IB Union Calendar No. 65 113th CONGRESS 1st Session H. R. 1919 [Report No. 113–93] IN THE HOUSE OF REPRESENTATIVES May 9, 2013 Mr. Latta (for himself, Mr. Matheson , Mr. Upton , Mr. Dingell , Mr. Cassidy , Mrs. Blackburn , Mr. McKinley , Mr. Rogers of Michigan , Mr. Burgess , Mr. Shimkus , Mr. Guthrie , Mr. Johnson of Ohio , and Mr. Schneider ) introduced the following bill; which was referred to the Committee on Energy and Commerce June 3, 2013 Additional sponsors: Mr. Olson , Mr. Long , Mr. Latham , Mr. Valadao , Mr. Rush , Mr. Veasey , Mr. Walberg , and Mrs. Walorski June 3, 2013 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed Strike out all after the enacting clause and insert the part printed in italic For text of introduced bill, see copy of bill as introduced on May 9, 2013 A BILL To amend the Federal Food, Drug, and Cosmetic Act with respect to the pharmaceutical distribution supply chain, and for other purposes.

1. Short title (a) Short title This Act may be cited as the Safeguarding America’s Pharmaceuticals Act of 2013 . (b) Table of contents The table of contents of this Act is as follows: Sec. 1. Short title. Sec. 2. Pharmaceutical distribution supply chain. Sec. 3. Enhanced drug distribution security. Sec. 4. National standards for wholesale distributors. Sec. 5. National licensure standards for third-party logistics providers. Sec. 6. Penalties. Sec. 7. Uniform national policy. Sec. 8 Electronic labeling. 2. Pharmaceutical distribution supply chain Chapter V of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 351 et seq. ) is amended by adding at the end the following: H Pharmaceutical Distribution Supply Chain 581. Definitions In this subchapter: (1) Authorized The term authorized means— (A) in the case of a manufacturer or repackager, having a valid registration in accordance with section 510; and (B) in the case of a wholesale distributor, third-party logistics provider, or dispenser, licensed (as defined in this section). (2) Dispenser The term dispenser — (A) subject to subparagraph (C), means a retail pharmacy, hospital pharmacy, a group of chain pharmacies under common ownership and control, or any other person authorized by law to dispense or administer prescription drugs, to the extent such pharmacy, group, or person does not act as a wholesale distributor; (B) includes warehouses and distribution centers under common ownership or control of entities described in subparagraph (A) that are members of an affiliated group pursuant to section 1504(a) of the Internal Revenue Code of 1986, to the extent such warehouses and distribution centers do not act as a wholesale distributor; and (C) does not include a person who only dispenses prescription drug product to be used in animals in accordance with section 512(a)(5). (3) Disposition The term disposition , with respect to a prescription drug product within the possession and control of an entity— (A) means the removal of such prescription drug product, or taking measures to prevent the introduction of such prescription drug product, from the pharmaceutical distribution supply chain; and (B) may include disposal, return of the prescription drug product for disposal, or other appropriate handling and other actions such as retaining a sample of the prescription drug product for additional physical examination or laboratory analysis by a manufacturer or regulatory or law enforcement agency. (4) Distribute or distribution The terms distribute and distribution mean the sale, purchase, trade, delivery, handling, or storage of a prescription drug product. (5) Illegitimate prescription drug product The term illegitimate prescription drug product means a prescription drug product which a manufacturer has confirmed— (A) is counterfeit, diverted, or stolen; (B) is intentionally adulterated such that the prescription drug product would result in serious adverse health consequences or death to humans; or (C) is otherwise unfit for distribution such that the prescription drug product is reasonably likely to cause serious adverse human health consequences or death. (6) Licensed The term licensed means— (A) in the case of a wholesale distributor, having a valid license to make wholesale distributions consistent with the standards under section 583; (B) in the case of a third-party logistics provider, having a valid license to engage in the activities of a third-party logistics provider in accordance with section 584; and (C) in the case of a dispenser, having a valid license to dispense prescription drugs under State law. (7) Manufacturer The term manufacturer means, with respect to a prescription drug product— (A) a person that holds an application approved under section 505 or a license issued under section 351 of the Public Health Service Act for such prescription drug product, or if such prescription drug product is not the subject of an approved application or license, the person who manufactured the prescription drug product; (B) a co-licensed partner of the person described in subparagraph (A) that obtains the prescription drug product directly from the person described in such subparagraph; or (C) a person that— (i) is a member of an affiliated group (as defined in section 1504(a) of the Internal Revenue Code of 1986) to which a person described in subparagraph (A) or (B) is also a member; and (ii) receives the prescription drug product directly from a person described in subparagraph (A) or (B). (8) Package (A) In general The term package means the smallest individual saleable unit of prescription drug product for distribution in interstate commerce by a manufacturer or repackager that is intended by the manufacturer for ultimate sale to the dispenser of such prescription drug product. (B) Individual saleable unit The term individual saleable unit means the smallest container of prescription drug product introduced into interstate commerce by the manufacturer or repackager that is intended by the manufacturer for individual sale to a dispenser. (9) Prescription drug The term prescription drug means a drug for human use subject to section 503(b)(1). (10) Prescription drug product The term prescription drug product means a prescription drug in a finished dosage form for administration to a patient without substantial further manufacturing (such as capsules, tablets, and lyophilized prescription drug products before reconstitution). (11) Prescription drug product identifier The term prescription drug product identifier means a standardized graphic that— (A) includes the standardized numerical identifier, lot number, and expiration date of a prescription drug product; and (B) is in both human-readable form and on a machine-readable data carrier that conforms to the standards developed by a widely recognized international standards development organization. (12) Quarantine The term quarantine means to store or identify a product, for the purpose of preventing distribution or transfer of the product, in a physically separate area clearly identified for such use, or through use of other procedures such as automated designation. (13) Repackager The term repackager means a person who owns or operates an establishment that repacks and relabels a prescription drug product or package for further sale or distribution. (14) Return The term return means providing prescription drug product to the authorized trading partner or trading partners from which such prescription drug product was purchased or received, or to a returns processor for handling of such prescription drug product. (15) Returns processor The terms returns processor mean a person who owns or operates an establishment that provides for the disposition of or otherwise processes saleable and nonsaleable prescription drug product received from an authorized trading partner such that the prescription drug product may be processed for credit to the purchaser, manufacturer, seller, or disposed of for no further distribution. (16) Specific patient need The term specific patient need — (A) means with respect to the transfer of a prescription drug product from one pharmacy to another, to fill a prescription for an identified patient; and (B) does not include the transfer of a prescription drug product from one pharmacy to another for the purpose of increasing or replenishing stock in anticipation of a potential need. (17) Standardized numerical identifier The term standardized numerical identifier means a set of numbers or characters that— (A) is used to uniquely identify each package or homogenous case of the prescription drug product; and (B) is composed of the National Drug Code that corresponds to the specific prescription drug product (including the particular package configuration) combined with a unique alphanumeric serial number of up to 20 characters. (18) Suspect prescription drug product The term suspect prescription drug product means a prescription drug product for which there is reason to believe that such prescription drug product— (A) is potentially counterfeit, diverted, or stolen; (B) is potentially intentionally adulterated such that the prescription drug product would result in serious adverse health consequences or death to humans; or (C) appears otherwise unfit for distribution such that the prescription drug product would result in serious adverse health consequences or death to humans. (19) Third-party logistics provider The term third-party logistics provider means an entity that provides or coordinates warehousing, distribution, or other logistics services of a prescription drug product in interstate commerce on behalf of a manufacturer, wholesale distributor, or dispenser of a prescription drug product, but does not take ownership of the prescription drug product, nor have responsibility to direct the sale or disposition of, the prescription drug product. (20) Trading partner The term trading partner means— (A) a manufacturer, repackager, wholesale distributor, or dispenser from whom a manufacturer, repackager, wholesale distributor, or dispenser accepts ownership of a prescription drug product or to whom a manufacturer, repackager, wholesale distributor, or dispenser transfers ownership of a prescription drug product; or (B) a third-party logistics provider from whom a manufacturer, repackager, wholesale distributor, or dispenser accepts possession of a prescription drug product or to whom a manufacturer, repackager, wholesale distributor, or dispenser transfers possession of a prescription drug product. (21) Transaction (A) In general The term transaction means the transfer in interstate commerce of prescription drug product between persons in which a change of ownership occurs. (B) Exemptions The term transaction does not include— (i) intracompany distribution of any prescription drug product, including between members of an affiliated group (as defined in section 1504(a) of the Internal Revenue Code of 1986); (ii) the distribution of a prescription drug product among hospitals or other health care entities that are under common control; (iii) the distribution of a prescription drug product for emergency medical reasons including a public health emergency declaration pursuant to section 319 of the Public Health Service Act, except that a drug shortage not caused by a public health emergency shall not constitute an emergency medical reason; (iv) the dispensing of a prescription drug product pursuant to a valid prescription