Prescription Drug Marketing Act of 1987; Prescription Drug Amendments of 1992; Policies, Requirements, and Administrative Procedures

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 203 and 205

[Docket No. 92N-0297]

RIN 0905-AC81

Prescription Drug Marketing Act of 1987; Prescription Drug

Amendments of 1992; Policies, Requirements, and Administrative

Procedures

AGENCY: Food and Drug Administration, HHS.

ACTION: Proposed rule.

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SUMMARY: The Food and Drug Administration (FDA) is issuing a proposed

rule to set forth agency policies and requirements and to provide

administrative procedures, information, and guidance for those sections

of the Prescription Drug Marketing Act of 1987 (PDMA), as modified by

the Prescription Drug Amendments of 1992 (PDA), that were not

implemented by the final rule that set forth Federal guidelines for

State licensing of wholesale drug distributors (55 FR 38012, September

14, 1990). FDA is also proposing to amend the definitions section of

the State licensing guidelines to make the definition of ``wholesale

distribution'' consistent with that in this proposed regulation.

DATES: Written comments by May 30, 1994.

ADDRESSES: Written comments to the Dockets Management Branch (HFA-305),

Food and Drug Administration, rm. 1-23, 12420 Parklawn Dr., Rockville,

MD 20857.

FOR FURTHER INFORMATION CONTACT: Richard L. Arkin, Center for Drug

Evaluation and Research (HFD-362), Food and Drug Administration, 7500

Standish Pl., Rockville, MD 20855, 301-594-1046.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background

II. Description of the Proposed Rule

A. Scope

B. Reimportation

C. Sales Restrictions

D. Samples

E. Wholesale Distribution

F. Request and Receipt Forms, Reports, and Records

G. Penalties and Rewards

H. Technical Amendment to State Licensing Guideline

III. Economic Analysis

IV. Executive Order 12612: Federalism

V. Paperwork Reduction Act of 1980

VI. Environmental Impact

VII. Request for Comments

I. Background

On April 22, 1988, the President signed PDMA into law (Pub. L. 100-

293). According to the congressional findings that were made part of

the text of PDMA as section 2, the legislation was intended to ensure

that drug products purchased by consumers would be safe and effective

and to avoid an unacceptable risk that counterfeit, adulterated,

misbranded, subpotent, or expired drugs were being sold to American

consumers. (See sec. 2(8), PDMA.)

Congress found, among other things, that legislation was necessary

because there were insufficient safeguards in the drug distribution

system to prevent the introduction and retail sale of substandard,

ineffective, or counterfeit drugs, and that a wholesale drug diversion

submarket had developed that prevented effective control over, or even

routine knowledge of, the true sources of drugs. (See secs. 2(2) and

2(3), PDMA.)

Congress found that large amounts of drugs had been reimported into

the United States as American goods returned, causing a health and

safety risk to American consumers because the drugs may have become

subpotent or adulterated during foreign handling and shipping. Congress

also found that a ready market for prescription drug reimports had been

the catalyst for a continuing series of frauds against American

manufacturers and had provided the cover for the importation of foreign

counterfeit drugs. (See sec. 2(4), PDMA.)

The congressional findings stated that the then-existing system of

providing drug samples to physicians through manufacturers'

representatives had been abused for decades and had resulted in the

sale to consumers of misbranded, expired, and adulterated

pharmaceuticals. (See sec. 2(6), PDMA.)

According to the congressional findings, the bulk resale of below-

wholesale-priced prescription drugs by health care entities for

ultimate sale at retail helped to fuel the diversion market and was an

unfair form of competition to wholesalers and retailers who had to pay

otherwise prevailing market prices. (See sec. 2(7), PDMA.)

PDMA amends sections 301, 303, 503, and 801 of the Federal Food,

Drug, and Cosmetic Act (the act) (21 U.S.C. 331, 333, 353, 381) to: (1)

Ban the reimportation of prescription human drugs produced in the

United States, except when reimported by the manufacturer or under FDA

authorization for emergency medical care; (2) ban the sale, purchase,

or trade, or the offer to sell, purchase, or trade, of any drug sample;

(3) ban the sale, purchase, or trade, or the offer to sell, purchase,

or trade, or counterfeit any drug coupon; (4) establish limits on the

distribution of drug samples to practitioners licensed to prescribe

such drugs or to pharmacies of hospitals or other health care entities,

including a requirement that such distributions occur only at the

request of a licensed practitioner; (5) require licensed practitioners

to request samples in writing; (6) mandate storage, handling, and

recordkeeping requirements for drug samples; (7) prohibit, with certain

exceptions, the sale, purchase, or trade, or the offer to sell,

purchase, or trade, of prescription human drugs that were purchased by

hospitals or other health care entities, or which were donated or

supplied at a reduced price to a charitable organization; (8) require

State licensing of wholesale distributors of prescription drugs under

Federal guidelines that include minimum standards for storage,

handling, and recordkeeping; (9) require unauthorized wholesale

distributors to provide to each wholesale distributor a statement

identifying each sale of the drug before the sale to such wholesale

distributor; and (10) set forth civil and criminal penalties for

violations of these provisions.

Most PDMA provisions became effective July 22, 1988. However, the

drug sample distribution requirements (section 503(d) of the act (21

U.S.C. 353(d))) became effective on October 20, 1988, and the

requirement for State licensure of wholesale distributors (section

503(e)(2) of the act) became effective on September 15, 1992 (2 years

after the adoption of final rules by the agency setting standards for

State licensing). In the Federal Register of September 13, 1988 (53 FR

35325), FDA published proposed State licensing guidelines to implement

that part of PDMA. FDA received approximately 50 comments on the

proposal. These comments were made part of a public docket (Docket No.

88N-0258), which is available for inspection at FDA's Dockets

Management Branch (address above). After considering all the comments

received on the proposed rule, FDA published revised State licensing

guidelines as a final rule (21 CFR part 205) in the Federal Register of

September 14, 1990 (55 FR 38012). That rule includes minimum

requirements for storage and handling of prescription drugs and for

establishment and maintenance of records of drug distribution.

The PDMA State licensing requirements were modified by the

enactment of PDA (Pub. L. 102-353, 106 Stat. 941) on August 26, 1992.

Among other things, PDA amended section 503(e) of the act to establish

a temporary Federal wholesale distributor registration procedure for

wholesale drug distributors in those States that do not have a

licensing program that meets the Federal guidelines. On September 3,

1992, FDA issued a letter to industry and other interested persons

providing information and guidance on the procedure to be followed by

wholesale distributors required to register under the procedure

established by PDA.

PDA also recast other parts of PDMA. Among other things, PDA: (1)

Amended section 303(b)(1) of the act to establish a scienter

requirement (``knowingly'') for conviction of violations of certain

prohibited acts under section 301(t) of the act relating to

reimportation (section 801(d)(1) of the act), samples (section

503(c)(1) of the act), coupons (503(c)(2) of the act), and unlicensed

wholesale distributors (section 503(e)(2)(A) of the act); (2) amended

section 503(d) of the act to prohibit the distribution of drug samples

by anyone other than the manufacturer or authorized distributors of

record, except that Congress excluded from the term ``distribute'' the

provision of a drug sample to a patient by a licensed practitioner,

health care professional acting at the direction and under the

supervision of such a practitioner, and a hospital or health care

entity pharmacy acting at the direction of such a practitioner; (3)

amended section 503(d)(2) and (d)(3) of the act to disallow any

distribution of drug samples by unauthorized distributors; (4) amended

section 503(e)(1) of the act to require that unauthorized distributors

provide a statement of origin identifying all prior sales, purchases,

or trades of such drugs and the names and addresses of the parties to

the transactions to all recipients; and (5) made certain conforming and

technical changes to the statute.

On August 1 and November 3, 1988, and January 26, 1990, FDA issued

letters to the regulated industry and other interested persons

providing information and guidance on those aspects of PDMA that were

not implemented by the State licensing rule. The letters requested

suggestions from the public regarding the drafting of regulations.

Suggestions from the public have been made part of a public docket

(Docket No. 88N-258L), which is also available for inspection at FDA's

Dockets Management Branch (address above). The agency has received

requests for the issuance of further guidance letters to provide

specific information in certain areas or to answer particular

questions. However, FDA believes that it is now appropriate to

establish definitive requirements through notice and comment

rulemaking.

In drafting this proposed rule, the agency considered the comments

submitted to Docket Nos. 88N-0258 and 88N-258L, including suggestions

received in response to FDA's three guidance letters, pertinent

comments received in response to the proposed rule on State licensing

of wholesale distributors, and other written submissions.

II. Description of the Proposed Rule

FDA is proposing to add a new part 203 to set forth agency policies

and requirements and to provide administrative procedures, information,

and guidance for those sections of PDMA that were not implemented by

part 205. FDA is also proposing to amend Sec. 205.3 to make the

definition of ``wholesale distribution'' consistent with that in

proposed part 203.

A summary of the provisions of proposed part 203 follows:

A. Scope

1. General

It was intended that PDMA would protect the public against the

threat of subpotent, adulterated, counterfeit, and misbranded drugs

posed by the existence of drug diversion schemes and a drug diversion

submarket, and the absence of appropriate controls over and creation

and maintenance of appropriate records regarding the distribution of

prescription drugs.

Accordingly, the scope of the proposed rule, as set forth in

proposed Sec. 203.1, includes establishment of procedures and

requirements pertaining to the reimportation and wholesale distribution

of prescription drugs; the sale, purchase, or trade (or the offer to

sell, purchase, or trade) of prescription drugs by hospitals, health

care entities, and charitable institutions; and the distribution of

prescription drug samples.

2. Bulk Drugs

Some questions have been raised about the applicability of PDMA to

bulk drugs. The statutory language of PDMA encompasses all drugs

subject to section 503(b) of the act within its scope.

The legislative history (``Report of the Committee on Energy and

Commerce,'' H. Rept. 100-76, April 30, 1987, and ``Report of the

Committee on Finance,'' S. Rept. 100-202, March 18, 1988) or the

congressional hearing record do not suggest that bulk drug substances

be treated any differently from other prescription drugs. Bulk drug

substances are susceptible to the same problems of lack of

accountability and diversion that this legislation was intended to

remedy. It is clear that applying the provisions of the statute to bulk

drug substances would help protect against the abuses that Congress

intended to address and contribute to the protection of the public

health. Accordingly, bulk drug substances are, as drugs within the

meaning of section 503(b) of the act, expressly brought within the

scope of PDMA and these implementing regulations.

3. Biological Products

Questions have also been raised about the applicability of PDMA to

biological products, even though the statutory language of PDMA

encompasses all drugs subject to section 503(b) of the act.

There is nothing in the legislative history or the congressional

hearing record to suggest that biological products that are

prescription drugs under section 503(b) of the act should be treated

differently from other prescription drugs. Biological products, except

for blood and blood components intended for transfusion, are

susceptible to the same problems of lack of accountability and

diversion that this legislation was intended to remedy. It is clear

that applying the provisions of the statute to biological products,

except for blood and blood components intended for transfusion, or

biological products which are also medical devices, would help protect

against the abuses that Congress intended to address and contribute to

the protection of the public health. Accordingly, biological products

that are prescription drugs under section 503(b) of the act, except for

blood and blood components intended for transfusion, fall under the

scope of PDMA and are expressly included in these implementing

regulations.

4. Blood and Blood Components Intended for Transfusion

Since passage of PDMA, a number of persons have presented to FDA

issues posed by the application of PDMA to the distribution and sale of

blood and blood components intended for transfusion by blood

establishments and hospitals. Two comments to the agency requested

clarification of PDMA's scope and urged FDA to exempt blood

establishments from all of PDMA's provisions. The comments contended

that licensing blood distributors as wholesalers would seriously

disrupt the Nation's blood services. A third comment suggested that the

agency could, by notice and comment rulemaking, exempt blood and blood

components from PDMA by declaring that they are not prescription drugs

for PDMA purposes.

PDMA, by its literal terms, applies to all drugs that are subject

to section 503(b) of the act; that is, to all human prescription drugs,

including biological products. There is no doubt that blood and blood

components intended for transfusion are prescription drugs. (See 21 CFR

606.121(c)(8)(i) and 610.61(s). See also 47 FR 22518, May 25, 1982; 46

FR 40212, August 7, 1981.) However, if PDMA were considered applicable

to the distribution of blood and blood components, the result would be

to impede the existing blood distribution system, thereby interfering

with our Nation's blood supply. Because application of PDMA to blood

and blood components would produce this untenable result, FDA believes

that Congress could not have intended to subject blood and blood

components to PDMA's provisions.

Moreover, the legislative history lacks any discussion of PDMA's

application to blood and blood components and also clearly shows that

Congress intended that PDMA remedy problems associated with the

distribution of those drugs that are popularly referred to as

``medicines'' or ``pharmaceuticals.'' (See Pub. L. 100-293, sec. 2

(1988) (``Report of the Committee on Energy and Commerce,'' H. Rept.

100-76, April 30, 1987, and ``Report of the Committee on Finance,'' S.

Rept. 100-202, March 18, 1988).) Blood and blood components are unique

drug products that are distributed in an entirely different way from

other prescription drugs. FDA believes that the fact that blood and

blood components are not part of the system of distribution and

marketing that Congress intended to regulate under the terms of PDMA

further signals that Congress could not have intended to include blood

and blood components within the scope of the licensing requirement.

Accordingly, FDA has taken a number of actions to clarify the scope

of PDMA to prescription drugs other than blood and blood components

intended for transfusion. In the final State licensing guideline rule

(55 FR 38012 at 38024), FDA specifically excluded from the definition

of ``wholesale distribution'' the sale, purchase, or trade of blood and

blood components intended for transfusion (see Sec. 205.3(f)(8)). At

the same time, FDA published another proposed rule, ``Applicability to

Blood and Blood Components Intended for Transfusion; Guidelines for

State Licensing of Wholesale Prescription Drug Distributors'' (55 FR

38027, September 14, 1990), asking for comments on the exclusion of

blood and blood components intended for transfusion from the PDMA State

licensing guidelines.

After considering the comments received and reviewing PDMA's

purpose and its legislative history, FDA has tentatively concluded that

PDMA is not intended to apply to blood and blood components intended

for transfusion. Accordingly, at Sec. 203.1 the proposed rule would

exclude blood and blood components intended for transfusion from the

requirements of and the restrictions in PDMA and also adds specific

language at Sec. 203.22(g) excluding blood and blood components

intended for transfusion from the PDMA sales restrictions.

5. Oxygen

Questions have also been raised about the applicability of PDMA to

the drug oxygen, U.S.P. (U.S. Pharmacopeia). FDA advises that oxygen,

U.S.P., is a prescription drug subject to section 503(b) of the act,

and, therefore, within the scope of PDMA and these proposed

regulations.

B. Reimportation

Section 801(d) of the act (21 U.S.C. 381(d)) provides that a

prescription drug that is manufactured in a State and exported may not

be reimported into the United States unless it is imported by the

manufacturer, except when authorized by the Secretary of Health and

Human Services for emergency medical care. The delegation of authority

provisions at 21 CFR 5.10 redelegate the functions of the Secretary to

the Commissioner of Food and Drugs.

Section 801(d) of the act responds to a finding that large amounts

of drugs were being reimported into the United States as ``American

Goods Returned,'' and that these imports posed a health and safety risk

to American consumers because they could become subpotent or

adulterated during foreign handling and shipping. (See sec. 2(4),

PDMA.)

The congressional findings also acknowledged that what was termed

``the ready market for prescription drug reimports'' was ``the catalyst

for a continuing series of frauds against American manufacturers and

has provided the cover for the importation of foreign counterfeit

drugs.'' (See sec. 2(5), PDMA.)

