, dispenser, or an 

authorized government agency. 

(h) Illegitimate product. The 3PL must 

establish, maintain, and follow written 

policies and procedures to store 

illegitimate product in a clearly defined, 

designated area from which the product 

may be dispositioned as directed by the 

respective manufacturer, wholesale 

distributor, dispenser, or an authorized 

government agency. 

§ 205.13 Recordkeeping and document 

maintenance. 

(a) Maintenance, availability, and 

accuracy of records and written policies 

and procedures. All required records 

and written policies and procedures 

outlined in § 205.12 must: 

(1) Be readily retrievable and made 

available to licensing authorities upon 

request; 

(2) Be securely stored from 

unauthorized access or modifications; 

(3) Contain only alterations signed 

and dated by the individual who made 

the alteration. Such alteration must 

preserve the original information and 

document the reason for the alteration; 

and 

(4) Accurately reflect the name of the 

3PL as it appears on the 3PL facility’s 

license, which must match the 

information that is reported to the Food 

and Drug Administration pursuant to 

the Food and Drug Administration 

reporting requirements at § 205.15. 

(b) Record and document retention. 

(1) Except for the records listed in 

paragraph (b)(2) of this section, all 

records and written policies and 

procedures required to be maintained by 

this part must be retained for a period 

of 3 years. 

(2) Records of suspect and illegitimate 

products and destroyed, returned, and 

recalled products must be retained for a 

period of 6 years. 

§ 205.14 3PLs must provide upon request 

a list of trading partners. 

A list of all manufacturers, wholesale 

distributors, repackagers, and 

dispensers for which the 3PL conducts 

3PL activities must be readily 

retrievable and made available to 

regulatory authorities upon request. 

§ 205.15 Requirements for initial and 

annual reporting to the Food and Drug 

Administration. 

(a) Electronic reporting requirement. 

The 3PL must report electronically to 

the Food and Drug Administration using 

a secure mechanism in a format the 

Food and Drug Administration can 

review, process, and archive. 

Information reported will be included in 

the Food and Drug Administration’s 

public database for 3PLs to the extent 

allowable by law. 

(b) Reporting periods—(1) Initial 

reporting. Any entity that owns or 

operates a facility that conducts 3PL 

activities must report to the Food and 

Drug Administration within 30 calendar 

days of obtaining an initial State or 

Federal 3PL license. 

(2) Annual reporting. Any entity that 

owns or operates a facility that is 

licensed to engage in 3PL activities must 

report to the Food and Drug 

Administration each calendar year 

between January 1 and March 31. 

(c) Required information. Information 

reported for each 3PL facility separately 


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licensed by the licensing authority must 

include: 

(1) A complete list of States by which 

the 3PL facility is licensed, including 

the corresponding identification number 

and the expiration date of each such 

license; 

(2) Name of company as it appears on 

the license and full business address; 

and 

(3) All trade names or business names 

under which the 3PL conducts business. 

(d) Timing for significant disciplinary 

action reporting—(1) Initial reporting. 

The 3PL must report to the Food and 

Drug Administration any significant 

disciplinary actions that occurred in the 

previous 12 months. 

(2) Subsequent reporting. The 3PL 

must, within 30 calendar days of a final 

action taken by a State or Federal 

licensing authority, report significant 

disciplinary actions to the Food and 

Drug Administration. 

(e) Reporting voluntary withdrawal of 

a State license. The 3PL must report to 

the Food and Drug Administration that 

it has withdrawn its license in a State 

within 30 calendar days after such 

withdrawal, including the reasons for 

the voluntary withdrawal of licensure. 

§ 205.16 Inspections. 

(a) A physical inspection of a facility 

owned, rented, or leased by a 3PL for 

conducting 3PL activities must be 

conducted prior to issuance of the 

initial license by the licensing authority. 

(1) Where the State is the licensing 

authority, the State may conduct the 

inspection or may accept an inspection 

by a third-party accreditation or 

inspection service approved by the State 

licensing authority. If the facility is out 

of state, the State may conduct the 

inspection or may accept an inspection 

by the State in which the facility is 

located. 

(2) Where the Food and Drug 

Administration is the licensing 

authority, the Food and Drug 

Administration may conduct the 

inspection or may accept an inspection 

by an organization approved by the 

Food and Drug Administration under 

§ 205.18. 

(b) Routine inspections must be 

conducted thereafter once every 3 years 

by the licensing authority, a third-party 

approved organization or inspection 

service approved by the Food and Drug 

Administration under § 205.18, or the 

State licensing the 3PL. 

(c) Records described in § 205.12(a)(1) 

that are kept at the inspection site or 

that can be immediately retrieved by 

computer or other electronic means 

must be readily available for inspection 

during the retention period. Records 

kept at a central location apart from the 

inspection site and not electronically 

retrievable must be made available for 

inspection within 2 business days of a 

request by a State or Federal official, or 

sooner if necessitated by the duration of 

the inspection. 

(d) The 3PLs must permit the Federal 

or State licensing authority and thirdparty approved organizations or 

inspection services approved by the 

Food and Drug Administration or the 

State to enter and inspect their facilities 

and to audit their records and written 

operating procedures. 

Subpart B—Approved Organizations 

for 3PLS 

§ 205.17 Use of approved third-party 

organizations. 

(a) A third-party organization that has 

been approved by the Food and Drug 

Administration pursuant to § 205.18 (or 

‘‘approved organization’’ (AO)) may 

conduct licensure review of a 3PL’s 

qualifications for licensure and may 

conduct inspections of 3PLs at the 

periodic intervals specified in § 205.16, 

as directed by the Food and Drug 

Administration. 

(b) If an organization has been 

approved by the Food and Drug 

Administration to conduct licensure 

review, the AO will: 

(1) Conduct the licensure review, 

which consists of: 

(i) Reviewing all documents 

submitted in support of the application 

for 3PL licensure; and 

(ii) Inspecting the facility, as directed 

by the licensing authority; 

(2) Complete the licensure review 

within a timeframe not to exceed 90 

calendar days after receiving notice to 

conduct a licensure review from the 

Food and Drug Administration; 

(3) Based on the licensure review, 

write a detailed document including 

any findings and observations in 

support of the AO’s recommendation to 

the Food and Drug Administration to 

grant or deny licensure; and 

(4) Send the original document to the 

Food and Drug Administration, with a 

copy to the 3PL, within 7 calendar days 

of completing the licensure review. 

(c) When conducting routine 

inspections at periodic intervals, the AO 

will: 

(1) Complete the inspection within a 

timeframe not to exceed 90 calendar 

days after receiving notice to conduct an 

inspection from the Food and Drug 

Administration; 

(2) Based on the inspection, write a 

detailed document including any 

findings and observations in support of 

the AO’s recommendation to the Food 

and Drug Administration regarding a 

3PL’s licensure; and 

(3) Send the original document to the 

Food and Drug Administration, with a 

copy to the 3PL, within 7 calendar days 

of completing the inspection. 

(d) To maintain approval, an 

organization approved by the Food and 

Drug Administration must: 

(1) Maintain records that support the 

AO’s initial and continuing 

qualifications for approval for a 

minimum of 5 years; 

(2) Maintain the following records 

related to licensure reviews for a 

minimum of 5 years: 

(i) Supporting documentation 

reviewed as part of a licensure review; 

(ii) Licensure review and inspection 

reports; 

(iii) Correspondence with the Food 

and Drug Administration and the 3PL 

associated with a licensure review; and 

(iv) Information on the identity and 

qualifications of all AO personnel who 

contributed to the licensure review, 

including a certification that such 

personnel have complied with all 

applicable requirements set forth in 

subpart A of this part and are free of any 

conflicts of interest, as set forth at 5 CFR 

part 2635 and 18 U.S.C. 208. 

(e) Records maintained by the AO 

must: 

(1) Be readily retrievable and made 

available to Federal licensing authorities 

upon request; 

(2) Be maintained and protected in 

accordance with all applicable laws, 

including those regarding protection of 

personal identifying information and 

confidential commercial information; 

(3) Be secure from unauthorized 

access or modifications; and 

(4) Contain only alterations signed 

and dated by the individual who made 

the alteration. Such alteration must 

preserve the original information and 

document the reason for the alteration. 

(f) An AO must report to the Food and 

Drug Administration within 24 hours of 

discovering any evidence or 

observations of potential violations 

found at a 3PL facility during an 

inspection of the facility that could pose 

an imminent threat to the public health. 

Reports must be made in the manner 

prescribed by the Food and Drug 

Administration. 

§ 205.18 General qualifications of 

approved organizations. 

(a) To become and remain an AO, the 

organization and anyone employed by 

the organization, including contractors 

used by the organization: 

(1) Must not be a current Federal or 

State government employee; 

(2) Must not engage in prescription 

drug-related activities, excluding 


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participation in the Agency’s AO 

program and related activities, but 

including and not limited to 

manufacturing, wholesale distribution, 

repackaging, relabeling, dispensing, or 

3PL activities; 

(3) Must disclose to the Food and 

Drug Administration any participation 

or financial interest in entities that 

participate in the design, manufacture, 

promotion, or sale of articles or 

activities that are predominantly FDAregulated or are expected to result in 

FDA-regulated articles; 

(4) Must not be owned or controlled 

by, or have any organizational, material, 

or financial affiliation with, any of the 

entities engaged in manufacturing, 

wholesale distribution, repackaging, 

relabeling, dispensing, 3PL activities, or 

the design, manufacture, promotion, or 

sale of prescription drugs as defined in 

section 581(12) of the Federal Food, 

Drug, and Cosmetic Act; 

(5) Must enter and abide by a written 

agreement with the applicant before 

data and information otherwise exempt 

from public disclosure may be disclosed 

to the AO or a contractor; 

(6) Must operate in accordance with 

professional and ethical business 

practices and applicable legal 

requirements, which include, but are 

not limited to: 

(i) Protecting against conflicts of 

interest as set forth in 5 CFR part 2635 

and 18 U.S.C. 208; 

(ii) Ensuring that the personnel 

employed or contracted by the AO who 

are working on licensure reviews have 

sufficient education, training, 

knowledge, and experience to conduct 

licensure reviews of 3PLs; 

(iii) Treating received information, 

records, and reports that qualify as 

confidential commercial information as 

described at 5 U.S.C. 552(b)(4) 

according to applicable requirements for 

such information; 

(iv) Maintaining appropriate security 

and protection, physical and electronic, 

of any information received in relation 

to licensure reviews to preserve 

confidentiality and ensure that the 

release of any information is limited to 

authorized disclosures to either the 

Food and Drug Administration or the 

3PL facility; 

(v) Reporting information to the Food 

and Drug Administration and entities 

for which licensure reviews were 

conducted that accurately reflects data 

reviewed, inspectional observations 

made, and other matters that relate to 

compliance with the Federal Food, 

Drug, and Cosmetic Act; and 

(vi) Promptly responding to and 

attempting to resolve any complaints 

regarding activities for which it is 

approved by the Food and Drug 

Administration; and 

(7) Must establish and maintain 

policies, procedures, and 

documentation to demonstrate that, at 

the time of application and throughout 

their tenure as an AO, the applicant has 

satisfied and can continue to satisfy the 

requirements to qualify as an AO 

capable of assessing compliance with all 

3PL requirements. Such policies, 

procedures, and documentation must 

include, but are not limited to: 

(i) AO program administration; 

(ii) Disciplinary actions and corrective 

measures; 

(iii) Recordkeeping and 

confidentiality; 

(iv) Use of contractors; and 

(v) Personnel qualifications and 

ongoing training. 