executed in accordance with section 503(b)(1); (v) the distribution of prescription drug product samples by a manufacturer or a licensed wholesale distributor in accordance with section 503(d); (vi) the distribution of blood or blood components intended for transfusion; (vii) the distribution of minimal quantities of prescription drug product by a licensed retail pharmacy to a licensed practitioner for office use; (viii) the distribution of a prescription drug product by a charitable organization to a nonprofit affiliate of the organization to the extent otherwise permitted by law; (ix) the distribution of a prescription drug product pursuant to the sale or merger of a pharmacy or pharmacies or a wholesale distributor or wholesale distributors, except that any records required to be maintained for the prescription drug product shall be transferred to the new owner of the pharmacy or pharmacies or wholesale distributor or wholesale distributors; (x) the dispensing of a prescription drug product approved under section 512(b); (xi) the transfer of prescription drug products to or from any facility that is licensed by the Nuclear Regulatory Commission or by a State pursuant to an agreement with such Commission under section 274 of the Atomic Energy Act of 1954 (42 U.S.C. 2021); (xii) the distribution of a combination product that consists of— (I) a product comprised of two or more components that are each a drug, biological product, or device and that are physically, chemically, or otherwise combined or mixed and produced as a single entity; (II) two or more separate products packaged together in a single package or as a unit and comprised of a drug and device or a device and biological product; or (III) two or more finished devices plus one or more drug or biological products which are packaged together in a medical convenience kit described in clause (xiv); (xiii) the distribution of a medical convenience kit which is a collection of finished products (consisting of devices or drugs) assembled in kit form strictly for the convenience of the purchaser or user if— (I) the medical convenience kit is assembled in an establishment that is registered with the Food and Drug Administration as a medical device manufacturer; (II) the person who manufacturers the medical convenience kit purchased the prescription drug product directly from the manufacturer or from a wholesale distributor that purchased the prescription drug product directly from the manufacturer; (III) the person who manufacturers the medical convenience kit does not alter the primary container or label of the prescription drug product as purchased from the manufacturer or wholesale distributor; (IV) the medical convenience kit does not contain a controlled substance (as defined in section 102 of the Controlled Substances Act); and (V) the prescription drug products contained in the medical convenience kit are— (aa) intravenous solutions intended for the replenishment of fluids and electrolytes; (bb) drugs intended to maintain the equilibrium of water and minerals in the body; (cc) drugs intended for irrigation or reconstitution; (dd) anesthetics; (ee) anticoagulants; (ff) vasopressors; or (gg) sympathicomimetics; (xiv) the distribution of an intravenous prescription drug product that, by its formulation, is intended for the replenishment of fluids and electrolytes (such as sodium, chloride, and potassium) or calories (such as dextrose and amino acids); (xv) the distribution of an intravenous prescription drug product used to maintain the equilibrium of water and minerals in the body, such as dialysis solutions; (xvi) the distribution of a prescription drug product that is intended for irrigation or reconstitution, or sterile water, whether intended for such purposes or for injection; (xvii) the distribution of compressed medical gas; or (xviii) (I) the distribution of a product by a dispenser, or a wholesale distributor acting at the direction of the dispenser, to a repackager registered under section 510 for the purpose of repackaging the drug for use by that dispenser or another health care entity that is under the dispenser’s ownership or control, so long as the dispenser retains ownership of the prescription drug product; and (II) the saleable or nonsaleable return by such repackager of such prescription drug product. (C) Compressed medical gas For purposes of subparagraph (B)(xviii), the term compressed medical gas means any substance in its gaseous or cryogenic liquid form that meets medical purity standards and has application in a medical or homecare environment, including oxygen and nitrous oxide. (22) Transaction history The term transaction history means a statement that— (A) includes the transaction information for each transaction conducted with respect to a prescription drug product beginning with the manufacturer or initial purchase distributor for each prior transaction going back to the manufacturer of the prescription drug product or to the initial purchase distributor; and (B) is in paper or electronic form. (23) Transaction information The term transaction information means— (A) the proprietary or established name or names of the prescription drug product; (B) the strength and dosage form of the prescription drug product; (C) the National Drug Code number of the prescription drug product; (D) the container size; (E) the number of containers; (F) the lot number of the prescription drug product; (G) the date of the transaction; (H) the business name and address of the person from whom ownership is being transferred; and (I) the business name and address of the person to whom ownership is being transferred. (24) Transaction statement The transaction statement is a statement, which states that the manufacturer, repackager, wholesale distributor, third-party logistics provider, or dispenser transferring ownership in a transaction— (A) is authorized; (B) received transaction information and a transaction statement as required under section 582 from the prior owner of the prescription drug product; (C) did not knowingly and intentionally ship an illegitimate prescription drug product; (D) did not knowingly and intentionally provide false transaction information; and (E) did not knowingly and intentionally alter the transaction history. (25) Verification and verify The terms verification and verify — (A) mean determining whether the prescription drug product identifier affixed to, or imprinted upon, a package or homogeneous case of the prescription drug product corresponds to the standardized numerical identifier or lot number, and expiration date assigned to the prescription drug product by the manufacturer or the repackager, as applicable; and (B) include making the determination under subparagraph (A) using human-readable or machine-readable methods. (26) Wholesale distributor The term wholesale distributor — (A) means a person engaged in wholesale distribution (as defined in section 583); and (B) excludes— (i) a manufacturer, a co-licensed partner of a manufacturer, or a third-party logistics provider, or a dispenser who does not engage in such wholesale distribution; (ii) a repackager engaged in such wholesale distribution; or (iii) the distribution of prescription drug product or an offer to distribute prescription drug product by an authorized repackager that has taken ownership or possession of the prescription drug product and repacked the prescription drug product in accordance with the requirements of section 582(e). 582. Requirements (a) In general (1) Compliance required An entity that is a manufacturer, repackager, wholesale distributor, third-party logistics provider, or dispenser shall comply with the requirements of this section. If an entity meets the definition of more than one of the entities referred to in the preceding sentence, such entity shall comply with all applicable requirements of this section, but shall not be required to comply with duplicative requirements. (2) Standards The Secretary shall, in consultation with other appropriate Federal officials, manufacturers, repackagers, wholesale distributors, third-party logistics providers, and dispensers, establish, by regulation, standards for the exchange of transaction information for purposes of complying with this section. The standards established under this paragraph shall be in accordance with a form developed by a widely recognized international standards development organization. In establishing such standards, the Secretary shall consider the feasibility of establishing standardized documentation to be used by all members of the pharmaceutical distribution supply chain to convey the transaction history and transaction statement to the subsequent owner of a prescription drug product. The Secretary shall publish such standards not later than 180 days after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 . (3) Waivers, exceptions, and exemptions Not later than one year after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , the Secretary shall promulgate a regulation to— (A) establish a process by which the Secretary may grant, at the request of an authorized manufacturer, repackager, wholesale distributor, or dispenser, a waiver from any of the requirements of this section— (i) if the Secretary determines that such requirements would result in an undue economic hardship; or (ii) for emergency medical reasons, including a public health emergency declaration pursuant to section 319 of the Public Health Service Act; (B) establish a process, with respect to the prescription drug product identifier requirement under paragraph (2) of subsections (b), (c), (d), and (e) through which— (i) a manufacturer or repackager may request a waiver with respect to prescription drug products that are packaged in a container too small or otherwise unable to accommodate a label with sufficient space to bear the information required for compliance with such requirement; and (ii) the Secretary determines whether to waive such requirement; and (C) establish a process by which the Secretary may add the prescription drug products or transactions that are exempt from the requirements of this section. (4) Grandfathered persons and prescription drug products (A) In general Not later than one year after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , the Secretary shall specify, by regulation, whether and under what circumstances the prescription drug product identifier requirement under paragraph (2) of subsections (b), (c), (d), and (e) shall apply to a prescription drug product that is in the supply chain or in a manufacturer’s inventory on the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 . (B) Third-party logistics provider licenses Until the date that is 1 year after the effective date of the third-party logistics provider licensing requirements under section 584, a third-party logistics provider shall be considered licensed under section 581(6)(B) unless the Secretary has made a finding that the third-party logistics provider does not utilize good handling and distribution practices and publishes notice thereof. (C) Label changes Changes made to package labels solely to incorporate the prescription drug product identifier may be submitted to the Secretary in the annual report of an establishment, in accordance with section 314.70(d) of chapter 21, Code of Federal Regulations (or any successor regulation). (b) Manufacturer