1. Restrictions on Reimportation

Proposed Sec. 203.10 sets forth the restriction that no

prescription drug manufactured in a State and exported from the United

States may be reimported by anyone other than its manufacturer, except

that FDA may grant permission to a person other than the manufacturer

to reimport a prescription drug if it deems such reimportation is

required for emergency medical care.

2. Defining ``Manufacturer''

FDA defined the term ``manufacturer'' in the PDMA State licensing

regulation to mean anyone engaged in manufacturing, preparing,

propagating, compounding, processing, packaging, repackaging, or

labeling of a prescription drug (Sec. 205.3(d)). This definition is

somewhat more inclusive than the definition used earlier by the agency

in the labeling provisions at Sec. 201.1 (21 CFR 201.1). The definition

in Sec. 201.1(b) states that the manufacturer is the person who

performs all of the following operations that are required to produce

the product: (1) Mixing, (2) granulating, (3) milling, (4) molding, (5)

lyophilizing, (6) tableting, (7) encapsulating, (8) coating, (9)

sterilizing, and (10) filling sterile, aerosol, or gaseous drugs into

dispensing containers; or at least some of the operations if the

labeling indicates the presence of other manufacturers. Under

Sec. 201.1, a packer or distributor is not the same as a manufacturer.

FDA concluded that the more inclusive definition of

``manufacturer'' was consistent with the intent of the statute in

imposing the requirement for State licensing of wholesale drug

distributors; however, the agency has preliminarily concluded that a

less inclusive definition of that term would be more consistent with

the intent of the remaining sections of PDMA. For example, the

statutory provision against reimportation by persons other than the

manufacturer (except when permission is granted by FDA) is intended to

establish accountability in reimportations so that adulterated and/or

misbranded goods do not reenter commercial channels in the United

States. The reimportation provision is based on the assumption that a

manufacturer, in the less inclusive sense, is the person most

knowledgeable about the product's characteristics; is the most capable

of determining that the product meets the stability, quality, and

purity standards it is represented to possess; and is the only person

capable of authenticating the basic integrity of the product.

The remaining sections of PDMA are consistent with the less

inclusive definition of ``manufacturer'' in Sec. 201.1, rather than the

more inclusive definition in Sec. 205.3(d). Accordingly, proposed

Sec. 203.3(p) proposes to adopt the definition of ``manufacturer'' in

Sec. 201.1 for this rule.

3. Applications for Reimportation to Provide Emergency Medical

CareProposed Sec. 203.11 provides an administrative procedure by which

applications may be made by a person other than the manufacturer for

the reimportation of prescription drugs for emergency medical care. The

proposal would codify the current procedure whereby applications for

reimportation are submitted to the Director of the FDA District Office

in the district where reimportation is sought. The District Office

would review and approve or disapprove each application.

4. An Appeal From an Adverse Decision by the District Office

Proposed Sec. 203.12 would also codify the current procedure that

permits an appeal from an adverse decision by the district office to be

made to the Office of Compliance (HFD-300), Center for Drug Evaluation

and Research, for prescription human drugs other than biological

products. An appeal from an adverse decision involving human

prescription biological products is to be made to the Office of

Compliance (HFM-600), Center for Biologics Evaluation and Research.

C. Sales Restrictions

Section 503(c)(3) of the act prohibits, with certain exceptions,

the sale, purchase, or trade (or any offer to sell, purchase, or trade)

of any prescription drug that was purchased by a public or private

hospital or other health care entity, or donated or supplied at a

reduced price to a charitable organization described in section

501(c)(3) of the Internal Revenue Code of 1954.

1. Defining ``Charitable Organization''

Section 501(c)(3) of the Internal Revenue Code generally exempts

from income taxes not-for-profit organizations that operate for

religious, charitable, scientific, literary, educational, and public

safety purposes. However, such exemptions are not automatic. Under 26

CFR 1.501, a charitable organization must apply for and be granted tax-

exempt status. Tax-exempt status may be revoked and the organization

may lose its exemption if it fails to meet the requirements of the

statute and regulations.

It is FDA's view that an organization can be accurately described

as one fitting the requirements of section 501(c)(3) of the Internal

Revenue Code only if it has been granted tax-exempt status by the

Department of the Treasury. Accordingly, FDA proposes to define the

term ``charitable organization'' in proposed Sec. 203.3(f) as a

nonprofit hospital, health care entity, organization, institution,

foundation, association, or corporation that has been granted an

exemption under section 501(c)(3) of the Internal Revenue Code of 1954,

as amended.

2. Restrictions and Exclusions

Proposed Sec. 203.20 restates the statutory restrictions on

prescription drug sales by hospitals, health care entities, and

charitable institutions (section 503(c)(3) of the act). These

restrictions reflect a congressional finding that the resale of

prescription drugs by health care entities at below wholesale prices

had helped to fuel the drug diversion market and that such sales

constituted an unfair form of competition to legitimate wholesalers and

retailers paying the prevailing market prices. (See sec. 2(7), PDMA.)

The statute does not distinguish sales made at the average

wholesale price (AWP) and those made at below AWP or at more than the

AWP. The sales restrictions apply to all sales, purchases, or trades by

hospitals, health care entities, and charitable institutions. Sales of

any human prescription drugs purchased by a hospital or other health

care entity, or donated or supplied at reduced cost to a charitable

institution, are prohibited unless excepted by section 503(c)(3)(B) of

the act or exempted under proposed Secs. 203.22, 203.23, or 203.24.

In its findings, Congress stated that it believed that these

resales had helped to create an unacceptable risk that counterfeit,

adulterated, misbranded, subpotent, or expired drugs would be sold to

American consumers. (See sec. 2(8), PDMA.)

a. Hospital, health care entity, or charitable institution cannot

be wholesaler. FDA has learned that some hospitals and health care

entities, including physicians, have obtained licenses as wholesale

distributors in an effort to circumvent the statutory restrictions

against the sale of prescription drugs by hospitals, health care

entities, and charitable institutions. Those hospitals and health care

entities that have secured wholesale drug distributor licenses claim

that the statutory restrictions are made inapplicable to them by the

first clause of the last sentence of section 503(c)(3) of the act,

which reads: ``For purposes of this paragraph, the term `entity' does

not include a wholesale distributor of drugs or a retail pharmacy

licensed under State law * * *.''

Such a reading is inconsistent not only with general rules of

statutory construction, but with the intent of Congress as reflected in

the legislative history. The legislative history, which addresses

Congress' concern about donations to charitable institutions and

institutional discounts for hospitals and health care entities, notes

that some of these institutions had been sources of unfair competition

and drug diversion, and explains that the statutory prohibition against

the sale of drugs donated to or acquired at reduced price by charitable

institutions or purchased by hospitals or health care entities is

directed at preventing unfair profits through resales of such drugs.

Congress said:

Section 503(c)(3) would prohibit resales of pharmaceuticals by

hospitals and other health care entities or charitable organizations

with certain exceptions. This provision is intended to cover resales

by both for profit and nonprofit health care entities. These

institutions typically receive discount prices, substantially below

the average wholesale price (AWP) for pharmaceuticals, based on

their status as a health care entity or charity. When hospitals or

other health care entities obtain pharmaceuticals at favorable

prices and then resell those drugs at a profit, they are unfairly

competing with wholesalers and retailers who cannot obtain such a

favorable price. Such resales defraud manufacturers, who are led to

believe that the drugs are for the use of the health care entity. In

any case, these resales reward the unscrupulous and penalize the

otherwise honest and efficient wholesaler or retailer while fueling

the diversion market.

(H. Rept. 100-76, pp. 12-13.)

FDA interprets the first clause of the last sentence of section

503(c)(3) of the act to mean that the general prohibition against drug

sales by hospitals, health care entities, and charitable institutions

was not intended to interfere with the operations of legitimate

licensed prescription drug wholesalers and retail pharmacies. Section

503(c)(3) of the act does not open up a loophole for a hospital, health

care entity, or charitable institution to avoid the statutory

prohibition against drug sales simply by obtaining a wholesaler

license.

Accordingly, proposed Sec. 203.3(n) would state that a person

cannot simultaneously be a ``health care entity'' and a retail pharmacy

or wholesale distributor. The agency is also proposing to amend the

State licensing guidelines by adopting the same definition for ``health

care entity'' at Sec. 205.3(h).

If a charitable institution or a for-profit or nonprofit hospital

or health care entity has a corporate for-profit subsidiary that is a

wholesale distributor or retail pharmacy, or if it is part of a group

in which there is common control over the hospital or health care

entity and a wholesale distributor or retail pharmacy, then the

charitable institution, hospital, or health care entity would be

prohibited under section 503(c)(3) of the act and proposed Secs. 203.20

and 203.22 from transferring any prescription drug donated or supplied

at reduced price to the charitable institution or purchased by the

hospital or health care entity to the related wholesale distributor or

retail pharmacy for further sale except for a sale under a valid

prescription or for emergency medical reasons.

A charitable institution, hospital, or health care entity that has

a wholesale distributor or retail pharmacy subsidiary, or one that is

part of a group in which there is common control over the charitable

institution, hospital, or health care entity and a wholesale

distributor or retail pharmacy, should maintain books and records that

provide sufficient audit trails to trace the purchase and sale of

prescription drugs to ensure that no prescription drug donated or

supplied at reduced price to the charitable institution or purchased by

the hospital or health care entity is transferred to a related

wholesale distributor or retail pharmacy for further sale except for a

sale under a valid prescription or for emergency medical reasons.

b. Statutory exclusions. Proposed Sec. 203.22 restates the

statutory exclusions to the sales restrictions. They are: (1) The

purchase or other acquisition of a drug for its own use by a hospital

or other health care entity that is a member of a group purchasing

organization from the group purchasing organization or from other

hospitals or health care entities that are members of the organization;

(2) the sale, purchase, or trade of a drug or an offer to sell,

purchase, or trade a drug by a charitable organization to a nonprofit

affiliate of the organization to the extent otherwise permitted by law;

(3) the sale, purchase, or trade of a drug or an offer to sell,

purchase, or trade a drug among hospitals or other health care entities

that are under common control; (4) the sale, purchase, or trade of a

drug or an offer to sell, purchase, or trade a drug for emergency

medical reasons; or (5) the sale, purchase, or trade of a drug, an

offer to sell, purchase, or trade a drug, or the dispensing of a drug

under a valid prescription.

c. Common control. One statutory exclusion to the general

prohibition against resale of drugs by hospitals, health care entities,

and charitable institutions permits the sale, purchase, or trade of

prescription drugs among hospitals and health care entities that are

under common control. There is no statutory definition of the term

``common control,'' nor is the term mentioned in the legislative

history.

The concept of common control can be found in other Federal

regulatory schemes that were in use at the time PDMA was enacted into

law. Both the Securities and Exchange Commission and the Environmental

Protection Agency define ``common control'' to mean possession of the

power to direct or cause the direction of the management and policies

of a person or an organization, whether by ownership of stock, voting

securities or rights, contract, or otherwise. (See 17 CFR 230.405 and

40 CFR 66.3(f).) FDA included this definition in the State licensing

guidelines at Sec. 205.3(f)(4). This proposal would adopt the same

definition in proposed Sec. 203.3(g).

d. Sales for emergency medical reasons. Section 503(c)(3) of the

act permits the sale, purchase, or trade of prescription drugs by a

hospital, health care entity, or charitable institution for emergency

medical reasons. The statute states that ``emergency medical reasons''

includes transfers of a drug between health care entities or from a

health care entity to a retail pharmacy undertaken to alleviate

temporary shortages of the drug arising from delays in or interruptions

of regular distribution schedules. The statute does not further

elaborate on the term ``emergency medical reasons.''

FDA believes that it may be useful to specify some of the

circumstances in which a sale for emergency medical reasons would be

allowed. (See proposed Sec. 203.3(k).)

FDA received a significant number of comments from providers of

emergency care, including emergency medical services, ambulance

corporations, fire companies, rescue squads, urgent care providers,

emergency care physicians and technicians, and State emergency care

agencies and commissions that advised the agency that hospital

pharmacies have traditionally supplied drugs for emergency use by

emergency medical services and licensed practitioners' offices

operating in the general service area of the hospital. Several comments

stated that wholesale distributors are reluctant to open small accounts

to provide such drugs for emergency care, and that nearby hospital

pharmacies are the logical providers. Moreover, the comments noted that

many States encourage hospitals to supply drugs for emergency use to

emergency medical services, and some States require emergency services

to acquire their drugs exclusively from hospitals.

The proposal would allow sale of drugs by a hospital or health care

entity to nearby emergency medical services such as ambulance services,

rescue squads, and fire companies in the same State or service or

marketing area for use in emergency treatment and to licensed

practitioners for emergency office treatment. The proposal would also

define emergency medical reasons to allow hospitals and health care

entities to provide minimal emergency supplies to nursing homes.

In contrast, FDA believes that the exception for emergency medical

reasons does not permit hospitals or health care entities regularly to

sell to licensed practitioners prescription drugs that will be used for

routine office procedures.

e. Government hospitals and health care entities. Proposed

Sec. 203.22(f) would also exclude the sale, purchase, or trade of

prescription drugs by Federal, State, and local government hospitals

and health care entities to other Federal, State, and local government

hospitals or health care entities from the general prohibition against

the sale, purchase, or trade of prescription drugs by a hospital,

health care entity, or charitable institution.

Congress has established an extensive system of public hospitals

and health care entities. These include hospitals, clinics, and

dispensaries operated for the military by the Department of Defense;

hospitals and clinics operated by the Veterans' Administration; and

hospitals and clinics operated by the U.S. Public Health Service

(including Indian Health Service hospitals and clinics).

In addition, State and local governments have established public

health hospitals, clinics, and dispensaries, including drug treatment

inpatient and outpatient facilities. These facilities operate under a

variety of organizational structures. They may be owned and operated by

governmental entities, or be organized as private corporations or

associations under contract to State or local government agencies.

These health care entities may have interagency arrangements for

the purchase and exchange of prescription drugs. Such facilities

operate because of Federal, State, or local governmental commitments to

provide health care to particular classes of patients in response to

specific client needs. Among these needs are the provision of services

to people with low incomes, the distribution of vaccines, and the

dispensing of antitoxins and blood derivatives in public health

emergencies.

As noted, the adoption of the prohibition against sales by

hospitals or health care entities was prompted in part because of the

differential pricing structure that permits purchases by hospitals and

health care entities at below wholesale prices and the resultant

temptation to resell drugs so acquired at a profit. However, there is

no financial incentive for a Federal, State, or local government

hospital or health care entity to sell prescription drugs purchased at

below wholesale prices because any profit from such a sale would go to

the Federal or State treasury. Accordingly, FDA believes that there is

little likelihood that permitting Federal, State, or local government

hospitals and health care entities to sell prescription drugs to other

Federal, State, or local government hospitals and health care entities

would lead to the kinds of abuses that PDMA was designed to end.

Therefore, proposed Sec. 203.22(f) would exclude such transactions

from the general prohibition against resales by hospitals and health

care entities and thus permit Federal, State, or local government

hospitals and health care entities to sell drugs to other Federal,

State, or local government hospitals and health care entities.

FDA has been asked whether a State or local government agency,

which, under a contract or memorandum of agreement, sends or allows

some of its patients to be treated at a private local clinic or other

health care entity, may transfer prescription drug products to such a

facility to be dispensed to patients. In other words, would such a

transfer violate the prohibition against the sale, purchase, or trade

of prescription drugs by a hospital, health care entity, or charitable

institution?

FDA advises that if a State or local government agency functions as

or operates a hospital, health care entity, or charitable institution,

and a private health care entity is bound by a contractual agreement to

the State or local government agency, then the State or local

government hospital or health care entity may sell prescription drugs

to the contract private health care entity provided that the

prescription drugs sold are only used to serve government patients and

programs. The State or local government hospital or health care agency

supplying the drug and the contract health care entity would be

obligated to implement appropriate controls to ensure that the drugs

sold by the Government hospital or health care entity to the contract

health care entity are dispensed to patients in the Government program

and not diverted or sold to other patients or otherwise used for non-

Government purposes.

If the State or local government agency does not function as or

operate a hospital, health care entity, or charitable institution, and

is acting as a prescription drug wholesaler, the prohibition against

the sale of prescription drugs by a hospital, health care entity, or

charitable institution would not be applicable.

3. Revocation of Acceptance, Reshipment, and Returns

FDA proposes to clarify the circumstances under which hospitals,

health care entities, and charitable institutions may, without

violating section 503(c)(3) of the act, return or ship back

prescription drugs to the manufacturer or distributor from which they

were purchased.

In particular, proposed Secs. 203.23 and 203.24 would,

respectively, describe the conditions by which hospitals, health care

entities, and charitable institutions may: (1) Revoke acceptance of any

prescription drug received because of an ordering or delivery mistake

and ship them back to the manufacturer or distributor, and (2) return a

drug to the manufacturer or distributor.

A number of persons who submitted comments to the PDMA docket

questioned the effect of the new statutory language on commercial

practice in the pharmaceutical industry. Several persons argued that

the sales provisions in the Uniform Commercial Code treat a sale as

completed once a nondefective product has been ordered, delivered, and

paid for, unless specific contractual provisions make the sale

conditional or revocable. Several persons urged that FDA view a return

for cash or credit after a completed sale as a new and prohibited sales

transaction.

However, many other comments to the agency in the months after

passage of PDMA observed that under common commercial practice in the

pharmaceutical industry, manufacturers and wholesale distributors

permit returns and urged that this practice be allowed to continue. FDA

is aware that hospital, health care entity, or charitable institution

pharmacies, and distributors sometimes return products because of

overstocks, changes in institutional formularies, the death of a

patient for whose use a drug product was acquired, or other reasons.

The comments received by the agency argued that to permit returns would

both help to keep down the costs of medical care and reduce the risk

that adulterated or misbranded drugs would find their way into the

diversion market.

FDA has tentatively concluded that it should, under specified

conditions, allow drug products to be shipped back or returned to the

manufacturer or distributor, and this tentative conclusion is reflected

in proposed Secs. 203.23 and 203.24.

Under proposed Sec. 203.23, a hospital, health care entity, or

charitable institution could revoke a sale and purchase transaction

because of a mistake in ordering or delivery and ship the prescription

drug back, provided: (1) The hospital, health care entity, or

charitable institution ships the drug back within 10 working days of

receipt; (2) the reshipment is made under proper storage, handling, and

shipping conditions; and (3) if reshipped to the wholesale distributor,

the hospital, health care entity, or charitable institution provides

written notice to the manufacturer of the revocation and reshipment.

The proposal would require that the manufacturer be notified of the

reshipment so that any chargebacks to the manufacturer by the wholesale

distributor or special price reduction credited by the manufacturer to

the wholesale distributor would be factored into the credit or refund

given the distributor. This is intended to prevent windfall profits

from the return of a specially priced drug to the wholesale

distributor.

Under proposed Sec. 203.24, a hospital, health care entity, or

charitable institution could return a product it had purchased from a

manufacturer or wholesale distributor, provided that: (1) The hospital,

health care entity, or charitable institution notifies the manufacturer

that the prescription drug product has been returned to the wholesale

distributor; and (2) the hospital, health care entity, or charitable

institution fills out a credit memo. Proposed Sec. 203.24 would require

the hospital, health care entity, or charitable institution to send a

copy of the credit memo to the manufacturer, for the same reasons that

notification of the manufacturer is required in the event of a

revocation and reshipment, i.e., so that any chargebacks or reduced

prices will be factored into any credit or refund to prevent windfall

profits from the transaction.

Proposed Secs. 203.23 and 203.24 would both require detailed

documentation to provide the kind of accountability contemplated by the

act to help ensure against diversion. To ensure that returned drugs

remain safe and effective, both proposed sections would require that

drugs returned to a manufacturer or wholesale distributor be kept under

proper conditions for storage, handling, and shipping, and that written

documentation reflecting the maintenance of proper conditions be

provided to the manufacturer or wholesale distributor to which the

drugs are returned.

Under the proposal, the value of any credit, refund, or merchandise

exchanged for the returned product could not exceed the purchase price.

For purposes of clarification and to ensure that the State

licensing regulation and this proposed rule, when adopted, are

consistent, the agency is also proposing to amend the definitions in

the State licensing guidelines at Sec. 205.3(f) by adding two

additional exceptions to ``wholesale distribution'' for the reshipment

of drugs, when conducted in accordance with Sec. 203.23, and drug

returns, when conducted in accordance with Sec. 203.24.

D. Samples

To provide accountability and oversight in the sample distribution

process, PDMA established in section 503(d) of the act a strict system

of controls over the distribution of prescription drug samples, which

are defined in section 503(c)(1) of the act. Under the statutory

scheme, no person could distribute any drug sample, except for a

manufacturer or distributor who distributed drug samples in accordance

with specific requirements and in response to a written request from a

licensed practitioner.

Under sections 503(d)(1) and (d)(2) of the act, both manufacturers

and distributors could engage in sample distribution if certain

requirements were followed. However, section 4(2) of PDA further

restricted the persons who can engage in distribution of drug samples

by amending section 503(d)(1) and (d)(2) of the act to restrict sample

distributions to manufacturers and authorized distributors of record.

This amendment is demonstrative of the intent of Congress, as reflected

elsewhere in PDMA and PDA, to restrict the activities of drug

distributors who are not authorized distributors of record. Proposed

Secs. 203.30, 203.31, and 203.33 through 203.39 are consistent with

this amendment.

Under the revised statutory scheme, no person may distribute any

drug sample, except for a manufacturer or authorized distributor of

record who distributes drug samples in accordance with specific

requirements and in response to a written request from a licensed

practitioner.

Section 503(d)(1) of the act states that, for purposes of this

subsection, the term ``distribute'' does not include the providing of a

drug sample to a patient by a practitioner licensed to prescribe such

drug, by a health care professional acting at the direction and under

the supervision of such a practitioner, or the pharmacy of a hospital

or of another health care entity acting at the direction of such a

practitioner who received the drug sample in accordance with the act

and regulations. The definition of ``distribute'' in proposed

Sec. 203.3(h) reflects this statutory exclusion.

PDMA sets up two different sample distribution systems, depending

on the mode of delivery: (1) By mail or common carrier, and (2) by

means other than mail or common carrier, i.e., representative or

detailer.

If a sample is delivered by mail or common carrier, the statute

requires the recipient to execute a written receipt when the drug

sample is delivered and return the receipt to the manufacturer or

authorized distributor of record from which the drug sample was

received. If the sample is delivered by a representative, a number of

additional procedures are required by the statute that pertain to

storage and handling, inventories, recordkeeping, reporting of thefts

and significant losses, notification of convictions of representatives

for drug sample violations, and accountability. The statute specifies

minimum requirements for the contents of written request forms and

details certain recordkeeping and reporting requirements.

1. Requirements for Drug Sample Distribution

The requirements for distribution of drug samples by manufacturers

and authorized distributors of record by mail or common carrier are set

forth in proposed Sec. 203.30. The requirements for distribution of

drug samples by representatives are set forth in proposed Sec. 203.31.

The proposed sections provide detailed requirements for written request

forms, receipts, and recordkeeping.

Most of these requirements are statutory; however, FDA has

tentatively concluded that clarification of some of the statutory

requirements is desirable. FDA also has tentatively concluded that

other requirements should be imposed to help ensure smooth operation of

the system, effective enforcement, effective accountability and

oversight of drug sample distribution, and provide adequate safeguards

against drug sample diversion.

2. Contents of the Sample Request Forms

Proposed Secs. 203.30 and 203.31 would require the written request

form for drug samples to bear certain information: (1) The name,

address, professional title, signature of the practitioner making the

request; (2) the practitioner's State license number or the Drug

Enforcement Administration (DEA) identification number; (3) the

proprietary or established name and strength of the drug sample

requested; (4) the quantity requested; (5) the name of the manufacturer

of the drug sample and the authorized distributor of record, if the

drug sample is requested from a distributor; and (6) the date of the

request.

A number of comments suggested that it is sometimes difficult for a

manufacturer or distributor to determine whether or not a particular

person who wishes to receive drug samples is a licensed practitioner.

FDA has added the requirement that the request form bear the

practitioner's State license or DEA identification number to assist the

manufacturer or distributor in determining whether or not a person is a

licensed practitioner.

The statute requires a request form to bear the ``identity'' of the

drug sample being requested. FDA has clarified the meaning of

``identity'' in the proposed rule by specifying that the request form

bear the proprietary or established name and strength of the requested

sample.

PDMA requires that the request form bear the name of the

manufacturer of the drug. However, where the statute also permits an

authorized distributor of record to distribute drug samples, the

identity is incomplete without naming both the manufacturer and

distributor. In that circumstance, FDA proposes to require that the

name of the distributor as well as the manufacturer be made part of the

sample request form.

The statute also permits delivery of a drug sample to the pharmacy

of a hospital or other health care entity at the request of a licensed

practitioner. However, the statute does not state how that request for

delivery should be made. FDA has tentatively concluded that the name

and address of the intended recipient should be part of the request

form. This conclusion is reflected in the requirements in proposed

Secs. 203.30 and 203.31 that, if the request is being made by a

licensed practitioner for delivery of a drug sample to a hospital or

health care entity pharmacy, the name and address of the intended

recipient be included on the request form.

3. Drug Sample Receipts

Proposed Secs. 203.30 and 203.31 would require the execution of a

written receipt by the recipient upon delivery of a drug sample. The

proposed sections also set out the contents of the receipt.

The statute requires the execution of a receipt upon delivery of a

drug sample by mail or common carrier to establish an audit trail for

drug sample orders and deliveries and to ensure that drug samples

ordered are received. The statute does not require the execution of a

written receipt for samples delivered by representatives in the

apparent belief that a representative always delivers a drug sample to

a licensed practitioner at the same time that the licensed practitioner

signs the request form.

A number of comments suggested that samples frequently are not

delivered at the time of the request, i.e., some time elapses between

request and delivery, even when a representative personally delivers

the drug sample. Sometimes the period of time is only a few minutes,

but often it may be hours, days, or weeks. In some instances, a

representative may receive a request for a drug sample at one sales

call and deliver the requested sample at a later date. In these cases,

because of lapses of memory, mistake, or because a diversion scheme may

be underway, the samples delivered may not always match the request.

Accordingly, the agency has tentatively concluded that the requirement

for a written receipt should extend to all drug sample deliveries, and

that requirement is included in proposed Secs. 203.30 and 203.31.

A sample request and receipt need not be on separate forms if

delivery is by a representative. A single form could be devised and

used containing all of the required information, which could be fully

completed and executed with a single signature, if the request and

delivery are simultaneous, or executed in part with a signature for the

request at the time of the request, and executed in part with a second

signature acknowledging receipt at the time of the delivery.

Proposed Secs. 203.30(c) and 203.31(c) state that a receipt is to

be on a form designated by the manufacturer or distributor. If the drug

sample is received by the requesting practitioner, both proposed

sections would require that the receipt contain the name, address,

professional title, and signature of the practitioner or the

practitioner's designee who acknowledges delivery of the drug sample;

the proprietary or established name and strength of the drug sample,

the quantity, and the lot or control number of the drug sample

delivered; and the date of the delivery. If the drug sample is received

by the pharmacy of a hospital or other health care entity at the

request of a licensed practitioner, both proposed sections would

require the receipt to contain the name and address of the requesting

licensed practitioner, the name and address of the hospital or health

care entity pharmacy designated to receive the drug sample; the name,

address, professional title, and signature of the person acknowledging

delivery of the drug sample; the proprietary or established name and

strength of the drug sample, the quantity, and the lot or control

number of the drug sample delivered; and the date of the delivery. FDA

believes this information is necessary to ensure that the sample

received is the same as the sample requested.

4. Additional Requirements For Delivery of Drug Samples by

Representatives

PDMA provides that manufacturers and distributors that utilize

representatives for the delivery of drug samples must abide by a number

of additional requirements. These additional requirements are intended

to guard against the kinds of abuses that Congress' findings stated had

been an integral part of the drug sample delivery system and had led to

large-scale drug sample diversion.

a. Inventories of drug samples of manufacturers' and distributors'

representatives. The statute provides that each drug manufacturer or

distributor that engages in drug sample distribution is required to

conduct, at least annually, a complete and accurate inventory of all

drug samples in the possession of representatives (21 U.S.C.

353(d)(3)(C)). The inventory is intended to guard against drug sample

diversion by providing manufacturers and distributors information that

will permit them to identify diverters and take appropriate action and

provide data for FDA enforcement activities.

The statute does not specify what is meant by such an inventory,

nor how it is to be conducted and reported. It is FDA's preliminary

view that such an inventory must go beyond a mere physical count, and

that meaningful information and data can only be provided if the

inventory is conducted utilizing generally accepted inventory practices

and a reconciliation report is prepared that relates the latest

inventory to the most recent prior inventory and to drug samples

acquired and distributed in the interim.

Accordingly, proposed Sec. 203.31(d) would require the manufacturer

or distributor to inventory all drug samples in the possession of a

manufacturer's or distributor's representative, and keep a record of

the inventory. The record would be required to identify all drug

samples by established or proprietary name, dosage strength, and number

of sample units of each drug sample in stock.

The proposal would require that the manufacturer or distributor

reconcile the number of drug samples on hand with the number received

during the reporting period. The reconciliation report would be

required to include: (1) A report of the physical count of the most

recently completed prior inventory; (2) a record of each drug sample

shipment received since the most recently completed prior inventory,

including the sender and date of the shipment, and the established or

proprietary name, dosage strength, and number of sample units received;

(3) a record of drug sample distributions since the most recently

completed inventory showing the name and address of each recipient of

each sample unit shipped, the date of the shipment, and the established

or proprietary name, dosage strength, lot or control number, and number

of sample units shipped; and (4) an explanation for any significant

loss.

To ensure impartiality, the proposal would also require that the

inventory and reconciliation reports be conducted and prepared by

persons other than the representatives being inventoried or their

supervisors or managers in their direct line of supervision or command.

To guard against drug sample diversion, the proposed section would

require manufacturers and distributors to evaluate carefully any

apparent discrepancy or significant loss in the inventory and

reconciliation, and to investigate fully any significant loss that

cannot be justified.

b. Lists of manufacturers' and distributors' representatives. PDMA

requires that each manufacturer or authorized distributor of record who

distributes drug samples maintain a list of the names and addresses of

its representatives who distribute drug samples and of the sites where

drug samples are stored. The proposal restates this statutory

requirement (Sec. 203.31(e)).

c. Notification if representative is convicted of violations. The

statute requires drug manufacturers or distributors of record to report

to FDA any conviction of a representative for violations of section

503(c)(1) of the act or a State law because of the sale, purchase, or

trade of a drug sample or the offer to sell, purchase, or trade a drug

sample. The proposal restates this statutory requirement

(Sec. 203.31(f)).

5. Drug Sample Storage and Handling Requirements

FDA has already excluded the distribution of drug samples by

representatives from the definition of ``wholesale distribution'' in

Sec. 205.3(f)(7), and the agency is proposing to adopt this exclusion

in the definition of ``wholesale distribution'' in proposed

Sec. 203.3(y). In view of this, representatives are not required to be

licensed as wholesale distributors by the States. PDMA requires

manufacturers and authorized distributors of record to store all drug

samples under conditions that will maintain their stability, integrity,

and effectiveness, and ensure that the drug samples are not

contaminated, deteriorated, or otherwise adulterated. Proposed

Sec. 203.32 reflects this requirement.

A representative, as an agent of the manufacturer or authorized

distributor of record, is bound by the same standard, and is required

to take adequate precautions to ensure the safety and efficacy of any

drug samples the representative distributes. Generally, if a

representative follows the labeling and compendial requirements for

storage and handling of a particular prescription drug in handling

samples of that drug, the safety and efficacy of the drug sample may be

assured.

6. Drug Sample Forms

A number of persons posed questions regarding drug sample request

and receipt forms. FDA does not contemplate developing its own forms

for sample request and receipt, and instead intends to rely on

manufacturers and distributors to develop appropriate forms.

Accordingly, any written request or receipt form developed by a

manufacturer or authorized distributor of record that complies with the

requirements of proposed Sec. 203.33 would be acceptable to FDA if it

contains the information and any signature required in this section.

The agency wishes to encourage transmission and receipt of sample

request and receipt forms by the most efficient and expeditious means.

Accordingly, proposed Sec. 203.33 would permit such forms to be

delivered by mail, common carrier, or private courier or to be

transmitted photographically or electronically (i.e., by telephoto,

wirephoto, radiophoto, facsimile transmission (FAX), xerography, or

electronic data transfer) or by any other system, provided that the

method for transmission meets the security requirements set forth in

proposed Sec. 203.60(d).

7. Written Policies and Procedures and Other Requirements for Drug

Sample Distribution

FDA received a number of questions and comments from drug

manufacturers and distributors seeking assistance in developing

appropriate administrative systems for distributing drug samples. There

are a wide variety of administrative systems in use, and enforcement

has been complicated by the multiplicity of sample distribution

procedures. Although standardization is not necessary, the agency

believes that clear internal administrative systems are essential to

ensure that sample distribution is carried out efficiently and that the

statutory requirements are met.

In addition, FDA expects that manufacturers and distributors will

have administrative systems in place to review all losses and thefts so

that patterns that may indicate the possibility of drug sample

diversion will be detected. The agency believes that this is consistent

with Congress' intent that manufacturers and distributors develop

adequate audit and security systems to detect and investigate sample

losses and thefts. (H. Rept. 100-76, p. 20; S. Rept. 100-202, p. 9.)

Accordingly, under proposed Sec. 203.34, each manufacturer or

authorized distributor of record that distributes drug samples would be

expected to adopt an administrative system to monitor losses and

thefts.

Also, proposed Sec. 203.34 would require drug manufacturers and

distributors to establish, maintain, and adhere to written policies and

procedures describing its administrative systems for sample

distribution. The proposed section contemplates that each

manufacturer's or distributor's written policies and procedures would

describe its administrative system for: (1) Distributing drug samples

by mail or common carrier, including methodology for reconciliation of

requests and receipts; (2) distributing drug samples by means other

than mail or common carrier; (3) conducting its inventory of drug

samples under proposed Sec. 203.31(d), including an inventory schedule;

(4) auditing and detecting falsified or incomplete drug sample records;

(5) identifying any significant loss of drug samples and notifying FDA

of the loss; (6) monitoring any loss or theft of drug samples; and (7)

storing drug samples by representatives.

8. Standing Requests

Both the House Report and Senate Report state that it is the intent

of Congress that separate written requests be made each time that

samples are requested to be delivered and that standing requests do not

fulfill the requirements of the statute, except that the Senate Report

states that FDA may provide by regulation for the delivery by mail of a

small number of samples for strictly limited periods of time. (H. Rept.

100-76, p. 14; S. Rept. 100-202, p. 6.)

Proposed Sec. 203.35 would require that separate written requests

be made for each sample or group of samples and does not allow for

open-ended or standing requests to order drug samples.

The proposed section states, however, that the agency does not

consider standing requests to include an arrangement by which a

licensed practitioner requests in writing that a specified number of

drug samples be delivered over a period of not more than 6 months, with

the actual delivery dates for parts of the order to be set by

subsequent communication.

9. Use of Fulfillment Houses, Shipping and Mailing Services, Other

Contractors, and Comarketing Agreements

FDA understands that some manufacturers and distributors employ

third parties to meet some of the requirements imposed on them under

PDMA. Third parties may include contractors such as fulfillment houses

(companies that receive and fill orders), mailing services, and other

contractors. In addition, some manufacturers and distributors enter

into comarketing agreements in which one manufacturer or its

representatives undertake a contractual commitment to provide specified

services relating to drug marketing for one or more other manufacturers

or distributors. FDA does not regard the use of third parties or entry

into comarketing agreements as absolving a manufacturer or distributor

from its responsibility for complying with the statute and regulations

pertaining to the distribution of its drug samples.

Accordingly, proposed Sec. 203.36 would make clear that a

manufacturer or authorized distributor of record that uses a

fulfillment house, shipping or mailing service, or other third party to

fulfill some of the requirements of PDMA, or engages in a comarketing

agreement with another manufacturer, remains responsible for creating

and maintaining all requests, receipts, forms, reports, and records

required under PDMA, PDA, and proposed part 203.

The agency will give a manufacturer or distributor that contracts

with a third party to maintain some or all of its records up to 48

hours to produce requested forms, reports, records, or other required

documents.

10. Investigation and Notification Requirements

In proposed Sec. 203.37, FDA proposes to codify the requirements

and procedures for undertaking investigations and making reports and

notifications to the agency regarding sample distribution.

a. Drug sample diversion. To ensure against drug sample diversion,

proposed Sec. 203.37(a) would impose an investigation and reporting

requirement on a manufacturer or distributor who has reason to believe

that any person has falsified drug sample requests, receipts, or

records. A full and complete investigation would have to be undertaken,

and the manufacturer or distributor would be required to report to FDA

that such an investigation is under way and that it has completed such

an investigation. The proposal would require the report to include the

reason for the investigation and the results of the investigation.

Because persons who falsify drug sample requests may be prosecuted

under Title 18 of the United States Code, and because falsifications

are often associated with drug diversion, FDA is proposing to require

manufacturers and distributors to report such offenses to the agency.

Accordingly, the proposal would require that a manufacturer or

distributor notify the agency of any falsification of drug sample

requests, receipts, or records, no later than 5 working days of

learning of the falsification. The proposal would permit an initial

notification to be made by telephone or in writing, with a complete

written report required not later than 30 days after the date of the

initial telephone or written notification.

b. Significant loss and known theft. PDMA requires a manufacturer

or distributor that distributes drug samples to notify FDA of any

significant loss of drug samples and any known theft of drug samples

(21 U.S.C. 353(d)(3)(D)). FDA believes that enforcement would be

facilitated if the manufacturer or distributor promptly notifies the

agency upon becoming aware of a significant loss or theft. Accordingly,

proposed Sec. 203.37(b) would require a manufacturer or distributor to

notify FDA within 5 working days of becoming aware of such a loss or

theft.

FDA is proposing in Sec. 203.39 that charitable organizations be

permitted to solicit and receive surplus drug samples from licensed

practitioners. As part of this program, FDA proposes to require that a

charitable institution that receives donated drug samples from a

licensed practitioner also be required to notify FDA within 5 working

days of becoming aware of a loss or theft.

The reporting of any significant loss of drug samples is critical

to the success of diversion control. Although a sample can

inadvertently become adulterated through mishandling, spoilage, or

exposure to the elements, and although samples are reported as stolen

or lost from time to time, some representatives reportedly have used

false claims of damage, theft, or loss to divert drug samples into

illicit commercial channels.

FDA intends this requirement to mean that the agency is to be

advised of actual, physical losses, but not insignificant accounting

mistakes. The agency does not seek to receive reports concerning minor

mathematical errors that are caught and corrected in the normal course

of business. These are not significant losses that would trigger the

reporting requirement. FDA seeks comment on how to distinguish between

significant losses and minor accounting or inventory errors.

The agency is mindful of the difficulty of establishing a threshold

for significant loss and requests comment on this issue and examples of

situations that may and may not be appropriate reportable losses. FDA

currently believes that a small discrepancy in the total inventory of a

multimillion dollar company may not be significant and thus may not

trigger the reporting requirement, but the loss of a hundred tablets of

a particular drug by one sales representative in one quarter might be

significant. Similarly, a bookkeeping imbalance may not be a loss, as

long as it represents small inventory discrepancies that are likely to

be accounted for in the normal course of audits or other methods of

inventory control.

FDA is not proposing to establish any ``tolerance'' level for

sample losses below which no report is required. Each manufacturer or

distributor is required to establish its own threshold for determining

when inventory not accounted for is significant. This threshold should

be derived from the firm's past experience in sample distribution and

inventory and should be based on the level of accuracy of its internal

audit and security system.

Some manufacturers or distributors might be able to set a

historically validated statistical baseline for the minimal amounts of

shrinkage that might be caused by routine accounting errors, mistakes,

or losses, and a statistical baseline for the frequency of occurrences

that might routinely happen with a particular representative or

product. However, any loss of drug samples exceeding the number or

frequencies of the established baselines must be reported. In addition,

any loss possibly associated with falsification of drug sample

inventory or distribution records, or connected with diversion

activity, suspicious circumstances, or theft must be investigated and

reported.

When FDA becomes aware of a significant loss or theft of drug

samples, it may conduct its own investigation in cooperation with or

independent of the manufacturer's or distributor's investigation.

FDA is proposing that an initial notification of a significant loss

or known theft be made by telephone or in writing, with a complete

written report required not later than 30 days after the date of the

initial notification.

c. Conviction of a representative. PDMA requires a manufacturer or

distributor to notify FDA of any conviction of its representatives for

a violation of section 503(c)(1) of the act or any State law involving

the sale, purchase, or trade of a drug sample or the offer to sell,

purchase, or trade a drug sample (21 U.S.C. 353(d)(3)(E)).

FDA believes that enforcement would be facilitated if prompt notice

of such a conviction is provided to the agency. Accordingly, proposed

Sec. 203.37(c)(1) would require a manufacturer or distributor to notify

FDA within 5 working days of becoming aware of the conviction of one or

more of its representatives for such a violation.

To facilitate such reports, proposed Sec. 203.37(c) would permit an

initial notification of such a conviction to be made by telephone or in

writing, but would require a complete written report to be submitted no

later than 30 days after the date of the initial notification.

d. Selection of individual responsible for drug sample information.

PDMA requires a manufacturer or distributor who distributes drug

samples to provide FDA with the name and telephone number of the

individual responsible for responding to a request for information

respecting drug samples (21 U.S.C. 353(d)(3)(F)).

FDA believes that enforcement would be facilitated if that

information is transmitted to the agency shortly after a designation is

made. Accordingly, proposed Sec. 203.37(d) would require a manufacturer

or distributor to notify FDA in writing within 30 days of the selection

of such an individual and would also require the manufacturer or

distributor to supply the individual's business address to expedite

easy communication.

e. Whom to notify at FDA. The proposed rule would set forth the

addresses to which notifications and reports are required to be made.

Under the proposal, reports and notifications are required to be made

to the Division of Drug Quality Evaluation (HFD-330), Center for Drug

Evaluation and Research, for human prescription drugs; or the Division

of Inspections and Surveillance (HFM-650), Center for Biologics

Evaluation and Research, for human biological prescription drug

products.

11. Sample Lot or Control Numbers

A drug sample is a drug product as defined in 21 CFR 320.1(b). In

21 CFR 201.10(i)(1)(iii) and 201.18 of the general labeling regulations

and 21 CFR 211.130(b) of the current good manufacturing practice (CGMP)

regulations, the label of drug products is required to bear an

identifying lot or control number capable of yielding the complete

manufacturing history of the package. Persons subject to the CGMP

regulations are required under 21 CFR 211.196 to maintain distribution

records containing lot or control numbers.

Maintenance of records of lot numbers on drug samples will help

provide the kind of accountability and oversight of prescription drug

sample distribution that PDMA is intended to provide. A comment to the

docket from the Department of Health and Human Services' Office of the

Inspector General not only endorsed this view, but suggested that

maintenance of drug sample distribution records, including lot numbers,

would be important for enforcement purposes.

Accordingly, proposed Sec. 203.38 would require the manufacturer or

authorized distributor of record of drug samples to include in the drug

sample labeling, the label of the sample unit, and distribution records

identifying lot or control numbers that will permit the tracking of the

distribution of each drug sample unit from the point of its manufacture

to the representative or, if delivered by mail or common carrier, to

the licensed practitioner. (In addition, as discussed earlier, proposed

Secs. 203.30 and 203.31 also require that drug sample request and

receipt forms include lot or control numbers.)

12. Sample Labels

FDA has been advised that some manufacturers and distributors use

ordinary stock packages as drug samples. The agency believes that this

practice makes it difficult to distinguish samples from ordinary stock

and contributes to drug diversion. FDA believes that it is essential

that drug samples be clearly and easily recognizable.

Accordingly, proposed Sec. 203.38(c) would require that each sample

unit bear a label that clearly denotes its status as a drug sample. An

appropriate designation would include (but not be limited to) the word

``sample'' and the terms ``not for sale'' and ``professional courtesy

package.'' The proposed section would also provide that drug products

that are labeled or imprinted as samples are deemed to be drug samples

within the meaning of the act.

An article that meets the statutory definition of a drug sample

that fails to bear the label required in proposed Sec. 203.38(c) would

still be a sample despite the absence of the required label.

13. Disposition of Drug Samples by Licensed Practitioners

PDMA permits manufacturers and distributors to distribute drug

samples to licensed practitioners and to hospital or health care entity

pharmacies at the request of a licensed practitioner, provided certain

documents and records are created and maintained.

PDMA restricts drug sample distribution to ``licensed

practitioners'' and to hospital or health care entity pharmacies at the

request of a ``licensed practitioner.'' A number of comments asked FDA

to define the term ``licensed practitioner.'' For purposes of proposed

part 203, FDA would, in proposed Sec. 203.3(o), define the term

``licensed practitioner'' to mean any person licensed by State law to

prescribe drugs.

Physicians and surgeons, including osteopathic physicians and

surgeons, are licensed to prescribe drugs in every State, as are

dentists and dental surgeons. In most States, podiatrists and

optometrists are licensed to prescribe certain drugs. In some States,

pharmacists, physicians' assistants, paramedics, emergency medical

technicians, certified nurse practitioners, certified nurse midwives,

or other medical professionals or paraprofessionals may be licensed to

prescribe drugs, sometimes on their own authority and sometimes on the

authority of supervising physicians.

Some States limit the authority to prescribe prescription drugs to

specific protocols or formularies for certain professionals or

paraprofessionals. For those professionals and paraprofessionals, FDA

follows the requirements of those States and considers the authority to

request and receive drug samples to be similarly limited.

Section 503(d)(1) of the act provides that no person may distribute

any drug sample unless the requirements set forth in paragraphs (d)(2)

and (d)(3) of that section are followed. Paragraphs (d)(2) and (d)(3)

set forth detailed requirements for manufacturers and authorized

distributors of record to follow when they distribute drug samples by

mail or common carrier and by representatives.

In the section-by-section analysis that the Senate and House of

Representatives ordered to be published in the Congressional Record

when PDA was introduced and passed, Congress stated that it did not

intend this prohibition to restrict the provision of a drug sample to a

patient by a licensed practitioner or by another person at the

direction of a licensed practitioner in certain circumstances.

(Congressional Record, August 10, 1992, p. S 12061-2; August 12, 1992,

p. H 8107-8.) Consequently, in PDA, Congress amended section 503(d)(1)

of the act to clarify the prohibition by stating that providing or

dispensing a drug sample in certain circumstances is not considered

distribution within the meaning of the statute. The clarification

specifically excludes from the term ``distribute'' the provision of a

drug sample to a patient by: (1) A practitioner licensed to prescribe

such drug, (2) a health care professional acting at the direction and

under the supervision of such a practitioner, and (3) the pharmacy of a

hospital or of another health care entity that received the drug sample

in accordance with the act and regulations, and that is acting at the

direction of the health care practitioner who requested the drug

sample.

A licensed practitioner who provides a drug sample other than as

set forth in section 503(d)(1) of the act is engaging in an act of

distribution, and drug sample distributions may be undertaken only as

permitted by PDMA.

FDA advises that PDMA and this proposed rule would permit a

licensed practitioner to: (1) Dispense the drug sample as set forth in

section 503(d)(1) of the act; (2) donate the drug sample to a

charitable institution as provided for in proposed Sec. 203.39; (3)

return the drug sample to the manufacturer or distributor; or (4)

destroy the drug sample.

FDA advises that any person, including a licensed practitioner, is

prohibited from carrying out certain distributions of drug samples,

including: (1) Selling, purchasing, or trading (or offering to sell,

purchase, or trade) any drug sample; (2) requesting a manufacturer or

distributor to deliver any drug sample to a retail pharmacy; (3)

delivering any drug sample to a retail pharmacy to be dispensed by the

pharmacist to a patient of the licensed practitioner or other persons;

(4) giving any drug sample to a retail pharmacy; or (5) donating any

drug sample to any charitable institution, except as provided in

proposed Sec. 203.39.

PDA singles out dispensing of drug samples by health care

professionals who act at the direction and under the supervision of

licensed practitioners, and hospital or health care entity pharmacies

that receive drug samples in accordance with the act and regulations

and that act at the direction of the health care practitioners who

request samples. Thus, Congress clearly intended to distinguish these

persons from retail pharmacists. The pharmacist in a retail pharmacy is

an autonomous professional who is licensed by the State and supervised

by the State Board of Pharmacy and independently dispenses drugs to

patients in response to a prescription written by a separate licensed

practitioner.

A manufacturer or distributor is prohibited from delivering a drug

sample to any retail pharmacy, and a retail pharmacy is barred from

receiving any drug sample from any person.

FDA has been advised that some licensed practitioners have

requested that drug samples be delivered to retail pharmacies in rural,

isolated, or medically underserved areas for dispensing to the

practitioner's patients. FDA views this practice as being inconsistent

with the accountability and oversight requirements imposed on sample

distribution by PDMA. The agency believes it makes enforcement of the

sample distribution sections difficult, and is a potential source of

drug diversion. Accordingly, FDA advises that a practitioner should not

request delivery of a drug sample to a retail pharmacy and that a

retail pharmacy should not accept a drug sample from a licensed

practitioner or from a manufacturer or distributor to be dispensed by

the pharmacist to a practitioner's patients or to other persons.

To cut off a potential source of drug diversion and promote

enforcement of PDMA, FDA advises licensed practitioners that they

should return adulterated or misbranded drug samples to the

manufacturer or distributor, or destroy them. Examples of drug samples

that may be adulterated or misbranded include, but are not limited to:

(1) Samples that have gone beyond the labeled expiration date; (2)

samples that are obviously discolored, soiled, spoiled, or otherwise

deteriorated; (3) samples with mutilated or damaged packaging; and (4)

samples with labeling that is torn, adjusted, or modified.

14. Donation of Drug Samples by Licensed Practitioners to Charitable

Institutions

FDA is aware of the practice whereby some licensed practitioners

give significant quantities of drug samples to charitable institutions,

such as free clinics, charity nursing homes, and charitable health care

entities. Donated drug samples are then dispensed by staff of the

charitable institutions to patients or given to domestic or overseas

missions or other charitable institutions.

Some charitable institutions actively solicit and collect donations

of drug samples from licensed practitioners, and it is not uncommon for

charitable institutions to rely on donated drug samples as a

significant source of prescription drugs for patient care. In response

to concerns about this practice, FDA established procedures for drug

sample donations in Compliance Policy Guide (CPG) 7132.08, ``Collection

and Charitable Distribution of Drugs,'' issued on October 1, 1980.

FDA continues to be concerned about drug sample donations. The

agency believes that ongoing donations of drug samples by licensed

practitioners to charitable institutions could be considered as being

inconsistent with the objectives of accountability and oversight of

sample distribution that PDMA is designed to provide. The agency is

concerned that this practice could make enforcement of the sample

distribution sections difficult and provide an avenue for drug

diversion.

One of the principal purposes of PDMA was to prevent drug

diversion. The easiest way to ensure that prescription drug samples

will not be diverted by charitable institutions would be to prohibit

such institutions from possessing them. However, Congress did not

choose to do so. Indeed, PDMA explicitly allows prescription drug

samples to be delivered by a manufacturer or distributor to the

pharmacy of a hospital or health care entity at the written request of

a licensed practitioner. Such a hospital or health care entity may be

operated for profit or as a charitable institution. PDMA is silent,

however, as to whether or not there are other legitimate means by which

a charitable institution can acquire prescription drug samples.

The operations of not-for-profit hospitals, health care entities,

and charitable institutions were closely scrutinized by Congress before

the passage of PDMA. Congress identified sales of drugs acquired at

below-wholesale prices by hospitals, health care entities, and

charitable institutions as a source of unfair competition for

prescription drug wholesalers who are required to pay the average

wholesale price, and suggested that such sales could be a source of

drug diversion. (See sec. 2(7), PDMA.)

Congress also identified the sale of prescription drug samples as a

source of diversion (see sec. 2(6), PDMA), but did not suggest that

charitable institutions were peculiarly likely to engage in this abuse.

Instead, Congress sought to balance the need for restrictions that

would prevent unfair competition and put an end to diversion of

prescription drug samples with the goals of providing prescription

drugs to all who need them and permitting the distribution, with

appropriate restrictions, of prescription drug samples to patients.

Congress did not alter this balance when in PDA, it revised the

PDMA sample distribution restrictions.

FDA has preliminarily concluded that development of a system that

would permit licensed practitioners to donate excess quantities of

prescription drug samples to charitable institutions for dispensing to

patients or for further distribution to domestic or overseas charitable

institutions for dispensing to patients would be consistent with PDMA,

PDA, and the goal of providing adequate medical care to patients in

need.

A system that would permit such donations with adequate

restrictions would ensure wider opportunities for the provision of

medical care, including prescription drugs, to patients in need, and

would, if appropriate controls were established similar to those

governing sample distribution, be consistent with the language and

intent of the statute. Controls would serve the objectives of

accountability and oversight in the act and minimize the potential for

drug diversion.

Such a system would also prevent the waste of significant

quantities of valuable prescription drugs that have been distributed as

drug samples to licensed practitioners who have not used or dispensed

them.

FDA believes that such a system should contain audit and security

protection, similar to those required in the statute for requesting

drug samples from manufacturers or distributors and delivering them to

licensed practitioners, to provide accountability and oversight, and to

protect the public against drug diversion.

In designing such a system, the agency has kept in mind that the

day-to-day operations of licensed practitioners, including the

provision of prescription drugs to patients, are regulated primarily by

the States. In addition, there is nothing in the legislative history of

PDMA or PDA that would suggest that Congress intended FDA to become

more deeply involved in the regulation of the activities of licensed

practitioners, except to the extent necessary to ensure that drug

samples are not diverted and that they do not, as a result, become

adulterated or misbranded.

Accordingly, the agency is proposing to establish a system of drug

sample donation controls in proposed Sec. 203.39. Proposed Sec. 203.39

would set up a system that would permit a licensed practitioner to

donate a drug sample to a charitable institution for dispensing to a

patient of that institution or for distribution to another properly

enrolled charitable institution for subsequent dispensing to patients,

provided that the institution is properly enrolled and certain

requirements are met.

Under proposed Sec. 203.39, a charitable institution that wishes to

solicit or receive drug samples would be required to: (1) Become

properly enrolled by notifying the agency of its intention to solicit

and receive drug sample donations and obtaining a central file number;

and (2) maintain records of drug samples received as donations and

subsequently dispensed or distributed to other charitable institutions.

A recipient charitable institution must provide written

certification of compliance with all regulations to a licensed

practitioner or charitable institution that provides a drug sample

before receiving any drug sample donation.

Under the proposal, the charitable institution or organization

(defined as one that has been granted tax exempt status by the

Department of the Treasury under the requirements of section 501(c)(3)

of the Internal Revenue Code of 1954) would be required to enroll with

FDA. A charitable institution would be enrolled when it has notified

the appropriate FDA district office that it intends to solicit and

receive drug samples, has made application to the district office for a

central file number, and has received the number. A charitable

institution would also be required to be licensed by the State, if

required by State law, and otherwise conform to State law.

Proposed Sec. 203.39(b) would establish procedures that the

charitable institution would be required to follow for receiving,

holding, dispensing, and distributing donated drug samples. These

requirements closely parallel the statutory and proposed regulatory

requirements for request and delivery of drug samples by manufacturers

and distributors to licensed practitioners.

Under proposed Sec. 203.39(b)(1), a recipient charitable

institution would be required to provide a written identification

document to any employee or agent authorized to act on behalf of the

institution in soliciting or receiving donations of prescription drug

samples. The employee or agent identification document would be valid

for a limited term, but could be renewed.

FDA is not proposing to delineate the form and content of the

required identification document, but it should be sufficient to

readily identify the agent or employee of the charity and to establish

that he or she has the authority to solicit and receive drug sample

donations.

Such an identification document would be acceptable to the agency,

for example, if it: (1) Would be effective for a fixed term, e.g., 1

year, and would bear an expiration date; (2) would include the name,

address, and central file number of the charitable institution; (3)

would exhibit the name, signature, and photograph of the authorized

employee or agent; and (4) would display an affirmative statement that

the employee or agent identified on the document is authorized by the

institution to solicit and receive donations of prescription drug

samples on behalf of the institution.

Proposed Sec. 203.39(b)(2) would require each recipient charitable

institution to maintain a current listing of all agents or employees

authorized to solicit and receive drug samples on behalf of the

institution. The listing would also be required to include the name and

telephone number of the authorized agent or employee in charge of

prescription drug sample solicitation, receipt, and redistribution.

One problem associated with drug sample diversion has been the

practice of ``shucking'' drug samples (separating drug sample dosage

units from their sample packaging (usually blister packs, cards, or

small boxes) and sample labeling) and repackaging them (often in

plastic bags or ``baggies,'' or in other nonstandard containers with

other sample dosage units from the same or different drug sample lots

or production runs). This repackaging process may be accompanied by

physical tampering with the sample dosage units with sharp or abrasive

instruments or with solvents to remove imprints denoting their status

as samples. Because this practice adulterates and misbrands the

samples, proposed Sec. 203.39(b)(3) would require that a drug sample

could be donated by a licensed practitioner or donating charitable

institution and could be received by a charitable institution only in

its original, unopened packaging with its labeling intact.

Proposed Sec. 203.39(b)(4) would permit delivery of a donated drug

sample to a recipient charitable institution by mail or common carrier,

collection by an authorized agent or employee of the recipient

charitable institution, or personal delivery by a licensed practitioner

or an authorized agent or employee of the donating charitable

institution. It would direct that the donor place the donated drug

samples in a sealed carton for delivery to or collection by the

recipient institution.

Under proposed Sec. 203.39(b)(5), a donated drug sample could not

be dispensed to a patient or be distributed to another charitable

institution until a licensed practitioner or registered pharmacist at

the recipient charitable institution has examined it to confirm that

the drug sample delivered matches the donation record and that any

adulterated or misbranded drug sample is eliminated. The recipient

would be required to reject any drug sample that: (1) Is out of date;

(2) has labeling that has become mutilated, obscured, or detached from

the drug sample packaging; (3) shows evidence of having been stored or

shipped under conditions that might adversely affect its stability,

integrity, or effectiveness; (4) is for a drug product that has been

recalled or is no longer marketed; or (5) is otherwise possibly

contaminated, deteriorated, or adulterated.

Proposed Sec. 203.39(b)(6) would require recipient charitable

institutions to dispose of any drug sample found to be unsuitable by

destroying it or by returning it to the manufacturer and to maintain

complete records of the disposition of all drug samples destroyed or

returned.

Proposed Sec. 203.39(b)(7) would require that, if a donated drug

sample is collected by an authorized agent or employee of the recipient

charitable institution or is personally delivered by a licensed

practitioner or an authorized agent of a donating charitable

institution, the employee or agent of the recipient institution is to

prepare at the time of collection or delivery a complete and accurate

donation record for the samples. Both the donor and recipient would be

required to sign the donation record when it is created, and the donor

and recipient would each retain a copy.

If a donated drug sample is transferred by mail or common carrier,

the licensed practitioner or donating charitable institution would be

required to prepare a donation record that would be signed by the

licensed practitioner or authorized agent of the donating charitable

institution (Sec. 203.39(b)(8) and (b)(9)). The donation record would

be shipped with the drug sample. An authorized agent or employee of the

recipient charitable institution would be required to countersign it,

keep a copy, and return a copy to the licensed practitioner or donating

charitable institution.

Proposed Sec. 203.39(b)(9) would require the donation record to

include: (1) The name, address, and telephone number of the licensed

practitioner (or donating charitable institution), and the

practitioner's professional title and State license number or DEA

identification number; (2) the manufacturer, brand name, quantity, and

lot or control number of the sample; (3) the date of the donation; (4)

the signature of the licensed practitioner (or the signature of the

authorized agent of the donating charitable institution); and (5) the

signature of the authorized agent or employee of the recipient

charitable institution.

The proposal would require charitable institutions to maintain

complete and accurate records of donation, receipt, inspection,

inventory, dispensing, redistribution, destruction, and returns

sufficient for complete accountability and auditing of drug sample

stocks (Sec. 203.39(b)(10)).

It would also require each recipient charitable institution to

conduct an inventory of drug sample stocks, at least annually,

utilizing independent inventory personnel, and to prepare a report

reconciling the results of each inventory with the most immediate prior

inventory. Inventory discrepancies and reconciliation problems would be

required to be investigated by the charitable institution and reported

to FDA (Sec. 203.39(b)(11)).

Proposed Sec. 203.39(b)(12) would require that a recipient

charitable institution provide written certification to the licensed

practitioner or donating charitable institution that it is in

conformity with all the requirements of proposed part 203 before

receiving any drug sample donation. Such certification, which links the

licensed practitioner with the charitable institution, could be made

part of the donation record.

Proposed Sec. 203.39(b)(13) would require a recipient charitable

institution to store drug samples under conditions that will maintain

the samples' stability, integrity, and effectiveness, and ensure that

the drug samples will be free of contamination, deterioration, and

adulteration.

Proposed Sec. 203.39(c) would also specify that a charitable

institution may donate drug samples to another recipient charitable

institution for dispensing to patients, provided that the recipient

charitable institution meets the appropriate requirements.

In addition to the procedure for drug sample donations delineated

in proposed Sec. 203.39, there are alternative means available for

charities to receive donated prescription drug products from

manufacturers and distributors. These include: (1) Direct donations of

prescription drug stock by manufacturers or distributors, with records

of distribution and receipt being maintained in accordance with State

regulations; and (2) deliveries of drug samples to charity hospital and

health care entity pharmacies by manufacturers and distributors or

their representatives under the request of a licensed practitioner in

accordance with the requirements set forth in proposed Secs. 203.30 and

203.31.

15. Free Distributions That Are Not Samples

There are certain situations in which manufacturers and

distributors may deliver prescription drugs at no charge without such

free distributions being samples. Accordingly, such distributions are

not subject to the recordkeeping requirements for samples.

Nevertheless, FDA believes that States and manufacturers and

distributors should establish recordkeeping requirements and systems,

where appropriate, to prevent diversion.

a. Distribution of drugs to indigent patients. As noted above, a

drug sample is defined at proposed Sec. 203.3(i) as a unit of a

prescription drug that: (1) Is not intended to be sold; and (2) is

intended to promote the sale of the drug. Drugs that are given free of

charge to patients in some circumstances may not necessarily be

samples. For example, manufacturers of some expensive new drugs have

decided that, under certain circumstances, they will arrange for

licensed practitioners to prescribe and dispense these drugs at no

charge or at reduced cost to indigent patients. In FDA's view, if the

objective of this practice is to ensure that patients in need of

prescription drugs will have access to them, whatever their financial

circumstances, then it is not a promotional scheme, and such drugs are

not samples under section 503(c)(1) of the act or proposed

Sec. 203.3(i).

b. Starter packs. Starter packs are also not drug samples. Starter

packs are prescription drug products distributed without charge by

manufacturers or distributors to pharmacists with the intent that the

pharmacists place the prescription drugs in stock and sell them at

retail. Starter packs may be distributed by manufacturers' or wholesale

distributors' representatives (detailers), by mail or common carrier,

or by direct delivery from a manufacturer or distributor. Starter packs

of solid oral dosage forms can be offered in ordinary stock packages,

in special packaging comprised of unit-of-use or course-of-treatment

sizes, or in special packaging smaller than standard stock packages

whose sizes have no relationship to treatment regimens.

Starter packs are intended to ``prime the pump'' by making a

product available at no cost to the pharmacist so the pharmacist will

fill prescriptions with the manufacturer's product. They permit the

patient and pharmacist to become familiar with the manufacturer's

product. Starter packs are a widely used selling tool and thus are

intended to promote the sale of the drug. Representatives often will

make a sales presentation before delivering them or at the same time

they are delivered.

PDMA's definition of drug sample sets up a two-element test that

determines whether a particular item of prescription drug is a drug

sample. The two-element test requires that the drug: (1) Is not

intended to be sold; and (2) is intended to promote the sale of the

drug. Starter packs meet the second element of the drug sample test

because they are intended to promote the sale of a particular drug.

However, even though starter packs are delivered without charge to

pharmacists, they do not conform to the first element of the statutory

drug sample definition because the manufacturer or distributor intends

that they be sold by the pharmacist. Accordingly, starter packs are not

samples.

Because starter packs are not samples, they are not subject to the

sample restrictions in PDMA. Instead, they are subject to regulation as

prescription drugs under the act in like manner as stock shipments of

prescription drugs. Because starter packs are not drug samples, the

request, receipt, and recordkeeping requirements in PDMA for samples do

not apply, and pharmacists are free to sell these products at retail.

Because starter packs provide opportunities for diversion similar

to those presented by drug samples, manufacturers, and distributors

should establish and maintain accounting, audit, and security systems

for starter packs to guard against diversion.

c. Pharmacy colleges. For many years, manufacturers have given

pharmacy schools and colleges pharmaceutical products for teaching

purposes. These products are given to help the schools train pharmacy

students in drug formulation, compounding, packaging, and labeling, and

to familiarize students with dosage forms. These products are not

intended to be distributed or dispensed, nor are they intended to

promote the sale of the drug. Accordingly, the agency does not view

prescription drugs donated to colleges of pharmacy for educational

purposes as drug samples.

d. Donations of drugs to charitable institutions. There is nothing

in PDMA or in the legislative history of PDMA that would suggest that

PDMA is intended to discourage direct donations by manufacturers or

distributors of stock packages of prescription drug products to

charitable institutions. Because these donations provide patients with

the prescription drugs they need without regard to cost and are not

intended to promote the sale of the drug, the distributions are not

sample distributions within the meaning of section 503(c)(1) of the act

or proposed Sec. 203.3(i).

16. ``Bid'' and ``Commercial'' Samples

Manufacturers of drug products sometimes take delivery of bulk drug

ingredients or precursor specimens for testing and evaluation purposes.

These specimens are scrutinized for compatibility with a manufacturer's

production equipment and to determine if they are suitable for use in

formulating the drug products the manufacturer wishes to produce.

Sometimes, manufacturers take delivery of examples of unpackaged

finished dosage forms to determine if they are suitable for use with

the manufacturer's packaging materials and equipment. These specimens,

referred to as ``bid'' or ``commercial'' samples, are generally

delivered in limited quantities for evaluation purposes.

The act defines a drug sample as a unit of a drug subject to

section 503(b) of the act (i.e., a prescription drug), which is not

intended to be sold and is intended to promote the sale of the drug (21

U.S.C. 353(c)(1)). Proposed Sec. 203.3(i) restates this definition.

Because of the statutory language and the threat of diversion, persons

who distribute ``bid'' or ``commercial'' samples should follow the

requirements for sample distribution set forth in the act and this

proposed rule.

17. Retail Pharmacists and Drug Samples

Proposed Sec. 203.40 would provide that the presence in a retail

pharmacy of any drug sample shall be considered evidence that the drug

sample was obtained by the retail pharmacy in violation of section

503(c)(1) of the act.

E. Wholesale Distribution

1. Identifying Statements (``Pedigrees'')

Section 503(e)(1) of the act imposed a new requirement on

``unauthorized'' or ``secondary'' wholesale prescription drug

distributors (wholesale drug distributors who are not authorized

distributors of record) to provide to a wholesale distributor

purchaser, before the completion of a sale, a statement identifying

each sale of the drug (often referred to as a ``statement of origin''

or ``drug pedigree''). PDA expanded this requirement by specifying the

information to be included in the drug pedigree and mandating that it

be provided to retail pharmacy buyers as well as wholesale distributor

purchasers.

The pedigree requirements for unauthorized distributors under PDMA,

as later amended by PDA, have been a matter of continuing interest and

discussion. These requirements affect only unauthorized wholesale

distributors (i.e., those who do not have an ongoing business

relationship with a manufacturer to distribute that manufacturer's

drugs) and impose upon them more stringent requirements than are

imposed on authorized distributors of record.

Before passage of PDA, section 503(e)(1) of the act required that

each person engaged in the wholesale distribution of drugs subject to

section 503(b) of the act (prescription drugs) who is not an authorized

distributor of record of such drugs provide to each wholesale

distributor of such drugs a statement identifying each sale of the

drug, including the date of the sale, before the sale to such wholesale

distributor. Soon after the enactment of PDMA, the terms ``secondary''

and ``unauthorized'' distributors became common to describe persons who

are not authorized distributors of record, and the term ``drug

pedigree'' became popular to describe the required statement of origin.

In order to make it possible to distinguish between authorized and

unauthorized distributors, section 503(e)(1) of the act also required

each manufacturer to maintain at its corporate offices a current list

of its authorized distributors. This requirement was not altered by

PDA, which otherwise amplified the pedigree requirement.

When Congress adopted section 503(e)(1) of the act, it was

responding to information uncovered by the Oversight Subcommittee of

the House Committee on Energy and Commerce. The Committee found that

most counterfeit, stolen, expired, or fraudulently obtained drugs

entering commercial channels had been handled by distributors who were

not authorized to distribute the manufacturer's product, rather than by

the manufacturer's authorized distributors. Accordingly, Congress

imposed a more stringent reporting requirement on distributions by

unauthorized distributors, requiring them to inform their wholesale

customers of all previous sales of the drug product. (H. Rept. 100-76,

p. 17.)

A number of comments to the agency after enactment of PDMA

reflected concerns about application of the drug pedigree requirement.

One comment asked FDA to consider whether the drug pedigree must

include the name and address of the seller, or whether a general

statement, such as ``this shipment of drugs came from an unnamed

authorized distributor on ------------------ ----, 199--,'' or a coded

statement, such as ``this shipment of drugs came from unauthorized

distributor [code] on -------------- ----, 199--,'' would comply with

PDMA.

The agency stated its position on the form and content of the drug

pedigree requirement in PDMA in a section of the August 1, 1988,

information and guidance letter to regulated industry and other

interested parties. The August 1, 1988, letter requested that any drug

pedigree be in writing, that it bear the title ``Statement Identifying

Prior Sales of Prescription Drugs by Unauthorized Distributors Required

by the Prescription Drug Marketing Act,'' and that it include all

necessary identifying information regarding all sales in the chain of

distribution of the product, starting with the manufacturer or

authorized distributor of record. The agency believed that this was

consistent with the legislative history of PDMA, which indicated that

Congress intended that the drug pedigree be a written certification

fully identifying the source and place from which the drugs were

obtained. (H. Rept. 100-76, p. 17; S. Rept. 100-202, p. 7.)

In the August 1, 1988, letter, the agency requested that the

identifying statement include the following information: (1) The

business name and address of the source from which the drug was

purchased; (2) the date of the sale; and (3) the identity, strength,

container size, number of containers, and lot number(s) of the drug.

FDA also requested that the drug pedigree accompany all products

purchased from an unauthorized distributor, even when they are resold.

Late in 1988, the American Association of Pharmaceutical

Distributors (AAPD), an organization of wholesale prescription drug

distributors who are not authorized distributors of record for some or

all of the products they distribute, designed a form for drug pedigrees

that substituted codes for names and addresses. AAPD's system, which is

now reportedly being used by its members and certain nonmembers, is

administered by an accountant employed by AAPD for that purpose. The

agency does not know if other code systems exist that are being used in

place of the required names and addresses on drug pedigrees.

In the months following passage of PDMA, some Senators and members

of Congress wrote to support coded pedigrees or pedigrees that did not

disclose full names and addresses. However, others expressed their

support for full disclosure on drug pedigrees.

Even before passage of PDA, FDA considered that Congress had

intended the PDMA drug pedigree requirement to require that each party

in a chain of distribution be given sufficient information to make an

informed determination as to the origin of drugs being purchased. In

the agency's view, general statements of origin could not provide

sufficient information for purchasers, and coded statements that made

information unintelligible to purchasers without the intervention of a

trade association or regulatory agency to decipher the code, would not

provide purchasers with the information that Congress intended that

they receive. In FDA's opinion, the only meaningful way to identify the

``source and place'' from which drugs were obtained was to require that

the identifying statement bear the business name and address of each

previous distributor and the date of each prior sale. Furthermore, the

only meaningful way to identify fully the drugs being described was to

provide detailed particulars about the drugs being sold. FDA has stated

this position in a number of letters, speeches, and public comments

since PDMA became law.

The PDA amendments to the PDMA significantly tightened the drug

pedigree requirement and constitute Congress' latest word on the issue.

PDA amended section 503(e)(1) of the act to require that unauthorized

distributors provide, before a sale takes place, a drug pedigree to

every wholesale distributor or retail pharmacy customer. The drug

pedigree is required to identify all prior sales, purchases, or trades

of such drugs and to specify by name and address all parties to the

transactions. PDA also states that FDA may require additional

information or a specific form for the drug pedigree.

As Congress stated in the section-by-section analysis that

accompanied PDA when it was introduced and passed, the stricter

language in the PDA revision ``makes it clear'' that any wholesale

distribution of a prescription drug by an unauthorized distributor,

including any sale to another unauthorized distributor, an authorized

distributor of record, or a retail pharmacy, must be preceded by a full

and complete identifying statement. ``The identifying statement,'' the

analysis added, ``must in all cases include the dates of each

transaction involving the drug and the names and addresses of all

parties to the transaction, and must contain any such other information

as the Secretary may require.'' (Congressional Record, page S 12061,

August 10, 1992; page H 8107, August 12, 1992.)

Passage of PDA thus gave added emphasis to Congress' intent, as

stated in the legislative history of PDMA, to restore accountability to

the wholesale sector of the pharmaceutical market and to regulate the

wholesale distribution of prescription drug products. (H. Rept. 100-76,

pp. 16-17; S. Rept. 100-202, p. 7.)

Proposed Sec. 203.50(a) would restate the statutory requirement

that, before the completion of any wholesale distribution by an

unauthorized wholesaler to another wholesale distributor or retail

pharmacy, the seller is required to provide to the purchaser a

statement identifying each prior sale, purchase, or trade of such drug.

It would require that the drug pedigree include: (1) The proprietary

and established name of the drug; (2) the dosage; (3) the container

size; (4) the number of containers; (5) the drug's lot or control

number(s); (6) the business name and address of all parties to each

prior transaction involving the drug, starting with the manufacturer;

and (7) the date of each previous transaction involving the drug.

2. Additional Manufacturing Processes

A manufacturer applies at least one manufacturing process to a bulk

drug substance or precursor product to produce a finished dosage form

or a precursor product that will be further manufactured into a

finished dosage form. Each of these processes produces a changed

product. Accordingly, proposed Sec. 203.50(b) specifies that a

manufacturer who subjects a drug to any additional manufacturing

processes to produce a different drug is not required to provide to a

purchaser a statement identifying the previous sales of the component

drug or drugs.

3. Authorized Distributor Lists

Proposed Sec. 203.50(c) would require each manufacturer to maintain

at the corporate offices a current written list of all authorized

distributors of record. The term ``authorized distributor of record''

is defined in proposed Sec. 203.3(b) to mean a distributor with whom a

manufacturer has established an ongoing relationship to distribute such

manufacturer's products. Because an agreement by which a single

shipment of drugs is distributed would not constitute an ongoing

relationship (see proposed Sec. 203.3(r)) that shipment would not

establish an ``authorized distributor of record'' relationship.

The proposal would also require the manufacturer's list to specify

whether each distributor listed is authorized to distribute the

manufacturer's full product line, or only particular, specified

products. The proposal would also require the manufacturer to update

the list on a continuing basis.

In the PDMA legislative history, Congress stated that

manufacturers' lists of authorized distributors of record should be

freely available to the public. Accordingly, FDA is also proposing that

each manufacturer make its list of authorized distributors of record

available on request to the public for inspection and copying.

4. Unknown Origins or ``Salvaged'' Drugs

A number of comments inquired about persons that purchase lost or

abandoned drugs from transportation companies for sale to licensed

wholesale distributors. This procedure is sometimes referred to as drug

salvage, although it differs from the process identified as salvaging

in 21 CFR part 211. These inquiries suggested that identifying

statements for ``salvaged'' drugs should list the transportation

company from which the drugs were ``salvaged'' as the point of origin.

FDA believes that this kind of business operation cannot meet the

requirements of the CGMP regulations, nor can it operate in a manner

consistent with PDMA's requirements (e.g., that a wholesale distributor

give a wholesale distributor purchaser a statement of origin for the

product being sold).

FDA's view is that the requirement for a statement of origin is

designed to permit prospective purchasers to determine if the source of

a drug is a legitimate source, such as an authorized distributor or

secondary distributor licensed by the State as a wholesale distributor.

The agency believes that an ``origin unknown'' statement or a statement

that a particular shipment of prescription drugs originated as

``salvage'' or that they came from a lost shipment from unknown persons

at an unknown time would not be consistent with the meaning of that

provision. Thus, in FDA's view, use of an ``origin unknown'' or

``salvage'' statement would not meet the requirement for an identifying

statement under section 503(e)(1) of the act.

5. State Licensing of Wholesale Distributors

PDMA established a requirement that any person engaged in the

wholesale distribution in interstate commerce of prescription drugs in

a State be licensed by the State in accordance with guidelines issued

as a final rule by the agency (21 U.S.C. 353(e)(2)). The final rule

that set forth guidelines for State licensing of wholesale prescription

drug distributors was published in the Federal Register of September

14, 1990 (55 FR 38012), making the requirement that any person engaging

in the wholesale distribution of prescription drugs in interstate

commerce shall be licensed by the State in which it operates, become

effective September 15, 1992.

However, Congress passed PDA, which modified the State licensing

requirement, before the date on which the requirement would have gone

into effect. PDA amended section 503(e) of the act to establish a

temporary Federal registration procedure for wholesale prescription

drug distributors in those States that do not have a licensing program

that meets the Federal guidelines.

This temporary Federal wholesale distributor registration procedure

expires on September 14, 1994. After that date, all persons engaged in

the wholesale distribution of prescription drugs in interstate commerce

are required to be licensed by the State.

FDA issued a letter to industry and other interested persons on

September 3, 1992, that provides information and guidance on the

procedure to be followed by wholesale distributors required to register

under the temporary Federal wholesale distributor registration

procedure established by PDA. (See the Federal Register of December 2,

1992 (57 FR 57068).)

6. Defining ``Wholesale Distribution''

The term ``wholesale distribution'' is defined in section

503(e)(4)(B) of the act as distribution of prescription drugs to other

than the consumer or patient, but not including intracompany sales or

distributions of drugs described in section 503(c)(3)(B) of the act.

The exclusions under section 503(c)(3)(B) of the act are for the

purchase or other acquisition by a hospital or other health care entity

member of a group purchasing organization of a drug for its own use

from the organization or from other hospitals or health care entity

members of the organization; the sale, purchase, or trade of a drug or

an offer to sell, purchase, or trade a drug by a charitable

organization to a nonprofit affiliate of the organization to the extent

otherwise permitted by law; the sale, purchase, or trade of a drug or

an offer to sell, purchase, or trade a drug among hospitals or other

health care entities under common control; the sale, purchase, or trade

of a drug or an offer to sell, purchase, or trade a drug for emergency

medical reasons; and the sale, purchase, or trade of a drug, an offer

to sell, purchase, or trade a drug, or the dispensing of a drug

pursuant to a prescription executed in accordance with section 503(b)

of the act.

These exclusions are part of the proposed definition of ``wholesale

distribution'' in proposed Sec. 203.3(y).

For clarity, FDA proposes to codify additional exclusions in

proposed Sec. 203.3(y) that have already been discussed in this notice.

They are the distribution of drug samples by manufacturers' and

authorized distributors' representatives; the sale, purchase, or trade

of blood and blood components intended for transfusion; drug

reshipments, when conducted in accordance with proposed Sec. 203.23;

and drug returns, when conducted in accordance with proposed

Sec. 203.24.

In addition, as discussed below, FDA is proposing to codify an

exclusion from the definition of wholesale distribution for the sale of

minimal quantities of drugs by retail pharmacies to licensed

practitioners for office use.

For consistency, FDA is also proposing to incorporate these

additional exclusions in the definition of ``wholesale distribution''

at Sec. 205.3(f).

7. Sales to Licensed Practitioners by Retail Pharmacies

In general, a retail pharmacy that engages in the business of

selling prescription drugs to licensed practitioners is a wholesale

distributor that, since September 15, 1992, has been required to be

licensed by the State as a wholesaler or registered with FDA if the

State does not have a conforming licensing program.

Licensed practitioners often purchase small quantities of drugs

from retail pharmacies for office use. Many wholesale distributors are

reluctant to open accounts with individual practitioners for small

quantities of drugs, and some practitioners believe that there is no

cost-effective, reasonable alternative for making occasional purchases

of small quantities of drugs for office use.

The legislative history supports the view that Congress did not

intend to interfere with this small-scale practice. According to the

House Report, ``It is the express intent of the Committee that the

scope of section 6 include distribution by * * * all sellers of

prescription drugs in wholesale quantities to persons or firms other

than the consumer or patient.'' (H. Rept. 100-76, p. 17.)

FDA believes that permitting the sale of small quantities of

prescription drugs by retail pharmacies to licensed practitioners for

office use without the requirement of a State wholesale distributor's

license satisfies a legitimate need and is consistent with the intent

of the statute. Accordingly, the agency has included language in

proposed Sec. 203.3(y) that would exclude the sale of minimal

quantities of drugs by retail pharmacies to licensed practitioners for

office use from the definition of ``wholesale distribution.''

In this context, sales of prescription drugs by a retail pharmacy

to licensed practitioners for office use will be considered to be

minimal if the total annual dollar volume of prescription drugs sold to

licensed practitioners does not exceed 5 percent of the dollar volume

of that retail pharmacy's annual prescription drug sales.

If a retail pharmacy is engaged in wholesale sales of prescription

drugs in any amount after September 15, 1992, the presumption will be

that the retail pharmacy is, in fact, a wholesale distributor that must

be licensed by the State in accordance with part 205, or registered

with FDA if the State does not have a conforming licensing program,

unless it can be shown that the total annual dollar volume of its sales

to licensed practitioners does not exceed 5 percent of the dollar

volume of that pharmacy's annual prescription drug sales and the

pharmacy does not otherwise engage in wholesale distribution.

8. Sales to Wholesale Distributors by Retail Pharmacies

FDA received a number of questions asking whether PDMA prohibits a

retail pharmacy from selling prescription drugs to a wholesale

distributor. FDA advises that there is no provision in PDMA, the final

PDMA State licensing guidelines, or this proposed rule that would

prohibit a retail pharmacy from selling prescription drugs to a

wholesale distributor. However, a retail pharmacy that engages in such

sales would become a wholesale distributor that would be required to

provide the wholesale distributor purchaser with an identifying

statement for the drugs sold and would be required to have a valid

State wholesale distributor license or be registered with FDA if the

State does not have a conforming licensing program.

F. Request and Receipt Forms, Reports, and Records

Proposed Sec. 203.60 sets forth standards for request and receipt

forms, reports, and for the creation, retention, and maintenance of

records and other documents under proposed part 203. These

requirements, although procedural in nature, are essential for the

efficient administration and enforcement of PDMA and proposed part 203.

1. Recordkeeping Media

FDA is proposing that manufacturers and distributors have the

option of creating or maintaining records on nonpaper media. FDA

believes that recent technological advances compel the agency to

reexamine how the requirements for written records (including forms

bearing written signatures) can be satisfied by electronic media. FDA

believes that greater efficiency, lower costs, and more effective

enforcement can result from an effort to facilitate the development and

use of photographic, electronic, and other nonpaper devices, and media

for creation and maintenance of sample requests, receipts, records, and

other forms.

Accordingly, proposed Sec. 203.60(a) would permit request and

receipt forms, reports, records, and other documents required by PDMA,

PDA, and this proposed rule to be created on paper or on electronic

media.

Proposed Sec. 203.60(b) would permit request and receipt forms,

reports, records, and other documents required by PDMA, PDA, and this

proposal that are created on paper to be maintained on paper or by

photographic or electronic recordation or imaging, provided that

appropriate security and authentication requirements are followed.

Proposed Sec. 203.60(c) would permit request and receipt forms,

reports, records, and other documents required by PDMA, PDA, and this

proposal that are created by means of electronic data entry and

recordkeeping equipment to be stored using computer technologies,

provided that appropriate security and authentication requirements are

followed.

Under this proposal, appropriate photographic records and

electrographic records could include, but not be limited to, those

maintained on microfilm, microcard, microfiche, and xerographic copies.

Appropriate electronic records could include, but not be limited to,

those maintained in analog or digital form or by means of image

recording technology on computer disks, cards, tapes, memory chips, or

optical media.

2. Security and Authentication Requirements for Request and Receipt

Forms, Reports, Records, and Other Documents

The proposed rule would require that any request or receipt form,

report, record, or other document, and any signature appearing thereon,

is to be created, maintained, or transmitted in a form that provides

reasonable assurance of being: (1) Resistant to tampering, revision,

modification, or alteration; (2) preserved in accessible and

retrievable fashion; and (3) visible or readily made visible to permit

copying or other means of duplication for purposes of review, analysis,

verification, authentication, and reproduction by the person who

executed the form or created the record, by the manufacturer or

distributor, and by authorized personnel of FDA or other regulatory and

law enforcement agencies.

3. Retention of Request and Receipt Forms, Reports, Lists, Records, and

Other Documents

The proposed rule also sets standards for the retention of request

and receipt forms, reports, lists, records, and other documents. PDMA

requires the retention of certain records for not less than 3 years.

FDA believes that, with one exception, the 3-year minimum requirement

should be extended to all records created and maintained under the

statute and the proposed rule to ensure efficient enforcement and

compliance operations. Accordingly, the proposal would state that any

person required to create or maintain forms, reports, lists, or other

records under the statute or regulations would have to retain them for

at least 3 years after the date of their creation.

The agency believes that a more stringent standard is necessary for

the retention of records relating to drug sample distribution because

some drug samples are relatively stable and may remain unexpired even

though 3 or more years may have elapsed since they were packaged and

shipped. Accordingly, the proposal would require that forms, reports,

or records relating to the distribution of drug samples be retained for

at least 3 years after the date of the record's creation or the date of

expiration of a drug sample for which the record is being kept,

whichever is later.

4. Availability of Forms, Reports, Lists, and Records

Forms, reports, lists, or other records are of little value to FDA

or other regulatory and law enforcement agencies, unless they are

readily available for inspection and copying. Accordingly, the proposal

would compel any person required to create or maintain forms, reports,

lists, or other records under PDMA, PDA, or the proposed rule to make

them available upon request, in a form that permits copying or other

means of duplication, to FDA or other Federal, State, or local

regulatory and law enforcement officials for review and reproduction.

5. Signatures on Forms, Reports, or Records

By affixing a signature to a document, the person who signs it is

giving his or her personal verification of the validity of a document.

For example, by affixing a signature to a drug sample request form, the

person signing it attests to the fact that he or she is a licensed

practitioner and that he or she has requested delivery of a specific

amount and type of drug sample. Similarly, a signature on a receipt

verifies the delivery of the drug samples to the licensed practitioner

or to the pharmacy of a hospital or other health care entity.

FDA has preliminarily concluded that a valid signature need not be

made by pen or indelible pencil on a piece of paper. Instead, the

agency believes that in certain circumstances a valid signature can be

created and recorded by electronic means.

Accordingly, under proposed Sec. 203.61 a verifiable signature may

be made by use of a writing or marking instrument such as a pen,

indelible pencil, or electronic stylus on electronic pad. Because some

imprinting or copying devices can be used to forge or falsely imprint a

signature, and because false signatures and forgeries could be an

integral part of a drug diversion scheme, the proposal would prohibit

imprinting or automatic reproduction of a signature by a device or

machine such as a stamp, copier, or autopen.

Proposed Sec. 203.61 would establish performance standards and

special security requirements for signatures signed on electronic

media. Proposed Sec. 203.61(b) would require that if electronic media

are used to execute and record signatures, it must be installed and

operated with: (1) A system permitting visual review of the signature;

(2) a system to detect or inhibit entry of a forged, traced,

fraudulent, or counterfeit signature, i.e., authentication software;

and (3) a mechanism that blocks alteration of documents or signatures

after the signatures are made, i.e., a locking device.

Persons interested in commenting on electronic records and

electronic signatures should be aware that an agency task force, the

FDA Electronic Identification/Signature Working Group, is currently

assessing issues relating to electronic signatures and recordkeeping.

In the Federal Register of July 21, 1992 (57 FR 32185), FDA published

an advance notice of proposed rulemaking (ANPRM) entitled ``Electronic

Identification/Signatures; Electronic Records; Request for Information

and Comments.'' The notice stated that the agency is considering

whether it should propose regulations that would, under certain

circumstances, accept electronic signatures in place of handwritten

signatures where signatures are currently required in Title 21 of the

Code of Federal Regulations and is asking for comments on any related

issues. Comments were to be identified with Docket No. 92N-0251. The

working group has reviewed the comments in the docket and the agency is

considering additional action. The agency's emerging position on

electronic signatures and records will be coordinated with the final

PDMA policies requirements and administrative procedures rule.

Suggestions on electronic signatures and other signature substitutes

and surrogates made to FDA in response to this proposed rule will also

be made available to the working group force for its review.

G. Penalties and Rewards

1. Criminal Penalties

Most violations of the act are punishable as misdemeanors, except

that a violation committed after a prior conviction, or a violation

committed with the intent to defraud or mislead, is punishable as a

felony. In addition, FDA advises that persons who knowingly make any

false, fictitious, or fraudulent statements or representations, or

knowingly make or use any false writing or document, in any matter

within the jurisdiction of a Federal department or agency; who engage

in mail fraud or wire fraud; or who otherwise obstruct agency

regulatory activities may be subject to prosecution under Title 18 of

the United States Code.

Most PDMA violations are felonies punishable by a prison term of

not more than 10 years, a fine of not more than $250,000, or both.

Felonies under PDMA include the knowing importation of a drug in

violation of section 801(d)(1) of the act; the knowing sale, purchase,

or trade of a drug or drug sample, or the knowing offer to sell,

purchase, or trade a drug or drug sample in violation of section

503(c)(1) of the act; the knowing sale, purchase, or trade of a drug

coupon; the knowing offer to sell, purchase, or trade a drug coupon, or

the knowing counterfeiting of such a coupon in violation of section

503(c)(2) of the act; or the knowing distribution of drugs in violation

of section 503(e)(2)(A) of the act. Misdemeanors include the

distribution of a drug sample in violation of section 503(d) of the act

and the failure to comply with the ``pedigree'' requirement of section

503(e)(1)(A) of the act.

2. Civil Penalties

PDMA also includes provisions for civil penalties for certain

violations of the drug sample distribution requirements.

A manufacturer or distributor who distributes drug samples by means

other than mail or common carrier, whose representative, in the course

of his or her employment, violates the PDMA prohibition against the

sale, purchase, or trade or offer to sell, purchase, or trade drug

samples, or any State law prohibiting the sale, purchase, or trade or

offer to sell, purchase, or trade drug samples, is, upon conviction of

the representative, subject to civil penalties as follows: (1) A civil

penalty of not more than $50,000 for each of the first two such

violations resulting in a conviction of any representative of the

manufacturer or distributor in any 10-year period; and (2) a civil

penalty of not more than $1,000,000 for each violation resulting in a

conviction of any representative after the second conviction in any 10-

year period.

A manufacturer or distributor who fails to report to FDA any

conviction of one of its representatives for violations of section

503(c)(1) of the act or any State law that prohibits the sale,

purchase, or trade of a drug sample (or the offer to sell, purchase, or

trade a drug sample) is subject to a civil penalty of not more than

$100,000.

In the Federal Register of May 26, 1993 (58 FR 30680), FDA

published a proposed rule on procedures for administrative hearings on

civil money penalties, including penalties under PDMA. FDA published a

correction to this proposal in the Federal Register of July 27, 1993

(58 FR 40103).

3. Rewards

Section 7 of PDMA (section 303(b)(5) of the act) provides that a

person who provides information leading to the institution of a

criminal proceeding against, and conviction of, a person for the sale,

purchase, or trade of a drug sample, or the offer to sell, purchase, or

trade a drug sample in violation of section 503(c)(1) of the act, is

entitled to one-half of the criminal fine imposed and collected for

such violation, but not more than $125,000. The proposed rule provides

in Sec. 203.70 that an application for such a reward be made to the

Director, Office of Compliance, of the appropriate Center.

H. Technical Amendment to State Licensing Guideline

FDA is proposing a technical amendment to the storage and handling

requirements of the State licensing guideline at Sec. 205.50(c) to

clarify the agency's intention that the paragraph require that

prescription drugs be stored at appropriate temperatures in accordance

with the requirements of the 22d edition of the U.S. Pharmacopoeia

(U.S.P. XXII), the current edition of that compendium.

III. Analysis of Impacts

FDA has examined the impacts of the proposed rule under Executive

Order 12866 and the Regulatory Flexibility Act (Pub. L. 96-354).

Executive Order 12866 directs agencies to assess all costs and benefits

of available regulatory alternatives and, when regulation is necessary,

to select regulatory approaches that maximize net benefits (including

potential economic, environmental, public health and safety, and other

advantages; distributive impacts; and equity). The agency believes that

this proposed rule is consistent with the principles set out in the

Executive Order. In addition, the proposed rule is not a significant

regulatory action as defined by the Executive Order.

Most of the requirements in this proposed rule have already been

implemented by the regulated industry in response to PDMA's enactment,

FDA's guidance, and industry trade associations' recommendations.

The regulatory costs of this proposal, which are due to increased

paperwork requirements, were calculated by multiplying an estimate of

the time necessary to complete the paperwork for each section by an

hourly wage rate of $44.99. The agency estimates that nonprofit health

care organizations (hospitals and charitable organizations) will

require roughly 76,100 hours to complete the paperwork, at a cost of

just over $3.4 million (76,000 hours X $44.99) annually. Pharmaceutical

manufacturers and distributors will need about 476,000 hours to comply

with the paperwork requirements, at a cost of around $21.4 million

(476,000 hours X $44.99) annually. In total, therefore, the industry

will utilize 552,000 hours (76,000 + 476,000) and spend approximately

$24.8 million (3.4 million + 21.4 million) to complete the paperwork

requirements. Further details for these estimates are included with the

agency's paperwork reduction package, prepared pursuant to the

Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

The Regulatory Flexibility Act requires agencies to analyze

regulatory options that would minimize any significant impact of a rule

on small entities. Most of the requirements in this proposed rule have

already been implemented by the regulated industry, including small

entities, in response to PDMA's enactment, FDA's guidance, and industry

trade association recommendations. Consequently, the agency certifies

that the proposed rule will not have a significant economic impact on a

substantial number of small entities. Accordingly, under the Regulatory

Flexibility Act, no further analysis is required.

IV. Executive Order 12612: Federalism

Executive Order 12612 requires Federal agencies to examine

carefully regulatory actions to determine if they would have a

significant impact on federalism. Using the criteria and principles set

forth in the Order, the agency has considered the impact of this

proposed rule on the States, on their relationship with the Federal

government, and on the distribution of power and responsibilities among

the various levels of government.

FDA is publishing this proposed rule to set forth agency policies

and requirements and provide administrative procedures, information,

and guidance for those sections of PDMA that are not related to State

licensing of wholesale drug distributors. Because enforcement of these

sections of PDMA is a Federal responsibility, there should be little,

if any, impact on the States from this rule, if it is finalized.

FDA certifies that it has examined this proposed rule. Because it

has little, if any, effect on federalism issues, as stated above, and

because any effects are not significant, this proposed rule does not

require an assessment under Executive Order 12612.

V. Paperwork Reduction Act of 1980

This proposed rule contains information collections which are

subject to review by the Office of Management and Budget (OMB) under

the Paperwork Reduction Act of 1980. The title, description, and

respondent description of the information collection are shown below

with an estimate of the annual reporting and recordkeeping burden.

Included in the estimate is the time for reviewing instructions,

searching existing data sources, gathering and maintaining the data

needed, and completing and reviewing the collection of information.

Title: Prescription Drug Marketing Act of 1987; Policies,

Requirements, and Administrative Procedures.

Description: The information requirements contained in the proposed

rule would collect information from establishments engaged in the

reimportation and wholesale distribution of drugs subject to section

503(b) of the act; the sale, purchase, or trade (or offer to sell,

purchase, or trade) of prescription drugs by hospitals, health care

entities, and charitable institutions; and the distribution of

prescription drug samples.

Description of Respondents: Businesses, hospitals, health care

entities, charitable institutions, and other for-profit and not-for-

profit organizations; small businesses or organizations.

Estimated Annual Reporting and Recordkeeping Burden

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

Annual Average

Section number of Annual burden per Annual

respondents frequency response burden hours

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

203.11............. 12 1 30 min 6.00

203.23(b), (c)..... 44,469 2 15 min 22,234.00

203.24............. 44,469 3 20 min 44,469.00

203.30(a), (b), (c) 34,000 120 1 min 68,000.00

203.31(a), (b), (c) 34,000 480 1 min 272,000.00

203.31(d).......... 27,200 1 30 min 13,600.00

203.31(e).......... 4,700 1 1 min 78.33

203.31(f).......... 12 1 30 min 6.00

203.34............. 4,700 1 24 hrs 112,800.00

203.37(a).......... 48 1 30 min 24.00

203.37(b).......... 1,200 1 60 min 1,200.00

203.37(c).......... 2 1 30 min 6.00

203.37(d).......... 4,700 1 15 min 1,175.00

203.39(a)(2)(i).... 6,800 1 15 min 1,700.00

203.39(b)(1), (2),

(6), (7), (8),

(9), (10), (12)... 300 1 3 hrs 900.00

203.39(b)(11), (14) 6,800 1 60 min 6,800.00

203.50(a).......... 125 1 30 min 62.50

203.50(c).......... 4,700 1 90 min 7,050.00

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

Total burden

hours........... ........... ........... ........... 552,111.33

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

The agency has submitted a copy of this proposed rule to OMB for

its review of these information collections. Interested persons are

requested to send comments regarding this burden estimate or any other

aspect of thiscollection of information, including suggestions for

reducing the burden, to FDA's Dockets Management Branch (address

above), and to the Office of Information and Regulatory Affairs, OMB,

rm. 3208, New Executive Office Bldg., Washington, DC 20503, Attn.: Desk

Officer for FDA.

VI. Environmental Impact

The agency has determined under 21 CFR 25.24(a)(7) and (a)(8) that

this action is of a type that does not individually or cumulatively

have a significant effect on the human environment. Therefore, neither

an environmental assessment nor an environmental impact statement is

required.

VII. Request for Comments

Interested persons may, on or before May 30, 1994, submit to the

Dockets Management Branch (address above) written comments regarding

this proposal. Two copies of any comments are to be submitted, except

that individuals may submit one copy. Comments are to be identified

with the docket number found in brackets in the heading of this

document. Received comments may be seen in the office above between 9

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

List of Subjects

21 CFR Part 203

Drugs, Labeling, Manufacturing, Prescription drugs, Reporting and

recordkeeping requirements, Warehouses.

21 CFR Part 205

Intergovernmental relations, Prescription drugs, Reporting and

recordkeeping requirements, Security measures, Warehouses.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under

authority delegated to the Commissioner of Food and Drugs, it is

proposed that Title 21 of the Code of Federal Regulations be amended as

follows:

1. Part 203 is added to read as follows:

PART 203--PRESCRIPTION DRUG MARKETING

Subpart A--General Provisions

Sec.

203.1 Scope.

203.2 Purpose.

203.3 Definitions.

Subpart B--Reimportation

203.10 Restrictions on reimportation.

203.11 Applications for reimportation to provide emergency medical

care.

203.12 An appeal from an adverse decision by the district office.

Subpart C--Sales Restrictions

203.20 Sales restrictions.

203.22 Exclusions.

203.23 Revocation of acceptance and reshipment.

203.24 Returns.

Subpart D--Samples

203.30 Sample distribution by mail or common carrier.

203.31 Sample distribution by means other than mail or

commoncarrier (direct delivery by a representative or detailer).

203.32 Drug sample storage and handling requirements.

203.33 Drug sample forms.

203.34 Policies and procedures; administrative systems.

203.35 Standing requests.

203.36 Fulfillment houses, shipping and mailing

services,comarketing agreements, and third party recordkeeping.

203.37 Investigation and notification requirements.

203.38 Sample lot or control numbers; labeling of sample units.

203.39 Donation of drug samples to charitable institutions.

203.40 Retail pharmacists and drug samples.

Subpart E--Wholesale Distribution

203.50 Requirements for wholesale distribution of

prescriptiondrugs.

Subpart F--Request and Receipt Forms, Reports, and Records

203.60 Request and receipt forms, reports, and records.

203.61 Signatures.

Subpart G--Rewards

203.70 Application for a reward.

Authority: Secs. 301, 303, 501, 502, 503, 510, 701, 704, 801 of

the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 331, 333, 351,

352, 353, 360, 371, 374, 381).

Subpart A--General Provisions

Sec. 203.1 Scope.

This part sets forth procedures and requirements pertaining to the

reimportation and wholesale distribution of prescription drugs,

including both bulk drug substances and finished dosage forms, and to

the sale, purchase, or trade (or the offer to sell, purchase, or trade)

of prescription drugs, including bulk drug substances, by hospitals,

health care entities, and charitable institutions, and to the

distribution of prescription drug samples. Blood and blood components

intended for transfusion are excluded from the restrictions in and the

requirements of the Prescription Drug Marketing Act of 1987 and the

Prescription Drug Amendments of 1992.

Sec. 203.2 Purpose.

The purpose of this part is to implement the Prescription Drug

Marketing Act of 1987 and the Prescription Drug Amendments of 1992,

except for those sections relating to State licensing of wholesale

distributors (see part 205 of this chapter), to protect the public

health, and to protect the public against drug diversion by

establishing procedures, requirements, and minimum standards for the

distribution of prescription drugs and prescription drug samples.

Sec. 203.3 Definitions.

(a) The act means the Federal Food, Drug, and Cosmetic Act, as

amended (21 U.S.C. 301 et seq.).

(b) Authorized distributor of record means a distributor with whom

a manufacturer has established an ongoing relationship to distribute

such manufacturer's products.

(c) Blood means whole blood collected from a single donor and

processed either for transfusion or further manufacturing.

(d) Blood component means that part of a single-donor unit of blood

separated by physical or mechanical means.

(e) Bulk drug substance means any drug or drug component furnished

in other than finished dosage form that is intended to furnish

pharmacological activity or other direct effect in the diagnosis, cure,

mitigation, treatment, or prevention of disease, or to affect the

structure or any function of the body of humans.

(f) Charitable institution or charitable organization means a

nonprofit hospital, health care entity, organization, institution,

foundation, association, or corporation that has been granted an

exemption under section 501(c)(3) of the Internal Revenue Code of 1954,

as amended.

(g) Common control means the power to direct or cause the direction

of the management and policies of a person or an organization, whether

by ownership of stock, voting rights, by contract, or otherwise.

(h) Distribute means to sell, offer to sell, deliver, or offer to

deliver a drug to a recipient, except that the term ``distribute'' does

not include the providing of a drug sample to a patient by:

(1) A practitioner licensed to prescribe such drug;

(2) A health care professional acting at the direction and under

the supervision of such a practitioner; or

(3) The pharmacy of a hospital or of another health care entity

that is acting at the direction of such a practitioner and that

received such sample in accordance with the act and regulations.

(i) Drug sample means a unit of a prescription drug that is not

intended to be sold and is intended to promote the sale of the drug.

(j) Drug coupon means a form that may be redeemed, at no cost or at

reduced cost, for a drug that is prescribed in accordance with section

503(b) of the act.

(k) Emergency medical reasons include, but are not limited to,

transfers of a prescription drug between health care entities or from a

health care entity to a retail pharmacy to alleviate a temporary

shortage of a prescription drug arising from delays in or interruption

of regular distribution schedules; sales to nearby emergency medical

services, i.e., ambulance companies and fire fighting organizations in

the same State or same marketing or service area, or nearby licensed

practitioners, of drugs for use in the treatment of acutely ill or

injured persons; provision of minimal emergency supplies of drugs to

nearby nursing homes for use in emergencies or during hours of the day

when necessary drugs cannot be obtained; and transfers of prescription

drugs by a retail pharmacy to another retail pharmacy to alleviate a

temporary shortage; but do not include regular and systematic sales to

licensed practitioners of prescription drugs that will be used for

routine office procedures.

(l) FDA means the U.S. Food and Drug Administration.

(m) Group purchasing organization means any entity established,

maintained, and operated for the purchase of prescription drugs for

distribution exclusively to its members with such membership consisting

solely of hospitals and health care entities bound by written contract

with the entity.

(n) Health care entity means any person that provides diagnostic,

medical, surgical, or dental treatment, or chronic or rehabilitative

care, but does not include any retail pharmacy or any wholesale

distributor. A person cannot simultaneously be a ``health care entity''

and a retail pharmacy or wholesale distributor.

(o) Licensed practitioner means any person licensed by State law to

prescribe drugs.

(p) Manufacturer means any person who is a manufacturer as defined

by Sec. 201.1 of this chapter.

(q) Nonprofit affiliate means any not-for-profit organization that

is either associated with or a subsidiary of a charitable organization

as defined in section 501(c)(3) of the Internal Revenue Code of 1954.

(r) Ongoing relationship means an association that exists when a

manufacturer and a distributor enter into a written agreement under

which the distributor is authorized to sell the manufacturer's products

for a period of time or for a number of shipments, at least one sale is

made under that agreement, and the name of the authorized distributor

of record is entered on the manufacturer's list of authorized

distributors of record.

(s) PDA means the Prescription Drug Amendments of 1992.

(t) PDMA means the Prescription Drug Marketing Act of 1987.

(u) Person includes any individual, partnership, corporation, or

association.

(v) Prescription drug means any drug (including any biological

product, except for blood and blood components intended for transfusion

or biological products which are also medical devices) required by

Federal law (including Federal regulation) to be dispensed only by a

prescription, including finished dosage forms, bulk drug substances,

and active ingredients subject to section 503(b) of the act.

(w) Representative means an employee or agent of a drug

manufacturer or distributor who promotes the sale of prescription drugs

to licensed practitioners and who may solicit or receive written

requests for the delivery of drug samples. A detailer is a

representative.

(x) Sample unit means a packet, card, blister pack, bottle,

container, or other single package comprised of one or more dosage

units of a prescription drug sample, intended by the manufacturer or

distributor to be distributed by a licensed practitioner to a patient

in an unbroken or unopened condition.

(y) Wholesale distribution means distribution of prescription drugs

to persons other than a consumer or patient, but does not include:

(1) Intracompany sales;

(2) The purchase or other acquisition by a hospital or other health

care entity that is a member of a group purchasing organization of a

drug for its own use from the group purchasing organization or from

other hospitals or health care entities that are members of such

organizations;

(3) The sale, purchase, or trade of a drug or an offer to sell,

purchase, or trade a drug by a charitable organization to a nonprofit

affiliate of the organization to the extent otherwise permitted by law;

(4) The sale, purchase, or trade of a drug or an offer to sell,

purchase, or trade a drug among hospitals or other health care entities

that are under common control;

(5) The sale, purchase, or trade of a drug or an offer to sell,

purchase, or trade a drug for emergency medical reasons;

(6) The sale, purchase, or trade of a drug, an offer to sell,

purchase, or trade a drug, or the dispensing of a drug under a

prescription executed in accordance with section 503(b) of the act;

(7) The distribution of drug samples by manufacturers' and

authorized distributors' representatives;

(8) The sale, purchase, or trade of blood or blood components

intended for transfusion;

(9) The reshipment of drugs, when conducted in accordance with

Sec. 203.23;

(10) Drug returns, when conducted in accordance with Sec. 203.24;

or

(11) The sale of minimal quantities of drugs by retail pharmacies

to licensed practitioners for office use.

(z) Wholesale distributor means any person engaged in wholesale

distribution of prescription drugs, including, but not limited to,

manufacturers; repackers; own-label distributors; private-label

distributors; jobbers; brokers; warehouses, including manufacturers'

and distributors' warehouses, chain drug warehouses, and wholesale drug

warehouses; independent wholesale drug traders; and retail pharmacies

that conduct wholesale distributions.

Subpart B--Reimportation

Sec. 203.10 Restrictions on reimportation.

No prescription drug that was manufactured in a State and exported

from the United States may be reimported by anyone other than its

manufacturer, except that FDA may grant permission to a person other

than the manufacturer to reimport a prescription drug if it deems such

reimportation is required for emergency medical care.

Sec. 203.11 Applications for reimportation to provide emergencymedical

care.

(a) Applications for reimportation for emergency medical care are

required to be submitted to the director of the FDA District Office in

the district where reimportation is sought (addresses found in

Sec. 5.115 of this chapter).

(b) Applications for reimportation to provide emergency medical

care will be reviewed and approved or disapproved by each district

office.

Sec. 203.12 An appeal from an adverse decision by the district office.

An appeal from an adverse decision by the district office involving

prescription human drugs other than biological products may be made to

the Office of Compliance (HFD-300), Center for Drug Evaluation and

Research, Food and Drug Administration, 7500 Standish Pl., Rockville,

MD 20855. An appeal from an adverse decision by the district office

involving prescription human biological products may be

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