(b) If an AO elects to use contractors 

for licensure reviews or licensure 

review-related activities, the AO 

remains responsible for the work of the 

contractors at all times. 

(1) AOs that use contractors to 

conduct licensure reviews must abide 

by the confidentiality agreements 

between the Food and Drug 

Administration and the AO and have 

policies and procedures in place to 

ensure the contractor’s continuing 

compliance with this part, as well as 

competence and qualifications to 

conduct licensure reviews. Such 

policies and procedures must ensure 

that contractors: 

(i) Meet the qualifications set forth in 

paragraph (a) of this section; 

(ii) Do not subcontract their licensure 

review duties, and that contractors are 

removed if such requirement is violated; 

(iii) Abide by the policies and 

procedures of the AO, as set forth in 

§ 205.19(b); and 

(iv) Complete and pass the same 

training required by the AO, as set forth 

in § 205.19(c). 

(2) If an AO elects to use contractors 

to conduct licensure reviews, the AO 

must receive and keep a record of 

written consent from the 3PL to share 

confidential commercial information 

with contractors by which a licensure 

review is being conducted. 

(3) AOs that elect to use contractors 

must submit to the Food and Drug 

Administration a list of contractors used 

by the organization, accompanied by a 

statement from the organization 

certifying that such contractors meet the 

requirements of this subpart. 

§ 205.19 Process and procedures for 

approval by the Food and Drug 

Administration. 

(a) Application. An application to 

become an AO must be completed and 

submitted electronically to the Food and 

Drug Administration in a format the 

Food and Drug Administration can 

review, process, and archive. 

(b) Required application information. 

Policies, procedures, and 

documentation as required by 

§ 205.18(a)(7) must accompany the 

application. 

(c) Training. Organizations must 

provide training as prescribed by the 

Food and Drug Administration, and any 

individual who conducts licensure 

reviews or supervises individuals who 

conduct licensure reviews is required to 

undergo and pass the prescribed 

training. 

(1) If an individual does not pass 

training, that person must wait 30 days 

before retaking the training and may be 

required to show proof of additional 

education or experiential learning to 

demonstrate competence before retaking 

the training evaluation. 

(2) To maintain approval, individuals 

employed by the AO and conducting 

licensure reviews or supervising those 

who conduct licensure reviews must 

undergo and pass annual training as 

prescribed by the Food and Drug 

Administration. Failure to complete and 

pass annual training may result in 

suspension of approval of the AO. 

(3) The Food and Drug 

Administration may require additional 

training. If such additional training is 

required, AOs will be given a set time 

period during which training must be 

completed and passed to maintain 

approval. 

(d) Auditing. Prior to conducting 

licensure reviews, an AO must undergo 

an onsite audit by the Food and Drug 

Administration. The Food and Drug 

Administration may also conduct 

random, periodic audits, as well as forcause audits, of an AO, as set forth in 

paragraph (o) of this section. 

(e) Duration of approval and renewal 

process. (1) The Food and Drug 

Administration approval to conduct 

licensure reviews is valid for a period of 

5 years. 

(2) AOs may submit a renewal 

application to the Food and Drug 

Administration 6 months prior to the 

expiration date, but no later than 3 

months prior to the expiration date, to 

renew the approval. 

(i) If a renewal application is 

submitted less than 3 months before the 

date of expiration, the AO’s approval 

will expire if approval is not renewed 

prior to the date of expiration. 

(ii) Upon expiration of the AO’s 

approval, the AO must cease conducting 

any licensure review or inspectionrelated activities. 


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(f) Denial of approval. If an 

organization does not meet all of the 

Food and Drug Administration’s 

standards detailed in §§ 205.17 and 

205.18 for becoming an AO, the Food 

and Drug Administration will deny 

approval of the application in writing. 

Requests for review and reconsideration 

of a denial of approval must be 

submitted to the Food and Drug 

Administration within 30 calendar days 

of the date of the Food and Drug 

Administration’s decision to deny the 

application. If, upon reconsideration, 

the Food and Drug Administration 

denies the applicant’s request for 

approval, the Food and Drug 

Administration will provide the 

applicant written notice of the denial 

and an opportunity to appeal pursuant 

to § 10.75 of this chapter. 

(g) Suspension of approval after 

notice and opportunity to request a 

hearing. (1) The Food and Drug 

Administration may suspend approval 

of an organization after an opportunity 

to request a hearing when there is a 

reasonable probability that the 

organization’s noncompliance will 

negatively impact public health. 

(2) If an AO fails to maintain the Food 

and Drug Administration’s standards 

pursuant to §§ 205.17 and 205.18, the 

Food and Drug Administration will give 

written notice of the intent to suspend 

the organization’s approval, including 

the grounds for the suspension, and the 

AO will have 30 days to provide 

additional information to the Food and 

Drug Administration for 

reconsideration. 

(3) If, upon reconsideration, the Food 

and Drug Administration still believes 

the AO’s approval should be suspended, 

the Food and Drug Administration will 

issue the AO a written formal notice of 

intent to suspend, along with notice of 

the opportunity to request a hearing 

pursuant to part 16 of this chapter. 

(4) An AO that wishes to request a 

hearing has 10 calendar days after the 

date of the formal notice of intent to 

suspend to submit a written notice of 

participation and request for a hearing. 

An AO that fails to submit a written 

notice of participation and request for a 

hearing within 10 calendar days from 

the date of the notice waives the 

opportunity for a hearing. 

(5) A suspended AO must notify any 

3PLs under a pending licensure review 

by the AO of the AO’s suspension 

within 7 calendar days. 

(h) Immediate suspension of 

approval. (1) When there is a reasonable 

probability that the organization’s 

noncompliance will cause imminent 

and serious adverse health 

consequences or death to humans, the 

Food and Drug Administration will 

suspend an AO’s approval effective 

immediately. 

(2) In such a situation, the Food and 

Drug Administration will provide the 

AO a written notice of immediate 

suspension, along with notice and 

opportunity to request a hearing 

pursuant to part 16 of this chapter 

within 14 calendar days of the AO’s 

request for such hearing. 

(3) An AO that wishes to request a 

hearing has 10 calendar days after the 

date of the formal notice of suspension 

to submit a written notice of 

participation and request for a hearing. 

An AO that fails to submit a written 

notice of participation and request for a 

hearing within 10 calendar days waives 

the opportunity for a hearing. 

(i) Reinstatement of approval. (1) An 

organization’s approval may be 

reinstated if the Food and Drug 

Administration determines that the 

suspended organization has rectified the 

issues leading to the suspension and can 

meet the standards set forth in this 

subpart. The organization must rectify 

the issues and come into compliance 

with the standards set forth in this 

subpart within 1 year from the date of 

suspension. If the issues have not been 

rectified within 1 year, or if the 

organization otherwise has failed to 

come into compliance with the 

standards set forth in this subpart 

within such time period, the Food and 

Drug Administration may revoke the 

AO’s approval subject to the provisions 

of this part. 

(2) An organization whose approval 

has been reinstated on a conditional 

basis will be subject to a 3-year 

probationary period, and if any material 

deficiencies arise during that period, the 

organization’s approval will be revoked. 

(j) Revocation of approval. (1) The 

Food and Drug Administration may 

revoke approval of an organization 

whose approval has been suspended 

pursuant to paragraphs (g) and (h) of 

this section: 

(i) If an organization fails to 

demonstrate its intent to rectify the 

issues leading to the suspension within 

6 months from the date of suspension; 

or 

(ii) If the Food and Drug 

Administration determines that the 

organization failed to rectify the issues 

leading to the suspension to the 

Agency’s satisfaction within 1 year of 

the date of suspension. 

(2) The Food and Drug 

Administration will give written notice 

of the intent to revoke the organization’s 

approval, including the grounds for the 

revocation, and an opportunity to 

request a hearing pursuant to part 16 of 

this chapter. 

(3) The AO must submit a written 

notice of participation and request a 

hearing within 10 calendar days after 

the date of the notice of revocation. An 

AO that fails to submit a written notice 

of participation and request for hearing 

within 10 calendar days waives the 

opportunity for a hearing. 

(4) An organization whose approval 

has been revoked that wishes to reapply 

to be an AO must submit a new 

application to the Food and Drug 

Administration. 

(k) Requests for reconsideration of 

Agency decision. (1) The Food and Drug 

Administration will follow the process 

outlined at § 10.75 of this chapter to 

review matters relating to denial of 

approval, including review of the 

organization’s application. 

(2) The Food and Drug 

Administration will follow the process 

outlined at part 16 of this chapter to 

review matters relating to a suspension 

or revocation action, including review 

of the organization’s application and 

administrative file. 

(3) The Food and Drug 

Administration’s decision after a request 

for reconsideration of denial, 

suspension, or revocation constitutes a 

final Agency action under 5 U.S.C. 702. 

(l) Voluntary withdrawal of approval. 

(1) An organization wishing to 

voluntarily withdraw its approval, 

including but not limited to when an 

AO goes out of business, must notify the 

Food and Drug Administration in 

writing at least 6 months prior to the 

date the organization intends for the 

withdrawal to become effective. 