requirements (1) Prescription drug product tracing (A) In general Beginning not later than January 1, 2015, a manufacturer shall— (i) prior to, or at the time of, each transaction in which such manufacturer transfers ownership of a prescription drug product, provide the subsequent owner with the transaction history and a transaction statement; and (ii) maintain the transaction information for each such transaction for not less than 3 years after the date of the transaction. (B) Requests for information Upon a request by the Secretary or other appropriate Federal or State official, in the event of a recall or for the purpose of investigating a suspect prescription drug product or an illegitimate prescription drug product, a manufacturer shall, not later than 2 business days after receiving the request or in such reasonable time as determined by the Secretary, provide to the Secretary or other official, the applicable transaction history and transaction statement for the prescription drug product. (2) Prescription drug product identifier Beginning not later than 5 years after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , a manufacturer shall affix or imprint a prescription drug product identifier on each package and homogenous case of a prescription drug product intended to be introduced in a transaction. Such manufacturer shall maintain the information in the prescription drug product identifier for such prescription drug product for not less than 3 years after the date of the transaction. (3) Authorized trading partners Beginning not later than January 1, 2015, a manufacturer shall ensure that each of its trading partners is authorized. (4) List of authorized distributors of record Beginning not later than January 1, 2015, each manufacturer of a prescription drug shall— (A) maintain a list of the authorized distributors of record of such drug at the corporate offices of such manufacturer; (B) make such list publicly available, including placement on the Internet Website of such manufacturer; and (C) update such list not less than once per quarter. (5) Verification Beginning not later than January 1, 2015, a manufacturer shall implement systems and processes to enable the manufacturer to comply with the following requirements: (A) Suspect prescription drug product (i) In general Upon making a determination that a prescription drug product in the possession or control of the manufacturer is a suspect prescription drug product, or upon receiving a request for verification from the Secretary that a prescription drug product within the possession or control of a manufacturer is a suspect prescription drug product, a manufacturer shall promptly conduct an investigation in coordination with trading partners, as applicable, to determine whether the prescription drug product is an illegitimate prescription drug product. Beginning not later than 5 years after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , such investigation shall include— (I) verifying the prescription drug product at the package level; (II) validating any applicable transaction history in the possession of the manufacturer; and (III) otherwise investigating to determine whether the prescription drug product is an illegitimate prescription drug product. (ii) Cleared prescription drug product If the manufacturer determines that a suspect prescription drug product is not an illegitimate prescription drug product, the manufacturer shall promptly notify the Secretary of such determination and such prescription drug product may be further distributed. (iii) Records A manufacturer shall keep records of its investigation of a suspect prescription drug product for not less than 3 years after the conclusion of the investigation. (B) Illegitimate prescription drug product (i) In general Upon determining that a prescription drug product in the possession or control of a manufacturer is an illegitimate prescription drug product, the manufacturer shall— (I) quarantine such prescription drug product from prescription drug product intended for distribution; and (II) provide for the disposition of the illegitimate prescription drug product. (ii) Trading partner Upon determining that a prescription drug product in the possession or control of a trading partner is an illegitimate prescription drug product, the manufacturer shall take reasonable steps to assist a trading partner to provide for the disposition of the illegitimate prescription drug product. (iii) Making a notification Upon determining that a prescription drug product in the possession or control of the manufacturer is an illegitimate prescription drug product, the manufacturer shall notify the Secretary of such determination not later than 24 hours after making such determination. The Secretary shall determine whether additional trading partner notification is appropriate. (iv) Responding to a notification Upon the receipt of a notification from the Secretary that a determination has been made that a prescription drug product is an illegitimate prescription drug product, a manufacturer shall— (I) identify all illegitimate prescription drug products that are subject to such notification and in the possession or control of the manufacturer, including any prescription drug product that is subsequently received; and (II) perform the activities described in clause (i). (v) Records A manufacturer shall keep records of the disposition of an illegitimate prescription drug product for not less than 3 years after the conclusion of the disposition. (C) Electronic database A manufacturer may satisfy the requirements of this paragraph through the use of a secure electronic database developed and operated by the manufacturer or another entity. The owner of such database shall establish the requirements and processes to respond to requests and may provide for data access to other members of the pharmaceutical distribution supply chain, as appropriate. The development and operation of such a database shall not relieve a manufacturer of the requirement under this paragraph to respond to a verification request submitted by means other than a secure electronic database. (D) Returned prescription drug product Beginning not later than 5 years after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , upon receipt of a returned prescription drug product that the manufacturer intends to further distribute, before further distributing such prescription drug product, the manufacturer shall— (i) verify the prescription drug product identifier for each sealed homogeneous case of such prescription drug product; or (ii) if such prescription drug product is not in a sealed homogeneous case, verify the prescription drug product identifier on each package. (c) Wholesale distributor requirements (1) Prescription drug product tracing (A) In general Beginning not later than April 1, 2015, a wholesale distributor shall— (i) not accept ownership of a prescription drug product unless the previous owner prior to, or at the time of, the transaction provides the applicable transaction history and a transaction statement for the prescription drug product; (ii) prior to, or at the time of, each transaction in which the wholesale distributor transfers ownership of a prescription drug product— (I) in the case that the wholesale distributor purchased the prescription drug product directly from the manufacturer, provide the subsequent owner with transaction history and a transaction statement for the prescription drug product; or (II) in the case that the wholesale distributor did not purchase the prescription drug product directly from the manufacturer, the exclusive distributor of the manufacturer, or a repackager that purchased directly from the manufacturer, provide the subsequent owner with transaction history beginning with the wholesale distributor that did purchase the product directly from the manufacturer, the exclusive distributor of the manufacturer, or a repackager that purchased directly from the manufacturer; (iii) notwithstanding clause (ii), if the wholesale distributor purchased the prescription drug product directly from the manufacturer, its exclusive distributor, or a repackager that purchased directly from the manufacturer or its authorized distributor of record— (I) provide an initial purchase transaction statement on the invoice to the customer, stating that the wholesale distributor purchased the prescription drug product package directly from the manufacturer, exclusive distributor, or repackager; (II) make available to the immediate subsequent recipient of such prescription drug product the information required under clause (ii) through any combination of self-generated paper, electronic data, or manufacturer-provided information on the prescription drug product package; and (III) for purposes of subclauses (I) and (II), need not include any transactions occurring before the transfer of the prescription drug product to the wholesale distributor; and (iv) maintain the transaction information for each transaction described in clauses (i) and (ii) for not less than 3 years after the transaction. (B) Returns exception (i) Saleable returns Notwithstanding subparagraph (A), a wholesale distributor may— (I) accept returned prescription drug product without a transaction history from a dispenser or repackager; and (II) distribute such returned prescription drug product with a transaction history that begins with the wholesale distributor that so accepted the returned product. (ii) Nonsaleable returns A wholesale distributor may return a nonsaleable prescription drug to the manufacturer or repackager, to the wholesale distributor from whom such prescription drug was purchased, or to a person acting on behalf of such a person, including a returns processor, without providing the information required under subparagraph (A). (C) Requests for information Upon a request by the Secretary or other appropriate Federal or State official, in the event of a recall or for the purpose of investigating a suspect prescription drug product or an illegitimate prescription drug product a wholesale distributor shall, not later than 2 business days after receiving the request or in such other reasonable time as determined by the Secretary, provide the applicable transaction history and transaction statements for the prescription drug product. (2) Prescription drug product identifier Beginning not later than 7 years after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , a wholesale distributor may engage in transactions involving a prescription drug product only if such prescription drug product is encoded with a prescription drug product identifier, except as provided in subsection (a)(4). (3) Authorized trading partners Beginning not later than January 1, 2015, a wholesale distributor shall ensure that each of its trading partners is authorized. (4) Verification Beginning not later than April 1, 2015, a wholesale distributor shall implement systems to enable the wholesale distributor to comply with the following requirements: (A) Suspect prescription drug product (i) In general Upon making a determination that a prescription drug product in the possession or control of the wholesale distributor is a suspect prescription drug product, or upon receiving a request for verification from the Secretary that a prescription drug product within the possession or control of a wholesale distributor is a suspect prescription drug product, a wholesale distributor shall promptly conduct an investigation to determine whether the prescription drug product is an illegitimate prescription drug product. Beginning not later than 7 years after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , such investigation shall include— (I) verifying a package of the prescription drug product; (II) validating any applicable transaction history in the possession of the wholesale distributor; and (III) otherwise investigating to determine whether the prescription drug product is an illegitimate prescription drug product. (ii) Cleared prescription drug product If the wholesale distributor determines that a suspect prescription drug product is not an illegitimate prescription drug product, the wholesale distributor shall promptly notify the Secretary of such determination and such prescription drug product may be further distributed. (iii) Records A wholesale distributor shall keep records of its investigation of a suspect prescription drug product for not less than 3 years after the conclusion of the investigation. (B) Illegitimate prescription drug product (i) In general Upon receiving notice that a manufacturer of a prescription drug product has determined that a prescription drug product in the possession or control of a wholesale distributor is an illegitimate prescription drug product, the wholesale distributor shall— (I) quarantine such prescription drug product within the possession or control of the wholesale distributor from prescription drug product intended for distribution; and (II) provide for the disposition of the illegitimate prescription drug product within the possession or control of the wholesale distributor. (ii) Trading partner Upon determining that a prescription drug product in the possession or control of a trading partner is an illegitimate prescription drug product, the wholesale distributor shall take reasonable steps to assist a trading partner to provide for the disposition of the illegitimate prescription drug product. (iii) Making a notification Upon determining that a prescription drug product in the possession or control of the wholesale distributor is an illegitimate prescription drug product, the wholesale distributor shall notify the Secretary of such determination not later than 24 hours after making such determination. The Secretary shall determine whether additional trading partner notification is appropriate. (iv) Responding to a notification Upon the receipt of a notification from the Secretary that a determination has been made that a prescription drug product is an illegitimate prescription drug product, a wholesale distributor shall— (I) identify all illegitimate prescription drug product subject to such notification that is in the possession or control of the wholesale distributor, including any prescription drug product that is subsequently received; and (II) perform the activities described in clause (i). (v) Records A wholesale distributor shall keep records of the disposition of an illegitimate prescription drug product for not less than 3 years after the conclusion of the disposition. (C) Electronic database A wholesale distributor may satisfy the requirements of this paragraph through the use of a secure electronic database developed and operated by the manufacturer or another entity. The owner of such database shall establish the requirements and processes to respond to requests and may provide for data access to other members of the pharmaceutical distribution supply chain, as appropriate. The development and operation of such a database shall not relieve a wholesale distributor of the requirement under this paragraph to respond to a verification request submitted by means other than a secure electronic database. (D) Returned prescription drug product Beginning not later than 7 years after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , upon receipt of a returned prescription drug product that the wholesale distributor intends to further distribute, before further distributing such prescription drug product, the wholesale distributor shall— (i) verify the prescription drug product identifier for each sealed homogeneous case of such prescription drug product; or (ii) if such prescription drug product is not in a sealed homogeneous case, verify the prescription drug product identifier on each package. (d) Dispenser requirements (1) Prescription drug product tracing (A) In general Beginning not later than July 1, 2015, a dispenser— (i) shall not accept ownership of a prescription drug product, unless the previous owner prior to, or at the time of, the transaction, provides transaction history and a transaction statement; (ii) prior to, or at the time of, each transaction in which the dispenser transfers ownership of a prescription drug product (but not including dispensing to a patient or returns) shall provide the subsequent owner with transaction history and a transaction statement for the prescription drug product, except that the requirements of this clause shall not apply to sales by a dispenser to another dispenser to fulfill a specific patient need; and (iii) shall maintain transaction information for a period of not less than 3 years after the date of the transaction. (B) Agreements with third parties A dispenser may enter into a written agreement with a third party, including an authorized wholesale distributor, under which the third party confidentially maintains the transaction information required to be maintained under this subsection on behalf of the dispenser. If a dispenser enters into such an agreement, the dispenser shall maintain a copy of the written agreement. (C) Returns exception (i) Saleable returns Notwithstanding subparagraph (A)(ii), a dispenser may return prescription drug product to the trading partner from which the dispenser obtained the prescription drug product without providing the information required under such subparagraph. (ii) Nonsaleable returns Notwithstanding subparagraph (A)(ii), a dispenser may return a nonsaleable prescription drug to the manufacturer or repackager, to the wholesale distributor from whom such prescription drug was purchased, to a returns processor, or to a person acting on behalf of such persons without providing the information required under such subparagraph. (D) Requests for information Upon a request by the Secretary or other appropriate Federal or State official, in the event of a recall or for the purpose of investigating a suspect prescription drug product or an illegitimate prescription drug product, a dispenser shall, not later than 2 business days after receiving the request or in another such reasonable time as determined by the Secretary, provide lot level transaction information. (2) Prescription drug product identifier Beginning not later than 8 years after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , a dispenser may engage in transactions involving a prescription drug product only if such prescription drug product is encoded with a prescription drug product identifier, except as provided in subsection (a)(4). (3) Authorized trading partners Beginning not later than January 1, 2015, a dispenser shall ensure that each of its trading partners is authorized. (4) Verification Beginning not later than January 1, 2015, a dispenser shall implement systems to enable the dispenser to comply with the following requirements: (A) Suspect prescription drug product (i) In general Upon making a determination that a prescription drug product in the possession or control of the dispenser is a suspect prescription drug product, or upon receiving a request for verification from the Secretary that a prescription drug product within the possession or control of a dispenser is a suspect prescription drug product, a dispenser shall promptly conduct an investigation to determine whether the prescription drug product is an illegitimate prescription drug product. Such investigation shall include— (I) verifying whether the lot number of a suspect prescription drug product corresponds with the lot number for such prescription drug product; (II) beginning 8 years after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , verifying that the product identifier of at least 3 packages or 10 percent of such suspect prescription drug product, whichever is greater, or all packages, if there are fewer than 3, corresponds with the prescription drug product identifier for such product; (III) validating any applicable transaction history in the possession of the dispenser; and (IV) otherwise investigating to determine whether the prescription drug product is an illegitimate prescription drug product. (ii) Cleared prescription drug product If the dispenser makes the determination that a suspect prescription drug product is not an illegitimate prescription drug product, the dispenser shall promptly notify the Secretary of such determination and such prescription drug product may be further dispensed. (iii) Records A dispenser shall keep records of its investigation of a suspect prescription drug product for not less than 3 years after the conclusion of the investigation. (B) Illegitimate prescription drug product (i) In general Upon receiving notice that a manufacturer of a prescription drug product has determined that a prescription drug product in the possession or control of a dispenser is an illegitimate prescription drug product, the dispenser shall— (I) quarantine such prescription drug product within the possession or control of the dispenser from prescription drug product intended for distribution; and (II) provide for the disposition of the illegitimate prescription drug product within the possession or control of the dispenser. (ii) Trading partners Upon determining that a prescription drug product in the possession or control of a trading partner is an illegitimate prescription drug product, the dispenser shall take reasonable steps to assist a trading partner to provide for the disposition of the illegitimate prescription drug product. (iii) Making a notification Upon determining that a prescription drug product in the possession or control of the dispenser is an illegitimate prescription drug product, the dispenser shall notify the Secretary of such determination not later than 24 hours after making such determination. The Secretary shall determine whether additional trading partner notification is appropriate. (iv) Responding to a notification Upon the receipt of a notification from the Secretary that a determination has been made that a prescription drug product is an illegitimate prescription drug product, a dispenser shall— (I) identify all illegitimate prescription drug products that are subject to such notification and in the possession or control of the dispenser, including any prescription drug product that is subsequently received; and (II) perform the activities described in clause (i). (v) Records A dispenser shall keep records of the disposition of an illegitimate prescription drug product for not less than 3 years after the conclusion of the disposition. (C) Electronic database A dispenser may satisfy the requirements of this paragraph through the use of a secure electronic database developed and operated by the manufacturer or another entity. The owner of such database shall establish the requirements and processes to enable responding to requests and may