(i) If an AO determines it will be 

withdrawing its approval with the Food 

and Drug Administration in less than 6 

months, it must notify the Food and 

Drug Administration immediately of its 

intent to withdraw, and such 

notification must inform the Food and 

Drug Administration of the date the 

organization will cease business 

operations. 

(ii) [Reserved] 

(2) No later than 7 calendar days after 

notifying FDA, the organization must 

notify any facilities with pending 

reviews that it intends to withdraw its 

approval with the Food and Drug 

Administration and must provide the 

date on which the withdrawal is 

effective. 

(m) AO-required notifications to 3PLs. 

The AO must, within 7 calendar days of 

the date of suspension, revocation, or 

voluntary withdrawal of approval, 

notify those 3PL facilities that have 

pending licensure reviews of the AO’s 

suspension or revocation. This 


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notification must inform the 3PL facility 

that it must apply for licensure review 

with another AO, or the Food and Drug 

Administration if no other AO is 

available to conduct the licensure 

review. 

(n) Change of operation or ownership. 

(1) The AO must report to the Food and 

Drug Administration within 30 calendar 

days any changes to the information 

submitted in the application for 

approval. 

(2) Approval is not transferable. 

(i) Changes in ownership of an AO 

require the organization to submit a new 

application to the Food and Drug 

Administration. 

(ii) Such application must be 

submitted to the Food and Drug 

Administration no later than 30 

calendar days prior to the date of the 

change of ownership. 

(iii) No later than 30 calendar days 

before the date of the change of 

ownership, the AO must notify any 3PL 

facilities with pending applications of 

the pending change in ownership. 

(iv) On the date the change of 

ownership takes place, the original 

approval is void. 

(o) Monitoring by the Food and Drug 

Administration. (1) AOs are subject to 

audits by the Food and Drug 

Administration to ensure compliance 

with the Food and Drug 

Administration’s requirements for 

approval. 

(2) If an AO refuses to cooperate with 

the Food and Drug Administration’s 

audit, the organization’s approval may 

be suspended pursuant to paragraph 

(g)(1) of this section. 

Subpart C—Wholesale Distributors 

Licensure Standards 

§ 205.20 Requirement that prescription 

drug wholesale distributors be licensed. 

(a) No wholesale distributor may 

engage in wholesale distribution of a 

prescription drug unless the person is 

licensed: 

(1) By the State from which the drug 

is distributed; or 

(2) If the State from which the drug is 

distributed has not established a 

licensure requirement in accordance 

with the standards set forth in this part, 

by the Food and Drug Administration; 

and 

(3) If the drug is distributed interstate, 

by the State into which the drug is 

distributed if such licensure is required 

by that State. 

(b) Any license issued or renewed 

pursuant to this section will expire 2 

years after the date on which the license 

was issued. A wholesale distributor may 

submit a renewal application up to 90 

calendar days before the date of 

expiration. A license will be considered 

valid during any period of the 

administrative delay on the part of the 

licensing authority, if the wholesale 

distributor timely submitted the renewal 

application. 

§ 205.21 Surety bond requirement. 

(a) Surety bond compliance. No 

wholesale distributor will be licensed 

under this section unless the wholesale 

distributor has furnished a bond, or 

other equivalent means of security 

acceptable to the State if the State is the 

licensing authority, that complies with 

the requirements of this section. 

(b) Surety bond requirements. (1) For 

the issuance or renewal of a wholesale 

distributor license, an applicant that is 

not a government-owned and -operated 

wholesale distributor must submit to the 

licensing authority a surety bond from 

an authorized surety company of 

$100,000 or other equivalent means of 

security acceptable to the State. The 

term of the initial surety bond must be 

effective on the date that the application 

is submitted to the licensing authority. 

(2) The licensing authority may accept 

a surety bond from an authorized surety 

company in the amount of $25,000 if the 

annual gross receipts of the previous tax 

year for the wholesale distributor are 

$10,000,000 or less. 

(3) If a wholesale distributor can 

provide evidence that it possesses the 

required bond in the State where the 

wholesale distributor is located, the 

requirement for a bond in another State 

for a non-resident wholesale distributor 

license will be waived. 

(c) Terms of the surety bond. (1) The 

terms of the bond submitted by a 

wholesale distributor must on its face 

reflect the requirements of this section, 

including meeting the requirements of 

liability coverage ($100,000 or $25,000, 

as applicable), as well as the 

responsibilities of the surety company 

and wholesale distributor as set forth in 

this section. 

(2) The bond must be continuous and 

remain in full force and effect, running 

concurrently with the license period 

and for every succeeding licensing 

period for which the wholesale 

distributor may be licensed. The bond 

must remain in full force and effect 

until 1 year after the license expires, 

after which liability for license 

administrative fees ceases except as to 

any liability or indebtedness incurred or 

accrued before the termination date. 

(3) The bond must guarantee that after 

receiving written notice from the 

licensing authority containing sufficient 

evidence to establish the surety’s 

liability under the bond, the surety 

company will pay within 30 calendar 

days any administrative fines or 

penalties imposed by the licensing 

authority on the wholesale distributor 

holding the surety bond in that State. 

This includes any fees and costs 

incurred by the licensing authority 

regarding that license authorized by law 

and which the wholesale distributor 

fails to pay within 30 calendar days 

after the fine or costs become final. Any 

such claim may be made directly to the 

surety company and need not be 

preceded by the filing of any action in 

a proper court. 

(4) The licensing authority may make 

a claim against the surety bond until 1 

year after the date of expiration on the 

wholesale distributor’s license or until 

60 calendar days after any 

administrative or legal proceeding, 

which involved the wholesale 

distributor, is concluded, including any 

appeal, whichever occurs later. 

(d) Cancellation of a bond and lapse 

of surety bond coverage. (1) A wholesale 

distributor may cancel its surety bond 

and must provide written notice 30 

calendar days before the effective date 

of the cancellation to all applicable 

licensing authorities and the surety 

company. 

(2) Cancellation of a surety bond is 

grounds for suspension of the wholesale 

distributor’s license unless the 

wholesale distributor provides a new 

bond before the effective date of the 

bond’s cancellation. If a new surety 

bond is provided before the effective 

date of the bond’s cancellation, the 

liability of the surety company 

continues until the cancellation date. 

Otherwise, the liability of the surety 

company continues for 1 year after the 

date of cancellation, after which liability 

ceases except as to any liability or 

indebtedness incurred or accrued before 

the cancellation date. 

(3) The wholesale distributor must 

immediately notify the licensing 

authority if there is a lapse in the 

wholesale distributor’s surety coverage. 

(4) If the licensing authority discovers 

a lapse in bond coverage that has not 

been previously disclosed by the 

wholesale distributor, the wholesale 

distributor’s license will be suspended 

pursuant to § 205.30. 

(e) Actions under the surety bond. 

The bond must provide that actions 

under the bond may be brought by a 

State or Federal licensing authority. 

(f) Required surety company 

information on the surety bond. The 

bond must provide the surety 

company’s name, street address or post 

office box number, city, State, and zip 

code. 


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(g) Change of surety company. A 

wholesale distributor that obtains a 

replacement surety bond from a 

different surety company to cover the 

remaining term of a previously obtained 

bond must submit the new surety bond 

to the licensing authority 30 calendar 

days prior to the expiration of the 

previous surety bond. There must be no 

gap in the coverage of the surety bond 

periods. 

(h) Parties to the surety bond. The 

surety bond must name the wholesale 

distributor as Principal, the licensing 

authority as obligee, and the surety 

company (and its heirs, executors, 

administrators, successors, and 

assignees, jointly and severally) as 

surety. 

§ 205.22 General application requirements 

for licensure. 

(a) Applicant requirements. An 

individual who submits an application 

on behalf of a wholesale distributor for 

a license issued pursuant to this subpart 

must: 

(1) Be 18 years of age or older; 

(2) Submit an affidavit that their 

ownership or management of or 

employment by the entity would not 

preclude the entity from receiving or 

maintaining a license under § 205.25(a); 

(3) Submit all application information 

required in the form required by the 

licensing authority; and 

(4) Pay any licensing fees that are 

required by the licensing authority 

pursuant to section 503(e)(3) of the 

Federal Food, Drug, and Cosmetic Act. 

(b) Surety bond requirement. The 

wholesale distributor must furnish a 

bond, or other equivalent means of 

security acceptable to the State, with the 

application for licensure in accordance 

with the surety bond requirements in 

§ 205.21. 

(c) General requirements for licensure 

application. The State or Federal 

licensing authority will require the 

following information from each 

wholesale distributor as part of the 

initial application for the license 

described in this section and as part of 

any renewal of such license: 

(1) The name and title of the 

individual who submits the application 

for licensure on behalf of the wholesale 

distributor; 

(2) The name of the wholesale 

distributor as it should appear on the 

license and the full business address 

and telephone number of the wholesale 

distributor; 

(3) All trade or business names used 

by the wholesale distributor, including 

prior trade or business names, within 

the past 7 years; 

(4) Name, email address, and 

telephone number of the designated 

representative or facility manager for the 

wholesale distributor; 

(5) The type of ownership or 

operation of the business entity, such as 

a partnership, corporation, limited 

liability company, or sole 

proprietorship; 

(6) The name of any owners or 

operators of the wholesale distributor, 

including: 

(i) If a sole proprietorship, the full 

name of the sole proprietor and the 

name of the business entity; 

(ii) If a partnership, the name of each 

partner and the name of the partnership; 

(iii) If a corporation, the corporate 

names, the names of any subsidiaries 

and affiliates, the name and title of each 

corporate officer and director, and the 

State of incorporation; and 

(iv) If a limited liability company, the 

name of the limited liability company, 

including any subsidiaries and affiliates, 

the name of each member, and the State 

in which the limited liability company 

was organized; 

(7) Whether the wholesale distributor 

has ever been convicted of a felony 

relating to wholesale drug distribution, 

a felony conviction of section 301(i) or 

(k) of the Federal Food, Drug, and 

Cosmetic Act, or a felony conviction of 

18 U.S.C. 1365, relating to product 

tampering, together with details 

concerning any such events; and 

(8) Whether the wholesale distributor 

has received any citations for violating 

requirements for licensure within the 

past 7 years or has received any 

significant disciplinary actions within 

the past 7 years that presented a threat 

of serious adverse health consequences 

or death to humans, together with 

details concerning any such events. 