provide for data access to other members of the pharmaceutical distribution supply chain, as appropriate. The development and operation of such a database shall not relieve a dispenser of the requirement under this paragraph to respond to a verification request submitted by means other than a secure electronic database. (e) Repackager requirements (1) Prescription drug product tracing (A) In general Beginning not later than April 1, 2015, with respect to a prescription drug product received by a repackager from a wholesale distributor, and beginning not later than January 1, 2015, with respect to any other prescription drug product, a repackager shall— (i) not accept ownership of a prescription drug product unless the previous owner, prior to, or at the time of, the transaction, provides transaction history and a transaction statement for the prescription drug product; (ii) prior to, or at the time of, each transaction in which the repackager transfers ownership of a prescription drug product, provide the subsequent owner with transaction history and a transaction statement; (iii) maintain the transaction information for each transaction described in clause (i) or (ii) for not less than 3 years after the transaction; and (iv) maintain records that allow the repackager to associate the prescription drug product identifier the repackager affixes or imprints with the prescription drug product identifier assigned by the original manufacturer of the prescription drug product. (B) Nonsaleable returns Notwithstanding subparagraph (A)(ii), a repackager may return prescription drug product to the trading partner from whom the repackager obtained the prescription drug product without providing the information required under such subparagraph. (C) Requests for information Upon a request by the Secretary or other appropriate Federal or State official, in the event of a recall or for the purpose of investigating a suspect prescription drug product or an illegitimate prescription drug product, a repackager shall, not later than 2 business days after receiving the request or in such other reasonable time as determined by the Secretary, provide the applicable transaction history and transaction statement for the prescription drug product. (2) Prescription drug product identifier Beginning not later than 6 years after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , a repackager— (A) shall affix or imprint a prescription drug product identifier to each package and homogenous case of prescription drug product intended to be introduced in a transaction; (B) shall maintain the prescription drug product identifier for such prescription drug product for not less than 3 years after the date of the transaction; and (C) may engage in transactions involving a prescription drug product only if such prescription drug product is encoded with a prescription drug product identifier except as provided in subsection (a)(4). (3) Authorized trading partners Beginning on January 1, 2015, a repackager shall ensure that each of its trading partners is authorized. (4) Verification Beginning not later than January 1, 2015, a repackager shall implement systems to enable the repackager to comply with the following requirements: (A) Suspect prescription drug product (i) In general Upon making a determination that a prescription drug product in the possession or control of the repackager is a suspect prescription drug product, or upon receiving a request for verification from the Secretary that a prescription drug product within the possession or control of a repackager is a suspect prescription drug product, a repackager shall promptly conduct an investigation to determine whether the prescription drug product is an illegitimate prescription drug product, including— (I) beginning not later than 6 years after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , verifying the prescription drug product at the package level; (II) validating any applicable transaction information in the possession of the repackager; and (III) otherwise investigating to determine whether the prescription drug product is an illegitimate prescription drug product. (ii) Cleared prescription drug product If the repackager determines that a suspect prescription drug product is not an illegitimate prescription drug product, the repackager shall promptly notify the Secretary of such determination and such prescription drug product may be further distributed. (iii) Records A repackager shall keep records of its investigation of a suspect prescription drug product for not less than 3 years after the conclusion of the investigation. (B) Illegitimate prescription drug product (i) In general Upon receiving notice that a manufacturer of a prescription drug product has determined that a prescription drug product in the possession or control of a repackager is an illegitimate prescription drug product, the repackager shall— (I) quarantine such prescription drug product within the possession or control of the repackager from prescription drug product intended for distribution; and (II) provide for the disposition of the illegitimate prescription drug product within the possession or control of the repackager. (ii) Trading partner Upon determining that a prescription drug product in the possession or control of a trading partner is an illegitimate prescription drug product, the repackagers shall take reasonable steps to assist the trading partner to provide for the disposition of the illegitimate prescription drug product. (iii) Making a notification Upon determining that a prescription drug product in the possession or control of the repackager is an illegitimate prescription drug product, the repackager shall notify the Secretary of such determination not later than 24 hours after making such determination. The Secretary shall determine whether additional trading partner notification is appropriate. (iv) Responding to a notification Upon the receipt of a notification from the Secretary that a determination has been made that a prescription drug product is an illegitimate prescription drug product, a repackager shall— (I) identify all illegitimate prescription drug products that are subject to such notification and in the possession or control of the repackager, including any prescription drug product that is subsequently received; and (II) perform the activities described in clause (i). (v) Records A repackager shall keep records of the disposition of an illegitimate prescription drug product for not less than 3 years after the conclusion of the disposition. (C) Electronic database A repackager may satisfy the requirements of this paragraph through the use of a secure electronic database developed and operated by the manufacturer or another entity. The owner of such database shall establish the requirements and processes to respond to requests and may provide for data access to other members of the pharmaceutical distribution supply chain, as appropriate. The development and operation of such a database shall not relieve a repackager of the requirement under this paragraph to respond to a verification request submitted by means other than a secure electronic database. (D) Returned prescription drug product Beginning not later than 6 years after the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , upon receipt of a returned prescription drug product that the repackager intends to further distribute, before further distributing such prescription drug product, the repackager shall— (i) verify the prescription drug product identifier for each sealed homogeneous case of such prescription drug product; or (ii) if such prescription drug product is not in a sealed homogeneous case, verify the prescription drug product identifier on each package. (f) Third-Party logistics provider requirements (1) Authorized trading partners Beginning on January 1, 2015, a third-party logistics provider shall ensure that each of its trading partners is authorized. (2) Verification Beginning not later than January 1, 2015, a third-party logistics provider shall implement systems to enable the third-party logistics provider to comply with the following requirements: (A) Suspect prescription drug product (i) In general Upon making a determination that a prescription drug product in the possession or control of a third-party logistics provider is a suspect prescription drug product, a third-party logistics provider shall promptly notify the owner of such prescription drug product of the need to conduct an investigation to determine whether the prescription drug product is an illegitimate prescription drug product. (ii) Cleared prescription drug product If the owner of the prescription drug product notifies the third-party logistics provider of the determination that a suspect prescription drug product is not an illegitimate prescription drug product, such prescription drug product may be further distributed. (iii) Records A third-party logistics provider shall keep records of the activities described in clauses (i) and (ii) with respect to a suspect prescription drug product for not less than 3 years after the conclusion of the investigation. (B) Illegitimate prescription drug product (i) In general Upon receiving notice that a manufacturer of a prescription drug product has determined that a prescription drug product in the possession or control of a third-party logistics provider is an illegitimate prescription drug product, the third-party logistics provider shall— (I) quarantine such prescription drug product within the possession or control of the third-party logistics provider from prescription drug product intended for distribution; (II) promptly notify the owner of such prescription drug product of the need to provide for the disposition of such prescription drug product; and (III) promptly transfer possession of the prescription drug product to the owner of such prescription drug product to provide for the disposition of the prescription drug product. (ii) Making a notification Upon determining that a prescription drug product in the possession or control of the third-party logistics provider is an illegitimate prescription drug product, the third-party logistics provider shall notify the Secretary not later than 24 hours after making such determination. The Secretary shall determine whether additional trading partner notification is appropriate. (iii) Responding to a notification Upon the receipt of a notification from the Secretary, a third-party logistics provider shall— (I) identify all illegitimate prescription drug product subject to such notification that is in the possession or control of the third-party logistics provider, including any prescription drug product that is subsequently received; and (II) perform the activities described in clause (i). (iv) Records A third-party logistics provider shall keep records of the activities described in clauses (i) and (ii) with respect to an illegitimate prescription drug product for not less than 3 years after the conclusion of the disposition. (g) Drop shipments This section does not apply to any entity, notwithstanding its status as a wholesale distributor or repackager, or other status that is not involved in the physical handling, distribution, or storage of a prescription drug product. For purposes of this subsection, facilitating the distribution of a prescription drug product by providing various administrative services, including processing of orders and payments, shall not, by itself, be construed as being involved in the handling, distribution, or storage of a prescription drug product. . 3. Enhanced drug distribution security (a) Pilot projects (1) In general Not later than 2 years after the date of the enactment of this Act, the Secretary shall establish one or more pilot projects in coordination with manufacturers, repackagers, wholesale distributors, third-party logistics providers, and dispensers to explore and evaluate methods to enhance the safety and security of the pharmaceutical distribution supply chain. (2) Content (A) In general The Secretary shall ensure that the pilot projects under paragraph (1) collectively— (i) reflect the diversity of the pharmaceutical distribution supply chain; and (ii) include participants representative of every sector within the pharmaceutical distribution supply chain, including participants representative of small businesses. (B) Project design The pilot projects shall be designed to— (i) utilize the prescription drug product identifier for tracing of a prescription drug product, which utilization may include— (I) verification of the prescription drug product identifier of a prescription drug product; and (II) the use of aggregation and inference; (ii) improve the technical capabilities of each sector within the pharmaceutical supply chain to comply with systems and processes needed to utilize the prescription drug product identifiers to enhance tracing of a prescription drug product; and (iii) conduct such other activities as the Secretary determines appropriate to explore and evaluate methods to enhance the safety and security of the pharmaceutical distribution supply chain. (b) Public meetings (1) In general Not later than 6 months after the date of the enactment of this Act, and at least every 6 months thereafter until the submission of the report required by subsection (e)(2), the Secretary shall hold a public meeting to enhance the safety and security of the pharmaceutical distribution supply chain. In conducting such meetings, the Secretary shall take all measures reasonable and practicable to ensure the protection of confidential commercial information and trade secrets. (2) Content In conducting meetings under this subsection, the Secretary shall seek to address, in at least one such meeting, each of the following topics: (A) Best practices in each of the sectors within the pharmaceutical distribution supply chain to implement the requirements of section 582 of the Federal Food, Drug, and Cosmetic Act, as added by section 2. (B) The costs and benefits of implementation of such section 582, including the impact on each pharmaceutical distribution supply chain sector and on public health. (C) Whether additional electronic traceability requirements, including tracing of prescription drug product at the package level, are feasible, cost effective, overly burdensome on small businesses, and needed to protect public health. (D) The systems and processes needed to utilize the prescription drug product identifiers to enhance tracing of prescription drug product at the package level. (E) The technical capabilities and legal authorities, if any, needed to establish an electronic system that provides for enhanced tracing of prescription drug product at the package level. (F) The impact that the requirements, systems, processes, capabilities, and legal authorities referred to in subparagraphs (C), (D), and (E) would have on patient safety, the drug supply, cost and regulatory burden, the timeliness of patient access to prescription drugs, and small businesses. (c) Study of the pharmaceutical distribution supply chain (1) In general The Comptroller General of the United States shall conduct a study to examine implementation of the requirements established under subchapter H of chapter V of the Federal Food, Drug, and Cosmetic Act, as added by section 2, in order to inform the regulations promulgated under this section. (2) Consideration In conducting the study under this subsection, the Comptroller General shall provide for stakeholder input and shall consider the following: (A) The implementation of the requirements established under such subchapter H with respect to— (i) the ability of the health care system collectively to maintain patient access to medicines; (ii) the scalability of such requirements, including with respect to prescription drug product lines; and (iii) the capability of different sectors within the pharmaceutical distribution supply chain, including small businesses, to affix and utilize the prescription drug product identifier. (B) The need for additional legal authorities and activities to address additional gaps in the pharmaceutical distribution supply chain, if any, after the implementation of the requirements established under such subchapter H with respect to— (i) the systems and processes needed to enhance tracing of prescription drug product at the package level; (ii) the impact, feasibility, and cost effectiveness that additional requirements pursuant to this section would have on each pharmaceutical distribution supply chain sector and the public health; and (iii) the systems and processes needed to enhance interoperability among trading partners. (C) Risks to the security and privacy of data collected, maintained, or exchanged pursuant to the requirements established under such subchapter H. (d) Small dispensers (1) In general Not later than 10 years after the date of the enactment of this Act, the Secretary shall enter into a contract with a private, independent consulting firm with relevant expertise to conduct a technology and software study on the feasibility of dispensers that have 25 or fewer full-time employees conducting interoperable, electronic tracing of prescription drug products at the package level. (2) Condition As a condition of the award of a contract under paragraph (1), the private independent consulting firm awarded such contract shall agree to consult with dispensers that have 25 or fewer full-time employees when conducting the study under such subparagraph. (3) Study content The study conducted under paragraph (1) shall assess whether, with respect to conducting interoperable, electronic tracing of prescription drug products at the package level, the necessary hardware and software— (A) is readily accessible to such dispensers; (B) is not prohibitively expensive to obtain, install, and maintain for such dispensers; and (C) can be integrated into business practices, such as interoperability with wholesale distributors, for such dispensers. (4) Publication The Secretary shall publish— (A) the statement of work for the study conducted under paragraph (1) for public comment not later than 30 days before commencing the study; and (B) the final version of such study for public comment not later than 30 days after such study is completed. (5) Report to Congress Not later than 30 days after the date on which the study conducted under paragraph (1) is completed, the Secretary shall submit to the Committee on Energy and Commerce of the House of Representatives and the Committee on Health, Education, Labor, and Pensions of the Senate, a report on the findings of the study and any recommendations to improve the technology and software available to small dispensers for purposes of conducting electronic, interoperable tracing of prescription drug products at the package level. (6) Public meeting Not later than 180 days after the date on which the study conducted under paragraph (1) is completed, the Secretary shall hold a public meeting at which members of the public, including stakeholders, may present their views on the study. (e) Reports (1) GAO report Not later than 12 years after the date of the enactment of this Act, the Comptroller General shall submit to the Committee on Energy and Commerce of the House of Representatives and the Committee on Health, Education, Labor, and Pensions of the Senate a report on the results of the study conducted under subsection (c). (2) FDA report Not later than 12 years after the date of the enactment of this Act, the Secretary shall submit to the Committee on Energy and Commerce of the House of Representatives and the Committee on Health, Education, Labor, and Pensions of the Senate a report on the results of the pilot program conducted under subsection (a), taking into consideration— (A) the comments received during the public meetings conducted under subsection (b); and (B) the results of the study conducted, and the public comments received during the public meeting held, under subsection (d). (f) Establishment of additional requirements (1) In general Notwithstanding any other provision of this Act, including the amendments made by this Act, not earlier than January 1, 2027, and not later than March 1, 2027, the Secretary shall issue proposed regulations that establish additional requirements to prevent a suspect product, illegitimate product, or a product that is counterfeit, stolen, diverted, or otherwise unfit for distribution from entering into or being further distributed in the supply chain, including— (A) requirements related to the use of interoperable electronic systems and technologies for enhanced tracing of prescription drug product at the package level, which may include verification of the prescription drug product identifier of a package of prescription drug product and enhanced verification of saleable returns; (B) requirements related to the use of additional prescription drug product identifiers or prescription drug product identifier technology that meet the standards developed under section 582(a)(2) of the Federal Food, Drug, and Cosmetic Act, as added by section 2; (C) requirements related to the use of aggregation, inference, and other methods, if determined to be necessary components of the systems and technologies referred to in subparagraph (A); and (D) other data transmission and maintenance requirements and interoperability standards. (2) Flexibility The requirements described in paragraph (1) shall provide for flexibility for a member of the pharmaceutical supply chain, by— (A) with respect to dispensers, allowing a dispenser to enter into a written agreement with a third party, including an authorized wholesale distributor, under which— (i) the third party confidentially maintains any information required to be maintained under such requirements for the dispenser; and (ii) the dispenser maintains a copy of the written agreement and is not relieved of the other obligations of the dispenser under such requirements; (B) establishing a process by which an authorized manufacturer, repackager, wholesale distributor, or dispenser may request a waiver from any such requirements if the Secretary determines that such requirements would result in an undue economic hardship on the manufacturer, wholesale distributor, or dispenser; (C) not requiring the adoption of specific business systems by a member of the pharmaceutical supply chain for the maintenance and transmission of prescription drug product tracing data; and (D) prescribing alternative methods of compliance for small businesses, as specified in paragraph (4). (3) Considerations In issuing proposed regulations under paragraph (1), the Secretary shall consider— (A) the results of the pilot project conducted under subsection (a); (B) the public meetings held under