(d) General requirements for licensure 

renewal. To renew a license, the 

wholesale distributor must submit the 

following to the renewing licensing 

authority: 

(1) Certification that the wholesale 

distributor has continued to meet all the 

standards and complied with the 

requirements in this subpart since the 

previous license was issued; and 

(2) Information about any changes to 

information previously submitted under 

this section, or § 205.21, or § 205.23(c) 

for which a notification was not already 

submitted to the licensing authority 

under § 205.24. 

(e) License availability requirement. 

The wholesale distributor must 

maintain its license in a readily 

retrievable manner and must permit 

inspection of the license by any official, 

agent, or employee of the licensing 

authority or of any Federal, State, or 

local agency engaged in enforcement of 

laws relating to the distribution of 

prescription drugs. 

§ 205.23 Federal licensure process. 

(a) Procedures for filing an FDA 

application for a wholesale distributor 

license. (1) All wholesale distributors 

must electronically submit an 

application to the Food and Drug 

Administration for a license to engage in 

wholesale distribution if the State does 

not have a licensing program for 

wholesale distributors consistent with 

the standards set forth in this section. 

The application must include the 

information in §§ 205.21 and 205.22, 

along with a surety bond and supporting 

documentation that demonstrates the 

applicant’s ability to comply with 

requirements intended to ensure the 

continued safety, identity, strength, 

quality, and purity of the prescription 

drugs. 

(2) If one or more organizations have 

been approved by the Food and Drug 

Administration under § 205.32 to 

conduct inspections of wholesale 

distributors, the wholesale distributor 

will indicate in its application to the 

Food and Drug Administration which 

AO it prefers to conduct its inspection. 

(3) If there is no organization 

approved by the Food and Drug 

Administration to conduct inspections 

for wholesale distributors, the Food and 

Drug Administration will conduct the 

inspection, as described in § 205.28(b). 

(4) The applicant, or the applicant’s 

agent or other authorized official, must 

sign the application. 

(5) An application for a wholesale 

distributor license will not be 

considered as filed until the Food and 

Drug Administration has received all 

required information and fees. 

(b) Determination that licensing 

requirements have been met. The Food 

and Drug Administration, not an AO, 

will determine whether the wholesale 

distributor meets all the applicable 

requirements set forth in this part. 

(c) Notification of easily correctable 

deficiencies. The Food and Drug 

Administration will make reasonable 

efforts to promptly communicate to 

applicants easily correctable 

deficiencies found in an application 

when those deficiencies are discovered. 

The Food and Drug Administration will 

also promptly inform applicants if more 

data or information is needed to 

facilitate the Agency’s review. 

(d) Issuance of wholesale distributor 

license by FDA. Approval of a wholesale 

distributor license application or 

issuance of a wholesale distributor 

license constitutes a determination by 

the Food and Drug Administration that, 

based upon information received, the 


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wholesale distributor meets the 

applicable requirements to be licensed 

under sections 503(e)(1) and 583 of the 

Federal Food, Drug, and Cosmetic Act. 

The Food and Drug Administration will 

approve an application and send the 

applicant an approval letter and license 

certificate if none of the reasons in 

§ 205.30(a)(1) for refusing to approve the 

application applies. Applicable 

requirements for wholesale distributors 

to engage in wholesale distribution must 

include but not be limited to the good 

storage practices set forth under 

§ 205.26. A license is effective on the 

date of issuance of the license 

certificate. 

(e) Validity of a wholesale distributor 

license. Licenses issued to a wholesale 

distributor will remain valid until the 

date of expiration, unless suspended or 

revoked. 

§ 205.24 Changes to information, 

operation, location, or ownership of a 

wholesale distributor. 

(a) Any change to any information 

required in this subpart, including 

changes to any information required 

pursuant to §§ 205.21, 205.22, and 

205.25, must be submitted electronically 

to the licensing authority within 30 

calendar days after such change is 

effective, except where otherwise 

provided in this subpart. 

(b) Any change in the location of a 

wholesale distributor at which 

wholesale distribution occurs will 

require an inspection of the new facility 

prior to the wholesale distributor 

beginning operations at the new facility. 

(1) On the date the change of location 

takes place, the wholesale distributor 

may not engage in wholesale 

distribution at the original facility. 

(2) [Reserved] 

(c) Any change in the person engaged 

in wholesale distribution will require a 

new license prior to beginning 

operations. 

(1) The application for a new license 

required by § 205.23 must be submitted 

no later than 30 calendar days prior to 

the change in ownership. 

(2) A new inspection of the wholesale 

distributor will be performed within a 

reasonable time. 

(3) A wholesale distributor can 

continue to operate under the original 

license for 30 calendar days after the 

change of ownership occurs or until the 

license application of the new owner is 

approved, whichever is sooner. 

§ 205.25 Prohibited persons and 

qualifications for key personnel. 

(a) A wholesale distributor is 

prohibited from obtaining or 

maintaining licensure if the wholesale 

distributor has been: 

(1) Convicted of any felony for 

violation of section 301(i) or (k) of the 

Federal Food, Drug, and Cosmetic Act; 

(2) Convicted of any felony violation 

of 18 U.S.C. 1365 relating to product 

tampering; or 

(3) Cited on two or more occasions 

within the previous 7 years for violating 

one or more of the requirements of 

section 583 or section 503(e) of the 

Federal Food, Drug, and Cosmetic Act 

or State requirements for licensure in 

such a way that presents a threat of 

serious adverse health consequences or 

death to humans. 

(b) All key personnel must have the 

education, background, training, and 

experience necessary to perform his or 

her assigned functions. 

(c) Licensure may also be denied 

when an applicant wholesale distributor 

or any of their key personnel has been: 

(1) Found to have delayed or 

otherwise impeded an inspection by the 

Federal or State licensing authority or 

an approved third-party inspector, or an 

inspector, after reasonable efforts, was 

unable to gain access to an 

establishment or a location to carry out 

the inspection required under § 205.28, 

as permitted by section 704(a) of the 

Federal Food, Drug, and Cosmetic Act 

(21 U.S.C. 374(a)); 

(2) Found to have omitted material 

information or furnished false or 

fraudulent information in an application 

made about the distribution of 

prescription drugs; or 

(3) Subject to licensure suspension or 

revocation by Federal, State, or local 

government for any license currently or 

previously held by the applicant for the 

manufacture or distribution of any 

drugs, including controlled substances. 

(d) The wholesale distributor must 

maintain a list of officers, directors, 

facility managers, designated 

representatives, and other key personnel 

in charge of wholesale distribution, 

including storage and handling, and 

include a description of their duties and 

a summary of their qualifications. This 

list must be available for review by the 

State or Federal licensing authority. 

(e) The wholesale distributor must 

establish and implement written 

policies and procedures designed to 

ensure that the qualifications of key 

personnel as required in this section are 

met, maintained, and documented. 

These written policies and procedures 

must be available for review by the State 

or Federal licensing authority, as 

provided in § 205.27. These policies and 

procedures must identify the personnel 

at the wholesale distributor’s facility 

who are responsible for the following 

actions: 

(1) Implementing and maintaining all 

facility and personnel requirements; 

(2) Ensuring that the facility complies 

with all licensure and reporting 

requirements; and 

(3) Ensuring that key personnel 

receive initial and regular training to 

ensure competence relevant to their job 

functions. 

(f) In addition to the qualifications for 

key personnel in paragraphs (a) through 

(e) of this section, a facility manager or 

designated representative must have the 

following qualifications to carry out 

those responsibilities: 

(1) Serves as the facility manager or 

designated representative of such 

facility manager for only one facility at 

any one time; 

(2) Is actively involved in and 

responsible for managing the daily 

operations of the wholesale distributor 

facility; and 

(3) Remains responsible for all facility 

manager or designated representative 

duties that are delegated to other 

personnel at the facility. 

(g) Any facility manager or designated 

representative, prior to their association, 

employment, or contracting with the 

wholesale distributor as a facility 

manager or designated representative, 

must submit a full set of fingerprints for 

purposes of conducting local and 

national criminal background checks. 

The results of the background checks 

must demonstrate no history of criminal 

convictions pursuant to paragraph (a) of 

this section. 

§ 205.26 National standards for the 

storage and handling of prescription drugs 

for wholesale distribution. 

Any facility owned, rented, or leased 

by a wholesale distributor for engaging 

in wholesale distribution must meet the 

facility requirements in paragraphs (a) 

and (b) of this section, and the 

wholesale distributor must establish, 

maintain, and follow policies and 

procedures as set forth in paragraph (c) 

of this section. 

(a) A wholesale distributor to which 

a license has been issued in the same 

name and at the same address as 

another authorized trading partner, such 

as a 3PL, must maintain separate 

systems and processes for the 

distribution of drugs that are specific to 

the wholesale distributor. 

(b) The facility the wholesale 

distributor owns, leases, or rents for 

purposes of engaging in wholesale 

distribution must be suitable for the 

storage and handling of prescription 

drugs, as demonstrated by the following: 

(1) General requirements. The facility 

is: 

(i) Not a personal residence; 


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(ii) Of a suitable size, construction, 

and configuration designed to ensure 

proper distribution, including storage 

and handing, of all prescription drugs 

stored at or distributed from the facility; 

(iii) Of a suitable size, construction, 

and configuration to facilitate cleaning, 

maintenance, and proper wholesale 

distribution operations; 

(iv) Maintained in a clean and orderly 

condition, free from infestation of any 

kind; 

(v) Equipped with sufficient lighting, 

ventilation, temperature, sanitation, 

humidity, space, equipment, and secure 

conditions for prescription drug storage; 

and 

(vi) Equipped with clearly defined 

designated areas that separate saleable 

prescription drugs from prescription 

drugs that are unfit for distribution. 

(2) Security of premises. The facility 

must be equipped with adequate 

security to prevent breaches. Adequate 

security includes ensuring that: 

(i) The facility is secure from 

unauthorized entry; 

(ii) Access from outside the premises 

is limited, well controlled, and 

documented; 

(iii) The outside perimeter of the 

premises is well lit; 

(iv) Entry into areas where 

prescription drugs are held is limited to 

key personnel who possess appropriate 

and verifiable experience and training 

necessary to safely and lawfully engage 

in the distribution of prescription drugs, 

as described in § 205.25, and to staff for 

purposes of maintenance and cleaning; 

and 

(v) The facility is equipped with a 

security system that protects against 

theft and diversion of prescription drugs 

and accidental or unsanctioned 

modifications to data, including an 

alarm system to detect and notify 

appropriate personnel of any 

unauthorized entry. 

(3) Equipment. The facility must have 

equipment that ensures prescription 

drugs are properly stored, including 

cold storage, refrigerators, temperature 

and humidity devices, and air handling 

units. All equipment utilized must be 

maintained in good repair and must be 

suitable for the distribution, including 

receipt, storing, and handling, 

warehousing, holding, displaying, or 

transporting of prescription drugs, as 

demonstrated by the following: 

(i) All equipment must be installed, 

maintained, and repaired by qualified 

individuals following written 

procedures established by the wholesale 

distributor. The wholesale distributor 

must be able to demonstrate that all 

equipment has been calibrated, as 

applicable, and validated at regular 

intervals to achieve the intended results 

accurately, consistently, and in a 

manner that can be reproduced by 

qualified individuals following the 

wholesale distributor’s written 

procedures. Such actions must be 

documented; 

(ii) Appropriate manual, 

electromechanical, or electronic 

temperature and humidity recording 

equipment or logs must be used to 

document proper storage of prescription 

drugs; and 

(iii) Monitoring equipment must 

immediately alert appropriate personnel 

of any deviations from the required 

storage conditions. 

(4) Facility assessments. Facility 

assessments, including temperature 

mapping and other assessments 

designed to ensure prescription drugs 

are properly stored in accordance with 

their labeling, must be regularly 

conducted and documented. 

(c) Every wholesale distributor must 

establish, maintain, and follow written 

policies and procedures for each of the 

requirements described in this section 

that are relevant to the scope of the 

wholesale distributor’s activities 

involving prescription drugs at the 

facility. The written policies and 

procedures must describe a system by 

which the wholesale distributor will 

monitor all processes, and, if deviations 

occur, promptly document and 

investigate to determine the root cause 

of the deviation. If a wholesale 

distributor uses a contractor to carry out 

any of its duties, the wholesale 

distributor remains responsible for 

compliance with this subpart and must 

ensure that the contractor abides by the 

applicable written policies and 

procedures. The written policies and 

procedures must clearly describe the 

responsibilities of the wholesale 

distributor and any contractors used to 

fulfill the wholesale distributor’s duties. 

Such arrangements must be documented 

and carried out in accordance with the 

requirements of this section. 

(1) Authorized trading partners. The 

wholesale distributor must ensure that it 

conducts business only with other 

authorized trading partners as defined 

in section 581(2) and (23) of the Federal 

Food, Drug, and Cosmetic Act. 

(2) Facility and equipment 

maintenance management. The 

wholesale distributor must ensure that 

the facility requirements in paragraph 

(b) of this section are met. 

(3) Transportation. The wholesale 

distributor must ensure prescription 

drugs are transported in a manner that: 

(i) Protects against breakage, 

contamination, adulteration, and theft; 

(ii) Prevents exposure to conditions 

that may compromise prescription drug 

identity, strength, quality, or purity; and 

(iii) Ensures that deviations from 

storage requirements during transport 

are identified, investigated, 

documented, corrected, and reported no 

later than 24 hours after discovery to the 

authorized trading partner from which 

the prescription drug was received, and 

to the manufacturer to determine if 

further commercial distribution is 

appropriate. 

(4) Examination of shipping 

containers. The wholesale distributor 

must ensure that all shipping containers 

are examined in accordance with the 

following standards: 

(i) Incoming shipments. Upon receipt, 

each shipping container must be 

visually examined for identity and to 

prevent the acceptance of prescription 

drugs that are unfit for distribution. This 

examination must be adequate to detect 

conditions that would suggest that the 

prescription drug may be unfit for 

distribution, such as alterations made or 

damage to the shipping container. 

(ii) Outgoing shipments. Each 

outgoing shipment must be properly 

inspected for identity of the prescription 

drug to ensure that there is no shipment 

of a prescription drug that has been 

damaged in storage or held under 

improper conditions and to prevent the 

introduction or further shipment of any 

prescription drug that is unfit for 

distribution, including through the 

wholesale distributor’s processing of 

returned or recalled drugs. 

(5) Storage and handling. The 

wholesale distributor must ensure that 

prescription drugs are stored at 

appropriate temperatures and under 

appropriate conditions in accordance 

with the drugs’ labeling, except that if 

no storage requirements are established 

in the drug’s labeling, the drug may be 

held at controlled room temperature to 

preserve the drug’s identity, strength, 

quality, and purity. 

(i) Inventory management. The 

wholesale distributor must: 

(A) Ensure compliance with the 

requirements of section 582(c) of the 

Federal Food, Drug, and Cosmetic Act; 

(B) Ensure that the facility’s stock is 

inspected regularly to protect against 

drug diversion and distribution of 

prescription drugs that are unfit for 

distribution; 

(C) Investigate, document, and correct 

any stock irregularities, including theft, 

loss, or diversion of prescription drugs, 

in accordance with section 582(c) of the 

Federal Food, Drug, and Cosmetic Act, 

as applicable; 

(D) Ensure that any prescription drug 

that appears to be unfit for distribution 


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is removed from saleable stock and 

handled appropriately according to the 

requirements in paragraphs (c)(5)(ii) 

through (iv) of this section; 

(E) Immediately report any confirmed 

losses or theft of prescription drugs to 

the manufacturer of the drug and the 

Food and Drug Administration; and 

(F) Ensure that records related to the 

actions required in paragraphs (c)(5)(i) 

through (iv) of this section are kept 

according to § 205.27. 

(ii) Handling of prescription drugs. 

The wholesale distributor must ensure 

that only prescription drugs fit for 

distribution are further distributed or 

transferred. 

(A) Any prescription drug that 

appears to be unfit for distribution must 

be stored in a secure area clearly 

defined for such use and physically 

segregated from saleable drugs, or 

electronically segregated, if appropriate, 

until the wholesale distributor 

determines by thorough examination 

that such drugs are fit for human use or 

nonsaleable. 

(B) Any prescription drug found to be 

adulterated, misbranded, or otherwise 

unfit for distribution must be stored in 

a secure area clearly defined for such 

use and physically or electronically 

segregated from saleable drugs until 

they are returned to the supplier or 

destroyed in accordance with the 

standards in paragraph (c)(6) of this 

section. 

(C) If a prescription drug is 

determined to be a suspect or 

illegitimate product, those suspect or 

illegitimate products must be handled 

according to the requirements of section 

582(c)(4) of the Federal Food, Drug, and 

Cosmetic Act. 

(iii) Returned prescription drugs. All 

returned prescription drugs must be 

stored in a secure area clearly defined 

for such use and physically segregated 

from saleable prescription drugs, until 

the wholesale distributor determines by 

thorough examination that such drugs 

are saleable or nonsaleable. 

(A) Saleable returns. Prescription 

drugs may be returned to saleable stock 

only if the conditions under which the 

drug has been returned do not cast 

doubt on the drug’s safety, identity, 

strength, quality, or purity. In 

determining whether the conditions 

under which a drug has been returned 

cast doubt on the drug’s safety, identity, 

strength, quality, or purity, the 

wholesale distributor must consider, 

among other things, the conditions 

under which the drug has been held, 

stored, or shipped. 

(B) Nonsaleable returns. If the 

conditions under which the prescription 

drug has been returned cast doubt on 

the drug’s safety, identity, strength, 

quality, or purity, drugs may be 

returned to the manufacturer or 

repackager, to the wholesale distributor 

from which such drug was purchased, 

or to an individual acting on behalf of 

such an entity, including a returns 

processor, or may be destroyed in a 

timely manner and in accordance with 

paragraph (c)(6) of this section and all 

applicable Federal and State laws. 

(iv) Recalled drugs. Recalled 

prescription drugs must be handled as 

instructed by the manufacturer in the 

recall notice, which may require that the 

recalled drugs be stored in a secure area 

clearly defined for such purpose and 

physically segregated from saleable 

drugs until they are returned to the 

manufacturer or repackager, to the 

wholesale distributor from which such 

drug was purchased, or to an individual 

acting on behalf of such an entity, 

including a returns processor, or 

destroyed in accordance with the 

standards in paragraph (c)(6) of this 

section. 

(6) Disposition of drugs. The 

wholesale distributor must establish, 

maintain, and follow written policies 

and procedures that ensure that 

prescription drugs removed from the 

pharmaceutical distribution supply 

chain because they are determined to be 

unfit for distribution are retained for 

further examination, returned to the 

manufacturer or repackager, returned to 

the wholesale distributor from which 

such drug was purchased, or returned to 

an individual acting on behalf of such 

an entity, including a returns processor, 

or destroyed in accordance with all 

applicable Federal and State laws and 

the following standards: 

(i) Quarantine and transfer for further 

examination. The wholesale distributor 

must establish and maintain records for 

prescription drugs retained in 

quarantine and subsequently transferred 

to a manufacturer or regulatory or law 

enforcement agency for further 

additional physical examination or 

laboratory analysis. 

(ii) Return the drugs. The wholesale 

distributor must establish and maintain 

records for the return of prescription 

drugs to the manufacturer, repackager, 

or wholesale distributor from which the 

wholesale distributor acquired the 

drugs, including when returned using a 

returns processor or reverse logistics 

provider to return the drugs. 

(iii) Destroy. When prescription drugs 

are authorized for destruction, the 

wholesale distributor must: 

(A) Destroy all containers, labels, and 

packaging to ensure that such items 

cannot be used in counterfeiting 

activities; 

(B) Ensure that the destruction of 

prescription drugs, containers, labels, 

and packaging are witnessed; and 

(C) Establish and maintain records for 

destroyed drugs and the witnessing 

thereof. 

(7) Preparation for foreseeable crises. 

The wholesale distributor must prepare 

for, protect against, and address any 

reasonably foreseeable crises that could 

affect security or operation of the 

facility such as strike, fire, flood, or 

other natural disaster, or other 

situations of local, State, or national 

emergency. 

§ 205.27 Standards for the establishment 

and maintenance of records of the 

distribution of prescription drugs. 

(a) Required records. Required records 

include, but are not limited to, the 

following: 

(1) Documentation pertaining to 

distribution, including storage and 

handling, security, inventory, transport, 

and shipping of prescription drugs, 

including written policies and 

procedures for identifying, recording, 

and reporting confirmed losses, thefts, 

and diversions, and prescription drugs 

that are unfit for distribution; 

(2) All policies, procedures, 

instructions, contracts, data, inspection 

reports, and any documentation related 

to compliance with this subpart; and 

(3) Invoices, purchase orders, packing 

slips, shipping records, and any other 

records of the distribution of 

prescription drugs. 

(b) Maintenance, availability, and 

accuracy of records. Records must: 

(1) Accurately reflect the name of the 

wholesale distributor as it appears on 

the wholesale distributor license and 

must match the information that is 

reported to the Food and Drug 

Administration pursuant to the Food 

and Drug Administration reporting 

requirements at § 205.29; 

(2) Be readily retrievable and made 

available to regulatory authorities upon 

request; 

(3) Be securely stored and protected 

from unauthorized access or 

modifications; and 

(4) Contain only alterations signed 

and dated by the individual who made 

the alteration. Such alteration must 

preserve the original information and 

document the reason for the alteration. 

(c) Written policies and procedures. 

Written policies and procedures must be 

implemented by the wholesale 

distributor to protect the integrity of 

records. 

(d) Record retention. (1) Except for the 

records listed in paragraph (d)(2) of this 

section, all records required to be 

maintained by this subpart must be 

retained for a period of 3 years. 


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(2) Records of investigation of suspect 

and illegitimate products and of 

destroyed, nonsaleable returned, and 

recalled prescription drugs must be 

retained for a period of 6 years. 

§ 205.28 Inspections. 

(a) A facility to be used in wholesale 

distribution must undergo a physical 

inspection prior to issuance of the 

initial license by the Federal or State 

licensing authority. 

(1) Where the State is the licensing 

authority, such inspection may be 

conducted by: 

(i) The State in which the facility to 

be licensed is located; or 

(ii) A third-party accreditation or 

inspection service approved by the State 

licensing the wholesale distributor; or 

(iii) If the facility is located out of 

State, the State issuing the license may 

conduct the inspection or may accept an 

inspection by the State in which the 

facility is located or by a third party, as 

described in paragraph (a)(1)(ii) of this 

section. 

(2) Where the Food and Drug 

Administration is the licensing 

authority, the Food and Drug 

Administration may conduct the 

inspection or may accept an inspection 

conducted by an organization approved 

by the Food and Drug Administration 

under § 205.32. 

(b) Records described in § 205.27 that 

are kept at the inspection site or that can 

be immediately retrieved by computer 

or other electronic means must be 

readily available for inspection during 

the retention period. Records kept at a 

central location apart from the 

inspection site and not electronically 

retrievable must be made available for 

inspection within 2 business days of a 

request by a State or Federal official, or 

sooner if necessitated by the duration of 

the inspection. 

(c) Wholesale distributors must 

permit the appropriate Federal, or State 

licensing authority and State- or FDAapproved third-party inspection services 

to enter and inspect their premises and 

to audit their records and written 

operating procedures. 

(d) To ensure compliance with this 

subpart, routine inspections will be 

conducted once every 3 years by the 

licensing authority, or a third-party 

accreditation or inspection service 

approved by the Food and Drug 

Administration or the State licensing 

the wholesale distributor. 

§ 205.29 Requirements for initial and 

annual reporting to the Food and Drug 

Administration. 

(a) Electronic reporting requirement. 

The wholesale distributor must report 

electronically to the Food and Drug 

Administration using a secure 

mechanism in a format the Food and 

Drug Administration can review, 

process, and archive pursuant to section 

503(e)(2)(A) of the Federal Food, Drug, 

and Cosmetic Act. Information reported 

will be included in the Food and Drug 

Administration’s public database for 

wholesale distributors pursuant to 

section 503(e)(2)(B) of the Federal Food, 

Drug, and Cosmetic Act. 

(b) Reporting periods—(1) Initial 

reporting. Any entity that owns or 

operates an establishment that engages 

in wholesale distribution must report 

within 30 calendar days of obtaining an 

initial State or Federal wholesale 

distributor license. 

(2) Annual reporting. Any entity that 

is licensed to engage in wholesale 

distribution must report to the Food and 

Drug Administration each calendar year 

between January 1 and March 31. 

(c) Required information. Information 

to be reported for each wholesale 

distributor must include: 

(1) A complete list of States where the 

wholesale distributor is licensed, 

including the corresponding 

identification number and the 

expiration date of each such license; 

(2) Name of company as it appears on 

the license, full business address, and 

contact information for the facility 

manager or designated representative of 

the wholesale distributor; 

(3) All trade names or business names 

under which the wholesale distributor 

conducts business; and 

(4) Any significant disciplinary 

actions by any State or Federal Agency 

taken against the wholesale distributor 

license related to the distribution of 

prescription drugs, including the State 

where the disciplinary action occurred, 

date of final action, type of disciplinary 

action, description of the violation, and 

documents associated with the 

disciplinary action. 

(d) Timing of significant disciplinary 

action reporting—(1) Initial reporting. 

The wholesale distributor must report to 

the Food and Drug Administration any 

significant disciplinary actions, 

including but not limited to revocation 

or suspension of a wholesale distributor 

license by a State or Federal licensing 

authority, which occurred in the 12 

months prior to obtaining licensure. 

(2) Subsequent reporting. The 

wholesale distributor must, within 30 

calendar days after a final action taken 

by a State or Federal licensing authority, 

report significant disciplinary actions to 

the Food and Drug Administration. 

(e) Other reports—(1) Closure of a 

facility. The wholesale distributor must 

report to the Food and Drug 

Administration that a facility has ceased 

operations within 30 calendar days after 

it has stopped operating as a wholesale 

distributor. 

(2) Voluntary withdrawal of a State 

license. The wholesale distributor must 

report to the Food and Drug 

Administration that it has withdrawn its 

license in a State within 30 calendar 

days after such withdrawal, including 

any reasons for the voluntary 

withdrawal of licensure. 

§ 205.30 Licensure denial, suspension, 

reinstatement, revocation, and voluntary 

termination—notice and opportunity to 

request a hearing. 

(a) Denial of application for licensure. 

(1) The licensing authority will refuse to 

approve a wholesale distributor license 

application for any of the following 

reasons: 

(i) The methods or procedures to be 

used in the distribution of the 

prescription drug, including receipt, 

storage, and handling, are inadequate to 

preserve its safety, identity, strength, 

quality, or purity. 

(ii) The facilities and controls used for 

the distribution of the prescription drug, 

including receipt, storage, and handling, 

are inadequate to preserve its safety, 

identity, strength, quality, or purity. 

(iii) The methods or procedures to be 

used in the distribution of the 

prescription drug, including receipt, 

storage, and handling, do not comply 

with the requirements for good storage 

practices in § 205.26. 

(iv) The personnel employed by the 

applicant do not meet the requirements 

necessary for good storage practices in 

§ 205.25. 

(v) There is insufficient information 

in the written policies and procedures 

required under § 205.26(c) to determine 

whether the methods or procedures to 

be used in the distribution of the 

prescription drug, including receipt, 

storage, and handling, comply with the 

requirements for good storage practices 

in § 205.26 and preserve the safety, 

identity, strength, quality, or purity of 

the prescription drug. 

(vi) The methods or procedures to be 

used in the distribution of the 

prescription drug, including receipt, 

storage, and handling, do not comply 

with the requirements for adequate 

recordkeeping in § 205.27. 

(vii) The application contains an 

untrue statement of material fact. 

(viii) The applicant does not permit a 

properly authorized officer or employee 

of the Food and Drug Administration, a 

State licensing authority, or an AO 

approved by the Food and Drug 

Administration pursuant to § 205.32 an 

adequate opportunity to inspect the 


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facilities, controls, and any records 

relevant to the application. 

(ix) For renewal applications, the 

applicant fails to report to the licensing 

authority any pertinent change of 

information required in § 205.21, 

§ 205.22, or § 205.24. 

(x) For renewal applications, the 

applicant fails to report to the Food and 

Drug Administration any of the 

requirements for annual reporting in 

§ 205.29. 

(2) If review of a wholesale 

distributor’s application fails to 

demonstrate that the wholesale 

distributor meets the requirements for 

licensure set forth in § 205.22 and 

paragraph (a)(1) of this section, the 

licensing authority will provide written 

notice to the applicant that its license 

application may be denied, setting forth 

the grounds for the denial and providing 

an opportunity to demonstrate that the 

wholesale distributor meets the 

requirements for licensure. 

(3) The notice will inform the 

applicant of its right to provide 

additional information and request 

reconsideration of the denial by the 

licensing authority within 14 calendar 

days of the date of the licensing 

authority’s written notice. 

(4) If no reconsideration is sought, or, 

if upon reconsideration, the licensing 

authority denies the applicant’s request 

for licensure, the licensing authority 

will provide the applicant written 

notice of the denial and will provide the 

applicant notice of the opportunity to 

request a hearing. 

(5) The applicant who wishes to 

request a hearing has 10 calendar days 

after the date of the notice of denial to 

submit a written notice of participation 

and request for a hearing. The applicant 

who fails to submit a written notice of 

participation and request for a hearing 

within 10 calendar days waives the 

opportunity for a hearing. 

(6) Parts 10 through 16 of this chapter 

apply to wholesale distributor licenses 

issued by the Food and Drug 

Administration under sections 503(e) 

and 583 of the Federal Food, Drug, and 

Cosmetic Act. 

(b) Suspension of license after notice 

and opportunity to request a hearing. (1) 

The licensing authority may move to 

suspend a license if the licensing 

authority has a reasonable belief that the 

licensee has failed to comply with any 

of the standards for receiving and 

maintaining licensure described in this 

subpart and that the nature of the 

noncompliance at issue would likely 

compromise the quality of product or 

threaten public safety. 

(2) The licensing authority will 

provide written notice of the intent to 

suspend a wholesale distributor license 

setting forth the grounds for the 

suspension pursuant to this part, 

including what information would be 

required to demonstrate or achieve 

compliance. The notice will inform the 

applicant of its right to provide 

additional information, request 

reconsideration of the suspension by the 

licensing authority, and demonstrate or 

achieve compliance before suspension. 

(3) Each wholesale distributor license 

holder has 30 calendar days from the 

date of the notice of intent to suspend 

to present, in writing, comments and 

information bearing on the initial 

decision. 

(4) If no comments or information is 

received within 30 calendar days or, if 

upon reconsideration, the licensing 

authority believes the wholesale 

distributor license should still be 

suspended, the licensing authority will 

provide the wholesale distributor a 

second written notice of the intent to 

suspend, informing the wholesale 

distributor of the opportunity to request 

a hearing on the question of whether 

there are grounds for suspension. 

(5) The wholesale distributor must 

submit a written notice of participation 

and request a hearing in writing within 

10 calendar days after the date of the 

notice of the intent to suspend. A 

wholesale distributor that fails to submit 

a written notice of participation and 

request for hearing within 10 calendar 

days waives the opportunity for a 

hearing. 

(6) Parts 10 through 16 of this chapter 

apply to wholesale distributor licenses 

issued by the Food and Drug 

Administration under sections 503(e) 

and 583 of the Federal Food, Drug, and 

Cosmetic Act. 

(7) If a wholesale distributor’s license 

is suspended and the wholesale 

distributor does not demonstrate or 

achieve compliance to the licensing 

authority’s satisfaction within the time 

period indicated in the notice of 

suspension, the licensing authority will 

move to revoke the wholesale 

distributor’s license. 

(c) Immediate suspension of license. 

(1) The licensing authority may suspend 

a license effective immediately if the 

licensing authority reasonably believes 

that the licensee has failed to comply 

with any of the standards for receiving 

and maintaining licensure described in 

this subpart and that the nature of the 

noncompliance at issue would 

reasonably be expected to cause an 

imminent threat to public health. 

(2) The licensing authority will 

provide the wholesale distributor with 

written notice of immediate suspension 

of its license setting forth the grounds 

for the suspension pursuant to this part, 

including what information would be 

required to demonstrate compliance, 

and the opportunity to request a hearing 

within 10 calendar days of the 

wholesale distributor’s request for such 

hearing. 

(3) The wholesale distributor must 

submit a written notice of participation 

and request a hearing in writing within 

10 calendar days after the date of the 

written notice of immediate suspension. 

A wholesale distributor that fails to 

submit a written notice of participation 

and request for hearing within 10 

calendar days from the date of the 

written notice waives the opportunity 

for a hearing. 

(4) Parts 10 through 16 of this chapter 

apply to wholesale distributor licenses 

issued by the Food and Drug 

Administration under sections 503(e) 

and 583 of the Federal Food, Drug, and 

Cosmetic Act. 

(5) If a wholesale distributor’s license 

is suspended and the wholesale 

distributor does not demonstrate or 

achieve compliance to the licensing 

authority’s satisfaction within the time 

period indicated in the notice of 

suspension, the licensing authority will 

move to revoke the wholesale 

distributor’s license. 

(d) Reinstatement of suspended 

licenses. The licensing authority may 

reinstate a previously suspended license 

upon a wholesale distributor’s showing 

of compliance with requirements in this 

part and upon such inspection and 

examination as the licensing authority 

may require. 

(e) Revocation. (1) If compliance is 

not demonstrated or achieved to the 

licensing authority’s satisfaction within 

the time period indicated in the notice 

of suspension, the licensing authority 

will move to revoke the wholesale 

distributor’s license. 

(2) The licensing authority will notify 

the wholesale distributor of the intent to 

revoke the wholesale distributor’s 

license, setting forth the grounds for the 

revocation and offering an opportunity 

to request a hearing on the proposed 

revocation. 

(3) The wholesale distributor must 

submit a written notice of participation 

and request a hearing within 10 

calendar days after the date of the notice 

of revocation. A wholesale distributor 

that fails to submit a written notice of 

participation and request for hearing 

within 10 calendar days waives the 

opportunity for a hearing. 

(4) Parts 10 through 16 of this chapter 

apply to wholesale distributor licenses 

issued by the Food and Drug 

Administration under sections 503(e) 


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and 583 of the Federal Food, Drug, and 

Cosmetic Act. 

(f) Nonrenewal. If a license renewal 

application is not submitted by the date 

of expiration of the license, the license 

will be considered expired. A wholesale 

distributor may not engage in wholesale 

distribution with an expired license and 

must submit a new application for 

licensure. 

(g) Voluntary termination of licensure 

upon request by the wholesale 

distributor. The licensing authority will 

terminate a wholesale distributor’s 

license upon the wholesale distributor’s 

request, which will include a notice of 

intent to discontinue prescription drug 

wholesale distribution and waive 

opportunity for a hearing. A wholesale 

distributor that voluntarily terminates 

licensure must obtain a new license 

before resuming wholesale distribution. 

(1) If a wholesale distributor that has 

had its license revoked wishes to apply 

for a new license, the wholesale 

distributor must submit a new license 

application, which may include an 

inspection if required by the licensing 

authority under § 205.28(a). 

(2) [Reserved] 

Subpart D—Approved Organizations 

for Wholesale Distributors 

§ 205.31 Use of approved third-party 

organizations. 

(a) A third-party organization that has 

been approved by the Food and Drug 

Administration pursuant to § 205.32 

(‘‘approved organization’’ (AO)) may be 

used to conduct initial and routine 

inspections of the wholesale 

distributor’s facility, as directed by the 

Food and Drug Administration. 

(b) If an organization has been 

approved by the Food and Drug 

Administration to conduct inspections, 

the AO must: 

(1) Complete inspections within a 

timeframe not to exceed 90 calendar 

days after receiving notice from the 

Food and Drug Administration to 

conduct an inspection; 

(2) Based on the inspection, write a 

detailed document including a summary 

of the AO’s findings; and 

(3) Send the original document to the 

Food and Drug Administration, with a 

copy to the wholesale distributor, 

within 7 calendar days of completing 

the inspection. 

(c) To become an AO, and to maintain 

its approval, an organization seeking the 

Food and Drug Administration’s 

approval and current AOs must: 

(1) Maintain records, including those 

that support the AO’s initial and 

continuing qualifications for approval, 

for a minimum of 5 years. 

(2) Maintain the following records of 

inspections submitted to the licensing 

authority for a minimum of 5 years: 

(i) Copies of the records and 

supporting documentation reviewed as 

part of an inspection; 

(ii) Inspection reports; 

(iii) Correspondence with the Food 

and Drug Administration and the 

wholesale distributor associated with an 

inspection; and 

(iv) Information on the identity, 

conflict of interest certification/ 

compliance statement, and 

qualifications of all AO personnel who 

contributed to the inspection. 

(3) Records maintained by the AO 

must: 

(i) Be readily retrievable and made 

available to Federal licensing authorities 

upon request; 

(ii) Be secure from unauthorized 

access or modifications; and 

(iii) Contain only alterations signed 

and dated by the individual who made 

the alteration. Such alteration must 

preserve the original information and 

document the reason for the alteration. 

(4) An AO must immediately report to 

the Food and Drug Administration the 

discovery of any evidence or 

observations of potential violations 

found at a wholesale distributor facility 

during an inspection of the facility that 

could pose imminent and serious 

adverse health consequences or death to 

humans. Reports must be made in the 

manner prescribed by the Food and 

Drug Administration. 

§ 205.32 General qualifications of 

approved organizations. 

(a) To become and remain an AO, the 

organization and anyone employed by 

the organization, including contractors 

used by the organization: 

(1) Must not be a current Federal or 

State government employee; 

(2) Must not engage in prescription 

drug-related activities, excluding 

participation in the Agency’s AO 

program and related activities, but 

including and not limited to 

manufacturing, wholesale distribution, 

repackaging, relabeling, dispensing, or 

3PL activities; 

(3) Must disclose to the Food and 

Drug Administration any participation 

or financial interest in entities that 

participate in the design, manufacture, 

promotion, or sale of articles or 

activities that are predominantly Food 

and Drug Administration-regulated or 

are expected to result in Food and Drug 

Administration-regulated articles; 

(4) Must not be owned or controlled 

by, or have any organizational, material, 

or financial affiliation with, any of the 

entities engaged in manufacturing, 

wholesale distribution, repackaging, 

relabeling, dispensing, 3PL activities, or 

the design, manufacture, promotion, or 

sale of prescription drugs as defined in 

section 581(12) of the Federal Food, 

Drug, and Cosmetic Act; 

(5) Must enter and abide by a written 

agreement with the applicant before 

data and information otherwise exempt 

from public disclosure may be disclosed 

to the AO or the contractor; 

(6) Must operate in accordance with 

professional and ethical business 

practices, which include: 

(i) Protecting against conflicts of 

interest as set forth in 5 CFR part 2635 

and 18 U.S.C. 208; 

(ii) Ensuring that the personnel 

employed or contracted by the AO who 

are working on inspections have 

sufficient education, training, 

knowledge, and experience to conduct 

inspections of wholesale distributors; 

(iii) Protecting against unauthorized 

disclosure of nonpublic information 

received, records, reports, and 

recommendations and maintaining 

appropriate security and protection of 

such information; 

(iv) Maintaining appropriate security 

and protection, physical and electronic, 

of any information received in relation 

to inspections; 

(v) Reporting information to the Food 

and Drug Administration and entities 

for which licensure reviews were 

conducted that accurately reflects data 

reviewed, inspectional observations 

made, and other matters that relate to or 

may influence compliance with the 

Federal Food, Drug, and Cosmetic Act; 

and 

(vi) Promptly responding to and 

attempting to resolve any complaints 

regarding activities for which it is 

approved by the Food and Drug 

Administration; and 

(7) Must establish and maintain 

policies, procedures, and 

documentation to demonstrate that, at 

the time of application, and throughout 

their tenure as an AO, the applicant has 

and can continue to satisfy the 

requirements to qualify as an AO 

capable of assessing compliance with all 

wholesale distributor requirements. 

Such policies, procedures, and 

documentation must include, but are 

not limited to: 

(i) AO program administration; 

(ii) Disciplinary actions and corrective 

measures; 

(iii) Recordkeeping and 

confidentiality; 

(iv) Use of contractors; and 

(v) Personnel qualifications and 

ongoing training. 

(b) If an AO elects to use contractors 

for inspections, the AO remains 


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responsible for the work of the 

contractors at all times. 

(1) AOs that use contractors to 

conduct inspections must have policies 

and procedures in place to ensure the 

contractor’s continuing compliance with 

this part, as well as competence and 

qualifications to conduct inspections. 

Such policies and procedures must 

ensure that contractors: 

(i) Meet the qualifications set forth in 

paragraph (a) of this section; 

(ii) Do not subcontract their 

inspection duties, and that contractors 

are removed if such requirement is 

violated; 

(iii) Abide by the policies and 

procedures of the AO, as set forth in 

§ 205.33(b); and 

(iv) Complete and pass the same 

training required by the AO, as set forth 

in § 205.33(c). 

(2) If an AO elects to use contractors 

to conduct inspections, the AO must 

receive and keep a record of written 

consent from the wholesale distributor 

to share confidential commercial 

information with contractors for which 

an inspection is being conducted. 

(3) AOs that elect to use contractors 

must submit to the Food and Drug 

Administration a list of contractors used 

by the organization, accompanied by a 

statement from the organization 

certifying that such contractors meet the 

requirements of this subpart. 

§ 205.33 Process and procedures for 

approval by the Food and Drug 

Administration. 

(a) Application. An application to 

become an AO must be completed and 

submitted electronically to the Food and 

Drug Administration in a format the 

Food and Drug Administration can 

renew, process, and archive. 

(b) Required application information. 

Policies, procedures, and 

documentation as required by 

§ 205.32(a)(7) must accompany the 

application. 

(c) Training. Organizations must 

provide training and any individual 

who conducts inspections or supervises 

individuals who conduct inspections is 

required to undergo and pass the 

prescribed training. 

(1) If an individual does not pass 

training, that person must wait 30 days 

before retaking the training, and may be 

required to show proof of additional 

education or experiential learning to 

demonstrate competence before retaking 

the training evaluation. 

(2) To maintain approval, individuals 

employed by the AO and conducting 

inspections or supervising those who 

conduct inspections must undergo and 

pass annual training as prescribed by 

the Food and Drug Administration. 

Failure to complete and pass annual 

training may result in suspension of 

approval. 

(3) The Food and Drug 

Administration may require additional 

training. If such additional training is 

required, AOs will be given a set time 

period during which training must be 

completed and passed to maintain 

approval. 

(d) Auditing. Prior to conducting its 

first inspection, an AO must undergo an 

onsite audit by the Food and Drug 

Administration. The Food and Drug 

Administration may also conduct 

random, periodic audits, as well as forcause audits, of an AO, as set forth in 

paragraph (o) of this section. 

(e) Duration of approval and renewal 

process. (1) The Food and Drug 

Administration approval to conduct 

inspections is valid for a period of 5 

years. 

(2) AOs must submit a renewal 

application to the Food and Drug 

Administration no later than 6 months 

prior to the expiration date to renew its 

approval. 

(i) If a renewal application is 

submitted less than 6 months before the 

date of expiration, the AO’s approval 

will expire if approval is not renewed 

prior to the date of expiration. 

(ii) Upon expiration of the AO’s 

approval, the AO must cease conducting 

any inspection-related activities. 

(f) Denial of approval. If an 

organization does not meet all of the 

Food and Drug Administration’s 

standards detailed in §§ 205.31 and 

205.32 for becoming an AO, the Food 

and Drug Administration will deny the 

application in writing. Requests for 

review and reconsideration of a denial 

of an application must be submitted to 

the Food and Drug Administration 

within 30 calendar days of the date of 

the Food and Drug Administration’s 

decision. If, upon reconsideration, the 

licensing authority denies the 

applicant’s request for approval, the 

licensing authority will provide the 

applicant written notice of the denial 

and an opportunity to appeal pursuant 

to § 10.75 of this chapter. 

(g) Suspension of approval after 

notice and opportunity to request a 

hearing. (1) The Food and Drug 

Administration may suspend approval 

of an organization after opportunity to 

request a hearing when there is a 

reasonable probability that the 

organization’s noncompliance will 

negatively impact public health. 

(2) If an AO fails to maintain the Food 

and Drug Administration’s standards 

pursuant to §§ 205.31 and 205.32, the 

Food and Drug Administration will give 

written notice of the intent to suspend 

the organization’s approval, including 

the grounds for the suspension, and the 

AO will have 30 days after the date of 

the notice to provide additional 

information to the Food and Drug 

Administration for reconsideration. 

(3) If no additional information is 

provided or, if upon reconsideration, 

the Food and Drug Administration still 

believes the AO’s approval should be 

suspended, the Food and Drug 

Administration will issue the AO a 

formal written notice of intent to 

suspend, along with notice of the 

opportunity to request a hearing 

pursuant to part 16 of this chapter. 

(4) An AO that wishes to request a 

hearing has 10 calendar days after the 

date of the formal notice of intent to 

suspend to submit a written notice of 

participation and request for a hearing. 

An AO that fails to submit a written 

notice of participation and request for a 

hearing within 10 calendar days from 

the date of the notice waives the 

opportunity for a hearing. 

(5) A suspended AO must notify any 

wholesale distributors with a pending 

inspection to be performed by the AO of 

the AO’s suspension within 7 calendar 

days. 

(h) Immediate suspension of 

approval. (1) When there is a reasonable 

probability that the organization’s 

noncompliance will cause imminent 

and serious adverse health 

consequences or death to humans, the 

Food and Drug Administration will 

suspend an AO’s approval effective 

immediately. 

(2) In such a situation, the Food and 

Drug Administration will provide the 

AO a written notice of immediate 

suspension, along with notice and 

opportunity to request a hearing 

pursuant to part 16 of this chapter 

within 14 calendar days of the AO’s 

request for such hearing. 

(3) An AO that wishes to request a 

hearing has 10 calendar days after the 

date of the formal notice of suspension 

to submit a written notice of 

participation and request for a hearing. 

An AO that fails to submit a written 

notice of participation and request for a 

hearing within 10 calendar days waives 

the opportunity for a hearing. 

(i) Reinstatement of approval. (1) An 

organization’s approval may be 

reinstated if the Food and Drug 

Administration determines that the 

suspended organization has rectified the 

issues leading to the suspension and can 

meet the standards set forth in this 

subpart. Pursuant to this paragraph (i), 

the organization must rectify the issues 

and come into compliance with the 

Food and Drug Administration’s 


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standards within 1 year from the date of 

suspension. If the issues have not been 

rectified within 1 year, the Food and 

Drug Administration may revoke the 

AO’s approval subject to the provisions 

of this part. 

(2) An organization whose approval 

has been reinstated on a conditional 

basis will be subject to a 3-year 

probationary period, and if any material 

deficiencies arise during that period, the 

organization’s approval may be revoked. 

(j) Revocation of approval. (1) The 

Food and Drug Administration may 

revoke approval of an organization 

whose approval has been suspended 

pursuant to paragraphs (g) and (h) of 

this section: 

(i) If an organization fails to 

demonstrate intent to comply with the 

issues leading to the suspension within 

6 months from the date of suspension; 

or 

(ii) If the Food and Drug 

Administration determines that the 

organization failed to rectify the issues 

leading to the suspension to the 

Agency’s satisfaction within 1 year of 

the date of suspension. 

(2) The Food and Drug 

Administration will give written notice 

of the intent to revoke the organization’s 

approval, including the grounds for the 

revocation, and an opportunity to 

request a hearing pursuant to part 16 of 

this chapter. 

(3) The AO must submit a written 

notice of participation and request a 

hearing within 10 calendar days after 

the date of the notice of revocation. An 

AO that fails to submit a written notice 

of participation and request for hearing 

within 10 calendar days waives the 

opportunity for a hearing. 

(4) An organization whose approval is 

revoked that wishes to reapply to be an 

AO must submit a new application to 

the Food and Drug Administration. 

(k) Requests for reconsideration of 

Agency decision. (1) The Food and Drug 

Administration will follow the process 

outlined at § 10.75 of this chapter to 

review matters relating to denial of 

approval, including review of the 

organization’s application. 

(2) The Food and Drug 

Administration will follow the process 

outlined at part 16 of this chapter to 

review matters relating to a suspension 

or revocation action, including review 

of the organization’s application and 

administrative file. 

(3) The Food and Drug 

Administration’s decision after request 

for reconsideration of denial, 

suspension, or revocation constitutes a 

final Agency action under 5 U.S.C. 702. 

(l) Voluntary withdrawal of approval. 

(1) An organization wishing to 

voluntarily withdraw its approval, 

including but not limited to when an 

AO goes out of business, must notify the 

Food and Drug Administration in 

writing at least 6 months prior to the 

date the organization intends for the 

withdrawal to become effective. 

(i) If an AO determines it will be 

withdrawing its approval with the Food 

and Drug Administration in less than 6 

months, it must notify the Food and 

Drug Administration immediately of its 

intent to withdraw, and such 

notification must inform the Food and 

Drug Administration of the date the 

organization will cease business 

operations. 

(ii) [Reserved] 

(2) No later than 7 calendar days after 

notifying the Food and Drug 

Administration, the organization must 

notify any facilities with pending 

inspections that it intends to withdraw 

its approval with the Food and Drug 

Administration and must provide the 

date on which the withdrawal is 

effective. 

(m) AO-required notifications to 

wholesale distributors. The AO must, 

within 7 calendar days of the date of 

suspension, revocation, or voluntary 

withdrawal of approval, notify those 

wholesale distributor facilities that have 

pending inspections of the AO’s 

suspension or revocation. This 

notification must inform the wholesale 

distributor facility that it must apply for 

inspection with another AO, or the Food 

and Drug Administration if no other 

organization is approved. 

(n) Change of operation or ownership. 

(1) The AO must report to the Food and 

Drug Administration within 30 calendar 

days any changes to the information 

submitted with its application for 

approval. 

(2) Approval is not transferable. 

(i) Changes in ownership of an AO 

require the organization to submit a new 

application to the Food and Drug 

Administration. 

(ii) Such application must be 

submitted to the Food and Drug 

Administration no later than 30 

calendar days prior to the date of the 

change of ownership. 

(iii) No later than 30 calendar days 

before the date of the change of 

ownership, the AO must notify any 

wholesale distributor facilities with 

pending applications of the pending 

change in ownership. 

(iv) On the date the change of 

ownership takes place, the original 

approval is void. 

(o) Monitoring by the Food and Drug 

Administration. (1) AOs are subject to 

both periodic and for-cause audits by 

the Food and Drug Administration to 

ensure compliance with the Food and 

Drug Administration’s requirements for 

approval in this part. 

(2) If an AO refuses to cooperate with 

the Food and Drug Administration’s 

audit, the organization’s approval may 

be suspended. 

Dated: January 24, 2022. 

Janet Woodcock, 

Acting Commissioner of Food and Drugs. 

[FR Doc. 2022–01929 Filed 2–3–22; 8:45 am] 

BILLING CODE 4164–01–P 


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