subsection (b); (C) the studies conducted under subsections (c) and (d); (D) the reports submitted under subsection (e); (E) the public health benefits of such regulations compared with the cost of compliance with the requirements contained in such regulations, including with respect to entities of varying sizes and capabilities; and (F) the diversity of the pharmaceutical distribution supply chain by providing appropriate flexibility for each sector in the supply chain, including small businesses. (4) Small business protection The Secretary, taking into consideration the study conducted under paragraph (d), shall, if the Secretary determines that the requirements established pursuant to paragraph (1) would result in an undue economic hardship on small businesses, provide for alternative methods of compliance with any such requirement by small businesses, including— (A) establishing timelines for such compliance (including compliance by dispensers with 25 or fewer full-time employees) that do not impose undue economic hardship for small businesses, including dispensers with respect to which the study concluded has insufficient hardware and software to conduct interoperable, electronic tracing of prescription drug products at the package level; and (B) establishing a process by which a dispenser may request a waiver from any such requirement. (5) Regulations In issuing regulations to carry out this subsection, the Secretary shall— (A) issue a notice of proposed rulemaking that includes a copy of the proposed rule; (B) provide for a period of not less than 60 days for comments on the proposed rule; and (C) provide for an effective date of the final rule that is 2 years after the date on which such final rule is published. (6) Sunset The requirements regarding the provision and receipt of transaction history and transaction statements under section 582 of the Federal Food, Drug, and Cosmetic Act, as added by section 2, shall cease to be effective on the date on which the regulations issued under this section are fully implemented. (g) Definitions In this section: (1) The terms defined in section 581 of the Federal Food, Drug, and Cosmetic Act, as added by section 2, shall have the same meanings in this section as such terms are given in such section 581. (2) The term Secretary means the Secretary of Health and Human Services, acting through the Commissioner of Food and Drugs. 4. National standards for wholesale distributors (a) Standards Chapter V of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 351 et seq. ) is amended— (1) in section 503 (21 U.S.C. 353), by striking (e)(1)(A) and all that follows through (3) For the purposes of this subsection and subsection (d)— and inserting the following: (e) For purposes of subsection (d)— ; (2) in section 503(e) ( 21 U.S.C. 353(e) ), by redesignating subparagraphs (A) and (B) as paragraphs (1) and (2), respectively; and (3) in subchapter H, as added by section 2, by adding at the end the following: 583. National standards for wholesale distributors (a) Standards (1) In general The Secretary shall establish, by regulation, standards for the licensing of persons that make wholesale distributions. (2) Requirements The standards under paragraph (1) shall, with respect to wholesale distributions, include requirements for— (A) the storage and handling of drugs subject to section 503(b)(1), including facility requirements; (B) the establishment and maintenance of records of the distributions of such drugs; (C) the furnishing of a bond or other equivalent means of security in accordance with paragraph (3); (D) mandatory background checks and fingerprinting of facility managers or designated representatives; (E) the establishment and implementation of qualifications for key personnel; (F) the mandatory physical inspection of any facility to be used in wholesale distribution within a reasonable timeframe from the initial application for licensure of the wholesale distributor; and (G) in accordance with paragraph (5), the prohibition of certain persons from engaging in wholesale distribution. (3) Bond or other security The requirements under paragraph (2)(C) shall provide for the following: (A) An applicant that is not a government-owned-and-operated wholesale distributor, for the issuance or renewal of a wholesale distributor license, shall submit a surety bond of $100,000 or other equivalent means of security acceptable to the applicable licensing authority. (B) For purposes of subparagraph (A), the applicable licensing authority may accept a surety bond less than $100,000 if the annual gross receipts of the previous tax year for the wholesale distributor is $10,000,000 or less, in which case the surety bond may not be less than $25,000. (C) If a wholesale distributor can provide evidence that it possesses the required bond in a State, the requirement for a bond in another State is waived. (4) Inspections To satisfy the inspection requirement under paragraph (2)(F), the Secretary may conduct the inspection, or may accept an inspection by— (A) the government of the State in which the facility is located; or (B) a third-party accreditation or inspection service approved by the Secretary. (5) Prohibited persons The requirements under paragraph (2) shall include requirements to prohibit a person from receiving or maintaining licensure for wholesale distribution if the person— (A) has been convicted of any felony for conduct relating to wholesale distribution; any felony violation of section 301(i) or 301(k); or any felony violation of section 1365 of title 18, United States Code, relating to prescription drug product tampering; or (B) has engaged in a pattern of violating the requirements of this section that presents a threat of serious adverse health consequences or death to humans. (b) Reporting by licensed wholesale distributors (1) Annual report Beginning not later than 1 year after the date of the enactment of this section, each person engaged in wholesale distribution in interstate commerce shall submit on an annual basis, and update as necessary, a report to the Secretary including— (A) the wholesale distributor’s name; (B) the wholesale distributor’s address; (C) a listing of each State in which the wholesale distributor is licensed for wholesale distribution; and (D) any disciplinary actions taken by a State, the Federal Government, or a foreign government during the reporting period against the wholesale distributor. (2) Posting on Internet The Secretary shall post on the public Internet Website of the Food and Drug Administration the name of each wholesale distributor, and the State in which each such distributor is licensed, based on reports under paragraph (1). (c) Preservation of State authority This subchapter does not prohibit a State from— (1) licensing wholesale distributors for the conduct of wholesale distribution activities in the State in accordance with this subchapter; and (2) collecting fees from wholesale distributors in connection with such licensing, so long as the State does not require such licensure to the extent to which an entity is engaged in third-party logistics provider activities. (d) Definition In this section, the term wholesale distribution means the distribution of a drug subject to section 503(b)(1) to a person other than a consumer or patient, but does not include— (1) intracompany distribution of any drug between members of an affiliated group (as defined in section 1504(a) of the Internal Revenue Code of 1986); (2) the distribution of a drug, or an offer to distribute a drug among hospitals or other health care entities which 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, except that a drug shortage not caused by a public health emergency shall not constitute such an emergency medical reason; (4) dispensing of a drug pursuant to a valid prescription executed in accordance with subsection 503(b)(1); (5) the distribution of minimal quantities of 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 third-party logistics provider provided that such third-party logistics provider does not take ownership of the drug; (10) the transport of a drug by a common carrier, 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 of the drug and repacked it in accordance with section 582(e); (12) saleable drug returns when conducted by a dispenser in accordance with section 203.23 of title 21, Code of Federal Regulations (or any successor regulation); (13) the distribution of a combination prescription drug product described in section 581(20)(B)(xiii); (14) the distribution of a medical convenience kit described in section 581(21)(B)(xiv); (15) 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); (16) the distribution of an intravenous drug used to maintain the equilibrium of water and minerals in the body, such as dialysis solutions; (17) the distribution of a drug that is intended for irrigation or reconstitution, or sterile water, whether intended for such purposes or for injection; (18) the distribution of compressed medical gas (as defined in section 581(21)(C)); (19) facilitating the distribution of a prescription drug product by providing administrative services, such as processing of orders and payments, without physical handling, distribution, or storage of a prescription drug product; or (20) (A) the distribution of a product by a dispenser, or a wholesale distributor acting at the direction of the dispenser, to a repackager registered under section 510 for the purpose of repackaging the drug for use by that dispenser or another health care entity that is under the dispenser’s ownership or control, so long as the dispenser retains ownership of the prescription drug product; and (B) the saleable or nonsaleable return by such repackager of such prescription drug product. (e) Effective date The standards required by subsection (a) shall take effect not later than 2 years after the date of the enactment of this section. The Secretary shall issue the regulations required by subsection (a) not later than 1 year after the date of the enactment of this Act. . (b) Conforming amendment Section 804(a)(5)(A) of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 384(a)(5)(A) ) is amended by striking 503(e)(2)(A) and inserting 583(a) . 5. National licensure standards for third-party logistics providers Subchapter H of chapter V of the Federal Food, Drug, and Cosmetic Act, as amended by section 4, is further amended by adding at the end the following: 584. National licensure standards for third-party logistics providers (a) License requirement No facility may engage in the activities of a third-party logistics provider in any State unless— (1) the facility is licensed— (A) by the State from which the drug is distributed by the third-party logistics provider in accordance with a qualified licensing program, if the State has such a program; or (B) by the Secretary under this section, if the State from which the drug is distributed does not have such a program; and (2) if the drug is distributed interstate and the facility is not licensed by the Secretary under paragraph (1)(B), registers with the State into which the drug is distributed if such State requires such registration. (b) Reporting by licensed third-Party logistics providers (1) Annual report Beginning not later than 1 year after the date of the enactment of this section, each facility engaged in the activities of a third-party logistics provider shall submit on an annual basis, and update as necessary, a report to the Secretary including— (A) the facility’s name; (B) the facility’s address; (C) a listing of each jurisdiction (whether State or Federal) in which the facility is licensed for third-party logistics provider activities; and (D) any disciplinary actions taken by a State or Federal licensing authority during the reporting period against the facility. (2) Posting on Internet The Secretary shall post on the public Internet Website of the Food and Drug Administration the name of each third-party logistics provider, and each jurisdiction (whether State or Federal) in which the provider is licensed, based on reports under paragraph (1). (c) Preservation of State authority This subchapter does not prohibit a State from— (1) licensing third-party logistic providers for the conduct of third-party logistics provider activities in the State in accordance with this subchapter; and (2) collecting fees from third-party logistics providers in connection with such licensing, so long as the State does not require such licensure to the extent to which an entity is engaged in wholesale distribution. (d) Costs (1) Authorized licensure fees In the case of a facility engaging in the activities of a third-party logistics provider licensed by the Secretary under this section, the Secretary may assess and collect a reasonable fee in an amount equal to the costs to the Federal Government of establishing and administering the licensure program established, and conducting period inspections, under this section. (2) Adjustment The Secretary shall adjust the amount of the fee under paragraph (1) on an annual basis, if necessary, to generate an amount of revenue equal to the costs referred to in such paragraph. (3) Availability Fees assessed and collected under this subsection shall be available for obligation only to the extent and in the amount provided in advance in appropriations Acts. Such fees shall remain available until expended. (e) License regulations (1) In general The Secretary shall establish, by regulation, standards, terms, and conditions for licensing persons to engage in third-party logistics provider activities. (2) Content The regulations under paragraph (1) shall— (A) include standards relating to eligibility for, and revocation and reissuance of, licenses; (B) establish a process by which the applicable licensing authority will, upon request by a third-party logistics provider that is accredited by a third-party accreditation program approved by the Secretary, issue a license to the provider; (C) establish a process by which the Secretary shall issue a license to a third-party logistics provider if the Secretary is not able to approve a third-party accreditation program because no such program meets the Secretary’s requirements necessary for approval of such a third-party accreditation program; (D) require that the third-party logistics provider comply with storage practices, as determined by the Secretary, at the provider’s facilities, including— (i) maintaining access to warehouse space of suitable size to facilitate safe operations, including a suitable area to quarantine suspect prescription drug product; (ii) maintaining adequate security; and (iii) having written policies and procedures to— (I) address receipt, security, storage, inventory, shipment, and distribution of a prescription drug product; (II) identify, record, and report confirmed losses or thefts in the United States; (III) correct errors and inaccuracies in inventories; (IV) provide support for manufacturer recalls; (V) prepare for, protect against, and address any reasonably foreseeable crisis that affects security or operation at the facility, such as a strike, fire, or flood; (VI) ensure that any expired prescription drug product is segregated from other prescription drug products and returned to the manufacturer or repackager or destroyed; (VII) maintain the capability to electronically trace the receipt and outbound distribution of a prescription drug product, and supplies and records of inventory; and (VIII) quarantine or destroy a suspect prescription drug product if directed to do so by the respective manufacturer, wholesale distributor, dispenser, or an authorized government agency; (E) provide for periodic inspection, as determined by the Secretary, of such facility warehouse space to ensure compliance with this section; (F) prohibit a facility from having as a manager or designated representative anyone convicted of any felony violation of section 301(i) or 301(k) or any felony violation of section 1365 of title 18, United States Code, relating to prescription drug product tampering; (G) perform mandatory background checks of the provider’s facility managers or designated representatives of such managers; (H) require a third-party logistics provider to provide to the applicable licensing authority, upon the authority’s request, a list of all prescription drug product manufacturers, wholesale distributors, and dispensers for whom the third-party logistics provider provides services at the provider’s facilities; and (I) include procedures under which any third-party logistics provider license— (i) will expire on the date that is 3 years after issuance of the license; and (ii) may be renewed for additional 3-year periods. (f) Validity of license A license issued under this section shall remain valid as long as such third-party logistics provider remains accredited by the Secretary, subject to renewal under subsection (d). If the Secretary finds that the third-party accreditation program demonstrates that all applicable requirements for licensure under this section are met, the Secretary shall issue a license under this section to a third-party logistics provider receiving accreditation. (g) Qualified licensing program defined In this section, the term qualified licensing program means a program meeting the requirements of this section and the regulations thereunder. (h) Effective date The requirements of this section shall take effect not later than 1 year after the date of the enactment of this section. The Secretary shall issue the regulations required by subsection (d) not later than 180 days after the date of the enactment of this section. . 6. Penalties (a) Prohibited acts Section 301(t) of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 331(t) ) is amended by striking or the distribution of drugs in violation of section 503(e) or the failure to otherwise comply with the requirements of section 503(e) and inserting the failure to comply with any requirement of section 582, engaging in the wholesale distribution of a drug in violation of section 583 or the failure to otherwise comply with the requirements of section 583, or engaging in the activities of a third-party logistics provider in violation of section 584 or the failure to otherwise comply with the requirements of section 584 . (b) Enhanced penalty for knowing unlicensed activities Section 303(b)(1)(D) of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 333(b)(1)(D) ) is amended by striking 503(e)(2)(A) and inserting 583 or 584 . (c) Misbranding Section 502 of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 352 ) is amended by adding at the end the following: (bb) If it is a drug and it fails to bear a prescription drug product identifier as required by section 582. . 7. Uniform national policy Subchapter H of chapter V of the Federal Food, Drug, and Cosmetic Act, as amended by section 5, is further amended by adding at the end the following: 585. Uniform national policy (a) Preemption of State prescription drug product tracing and other requirements Beginning on the date of the enactment of the Safeguarding America’s Pharmaceuticals Act of 2013 , no State or political subdivision of a State may establish or continue in effect any requirements for tracing drugs through the distribution system (including any requirements with respect to paper or electronic pedigrees, track and trace, statements of distribution history, transaction history, or transaction statements, or verification, investigation, disposition, alerts, or recordkeeping relating to the pharmaceutical distribution supply chain system) that— (1) are inconsistent with, more stringent than, or in addition to any requirements applicable under this Act; or (2) are inconsistent with any applicable waiver, exception, or exemption issued by the Secretary under section 582(a). (b) Standards or licensure (1) In general Beginning on the date of the enactment of Safeguarding America’s Pharmaceuticals Act of 2013 , no State or political subdivision of a State may establish or continue any standards, requirements, or regulations with respect to wholesale drug distributor or third-party logistics provider licensure which are inconsistent with, less stringent than, in addition to, or more stringent than, the standards and requirements under this Act. (2) Licensing fees Paragraph (1) does not affect the authority of a State to collect fees from wholesale drug distributors or third-party logistics providers in connection with State licensing under section 583 or 584 pursuant to a licensing program meeting the requirements of such sections. (3) Enforcement, suspension, and revocation of licenses Notwithstanding paragraph (1), a State— (A) may take administrative action, including fines, to enforce a licensure requirement promulgated by the State in accordance with this Act; (B) may provide for the suspension or revocation of licenses issued by the State for violations of the laws of such State; (C) upon conviction of a person for a violation of Federal, State, or local controlled substance laws or regulations, may provide for fines, imprisonment, or civil penalties; and (D) may regulate activities of entities licensed pursuant to section 583 or 584 in a manner that is consistent with the provisions of this subchapter. . 8 Electronic labeling (a) In general Section 502(f) of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 352(f) ) is amended by adding at the end the following new sentence: Required labeling (other than immediate container or carton labels) that is intended for use by a physician, a pharmacist, or another health care professional, and that provides directions for human use of a drug subject to section 503(b)(1), may (except as necessary to mitigate a safety risk, as specified by the Secretary in regulation) be made available by electronic means instead of paper form, provided that such labeling complies with all applicable requirements of law, the manufacturer or distributor, as applicable, affords health care professionals and authorized dispensers (as defined in section 581) the opportunity to request the labeling in paper form, and after such a request the manufacturer or distributor promptly provides the requested information without additional cost. . (b) Regulations The Secretary of Health and Human Services shall promulgate regulations implementing the amendment made by subsection (a). (c) Application The last sentence of section 502(f) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 352(f)), as added by subsection (a), shall apply beginning on the earlier of— (1) the effective date of final regulations promulgated under subsection (b); or (2) the day that is 180 days after the date of enactment of this Act.

June 3, 2013 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed