[Congressional Record (Bound Edition), Volume 159 (2013), Part 10]
[House]
[Pages 14631-14652]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     DRUG QUALITY AND SECURITY ACT

  Mr. UPTON. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 3204) to amend the Federal Food, Drug, and Cosmetic Act with 
respect to human drug compounding and drug supply chain security, and 
for other purposes.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 3204

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

     SECTION 1. SHORT TITLE.

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

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

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

Sec. 1. Short title.
Sec. 2. References in Act; table of contents.

                       TITLE I--DRUG COMPOUNDING

Sec. 101. Short title.
Sec. 102. Voluntary outsourcing facilities.
Sec. 103. Penalties.
Sec. 104. Regulations.
Sec. 105. Enhanced communication.
Sec. 106. Severability.
Sec. 107. GAO study.

                  TITLE II--DRUG SUPPLY CHAIN SECURITY

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

                       TITLE I--DRUG COMPOUNDING

     SEC. 101. SHORT TITLE.

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

     SEC. 102. VOLUNTARY OUTSOURCING FACILITIES.

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

     ``SEC. 503B. OUTSOURCING FACILITIES.

       ``(a) In General.--Sections 502(f)(1), 505, and 582 shall 
     not apply to a drug compounded by or under the direct 
     supervision of a licensed pharmacist in a facility that 
     elects to register as an outsourcing facility if each of the 
     following conditions is met:
       ``(1) Registration and reporting.--The drug is compounded 
     in an outsourcing facility that is in compliance with the 
     requirements of subsection (b).
       ``(2) Bulk drug substances.--The drug is compounded in an 
     outsourcing facility that does not compound using bulk drug 
     substances (as defined in section 207.3(a)(4) of title 21, 
     Code of Federal Regulations (or any successor regulation)), 
     unless--
       ``(A)(i) the bulk drug substance appears on a list 
     established by the Secretary identifying bulk drug substances 
     for which there is a clinical need, by--
       ``(I) publishing a notice in the Federal Register proposing 
     bulk drug substances to be included on the list, including 
     the rationale for such proposal;
       ``(II) providing a period of not less than 60 calendar days 
     for comment on the notice; and

[[Page 14632]]

       ``(III) publishing a notice in the Federal Register 
     designating bulk drug substances for inclusion on the list; 
     or
       ``(ii) the drug compounded from such bulk drug substance 
     appears on the drug shortage list in effect under section 
     506E at the time of compounding, distribution, and 
     dispensing;
       ``(B) if an applicable monograph exists under the United 
     States Pharmacopeia, the National Formulary, or another 
     compendium or pharmacopeia recognized by the Secretary for 
     purposes of this paragraph, the bulk drug substances each 
     comply with the monograph;
       ``(C) the bulk drug substances are each manufactured by an 
     establishment that is registered under section 510 (including 
     a foreign establishment that is registered under section 
     510(i)); and
       ``(D) the bulk drug substances are each accompanied by a 
     valid certificate of analysis.
       ``(3) Ingredients (other than bulk drug substances).--If 
     any ingredients (other than bulk drug substances) are used in 
     compounding the drug, such ingredients comply with the 
     standards of the applicable United States Pharmacopeia or 
     National Formulary monograph, if such monograph exists, or of 
     another compendium or pharmacopeia recognized by the 
     Secretary for purposes of this paragraph if any.
       ``(4) Drugs withdrawn or removed because unsafe or not 
     effective.--The drug does not appear on a list published by 
     the Secretary of drugs that have been withdrawn or removed 
     from the market because such drugs or components of such 
     drugs have been found to be unsafe or not effective.
       ``(5) Essentially a copy of an approved drug.--The drug is 
     not essentially a copy of one or more approved drugs.
       ``(6) Drugs presenting demonstrable difficulties for 
     compounding.--The drug--
       ``(A) is not identified (directly or as part of a category 
     of drugs) on a list published by the Secretary, through the 
     process described in subsection (c), of drugs or categories 
     of drugs that present demonstrable difficulties for 
     compounding that are reasonably likely to lead to an adverse 
     effect on the safety or effectiveness of the drug or category 
     of drugs, taking into account the risks and benefits to 
     patients; or
       ``(B) is compounded in accordance with all applicable 
     conditions identified on the list described in subparagraph 
     (A) as conditions that are necessary to prevent the drug or 
     category of drugs from presenting the demonstrable 
     difficulties described in subparagraph (A).
       ``(7) Elements to assure safe use.--In the case of a drug 
     that is compounded from a drug that is the subject of a risk 
     evaluation and mitigation strategy approved with elements to 
     assure safe use pursuant to section 505-1, or from a bulk 
     drug substance that is a component of such drug, the 
     outsourcing facility demonstrates to the Secretary prior to 
     beginning compounding that such facility will utilize 
     controls comparable to the controls applicable under the 
     relevant risk evaluation and mitigation strategy.
       ``(8) Prohibition on wholesaling.--The drug will not be 
     sold or transferred by an entity other than the outsourcing 
     facility that compounded such drug. This paragraph does not 
     prohibit administration of a drug in a health care setting or 
     dispensing a drug pursuant to a prescription executed in 
     accordance with section 503(b)(1).
       ``(9) Fees.--The drug is compounded in an outsourcing 
     facility that has paid all fees owed by such facility 
     pursuant to section 744K.
       ``(10) Labeling of drugs.--
       ``(A) Label.--The label of the drug includes--
       ``(i) the statement `This is a compounded drug.' or a 
     reasonable comparable alternative statement (as specified by 
     the Secretary) that prominently identifies the drug as a 
     compounded drug;
       ``(ii) the name, address, and phone number of the 
     applicable outsourcing facility; and
       ``(iii) with respect to the drug--

       ``(I) the lot or batch number;
       ``(II) the established name of the drug;
       ``(III) the dosage form and strength;
       ``(IV) the statement of quantity or volume, as appropriate;
       ``(V) the date that the drug was compounded;
       ``(VI) the expiration date;
       ``(VII) storage and handling instructions;
       ``(VIII) the National Drug Code number, if available;
       ``(IX) the statement `Not for resale', and, if the drug is 
     dispensed or distributed other than pursuant to a 
     prescription for an individual identified patient, the 
     statement `Office Use Only'; and
       ``(X) subject to subparagraph (B)(i), a list of active and 
     inactive ingredients, identified by established name and the 
     quantity or proportion of each ingredient.

       ``(B) Container.--The container from which the individual 
     units of the drug are removed for dispensing or for 
     administration (such as a plastic bag containing individual 
     product syringes) shall include--
       ``(i) the information described under subparagraph 
     (A)(iii)(X), if there is not space on the label for such 
     information;
       ``(ii) the following information to facilitate adverse 
     event reporting: www.fda.gov/medwatch and 1-800-FDA-1088 (or 
     any successor Internet Web site or phone number); and
       ``(iii) directions for use, including, as appropriate, 
     dosage and administration.
       ``(C) Additional information.--The label and labeling of 
     the drug shall include any other information as determined 
     necessary and specified in regulations promulgated by the 
     Secretary.
       ``(11) Outsourcing facility requirement.--The drug is 
     compounded in an outsourcing facility in which the 
     compounding of drugs occurs only in accordance with this 
     section.
       ``(b) Registration of Outsourcing Facilities and Reporting 
     of Drugs.--
       ``(1) Registration of outsourcing facilities.--
       ``(A) Annual registration.--Upon electing and in order to 
     become an outsourcing facility, and during the period 
     beginning on October 1 and ending on December 31 of each year 
     thereafter, a facility--
       ``(i) shall register with the Secretary its name, place of 
     business, and unique facility identifier (which shall conform 
     to the requirements for the unique facility identifier 
     established under section 510), and a point of contact email 
     address; and
       ``(ii) shall indicate whether the outsourcing facility 
     intends to compound a drug that appears on the list in effect 
     under section 506E during the subsequent calendar year.
       ``(B) Availability of registration for inspection; list.--
       ``(i) Registrations.--The Secretary shall make available 
     for inspection, to any person so requesting, any registration 
     filed pursuant to this paragraph.
       ``(ii) List.--The Secretary shall make available on the 
     public Internet Web site of the Food and Drug Administration 
     a list of the name of each facility registered under this 
     subsection as an outsourcing facility, the State in which 
     each such facility is located, whether the facility compounds 
     from bulk drug substances, and whether any such compounding 
     from bulk drug substances is for sterile or nonsterile drugs.
       ``(2) Drug reporting by outsourcing facilities.--
       ``(A) In general.--Upon initially registering as an 
     outsourcing facility, once during the month of June of each 
     year, and once during the month of December of each year, 
     each outsourcing facility that registers with the Secretary 
     under paragraph (1) shall submit to the Secretary a report--
       ``(i) identifying the drugs compounded by such outsourcing 
     facility during the previous 6-month period; and
       ``(ii) with respect to each drug identified under clause 
     (i), providing the active ingredient, the source of such 
     active ingredient, the National Drug Code number of the 
     source drug or bulk active ingredient, if available, the 
     strength of the active ingredient per unit, the dosage form 
     and route of administration, the package description, the 
     number of individual units produced, and the National Drug 
     Code number of the final product, if assigned.
       ``(B) Form.--Each report under subparagraph (A) shall be 
     prepared in such form and manner as the Secretary may 
     prescribe by regulation or guidance.
       ``(C) Confidentiality.--Reports submitted under this 
     paragraph shall be exempt from inspection under paragraph 
     (1)(B)(i), unless the Secretary finds that such an exemption 
     would be inconsistent with the protection of the public 
     health.
       ``(3) Electronic registration and reporting.--Registrations 
     and drug reporting under this subsection (including the 
     submission of updated information) shall be submitted to the 
     Secretary by electronic means unless the Secretary grants a 
     request for waiver of such requirement because use of 
     electronic means is not reasonable for the person requesting 
     waiver.
       ``(4) Risk-based inspection frequency.--
       ``(A) In general.--Outsourcing facilities--
       ``(i) shall be subject to inspection pursuant to section 
     704; and
       ``(ii) shall not be eligible for the exemption under 
     section 704(a)(2)(A).
       ``(B) Risk-based schedule.--The Secretary, acting through 
     one or more officers or employees duly designated by the 
     Secretary, shall inspect outsourcing facilities in accordance 
     with a risk-based schedule established by the Secretary.
       ``(C) Risk factors.--In establishing the risk-based 
     schedule, the Secretary shall inspect outsourcing facilities 
     according to the known safety risks of such outsourcing 
     facilities, which shall be based on the following factors:
       ``(i) The compliance history of the outsourcing facility.
       ``(ii) The record, history, and nature of recalls linked to 
     the outsourcing facility.
       ``(iii) The inherent risk of the drugs compounded at the 
     outsourcing facility.
       ``(iv) The inspection frequency and history of the 
     outsourcing facility, including whether the outsourcing 
     facility has been inspected pursuant to section 704 within 
     the last 4 years.
       ``(v) Whether the outsourcing facility has registered under 
     this paragraph as an entity that intends to compound a drug 
     that appears on the list in effect under section 506E.
       ``(vi) Any other criteria deemed necessary and appropriate 
     by the Secretary for purposes of allocating inspection 
     resources.

[[Page 14633]]

       ``(5) Adverse event reporting.--Outsourcing facilities 
     shall submit adverse event reports to the Secretary in 
     accordance with the content and format requirements 
     established through guidance or regulation under section 
     310.305 of title 21, Code of Federal Regulations (or any 
     successor regulations).
       ``(c) Regulations.--
       ``(1) In general.--The Secretary shall implement the list 
     described in subsection (a)(6) through regulations.
       ``(2) Advisory committee on compounding.--Before issuing 
     regulations to implement subsection (a)(6), the Secretary 
     shall convene and consult an advisory committee on 
     compounding. The advisory committee shall include 
     representatives from the National Association of Boards of 
     Pharmacy, the United States Pharmacopeia, pharmacists with 
     current experience and expertise in compounding, physicians 
     with background and knowledge in compounding, and patient and 
     public health advocacy organizations.
       ``(3) Interim list.--
       ``(A) In general.--Before the effective date of the 
     regulations finalized to implement subsection (a)(6), the 
     Secretary may designate drugs, categories of drugs, or 
     conditions as described such subsection by--
       ``(i) publishing a notice of such substances, drugs, 
     categories of drugs, or conditions proposed for designation, 
     including the rationale for such designation, in the Federal 
     Register;
       ``(ii) providing a period of not less than 60 calendar days 
     for comment on the notice; and
       ``(iii) publishing a notice in the Federal Register 
     designating such drugs, categories of drugs, or conditions.
       ``(B) Sunset of notice.--Any notice provided under 
     subparagraph (A) shall not be effective after the earlier 
     of--
       ``(i) the date that is 5 years after the date of enactment 
     of the Compounding Quality Act; or
       ``(ii) the effective date of the final regulations issued 
     to implement subsection (a)(6).
       ``(4) Updates.--The Secretary shall review, and update as 
     necessary, the regulations containing the lists of drugs, 
     categories of drugs, or conditions described in subsection 
     (a)(6) regularly, but not less than once every 4 years. 
     Nothing in the previous sentence prohibits submissions to the 
     Secretary, before or during any 4-year period described in 
     such sentence, requesting updates to such lists.
       ``(d) Definitions.--In this section:
       ``(1) The term `compounding' includes the combining, 
     admixing, mixing, diluting, pooling, reconstituting, or 
     otherwise altering of a drug or bulk drug substance to create 
     a drug.
       ``(2) The term `essentially a copy of an approved drug' 
     means--
       ``(A) a drug that is identical or nearly identical to an 
     approved drug, or a marketed drug not subject to section 
     503(b) and not subject to approval in an application 
     submitted under section 505, unless, in the case of an 
     approved drug, the drug appears on the drug shortage list in 
     effect under section 506E at the time of compounding, 
     distribution, and dispensing; or
       ``(B) a drug, a component of which is a bulk drug substance 
     that is a component of an approved drug or a marketed drug 
     that is not subject to section 503(b) and not subject to 
     approval in an application submitted under section 505, 
     unless there is a change that produces for an individual 
     patient a clinical difference, as determined by the 
     prescribing practitioner, between the compounded drug and the 
     comparable approved drug.
       ``(3) The term `approved drug' means a drug that is 
     approved under section 505 and does not appear on the list 
     described in subsection (a)(4) of drugs that have been 
     withdrawn or removed from the market because such drugs or 
     components of such drugs have been found to be unsafe or not 
     effective.
       ``(4)(A) The term `outsourcing facility' means a facility 
     at one geographic location or address that--
       ``(i) is engaged in the compounding of sterile drugs;
       ``(ii) has elected to register as an outsourcing facility; 
     and
       ``(iii) complies with all of the requirements of this 
     section.
       ``(B) An outsourcing facility is not required to be a 
     licensed pharmacy.
       ``(C) An outsourcing facility may or may not obtain 
     prescriptions for identified individual patients.
       ``(5) The term `sterile drug' means a drug that is intended 
     for parenteral administration, an ophthalmic or oral 
     inhalation drug in aqueous format, or a drug that is required 
     to be sterile under Federal or State law.''.
       ``(d) Obligation to Pay Fees.--Payment of the fee under 
     section 744K, as described in subsection (a)(9), shall not 
     relieve an outsourcing facility that is licensed as a 
     pharmacy in any State that requires pharmacy licensing fees 
     of its obligation to pay such State fees.''.
       (b) Fees.--Subchapter C of chapter VII (21 U.S.C. 379f et 
     seq.) is amended by adding at the end the following:

           ``PART 9--FEES RELATING TO OUTSOURCING FACILITIES

     ``SEC. 744J. DEFINITIONS.

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

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

       ``(a) Establishment and Reinspection Fees.--
       ``(1) In general.--For fiscal year 2015 and each subsequent 
     fiscal year, the Secretary shall, in accordance with this 
     subsection, assess and collect--
       ``(A) an annual establishment fee from each outsourcing 
     facility; and
       ``(B) a reinspection fee from each outsourcing facility 
     subject to a reinspection in such fiscal year.
       ``(2) Multiple reinspections.--An outsourcing facility 
     subject to multiple reinspections in a fiscal year shall be 
     subject to a reinspection fee for each reinspection.
       ``(b) Establishment and Reinspection Fee Setting.--The 
     Secretary shall--
       ``(1) establish the amount of the establishment fee and 
     reinspection fee to be collected under this section for each 
     fiscal year based on the methodology described in subsection 
     (c); and
       ``(2) publish such fee amounts in a Federal Register notice 
     not later than 60 calendar days before the start of each such 
     year.
       ``(c) Amount of Establishment Fee and Reinspection Fee.--
       ``(1) In general.--For each outsourcing facility in a 
     fiscal year--
       ``(A) except as provided in paragraph (4), the amount of 
     the annual establishment fee under subsection (b) shall be 
     equal to the sum of--
       ``(i) $15,000, multiplied by the inflation adjustment 
     factor described in paragraph (2); plus
       ``(ii) the small business adjustment factor described in 
     paragraph (3); and
       ``(B) the amount of any reinspection fee (if applicable) 
     under subsection (b) shall be equal to $15,000, multiplied by 
     the inflation adjustment factor described in paragraph (2).
       ``(2) Inflation adjustment factor.--
       ``(A) In general.--For fiscal year 2015 and subsequent 
     fiscal years, the fee amounts established in paragraph (1) 
     shall be adjusted by the Secretary by notice, published in 
     the Federal Register, for a fiscal year by the amount equal 
     to the sum of--
       ``(i) 1;
       ``(ii) the average annual percent change in the cost, per 
     full-time equivalent position of the Food and Drug 
     Administration, of all personnel compensation and benefits 
     paid with respect to such positions for the first 3 years of 
     the preceding 4 fiscal years, multiplied by the proportion of 
     personnel compensation and benefits costs to total costs of 
     an average full-time equivalent position of the Food and Drug 
     Administration for the first 3 years of the preceding 4 
     fiscal years; plus
       ``(iii) the average annual percent change that occurred in 
     the Consumer Price Index for urban consumers (U.S. City 
     Average; Not Seasonally Adjusted; All items; Annual Index) 
     for the first 3 years of the preceding 4 years of available 
     data multiplied by the proportion of all costs other than 
     personnel compensation and benefits costs to total costs of 
     an average full-time equivalent position of the Food and Drug 
     Administration for the first 3 years of the preceding 4 
     fiscal years.
       ``(B) Compounded basis.--The adjustment made each fiscal 
     year under subparagraph (A) shall be added on a compounded 
     basis to the sum of all adjustments made each fiscal year 
     after fiscal year 2014 under subparagraph (A).
       ``(3) Small business adjustment factor.--The small business 
     adjustment factor described in this paragraph shall be an 
     amount established by the Secretary for each fiscal year 
     based on the Secretary's estimate of--
       ``(A) the number of small businesses that will pay a 
     reduced establishment fee for such fiscal year; and
       ``(B) the adjustment to the establishment fee necessary to 
     achieve total fees equaling the total fees that the Secretary 
     would have collected if no entity qualified for the small 
     business exception in paragraph (4).
       ``(4) Exception for small businesses.--
       ``(A) In general.--In the case of an outsourcing facility 
     with gross annual sales of $1,000,000 or less in the 12 
     months ending April 1 of the fiscal year immediately 
     preceding the fiscal year in which the fees under this 
     section are assessed, the amount of the establishment fee 
     under subsection (b) for a fiscal year shall be equal to \1/
     3\ of the amount calculated under paragraph (1)(A)(i) for 
     such fiscal year.

[[Page 14634]]

       ``(B) Application.--To qualify for the exception under this 
     paragraph, a small business shall submit to the Secretary a 
     written request for such exception, in a format specified by 
     the Secretary in guidance, certifying its gross annual sales 
     for the 12 months ending April 1 of the fiscal year 
     immediately preceding the fiscal year in which fees under 
     this subsection are assessed. Any such application shall be 
     submitted to the Secretary not later than April 30 of such 
     immediately preceding fiscal year.
       ``(5) Crediting of fees.--In establishing the small 
     business adjustment factor under paragraph (3) for a fiscal 
     year, the Secretary shall--
       ``(A) provide for the crediting of fees from the previous 
     year to the next year if the Secretary overestimated the 
     amount of the small business adjustment factor for such 
     previous fiscal year; and
       ``(B) consider the need to account for any adjustment of 
     fees and such other factors as the Secretary determines 
     appropriate.
       ``(d) Use of Fees.--The Secretary shall make all of the 
     fees collected pursuant to subparagraphs (A) and (B) of 
     subsection (a)(1) available solely to pay for the costs of 
     oversight of outsourcing facilities.
       ``(e) Supplement Not Supplant.--Funds received by the 
     Secretary pursuant to this section shall be used to 
     supplement and not supplant any other Federal funds available 
     to carry out the activities described in this section.
       ``(f) Crediting and Availability of Fees.--Fees authorized 
     under this section shall be collected and available for 
     obligation only to the extent and in the amount provided in 
     advance in appropriations Acts. Such fees are authorized to 
     remain available until expended. Such sums as may be 
     necessary may be transferred from the Food and Drug 
     Administration salaries and expenses appropriation account 
     without fiscal year limitation to such appropriation account 
     for salaries and expenses with such fiscal year limitation. 
     The sums transferred shall be available solely for the 
     purpose of paying the costs of oversight of outsourcing 
     facilities.
       ``(g) Collection of Fees.--
       ``(1) Establishment fee.--An outsourcing facility shall 
     remit the establishment fee due under this section in a 
     fiscal year when submitting a registration pursuant to 
     section 503B(b) for such fiscal year.
       ``(2) Reinspection fee.--The Secretary shall specify in the 
     Federal Register notice described in subsection (b)(2) the 
     manner in which reinspection fees assessed under this section 
     shall be collected and the timeline for payment of such fees. 
     Such a fee shall be collected after the Secretary has 
     conducted a reinspection of the outsourcing facility 
     involved.
       ``(3) Effect of failure to pay fees.--
       ``(A) Registration.--An outsourcing facility shall not be 
     considered registered under section 503B(b) in a fiscal year 
     until the date that the outsourcing facility remits the 
     establishment fee under this subsection for such fiscal year.
       ``(B) Misbranding.--All drugs manufactured, prepared, 
     propagated, compounded, or processed by an outsourcing 
     facility for which any establishment fee or reinspection fee 
     has not been paid, as required by this section, shall be 
     deemed misbranded under section 502 until the fees owed for 
     such outsourcing facility under this section have been paid.
       ``(4) Collection of unpaid fees.--In any case where the 
     Secretary does not receive payment of a fee assessed under 
     this section within 30 calendar days after it is due, such 
     fee shall be treated as a claim of the United States 
     Government subject to provisions of subchapter II of chapter 
     37 of title 31, United States Code.
       ``(h) Annual Report to Congress.--Not later than 120 
     calendar days after each fiscal year in which fees are 
     assessed and collected under this section, the Secretary 
     shall submit a report to the Committee on Health, Education, 
     Labor, and Pensions of the Senate and the Committee on Energy 
     and Commerce of the House of Representatives, to include a 
     description of fees assessed and collected for such year, a 
     summary description of entities paying the fees, a 
     description of the hiring and placement of new staff, a 
     description of the use of fee resources to support inspecting 
     outsourcing facilities, and the number of inspections and 
     reinspections of such facilities performed each year.
       ``(i) Authorization of Appropriations.--For fiscal year 
     2014 and each subsequent fiscal year, there is authorized to 
     be appropriated for fees under this section an amount 
     equivalent to the total amount of fees assessed for such 
     fiscal year under this section.''.

     SEC. 103. PENALTIES.

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

     SEC. 104. REGULATIONS.

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

     SEC. 105. ENHANCED COMMUNICATION.

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

     SEC. 106. SEVERABILITY.

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

     SEC. 107. GAO STUDY.

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

                  TITLE II--DRUG SUPPLY CHAIN SECURITY

     SEC. 201. SHORT TITLE.

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

     SEC. 202. PHARMACEUTICAL DISTRIBUTION SUPPLY CHAIN.

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

[[Page 14635]]



        ``Subchapter H--Pharmaceutical Distribution Supply Chain

     ``SEC. 581. DEFINITIONS.

       ``In this subchapter:
       ``(1) Affiliate.--The term `affiliate' means a business 
     entity that has a relationship with a second business entity 
     if, directly or indirectly--
       ``(A) one business entity controls, or has the power to 
     control, the other business entity; or
       ``(B) a third party controls, or has the power to control, 
     both of the business entities.
       ``(2) Authorized.--The term `authorized' means--
       ``(A) in the case of a manufacturer or repackager, having a 
     valid registration in accordance with section 510;
       ``(B) in the case of a wholesale distributor, having a 
     valid license under State law or section 583, in accordance 
     with section 582(a)(6), and complying with the licensure 
     reporting requirements under section 503(e), as amended by 
     the Drug Supply Chain Security Act;
       ``(C) in the case of a third-party logistics provider, 
     having a valid license under State law or section 584(a)(1), 
     in accordance with section 582(a)(7), and complying with the 
     licensure reporting requirements under section 584(b); and
       ``(D) in the case of a dispenser, having a valid license 
     under State law.
       ``(3) Dispenser.--The term `dispenser'--
       ``(A) means a retail pharmacy, hospital pharmacy, a group 
     of chain pharmacies under common ownership and control that 
     do not act as a wholesale distributor, or any other person 
     authorized by law to dispense or administer prescription 
     drugs, and the affiliated warehouses or distribution centers 
     of such entities under common ownership and control that do 
     not act as a wholesale distributor; and
       ``(B) does not include a person who dispenses only products 
     to be used in animals in accordance with section 512(a)(5).
       ``(4) Disposition.--The term `disposition', with respect to 
     a product within the possession or control of an entity, 
     means the removal of such product from the pharmaceutical 
     distribution supply chain, which may include disposal or 
     return of the product for disposal or other appropriate 
     handling and other actions, such as retaining a sample of the 
     product for further additional physical examination or 
     laboratory analysis of the product by a manufacturer or 
     regulatory or law enforcement agency.
       ``(5) Distribute or distribution.--The term `distribute' or 
     `distribution' means the sale, purchase, trade, delivery, 
     handling, storage, or receipt of a product, and does not 
     include the dispensing of a product pursuant to a 
     prescription executed in accordance with section 503(b)(1) or 
     the dispensing of a product approved under section 512(b).
       ``(6) Exclusive distributor.--The term `exclusive 
     distributor' means the wholesale distributor that directly 
     purchased the product from the manufacturer and is the sole 
     distributor of that manufacturer's product to a subsequent 
     repackager, wholesale distributor, or dispenser.
       ``(7) Homogeneous case.--The term `homogeneous case' means 
     a sealed case containing only product that has a single 
     National Drug Code number belonging to a single lot.
       ``(8) Illegitimate product.--The term `illegitimate 
     product' means a product for which credible evidence shows 
     that the product--
       ``(A) is counterfeit, diverted, or stolen;
       ``(B) is intentionally adulterated such that the product 
     would result in serious adverse health consequences or death 
     to humans;
       ``(C) is the subject of a fraudulent transaction; or
       ``(D) appears otherwise unfit for distribution such that 
     the product would be reasonably likely to result in serious 
     adverse health consequences or death to humans.
       ``(9) Licensed.--The term `licensed' means--
       ``(A) in the case of a wholesale distributor, having a 
     valid license in accordance with section 503(e) or section 
     582(a)(6), as applicable;
       ``(B) in the case of a third-party logistics provider, 
     having a valid license in accordance with section 584(a) or 
     section 582(a)(7), as applicable; and
       ``(C) in the case of a dispenser, having a valid license 
     under State law.
       ``(10) Manufacturer.--The term `manufacturer' means, with 
     respect to a product--
       ``(A) a person that holds an application approved under 
     section 505 or a license issued under section 351 of the 
     Public Health Service Act for such product, or if such 
     product is not the subject of an approved application or 
     license, the person who manufactured the product;
       ``(B) a co-licensed partner of the person described in 
     subparagraph (A) that obtains the product directly from a 
     person described in this subparagraph or subparagraph (A) or 
     (C); or
       ``(C) an affiliate of a person described in subparagraph 
     (A) or (B) that receives the product directly from a person 
     described in this subparagraph or subparagraph (A) or (B).
       ``(11) Package.--
       ``(A) In general.--The term `package' means the smallest 
     individual saleable unit of product for distribution by a 
     manufacturer or repackager that is intended by the 
     manufacturer for ultimate sale to the dispenser of such 
     product.
       ``(B) Individual saleable unit.--For purposes of this 
     paragraph, an `individual saleable unit' is the smallest 
     container of product introduced into commerce by the 
     manufacturer or repackager that is intended by the 
     manufacturer or repackager for individual sale to a 
     dispenser.
       ``(12) Prescription drug.--The term `prescription drug' 
     means a drug for human use subject to section 503(b)(1).
       ``(13) Product.--The term `product' means a prescription 
     drug in a finished dosage form for administration to a 
     patient without substantial further manufacturing (such as 
     capsules, tablets, and lyophilized products before 
     reconstitution), but for purposes of section 582, does not 
     include blood or blood components intended for transfusion, 
     radioactive drugs or radioactive biological products (as 
     defined in section 600.3(ee) of title 21, Code of Federal 
     Regulations) that are regulated by the Nuclear Regulatory 
     Commission or by a State pursuant to an agreement with such 
     Commission under section 274 of the Atomic Energy Act of 1954 
     (42 U.S.C. 2021), imaging drugs, an intravenous product 
     described in clause (xiv), (xv), or (xvi) of paragraph 
     (24)(B), any medical gas (as defined in section 575), 
     homeopathic drugs marketed in accordance with applicable 
     guidance under this Act, or a drug compounded in compliance 
     with section 503A or 503B.
       ``(14) Product identifier.--The term `product identifier' 
     means a standardized graphic that includes, in both human-
     readable form and on a machine-readable data carrier that 
     conforms to the standards developed by a widely recognized 
     international standards development organization, the 
     standardized numerical identifier, lot number, and expiration 
     date of the product.
       ``(15) Quarantine.--The term `quarantine' means the storage 
     or identification of a product, to prevent distribution or 
     transfer of the product, in a physically separate area 
     clearly identified for such use or through other procedures.
       ``(16) Repackager.--The term `repackager' means a person 
     who owns or operates an establishment that repacks and 
     relabels a product or package for--
       ``(A) further sale; or
       ``(B) distribution without a further transaction.
       ``(17) Return.--The term `return' means providing product 
     to the authorized immediate trading partner from which such 
     product was purchased or received, or to a returns processor 
     or reverse logistics provider for handling of such product.
       ``(18) Returns processor or reverse logistics provider.--
     The term `returns processor' or `reverse logistics provider' 
     means a person who owns or operates an establishment that 
     dispositions or otherwise processes saleable or nonsaleable 
     product received from an authorized trading partner such that 
     the product may be processed for credit to the purchaser, 
     manufacturer, or seller or disposed of for no further 
     distribution.
       ``(19) Specific patient need.--The term `specific patient 
     need' refers to the transfer of a product from one pharmacy 
     to another to fill a prescription for an identified patient. 
     Such term does not include the transfer of a product from one 
     pharmacy to another for the purpose of increasing or 
     replenishing stock in anticipation of a potential need.
       ``(20) Standardized numerical identifier.--The term 
     `standardized numerical identifier' means a set of numbers or 
     characters used to uniquely identify each package or 
     homogenous case that is composed of the National Drug Code 
     that corresponds to the specific product (including the 
     particular package configuration) combined with a unique 
     alphanumeric serial number of up to 20 characters.
       ``(21) Suspect product.--The term `suspect product' means a 
     product for which there is reason to believe that such 
     product--
       ``(A) is potentially counterfeit, diverted, or stolen;
       ``(B) is potentially intentionally adulterated such that 
     the product would result in serious adverse health 
     consequences or death to humans;
       ``(C) is potentially the subject of a fraudulent 
     transaction; or
       ``(D) appears otherwise unfit for distribution such that 
     the product would result in serious adverse health 
     consequences or death to humans.
       ``(22) Third-party logistics provider.--The term `third-
     party logistics provider' means an entity that provides or 
     coordinates warehousing, or other logistics services of a 
     product in interstate commerce on behalf of a manufacturer, 
     wholesale distributor, or dispenser of a product, but does 
     not take ownership of the product, nor have responsibility to 
     direct the sale or disposition of the product.
       ``(23) Trading partner.--The term `trading partner' means--
       ``(A) a manufacturer, repackager, wholesale distributor, or 
     dispenser from whom a

[[Page 14636]]

     manufacturer, repackager, wholesale distributor, or dispenser 
     accepts direct ownership of a product or to whom a 
     manufacturer, repackager, wholesale distributor, or dispenser 
     transfers direct ownership of a product; or
       ``(B) a third-party logistics provider from whom a 
     manufacturer, repackager, wholesale distributor, or dispenser 
     accepts direct possession of a product or to whom a 
     manufacturer, repackager, wholesale distributor, or dispenser 
     transfers direct possession of a product.
       ``(24) Transaction.--
       ``(A) In general.--The term `transaction' means the 
     transfer of product between persons in which a change of 
     ownership occurs.
       ``(B) Exemptions.--The term `transaction' does not 
     include--
       ``(i) intracompany distribution of any product between 
     members of an affiliate or within a manufacturer;
       ``(ii) the distribution of a product among hospitals or 
     other health care entities that are under common control;
       ``(iii) the distribution of a product for emergency medical 
     reasons including a public health emergency declaration 
     pursuant to section 319 of the Public Health Service Act, 
     except that a drug shortage not caused by a public health 
     emergency shall not constitute an emergency medical reason;
       ``(iv) the dispensing of a product pursuant to a 
     prescription executed in accordance with section 503(b)(1);
       ``(v) the distribution of product samples by a manufacturer 
     or a licensed wholesale distributor in accordance with 
     section 503(d);
       ``(vi) the distribution of blood or blood components 
     intended for transfusion;
       ``(vii) the distribution of minimal quantities of product 
     by a licensed retail pharmacy to a licensed practitioner for 
     office use;
       ``(viii) the sale, purchase, or trade of a drug or an offer 
     to sell, purchase, or trade a drug by a charitable 
     organization described in section 501(c)(3) of the Internal 
     Revenue Code of 1986 to a nonprofit affiliate of the 
     organization to the extent otherwise permitted by law;
       ``(ix) the distribution of a product pursuant to the sale 
     or merger of a pharmacy or pharmacies or a wholesale 
     distributor or wholesale distributors, except that any 
     records required to be maintained for the product shall be 
     transferred to the new owner of the pharmacy or pharmacies or 
     wholesale distributor or wholesale distributors;
       ``(x) the dispensing of a product approved under section 
     512(c);
       ``(xi) products transferred to or from any facility that is 
     licensed by the Nuclear Regulatory Commission or by a State 
     pursuant to an agreement with such Commission under section 
     274 of the Atomic Energy Act of 1954 (42 U.S.C. 2021);
       ``(xii) a combination product that is not subject to 
     approval under section 505 or licensure under section 351 of 
     the Public Health Service Act, and that is--

       ``(I) a product comprised of a device and 1 or more other 
     regulated components (such as a drug/device, biologic/device, 
     or drug/device/biologic) that are physically, chemically, or 
     otherwise combined or mixed and produced as a single entity;
       ``(II) 2 or more separate products packaged together in a 
     single package or as a unit and comprised of a drug and 
     device or device and biological product; or
       ``(III) 2 or more finished medical devices plus one or more 
     drug or biological products that are packaged together in 
     what is referred to as a `medical convenience kit' as 
     described in clause (xiii);

       ``(xiii) the distribution of a collection of finished 
     medical devices, which may include a product or biological 
     product, assembled in kit form strictly for the convenience 
     of the purchaser or user (referred to in this clause as a 
     `medical convenience kit') if--

       ``(I) the medical convenience kit is assembled in an 
     establishment that is registered with the Food and Drug 
     Administration as a device manufacturer in accordance with 
     section 510(b)(2);
       ``(II) the medical convenience kit does not contain a 
     controlled substance that appears in a schedule contained in 
     the Comprehensive Drug Abuse Prevention and Control Act of 
     1970;
       ``(III) in the case of a medical convenience kit that 
     includes a product, the person that manufacturers the kit--

       ``(aa) purchased such product directly from the 
     pharmaceutical manufacturer or from a wholesale distributor 
     that purchased the product directly from the pharmaceutical 
     manufacturer; and
       ``(bb) does not alter the primary container or label of the 
     product as purchased from the manufacturer or wholesale 
     distributor; and

       ``(IV) in the case of a medical convenience kit that 
     includes a product, the product is--

       ``(aa) an intravenous solution intended for the 
     replenishment of fluids and electrolytes;
       ``(bb) a product intended to maintain the equilibrium of 
     water and minerals in the body;
       ``(cc) a product intended for irrigation or reconstitution;
       ``(dd) an anesthetic;
       ``(ee) an anticoagulant;
       ``(ff) a vasopressor; or
       ``(gg) a sympathomimetic;
       ``(xiv) the distribution of an intravenous product that, by 
     its formulation, is intended for the replenishment of fluids 
     and electrolytes (such as sodium, chloride, and potassium) or 
     calories (such as dextrose and amino acids);
       ``(xv) the distribution of an intravenous product used to 
     maintain the equilibrium of water and minerals in the body, 
     such as dialysis solutions;
       ``(xvi) the distribution of a product that is intended for 
     irrigation, or sterile water, whether intended for such 
     purposes or for injection;
       ``(xvii) the distribution of a medical gas (as defined in 
     section 575); or
       ``(xviii) the distribution or sale of any licensed product 
     under section 351 of the Public Health Service Act that meets 
     the definition of a device under section 201(h).
       ``(25) Transaction history.--The term `transaction history' 
     means a statement in paper or electronic form, including the 
     transaction information for each prior transaction going back 
     to the manufacturer of the product.
       ``(26) Transaction information.--The term `transaction 
     information' means--
       ``(A) the proprietary or established name or names of the 
     product;
       ``(B) the strength and dosage form of the product;
       ``(C) the National Drug Code number of the product;
       ``(D) the container size;
       ``(E) the number of containers;
       ``(F) the lot number of the product;
       ``(G) the date of the transaction;
       ``(H) the date of the shipment, if more than 24 hours after 
     the date of the transaction;
       ``(I) the business name and address of the person from whom 
     ownership is being transferred; and
       ``(J) the business name and address of the person to whom 
     ownership is being transferred.
       ``(27) Transaction statement.--The `transaction statement' 
     is a statement, in paper or electronic form, that the entity 
     transferring ownership in a transaction--
       ``(A) is authorized as required under the Drug Supply Chain 
     Security Act;
       ``(B) received the product from a person that is authorized 
     as required under the Drug Supply Chain Security Act;
       ``(C) received transaction information and a transaction 
     statement from the prior owner of the product, as required 
     under section 582;
       ``(D) did not knowingly ship a suspect or illegitimate 
     product;
       ``(E) had systems and processes in place to comply with 
     verification requirements under section 582;
       ``(F) did not knowingly provide false transaction 
     information; and
       ``(G) did not knowingly alter the transaction history.
       ``(28) Verification or verify.--The term `verification' or 
     `verify' means determining whether the product identifier 
     affixed to, or imprinted upon, a package or homogeneous case 
     corresponds to the standardized numerical identifier or lot 
     number and expiration date assigned to the product by the 
     manufacturer or the repackager, as applicable in accordance 
     with section 582.
       ``(29) Wholesale distributor.--The term `wholesale 
     distributor' means a person (other than a manufacturer, a 
     manufacturer's co-licensed partner, a third-party logistics 
     provider, or repackager) engaged in wholesale distribution 
     (as defined in section 503(e)(4), as amended by the Drug 
     Supply Chain Security Act).

     ``SEC. 582. REQUIREMENTS.

       ``(a) In General.--
       ``(1) Other activities.--Each manufacturer, repackager, 
     wholesale distributor, and dispenser shall comply with the 
     requirements set forth in this section with respect to the 
     role of such manufacturer, repackager, wholesale distributor, 
     or dispenser in a transaction involving product. If an entity 
     meets the definition of more than one of the entities listed 
     in the preceding sentence, such entity shall comply with all 
     applicable requirements in this section, but shall not be 
     required to duplicate requirements.
       ``(2) Initial standards.--
       ``(A) In general.--The Secretary shall, in consultation 
     with other appropriate Federal officials, manufacturers, 
     repackagers, wholesale distributors, dispensers, and other 
     pharmaceutical distribution supply chain stakeholders, issue 
     a draft guidance document that establishes standards for the 
     interoperable exchange of transaction information, 
     transaction history, and transaction statements, in paper or 
     electronic format, for compliance with this subsection and 
     subsections (b), (c), (d), and (e). In establishing such 
     standards, the Secretary shall consider the feasibility of 
     establishing standardized documentation to be used by members 
     of the pharmaceutical distribution supply chain to convey the 
     transaction information, transaction history, and transaction 
     statement to the subsequent purchaser of a product and to 
     facilitate the exchange of lot level data. The standards 
     established under this paragraph shall take into 
     consideration the standards established under section 505D 
     and shall comply with a form and format developed by a widely 
     recognized international standards development organization.

[[Page 14637]]

       ``(B) Public input.--Prior to issuing the draft guidance 
     under subparagraph (A), the Secretary shall gather comments 
     and information from stakeholders and maintain such comments 
     and information in a public docket for at least 60 days prior 
     to issuing such guidance.
       ``(C) Publication.--The Secretary shall publish the 
     standards established under subparagraph (A) not later than 1 
     year after the date of enactment of the Drug Supply Chain 
     Security Act.
       ``(3) Waivers, exceptions, and exemptions.--
       ``(A) In general.--Not later than 2 years after the date of 
     enactment of the Drug Supply Chain Security Act, the 
     Secretary shall, by guidance--
       ``(i) establish a process by which an authorized 
     manufacturer, repackager, wholesale distributor, or dispenser 
     may request a waiver from any of the requirements set forth 
     in this section, which the Secretary may grant if the 
     Secretary determines that such requirements would result in 
     an undue economic hardship or for emergency medical reasons, 
     including a public health emergency declaration pursuant to 
     section 319 of the Public Health Service Act;
       ``(ii) establish a process by which the Secretary 
     determines exceptions, and a process through which a 
     manufacturer or repackager may request such an exception, to 
     the requirements relating to product identifiers if a product 
     is packaged in a container too small or otherwise unable to 
     accommodate a label with sufficient space to bear the 
     information required for compliance with this section; and
       ``(iii) establish a process by which the Secretary may 
     determine other products or transactions that shall be exempt 
     from the requirements of this section.
       ``(B) Content.--The guidance issued under subparagraph (A) 
     shall include a process for the biennial review and renewal 
     of such waivers, exceptions, and exemptions, as applicable.
       ``(C) Process.--In issuing the guidance under this 
     paragraph, the Secretary shall provide an effective date that 
     is not later than 180 days prior to the date on which 
     manufacturers are required to affix or imprint a product 
     identifier to each package and homogenous case of product 
     intended to be introduced in a transaction into commerce 
     consistent with this section.
       ``(4) Self-executing requirements.--Except where otherwise 
     specified, the requirements of this section may be enforced 
     without further regulations or guidance from the Secretary.
       ``(5) Grandfathering product.--
       ``(A) Product identifier.--Not later than 2 years after the 
     date of enactment of the Drug Supply Chain Security Act, the 
     Secretary shall finalize guidance specifying whether and 
     under what circumstances product that is not labeled with a 
     product identifier and that is in the pharmaceutical 
     distribution supply chain at the time of the effective date 
     of the requirements of this section shall be exempted from 
     the requirements of this section.
       ``(B) Tracing.--For a product that entered the 
     pharmaceutical distribution supply chain prior to January 1, 
     2015--
       ``(i) authorized trading partners shall be exempt from 
     providing transaction information as required under 
     subsections (b)(1)(A)(i), (c)(1)(A)(ii), (d)(1)(A)(ii), and 
     (e)(1)(A)(ii);
       ``(ii) transaction history required under this section 
     shall begin with the owner of such product on such date; and
       ``(iii) the owners of such product on such date shall be 
     exempt from asserting receipt of transaction information and 
     transaction statement from the prior owner as required under 
     this section.
       ``(6) Wholesale distributor licenses.--Notwithstanding 
     section 581(9)(A), until the effective date of the wholesale 
     distributor licensing regulations under section 583, the term 
     `licensed' or `authorized', as it relates to a wholesale 
     distributor with respect to prescription drugs, shall mean a 
     wholesale distributor with a valid license under State law.
       ``(7) Third-party logistics provider licenses.--Until the 
     effective date of the third-party logistics provider 
     licensing regulations under section 584, a third-party 
     logistics provider shall be considered `licensed' under 
     section 581(9)(B) unless the Secretary has made a finding 
     that the third-party logistics provider does not utilize good 
     handling and distribution practices and publishes notice 
     thereof.
       ``(8) Label changes.--Changes made to package labels solely 
     to incorporate the product identifier may be submitted to the 
     Secretary in the annual report of an establishment, in 
     accordance with section 314.70(d) of chapter 21, Code of 
     Federal Regulations (or any successor regulation).
       ``(9) Product identifiers.--With respect to any requirement 
     relating to product identifiers under this subchapter--
       ``(A) unless the Secretary allows, through guidance, the 
     use of other technologies for data instead of or in addition 
     to the technologies described in clauses (i) and (ii), the 
     applicable data--
       ``(i) shall be included in a 2-dimensional data matrix 
     barcode when affixed to, or imprinted upon, a package; and
       ``(ii) shall be included in a linear or 2-dimensional data 
     matrix barcode when affixed to, or imprinted upon, a 
     homogeneous case; and
       ``(B) verification of the product identifier may occur by 
     using human-readable or machine-readable methods.
       ``(b) Manufacturer Requirements.--
       ``(1) Product tracing.--
       ``(A) In general.--Beginning not later than January 1, 
     2015, a manufacturer shall--
       ``(i) prior to, or at the time of, each transaction in 
     which such manufacturer transfers ownership of a product, 
     provide the subsequent owner with transaction history, 
     transaction information, and a transaction statement, in a 
     single document in an paper or electronic format; and
       ``(ii) capture the transaction information (including lot 
     level information), transaction history, and transaction 
     statement for each transaction and maintain such information, 
     history, and statement for not less than 6 years after the 
     date of the transaction.
       ``(B) Requests for information.--Upon a request by the 
     Secretary or other appropriate Federal or State official, in 
     the event of a recall or for the purpose of investigating a 
     suspect product or an illegitimate product, a manufacturer 
     shall, not later than 1 business day, and not to exceed 48 
     hours, after receiving the request, or in other such 
     reasonable time as determined by the Secretary, based on the 
     circumstances of the request, provide the applicable 
     transaction information, transaction history, and transaction 
     statement for the product.
       ``(C) Electronic format.--
       ``(i) In general.--Beginning not later than 4 years after 
     the date of enactment of the Drug Supply Chain Security Act, 
     except as provided under clause (ii), a manufacturer shall 
     provide the transaction information, transaction history, and 
     transaction statement required under subparagraph (A)(i) in 
     electronic format.
       ``(ii) Exception.--A manufacturer may continue to provide 
     the transaction information, transaction history, and 
     transaction statement required under subparagraph (A)(i) in a 
     paper format to a licensed health care practitioner 
     authorized to prescribe medication under State law or other 
     licensed individual under the supervision or direction of 
     such a practitioner who dispenses product in the usual course 
     of professional practice.
       ``(2) Product identifier.--
       ``(A) In general.--Beginning not later than 4 years after 
     the date of enactment of the Drug Supply Chain Security Act, 
     a manufacturer shall affix or imprint a product identifier to 
     each package and homogenous case of a product intended to be 
     introduced in a transaction into commerce. Such manufacturer 
     shall maintain the product identifier information for such 
     product for not less than 6 years after the date of the 
     transaction.
       ``(B) Exception.--A package that is required to have a 
     standardized numerical identifier is not required to have a 
     unique device identifier.
       ``(3) Authorized trading partners.--Beginning not later 
     than January 1, 2015, the trading partners of a manufacturer 
     may be only authorized trading partners.
       ``(4) Verification.--Beginning not later than January 1, 
     2015, a manufacturer shall have systems in place to enable 
     the manufacturer to comply with the following requirements:
       ``(A) Suspect product.--
       ``(i) In general.--Upon making a determination that a 
     product in the possession or control of the manufacturer is a 
     suspect product, or upon receiving a request for verification 
     from the Secretary that has made a determination that a 
     product within the possession or control of a manufacturer is 
     a suspect product, a manufacturer shall--

       ``(I) quarantine such product within the possession or 
     control of the manufacturer from product intended for 
     distribution until such product is cleared or dispositioned; 
     and
       ``(II) promptly conduct an investigation in coordination 
     with trading partners, as applicable, to determine whether 
     the product is an illegitimate product, which shall include 
     validating any applicable transaction history and transaction 
     information in the possession of the manufacturer and 
     otherwise investigating to determine whether the product is 
     an illegitimate product, and, beginning 4 years after the 
     date of enactment of the Drug Supply Chain Security Act, 
     verifying the product at the package level, including the 
     standardized numerical identifier.

       ``(ii) Cleared product.--If the manufacturer makes the 
     determination that a suspect product is not an illegitimate 
     product, the manufacturer shall promptly notify the 
     Secretary, if applicable, of such determination and such 
     product may be further distributed.
       ``(iii) Records.--A manufacturer shall keep records of the 
     investigation of a suspect product for not less than 6 years 
     after the conclusion of the investigation.
       ``(B) Illegitimate product.--
       ``(i) In general.--Upon determining that a product in the 
     possession or control of a manufacturer is an illegitimate 
     product, the manufacturer shall, in a manner consistent with 
     the systems and processes of such manufacturer--

[[Page 14638]]

       ``(I) quarantine such product within the possession or 
     control of the manufacturer from product intended for 
     distribution until such product is dispositioned;
       ``(II) disposition the illegitimate product within the 
     possession or control of the manufacturer;
       ``(III) take reasonable and appropriate steps to assist a 
     trading partner to disposition an illegitimate product not in 
     the possession or control of the manufacturer; and
       ``(IV) retain a sample of the product for further physical 
     examination or laboratory analysis of the product by the 
     manufacturer or Secretary (or other appropriate Federal or 
     State official) upon request by the Secretary (or other 
     appropriate Federal or State official), as necessary and 
     appropriate.

       ``(ii) Making a notification.--

       ``(I) Illegitimate product.--Upon determining that a 
     product in the possession or control of the manufacturer is 
     an illegitimate product, the manufacturer shall notify the 
     Secretary and all immediate trading partners that the 
     manufacturer has reason to believe may have received such 
     illegitimate product of such determination not later than 24 
     hours after making such determination.
       ``(II) High risk of illegitimacy.--A manufacturer shall 
     notify the Secretary and immediate trading partners that the 
     manufacturer has reason to believe may have in the trading 
     partner's possession a product manufactured by, or purported 
     to be a product manufactured by, the manufacturer not later 
     than 24 hours after determining or being notified by the 
     Secretary or a trading partner that there is a high risk that 
     such product is an illegitimate product. For purposes of this 
     subclause, a `high risk' may include a specific high risk 
     that could increase the likelihood that illegitimate product 
     will enter the pharmaceutical distribution supply chain and 
     other high risks as determined by the Secretary in guidance 
     pursuant to subsection (h).

       ``(iii) Responding to a notification.--Upon the receipt of 
     a notification from the Secretary or a trading partner that a 
     determination has been made that a product is an illegitimate 
     product, a manufacturer shall identify all illegitimate 
     product subject to such notification that is in the 
     possession or control of the manufacturer, including any 
     product that is subsequently received, and shall perform the 
     activities described in subparagraph (A).
       ``(iv) Terminating a notification.--Upon making a 
     determination, in consultation with the Secretary, that a 
     notification is no longer necessary, a manufacturer shall 
     promptly notify immediate trading partners that the 
     manufacturer notified pursuant to clause (ii) that such 
     notification has been terminated.
       ``(v) Records.--A manufacturer shall keep records of the 
     disposition of an illegitimate product for not less than 6 
     years after the conclusion of the disposition.
       ``(C) Requests for verification.--Beginning 4 years after 
     the date of enactment of the Drug Supply Chain Security Act, 
     upon receiving a request for verification from an authorized 
     repackager, wholesale distributor, or dispenser that is in 
     possession or control of a product such person believes to be 
     manufactured by such manufacturer, a manufacturer shall, not 
     later than 24 hours after receiving the request for 
     verification or in other such reasonable time as determined 
     by the Secretary, based on the circumstances of the request, 
     notify the person making the request whether the product 
     identifier, including the standardized numerical identifier, 
     that is the subject of the request corresponds to the product 
     identifier affixed or imprinted by the manufacturer. If a 
     manufacturer responding to a request for verification 
     identifies a product identifier that does not correspond to 
     that affixed or imprinted by the manufacturer, the 
     manufacturer shall treat such product as suspect product and 
     conduct an investigation as described in subparagraph (A). If 
     the manufacturer has reason to believe the product is an 
     illegitimate product, the manufacturer shall advise the 
     person making the request of such belief at the time such 
     manufacturer responds to the request for verification.
       ``(D) Electronic database.--A manufacturer may satisfy the 
     requirements of this paragraph by developing a secure 
     electronic database or utilizing a secure electronic database 
     developed or operated by another entity. The owner of such 
     database shall establish the requirements and processes to 
     respond to requests and may provide for data access to other 
     members of the pharmaceutical distribution supply chain, as 
     appropriate. The development and operation of such a database 
     shall not relieve a manufacturer of the requirement under 
     this paragraph to respond to a request for verification 
     submitted by means other than a secure electronic database.
       ``(E) Saleable returned product.--Beginning 4 years after 
     the date of enactment of the Drug Supply Chain Security Act 
     (except as provided pursuant to subsection (a)(5)), upon 
     receipt of a returned product that the manufacturer intends 
     to further distribute, before further distributing such 
     product, the manufacturer shall verify the product 
     identifier, including the standardized numerical identifier, 
     for each sealed homogeneous case of such product or, if such 
     product is not in a sealed homogeneous case, verify the 
     product identifier, including the standardized numerical 
     identifier, on each package.
       ``(F) Nonsaleable returned product.--A manufacturer may 
     return a nonsaleable product to the manufacturer or 
     repackager, to the wholesale distributor from whom such 
     product was purchased, or to a person acting on behalf of 
     such a person, including a returns processor, without 
     providing the information described in paragraph (1)(A)(i).
       ``(c) Wholesale Distributor Requirements.--
       ``(1) Product tracing.--
       ``(A) In general.--Beginning not later than January 1, 
     2015, the following requirements shall apply to wholesale 
     distributors:
       ``(i) A wholesale distributor shall not accept ownership of 
     a product unless the previous owner prior to, or at the time 
     of, the transaction provides the transaction history, 
     transaction information, and a transaction statement for the 
     product, as applicable under this subparagraph.
       ``(ii)(I)(aa) If the wholesale distributor purchased a 
     product directly from the manufacturer, the exclusive 
     distributor of the manufacturer, or a repackager that 
     purchased directly from the manufacturer, then prior to, or 
     at the time of, each transaction in which the wholesale 
     distributor transfers ownership of a product, the wholesale 
     distributor shall provide to the subsequent purchaser--

       ``(AA) a transaction statement, which shall state that such 
     wholesale distributor, or a member of the affiliate of such 
     wholesale distributor, purchased the product directly from 
     the manufacturer, exclusive distributor of the manufacturer, 
     or repackager that purchased the product directly from the 
     manufacturer; and
       ``(BB) subject to subclause (II), the transaction history 
     and transaction information.

       ``(bb) The wholesale distributor shall provide the 
     transaction history, transaction information, and transaction 
     statement under item (aa)--
       ``(AA) if provided to a dispenser, on a single document in 
     a paper or electronic format; and
       ``(BB) if provided to a wholesale distributor, through any 
     combination of self-generated paper, electronic data, or 
     manufacturer-provided information on the product package.
       ``(II) For purposes of transactions described in subclause 
     (I), transaction history and transaction information shall 
     not be required to include the lot number of the product, the 
     initial transaction date, or the initial shipment date from 
     the manufacturer (as defined in subparagraphs (F), (G), and 
     (H) of section 581(26)).
       ``(iii) If the wholesale distributor did not purchase a 
     product directly from the manufacturer, the exclusive 
     distributor of the manufacturer, or a repackager that 
     purchased directly from the manufacturer, as described in 
     clause (ii), then prior to, or at the time of, each 
     transaction or subsequent transaction, the wholesale 
     distributor shall provide to the subsequent purchaser a 
     transaction statement, transaction history, and transaction 
     information, in a paper or electronic format that complies 
     with the guidance document issued under subsection (a)(2).
       ``(iv) For the purposes of clause (iii), the transaction 
     history supplied shall begin only with the wholesale 
     distributor described in clause (ii)(I), but the wholesale 
     distributor described in clause (iii) shall inform the 
     subsequent purchaser that such wholesale distributor received 
     a direct purchase statement from a wholesale distributor 
     described in clause (ii)(I).
       ``(v) A wholesale distributor shall--

       ``(I) capture the transaction information (including lot 
     level information) consistent with the requirements of this 
     section, transaction history, and transaction statement for 
     each transaction described in clauses (i), (ii), and (iii) 
     and maintain such information, history, and statement for not 
     less than 6 years after the date of the transaction; and
       ``(II) maintain the confidentiality of the transaction 
     information (including any lot level information consistent 
     with the requirements of this section), transaction history, 
     and transaction statement for a product in a manner that 
     prohibits disclosure to any person other than the Secretary 
     or other appropriate Federal or State official, except to 
     comply with clauses (ii) and (iii), and, as applicable, 
     pursuant to an agreement under subparagraph (D).

       ``(B) Returns.--
       ``(i) Saleable returns.--Notwithstanding subparagraph 
     (A)(i), the following shall apply:

       ``(I) Requirements.--Until the date that is 6 years after 
     the date of enactment of the Drug Supply Chain Security Act 
     (except as provided pursuant to subsection (a)(5)), a 
     wholesale distributor may accept returned product from a 
     dispenser or repackager pursuant to the terms and conditions 
     of any agreement between the parties, and, notwithstanding 
     subparagraph (A)(ii), may distribute such returned product 
     without providing the transaction history. For transactions 
     subsequent to the return, the transaction history of such 
     product shall begin with the wholesale distributor that 
     accepted the returned product, consistent with the 
     requirements of this subsection.

[[Page 14639]]

       ``(II) Enhanced requirements.--Beginning 6 years after the 
     date of enactment of the Drug Supply Chain Security Act 
     (except as provided pursuant to subsection (a)(5)), a 
     wholesale distributor may accept returned product from a 
     dispenser or repackager only if the wholesale distributor can 
     associate returned product with the transaction information 
     and transaction statement associated with that product. For 
     all transactions after such date, the transaction history, as 
     applicable, of such product shall begin with the wholesale 
     distributor that accepted and verified the returned product. 
     For purposes of this subparagraph, the transaction 
     information and transaction history, as applicable, need not 
     include transaction dates if it is not reasonably practicable 
     to obtain such dates.

       ``(ii) Nonsaleable returns.--A wholesale distributor may 
     return a nonsaleable product to the manufacturer or 
     repackager, to the wholesale distributor from whom such 
     product was purchased, or to a person acting on behalf of 
     such a person, including a returns processor, without 
     providing the information required under subparagraph (A)(i).
       ``(C) Requests for information.--Upon a request by the 
     Secretary or other appropriate Federal or State official, in 
     the event of a recall or for the purpose of investigating a 
     suspect product or an illegitimate product, a wholesale 
     distributor shall, not later than 1 business day, and not to 
     exceed 48 hours, after receiving the request or in other such 
     reasonable time as determined by the Secretary, based on the 
     circumstances of the request, provide the applicable 
     transaction information, transaction history, and transaction 
     statement for the product.
       ``(D) Trading partner agreements.--Beginning 6 years after 
     the date of enactment of the Drug Supply Chain Security Act, 
     a wholesale distributor may disclose the transaction 
     information, including lot level information, transaction 
     history, or transaction statement of a product to the 
     subsequent purchaser of the product, pursuant to a written 
     agreement between such wholesale distributor and such 
     subsequent purchaser. Nothing in this subparagraph shall be 
     construed to limit the applicability of subparagraphs (A) 
     through (C).
       ``(2) Product identifier.--Beginning 6 years after the date 
     of enactment of the Drug Supply Chain Security Act, a 
     wholesale distributor may engage in transactions involving a 
     product only if such product is encoded with a product 
     identifier (except as provided pursuant to subsection 
     (a)(5)).
       ``(3) Authorized trading partners.--Beginning not later 
     than January 1, 2015, the trading partners of a wholesale 
     distributor may be only authorized trading partners.
       ``(4) Verification.--Beginning not later than January 1, 
     2015, a wholesale distributor shall have systems in place to 
     enable the wholesale distributor to comply with the following 
     requirements:
       ``(A) Suspect product.--
       ``(i) In general.--Upon making a determination that a 
     product in the possession or control of a wholesale 
     distributor is a suspect product, or upon receiving a request 
     for verification from the Secretary that has made a 
     determination that a product within the possession or control 
     of a wholesale distributor is a suspect product, a wholesale 
     distributor shall--

       ``(I) quarantine such product within the possession or 
     control of the wholesale distributor from product intended 
     for distribution until such product is cleared or 
     dispositioned; and
       ``(II) promptly conduct an investigation in coordination 
     with trading partners, as applicable, to determine whether 
     the product is an illegitimate product, which shall include 
     validating any applicable transaction history and transaction 
     information in the possession of the wholesale distributor 
     and otherwise investigating to determine whether the product 
     is an illegitimate product, and, beginning 6 years after the 
     date of enactment of the Drug Supply Chain Security Act 
     (except as provided pursuant to subsection (a)(5)), verifying 
     the product at the package level, including the standardized 
     numerical identifier.

       ``(ii) Cleared product.--If the wholesale distributor 
     determines that a suspect product is not an illegitimate 
     product, the wholesale distributor shall promptly notify the 
     Secretary, if applicable, of such determination and such 
     product may be further distributed.
       ``(iii) Records.--A wholesale distributor shall keep 
     records of the investigation of a suspect product for not 
     less than 6 years after the conclusion of the investigation.
       ``(B) Illegitimate product.--
       ``(i) In general.--Upon determining, in coordination with 
     the manufacturer, that a product in the possession or control 
     of a wholesale distributor is an illegitimate product, the 
     wholesale distributor shall, in a manner that is consistent 
     with the systems and processes of such wholesale 
     distributor--

       ``(I) quarantine such product within the possession or 
     control of the wholesale distributor from product intended 
     for distribution until such product is dispositioned;
       ``(II) disposition the illegitimate product within the 
     possession or control of the wholesale distributor;
       ``(III) take reasonable and appropriate steps to assist a 
     trading partner to disposition an illegitimate product not in 
     the possession or control of the wholesale distributor; and
       ``(IV) retain a sample of the product for further physical 
     examination or laboratory analysis of the product by the 
     manufacturer or Secretary (or other appropriate Federal or 
     State official) upon request by the manufacturer or Secretary 
     (or other appropriate Federal or State official), as 
     necessary and appropriate.

       ``(ii) Making a notification.--Upon determining that a 
     product in the possession or control of the wholesale 
     distributor is an illegitimate product, the wholesale 
     distributor shall notify the Secretary and all immediate 
     trading partners that the wholesale distributor has reason to 
     believe may have received such illegitimate product of such 
     determination not later than 24 hours after making such 
     determination.
       ``(iii) Responding to a notification.--Upon the receipt of 
     a notification from the Secretary or a trading partner that a 
     determination has been made that a product is an illegitimate 
     product, a wholesale distributor shall identify all 
     illegitimate product subject to such notification that is in 
     the possession or control of the wholesale distributor, 
     including any product that is subsequently received, and 
     shall perform the activities described in subparagraph (A).
       ``(iv) Terminating a notification.--Upon making a 
     determination, in consultation with the Secretary, that a 
     notification is no longer necessary, a wholesale distributor 
     shall promptly notify immediate trading partners that the 
     wholesale distributor notified pursuant to clause (ii) that 
     such notification has been terminated.
       ``(v) Records.--A wholesale distributor shall keep records 
     of the disposition of an illegitimate product for not less 
     than 6 years after the conclusion of the disposition.
       ``(C) Electronic database.--A wholesale distributor may 
     satisfy the requirements of this paragraph by developing a 
     secure electronic database or utilizing a secure electronic 
     database developed or operated by another entity. The owner 
     of such database shall establish the requirements and 
     processes to respond to requests and may provide for data 
     access to other members of the pharmaceutical distribution 
     supply chain, as appropriate. The development and operation 
     of such a database shall not relieve a wholesale distributor 
     of the requirement under this paragraph to respond to a 
     verification request submitted by means other than a secure 
     electronic database.
       ``(D) Verification of saleable returned product.--Beginning 
     6 years after the date of enactment of the Drug Supply Chain 
     Security Act, upon receipt of a returned product that the 
     wholesale distributor intends to further distribute, before 
     further distributing such product, the wholesale distributor 
     shall verify the product identifier, including the 
     standardized numerical identifier, for each sealed 
     homogeneous case of such product or, if such product is not 
     in a sealed homogeneous case, verify the product identifier, 
     including the standardized numerical identifier, on each 
     package.
       ``(d) Dispenser Requirements.--
       ``(1) Product tracing.--
       ``(A) In general.--Beginning July 1, 2015, a dispenser--
       ``(i) shall not accept ownership of a product, unless the 
     previous owner prior to, or at the time of, the transaction, 
     provides transaction history, transaction information, and a 
     transaction statement;
       ``(ii) prior to, or at the time of, each transaction in 
     which the dispenser transfers ownership of a product (but not 
     including dispensing to a patient or returns) shall provide 
     the subsequent owner with transaction history, transaction 
     information, and a transaction statement for the product, 
     except that the requirements of this clause shall not apply 
     to sales by a dispenser to another dispenser to fulfill a 
     specific patient need; and
       ``(iii) shall capture transaction information (including 
     lot level information, if provided), transaction history, and 
     transaction statements, as necessary to investigate a suspect 
     product, and maintain such information, history, and 
     statements for not less than 6 years after the transaction.
       ``(B) Agreements with third parties.--A dispenser may enter 
     into a written agreement with a third party, including an 
     authorized wholesale distributor, under which the third party 
     confidentially maintains the transaction information, 
     transaction history, and transaction statements required to 
     be maintained under this subsection on behalf of the 
     dispenser. If a dispenser enters into such an agreement, the 
     dispenser shall maintain a copy of the written agreement and 
     shall not be relieved of the obligations of the dispenser 
     under this subsection.
       ``(C) Returns.--
       ``(i) Saleable returns.--A dispenser may return product to 
     the trading partner from which the dispenser obtained the 
     product without providing the information required under 
     subparagraph (A).
       ``(ii) Nonsaleable returns.--A dispenser may return a 
     nonsaleable product to the manufacturer or repackager, to the 
     wholesale distributor from whom such product was purchased, 
     to a returns processor, or to a person acting on behalf of 
     such a person

[[Page 14640]]

     without providing the information required under subparagraph 
     (A).
       ``(D) Requests for information.--Upon a request by the 
     Secretary or other appropriate Federal or State official, in 
     the event of a recall or for the purpose of investigating a 
     suspect or an illegitimate product, a dispenser shall, not 
     later than 2 business days after receiving the request or in 
     another such reasonable time as determined by the Secretary, 
     based on the circumstances of the request, provide the 
     applicable transaction information, transaction statement, 
     and transaction history which the dispenser received from the 
     previous owner, which shall not include the lot number of the 
     product, the initial transaction date, or the initial 
     shipment date from the manufacturer unless such information 
     was included in the transaction information, transaction 
     statement, and transaction history provided by the 
     manufacturer or wholesale distributor to the dispenser. The 
     dispenser may respond to the request by providing the 
     applicable information in either paper or electronic format. 
     Until the date that is 4 years after the date of enactment of 
     the Drug Supply Chain Security Act, the Secretary or other 
     appropriate Federal or State official shall grant a dispenser 
     additional time, as necessary, only with respect to a request 
     to provide lot level information described in subparagraph 
     (F) of section 581(26) that was provided to the dispenser in 
     paper format, limit the request time period to the 6 months 
     preceding the request or other relevant date, and, in the 
     event of a recall, the Secretary, or other appropriate 
     Federal or State official may request information only if 
     such recall involves a serious adverse health consequence or 
     death to humans.
       ``(2) Product identifier.--Beginning not later than 7 years 
     after the date of enactment of the Drug Supply Chain Security 
     Act, a dispenser may engage in transactions involving a 
     product only if such product is encoded with a product 
     identifier (except as provided pursuant to subsection 
     (a)(5)).
       ``(3) Authorized trading partners.--Beginning not later 
     than January 1, 2015, the trading partners of a dispenser may 
     be only authorized trading partners.
       ``(4) Verification.--Beginning not later than January 1, 
     2015, a dispenser shall have systems in place to enable the 
     dispenser to comply with the following requirements:
       ``(A) Suspect product.--
       ``(i) In general.--Upon making a determination that a 
     product in the possession or control of the dispenser is a 
     suspect product, or upon receiving a request for verification 
     from the Secretary that has made a determination that a 
     product within the possession or control of a dispenser is a 
     suspect product, a dispenser shall--

       ``(I) quarantine such product within the possession or 
     control of the dispenser from product intended for 
     distribution until such product is cleared or dispositioned; 
     and
       ``(II) promptly conduct an investigation in coordination 
     with trading partners, as applicable, to determine whether 
     the product is an illegitimate product.

       ``(ii) Investigation.--An investigation conducted under 
     clause (i)(II) shall include--

       ``(I) beginning 7 years after the date of enactment of the 
     Drug Supply Chain Security Act, verifying whether the lot 
     number of a suspect product corresponds with the lot number 
     for such product;
       ``(II) beginning 7 years after the date of enactment of 
     such Act, verifying that the product identifier, including 
     the standardized numerical identifier, of at least 3 packages 
     or 10 percent of such suspect product, whichever is greater, 
     or all packages, if there are fewer than 3, corresponds with 
     the product identifier for such product;
       ``(III) validating any applicable transaction history and 
     transaction information in the possession of the dispenser; 
     and
       ``(IV) otherwise investigating to determine whether the 
     product is an illegitimate product.

       ``(iii) Cleared product.--If the dispenser makes the 
     determination that a suspect product is not an illegitimate 
     product, the dispenser shall promptly notify the Secretary, 
     if applicable, of such determination and such product may be 
     further distributed or dispensed.
       ``(iv) Records.--A dispenser shall keep records of the 
     investigation of a suspect product for not less than 6 years 
     after the conclusion of the investigation.
       ``(B) Illegitimate product.--
       ``(i) In general.--Upon determining, in coordination with 
     the manufacturer, that a product in the possession or control 
     of a dispenser is an illegitimate product, the dispenser 
     shall--

       ``(I) disposition the illegitimate product within the 
     possession or control of the dispenser;
       ``(II) take reasonable and appropriate steps to assist a 
     trading partner to disposition an illegitimate product not in 
     the possession or control of the dispenser; and
       ``(III) retain a sample of the product for further physical 
     examination or laboratory analysis of the product by the 
     manufacturer or Secretary (or other appropriate Federal or 
     State official) upon request by the manufacturer or Secretary 
     (or other appropriate Federal or State official), as 
     necessary and appropriate.

       ``(ii) Making a notification.--Upon determining that a 
     product in the possession or control of the dispenser is an 
     illegitimate product, the dispenser shall notify the 
     Secretary and all immediate trading partners that the 
     dispenser has reason to believe may have received such 
     illegitimate product of such determination not later than 24 
     hours after making such determination.
       ``(iii) Responding to a notification.--Upon the receipt of 
     a notification from the Secretary or a trading partner that a 
     determination has been made that a product is an illegitimate 
     product, a dispenser shall identify all illegitimate product 
     subject to such notification that is in the possession or 
     control of the dispenser, including any product that is 
     subsequently received, and shall perform the activities 
     described in subparagraph (A).
       ``(iv) Terminating a notification.--Upon making a 
     determination, in consultation with the Secretary, that a 
     notification is no longer necessary, a dispenser shall 
     promptly notify immediate trading partners that the dispenser 
     notified pursuant to clause (ii) that such notification has 
     been terminated.
       ``(v) Records.--A dispenser shall keep records of the 
     disposition of an illegitimate product for not less than 6 
     years after the conclusion of the disposition.
       ``(C) Electronic database.--A dispenser may satisfy the 
     requirements of this paragraph by developing a secure 
     electronic database or utilizing a secure electronic database 
     developed or operated by another entity.
       ``(5) Exception.--Notwithstanding any other provision of 
     law, the requirements under paragraphs (1) and (4) shall not 
     apply to licensed health care practitioners authorized to 
     prescribe or administer medication under State law or other 
     licensed individuals under the supervision or direction of 
     such practitioners who dispense or administer product in the 
     usual course of professional practice.
       ``(e) Repackager Requirements.--
       ``(1) Product tracing.--
       ``(A) In general.--Beginning not later than January 1, 
     2015, a repackager described in section 581(16)(A) shall--
       ``(i) not accept ownership of a product unless the previous 
     owner, prior to, or at the time of, the transaction, provides 
     transaction history, transaction information, and a 
     transaction statement for the product;
       ``(ii) prior to, or at the time of, each transaction in 
     which the repackager transfers ownership of a product, 
     provide the subsequent owner with transaction history, 
     transaction information, and a transaction statement for the 
     product; and
       ``(iii) capture the transaction information (including lot 
     level information), transaction history, and transaction 
     statement for each transaction described in clauses (i) and 
     (ii) and maintain such information, history, and statement 
     for not less than 6 years after the transaction.
       ``(B) Returns.--
       ``(i) Nonsaleable product.--A repackager described in 
     section 581(16)(A) may return a nonsaleable product to the 
     manufacturer or repackager, or to the wholesale distributor 
     from whom such product was purchased, or to a person acting 
     on behalf of such a person, including a returns processor, 
     without providing the information required under subparagraph 
     (A)(ii).
       ``(ii) Saleable or nonsaleable product.--A repackager 
     described in section 581(16)(B) may return a saleable or 
     nonsaleable product to the manufacturer, repackager, or to 
     the wholesale distributor from whom such product was received 
     without providing the information required under subparagraph 
     (A)(ii) on behalf of the hospital or other health care entity 
     that took ownership of such product pursuant to the terms and 
     conditions of any agreement between such repackager and the 
     entity that owns the product.
       ``(C) Requests for information.--Upon a request by the 
     Secretary or other appropriate Federal or State official, in 
     the event of a recall or for the purpose of investigating a 
     suspect product or an illegitimate product, a repackager 
     described in section 581(16)(A) shall, not later than 1 
     business day, and not to exceed 48 hours, after receiving the 
     request or in other such reasonable time as determined by the 
     Secretary, provide the applicable transaction information, 
     transaction history, and transaction statement for the 
     product.
       ``(2) Product identifier.--
       ``(A) In general.--Beginning not later than 5 years after 
     the date of enactment of the Drug Supply Chain Security Act, 
     a repackager described in section 581(16)(A)--
       ``(i) shall affix or imprint a product identifier to each 
     package and homogenous case of product intended to be 
     introduced in a transaction in commerce;
       ``(ii) shall maintain the product identifier information 
     for such product for not less than 6 years after the date of 
     the transaction;
       ``(iii) may engage in transactions involving a product only 
     if such product is encoded with a product identifier (except 
     as provided pursuant to subsection (a)(5)); and
       ``(iv) shall maintain records for not less than 6 years to 
     allow the repackager to associate the product identifier the 
     repackager affixes or imprints with the product identifier 
     assigned by the original manufacturer of the product.

[[Page 14641]]

       ``(B) Exception.--A package that is required to have a 
     standardized numerical identifier is not required to have a 
     unique device identifier.
       ``(3) Authorized trading partners.--Beginning January 1, 
     2015, the trading partners of a repackager described in 
     section 581(16) may be only authorized trading partners.
       ``(4) Verification.--Beginning not later than January 1, 
     2015, a repackager described in section 581(16)(A) shall have 
     systems in place to enable the repackager to comply with the 
     following requirements:
       ``(A) Suspect product.--
       ``(i) In general.--Upon making a determination that a 
     product in the possession or control of the repackager is a 
     suspect product, or upon receiving a request for verification 
     from the Secretary that has made a determination that a 
     product within the possession or control of a repackager is a 
     suspect product, a repackager shall--

       ``(I) quarantine such product within the possession or 
     control of the repackager from product intended for 
     distribution until such product is cleared or dispositioned; 
     and
       ``(II) promptly conduct an investigation in coordination 
     with trading partners, as applicable, to determine whether 
     the product is an illegitimate product, which shall include 
     validating any applicable transaction history and transaction 
     information in the possession of the repackager and otherwise 
     investigating to determine whether the product is an 
     illegitimate product, and, beginning 5 years after the date 
     of enactment of the Drug Supply Chain Security Act (except as 
     provided pursuant to subsection (a)(5)), verifying the 
     product at the package level, including the standardized 
     numerical identifier.

       ``(ii) Cleared product.--If the repackager makes the 
     determination that a suspect product is not an illegitimate 
     product, the repackager shall promptly notify the Secretary, 
     if applicable, of such determination and such product may be 
     further distributed.
       ``(iii) Records.--A repackager shall keep records of the 
     investigation of a suspect product for not less than 6 years 
     after the conclusion of the investigation.
       ``(B) Illegitimate product.--
       ``(i) In general.--Upon determining, in coordination with 
     the manufacturer, that a product in the possession or control 
     of a repackager is an illegitimate product, the repackager 
     shall, in a manner that is consistent with the systems and 
     processes of such repackager--

       ``(I) quarantine such product within the possession or 
     control of the repackager from product intended for 
     distribution until such product is dispositioned;
       ``(II) disposition the illegitimate product within the 
     possession or control of the repackager;
       ``(III) take reasonable and appropriate steps to assist a 
     trading partner to disposition an illegitimate product not in 
     the possession or control of the repackager; and
       ``(IV) retain a sample of the product for further physical 
     examination or laboratory analysis of the product by the 
     manufacturer or Secretary (or other appropriate Federal or 
     State official) upon request by the manufacturer or Secretary 
     (or other appropriate Federal or State official), as 
     necessary and appropriate.

       ``(ii) Making a notification.--Upon determining that a 
     product in the possession or control of the repackager is an 
     illegitimate product, the repackager shall notify the 
     Secretary and all immediate trading partners that the 
     repackager has reason to believe may have received the 
     illegitimate product of such determination not later than 24 
     hours after making such determination.
       ``(iii) Responding to a notification.--Upon the receipt of 
     a notification from the Secretary or a trading partner, a 
     repackager shall identify all illegitimate product subject to 
     such notification that is in the possession or control of the 
     repackager, including any product that is subsequently 
     received, and shall perform the activities described in 
     subparagraph (A).
       ``(iv) Terminating a notification.--Upon making a 
     determination, in consultation with the Secretary, that a 
     notification is no longer necessary, a repackager shall 
     promptly notify immediate trading partners that the 
     repackager notified pursuant to clause (ii) that such 
     notification has been terminated.
       ``(v) Records.--A repackager shall keep records of the 
     disposition of an illegitimate product for not less than 6 
     years after the conclusion of the disposition.
       ``(C) Requests for verification.--Beginning 5 years after 
     the date of enactment of the Drug Supply Chain Security Act, 
     upon receiving a request for verification from an authorized 
     manufacturer, wholesale distributor, or dispenser that is in 
     possession or control of a product they believe to be 
     repackaged by such repackager, a repackager shall, not later 
     than 24 hours after receiving the verification request or in 
     other such reasonable time as determined by the Secretary, 
     based on the circumstances of the request, notify the person 
     making the request whether the product identifier, including 
     the standardized numerical identifier, that is the subject of 
     the request corresponds to the product identifier affixed or 
     imprinted by the repackager. If a repackager responding to a 
     verification request identifies a product identifier that 
     does not correspond to that affixed or imprinted by the 
     repackager, the repackager shall treat such product as 
     suspect product and conduct an investigation as described in 
     subparagraph (A). If the repackager has reason to believe the 
     product is an illegitimate product, the repackager shall 
     advise the person making the request of such belief at the 
     time such repackager responds to the verification request.
       ``(D) Electronic database.--A repackager may satisfy the 
     requirements of paragraph (4) by developing a secure 
     electronic database or utilizing a secure electronic database 
     developed or operated by another entity. The owner of such 
     database shall establish the requirements and processes to 
     respond to requests and may provide for data access to other 
     members of the pharmaceutical distribution supply chain, as 
     appropriate. The development and operation of such a database 
     shall not relieve a repackager of the requirement under 
     subparagraph (C) to respond to a verification request 
     submitted by means other than a secure electronic database.
       ``(E) Verification of saleable returned product.--Beginning 
     5 years after the date of enactment of the Drug Supply Chain 
     Security Act, upon receipt of a returned product that the 
     repackager intends to further distribute, before further 
     distributing such product, the repackager shall verify the 
     product identifier for each sealed homogeneous case of such 
     product or, if such product is not in a sealed homogeneous 
     case, verify the product identifier on each package.
       ``(f) Drop Shipments.--
       ``(1) In general.--A wholesale distributor that does not 
     physically handle or store product shall be exempt from the 
     provisions of this section, except the notification 
     requirements under clauses (ii), (iii), and (iv) of 
     subsection (c)(4)(B), provided that the manufacturer, 
     repackager, or other wholesale distributor that distributes 
     the product to the dispenser by means of a drop shipment for 
     such wholesale distributor includes on the transaction 
     information and transaction history to the dispenser the 
     contact information of such wholesale distributor and 
     provides the transaction information, transaction history, 
     and transaction statement directly to the dispenser.
       ``(2) Clarification.--For purposes of this subsection, 
     providing administrative services, including processing of 
     orders and payments, shall not by itself, be construed as 
     being involved in the handling, distribution, or storage of a 
     product.''.

     SEC. 203. ENHANCED DRUG DISTRIBUTION SECURITY.

       Section 582, as added by section 202, is amended by adding 
     at the end the following:
       ``(g) Enhanced Drug Distribution Security.--
       ``(1) In general.--On the date that is 10 years after the 
     date of enactment of the Drug Supply Chain Security Act, the 
     following interoperable, electronic tracing of product at the 
     package level requirements shall go into effect:
       ``(A) The transaction information and the transaction 
     statements as required under this section shall be exchanged 
     in a secure, interoperable, electronic manner in accordance 
     with the standards established under the guidance issued 
     pursuant to paragraphs (3) and (4) of subsection (h), 
     including any revision of such guidance issued in accordance 
     with paragraph (5) of such subsection.
       ``(B) The transaction information required under this 
     section shall include the product identifier at the package 
     level for each package included in the transaction.
       ``(C) Systems and processes for verification of product at 
     the package level, including the standardized numerical 
     identifier, shall be required in accordance with the 
     standards established under the guidance issued pursuant to 
     subsection (a)(2) and the guidances issued pursuant to 
     paragraphs (2), (3), and (4) of subsection (h), including any 
     revision of such guidances issued in accordance with 
     paragraph (5) of such subsection, which may include the use 
     of aggregation and inference as necessary.
       ``(D) The systems and processes necessary to promptly 
     respond with the transaction information and transaction 
     statement for a product upon a request by the Secretary (or 
     other appropriate Federal or State official) in the event of 
     a recall or for the purposes of investigating a suspect 
     product or an illegitimate product shall be required.
       ``(E) The systems and processes necessary to promptly 
     facilitate gathering the information necessary to produce the 
     transaction information for each transaction going back to 
     the manufacturer, as applicable, shall be required--
       ``(i) in the event of a request by the Secretary (or other 
     appropriate Federal or State official), on account of a 
     recall or for the purposes of investigating a suspect product 
     or an illegitimate product; or
       ``(ii) in the event of a request by an authorized trading 
     partner, in a secure manner that ensures the protection of 
     confidential commercial information and trade secrets, for 
     purposes of investigating a suspect product or assisting the 
     Secretary (or other appropriate Federal or State official) 
     with a request described in clause (i).
       ``(F) Each person accepting a saleable return shall have 
     systems and processes in

[[Page 14642]]

     place to allow acceptance of such product and may accept 
     saleable returns only if such person can associate the 
     saleable return product with the transaction information and 
     transaction statement associated with that product.
       ``(2) Compliance.--
       ``(A) Information maintenance agreement.--A dispenser may 
     enter into a written agreement with a third party, including 
     an authorized wholesale distributor, under which the third 
     party shall confidentially maintain any information and 
     statements required to be maintained under this section. If a 
     dispenser enters into such an agreement, the dispenser shall 
     maintain a copy of the written agreement and shall not be 
     relieved of the obligations of the dispenser under this 
     subsection.
       ``(B) Alternative methods.--The Secretary, taking into 
     consideration the assessment conducted under paragraph (3), 
     shall provide for alternative methods of compliance with any 
     of the requirements set forth in paragraph (1), including--
       ``(i) establishing timelines for compliance by small 
     businesses (including small business dispensers with 25 or 
     fewer full-time employees) with such requirements, in order 
     to ensure that such requirements do not impose undue economic 
     hardship for small businesses, including small business 
     dispensers for whom the criteria set forth in the assessment 
     under paragraph (3) is not met, if the Secretary determines 
     that such requirements under paragraph (1) would result in 
     undue economic hardship; and
       ``(ii) establishing a process by which a dispenser may 
     request a waiver from any of the requirements set forth in 
     paragraph (1) if the Secretary determines that such 
     requirements would result in an undue economic hardship, 
     which shall include a process for the biennial review and 
     renewal of any such waiver.
       ``(3) Assessment.--
       ``(A) In general.--Not later than the date that is 18 
     months after the Secretary issues the final guidance required 
     under subsection (h), the Secretary shall enter into a 
     contract with a private, independent consulting firm with 
     expertise to conduct a technology and software assessment 
     that looks at the feasibility of dispensers with 25 or fewer 
     full-time employees conducting interoperable, electronic 
     tracing of products at the package level. Such assessment 
     shall be completed not later than 8\1/2\ years after the date 
     of enactment of the Drug Supply Chain Security Act.
       ``(B) Condition.--As a condition of the award of the 
     contract under subparagraph (A), the private, independent 
     consulting firm shall agree to consult with dispensers with 
     25 or fewer full-time employees when conducting the 
     assessment under such subparagraph.
       ``(C) Content.--The assessment under subparagraph (A) shall 
     assess whether--
       ``(i) the necessary software and hardware is readily 
     accessible to such dispensers;
       ``(ii) the necessary software and hardware is prohibitively 
     expensive to obtain, install, and maintain for such 
     dispensers; and
       ``(iii) the necessary hardware and software can be 
     integrated into business practices, such as interoperability 
     with wholesale distributors, for such dispensers.
       ``(D) Publication.--The Secretary shall--
       ``(i) publish the statement of work for the assessment 
     under subparagraph (A) for public comment prior to beginning 
     the assessment;
       ``(ii) publish the final assessment for public comment not 
     later than 30 calendar days after receiving such assessment; 
     and
       ``(iii) hold a public meeting not later than 180 calendar 
     days after receiving the final assessment at which public 
     stakeholders may present their views on the assessment.
       ``(4) Procedure.--Notwithstanding section 553 of title 5, 
     United States Code, the Secretary, in promulgating any 
     regulation pursuant to this section, shall--
       ``(A) provide appropriate flexibility by--
       ``(i) not requiring the adoption of specific business 
     systems for the maintenance and transmission of data;
       ``(ii) prescribing alternative methods of compliance for 
     any of the requirements set forth in paragraph (1) or set 
     forth in regulations implementing such requirements, 
     including--

       ``(I) timelines for small businesses to comply with the 
     requirements set forth in the regulations in order to ensure 
     that such requirements do not impose undue economic hardship 
     for small businesses (including small business dispensers for 
     whom the criteria set forth in the assessment under paragraph 
     (3) is not met), if the Secretary determines that such 
     requirements would result in undue economic hardship; and
       ``(II) the establishment of a process by which a dispenser 
     may request a waiver from any of the requirements set forth 
     in such regulations if the Secretary determines that such 
     requirements would result in an undue economic hardship; and

       ``(iii) taking into consideration--

       ``(I) the results of pilot projects, including pilot 
     projects pursuant to this section and private sector pilot 
     projects, including those involving the use of aggregation 
     and inference;
       ``(II) the public meetings held and related guidance 
     documents issued under this section;
       ``(III) the public health benefits of any additional 
     regulations in comparison to the cost of compliance with such 
     requirements, including on entities of varying sizes and 
     capabilities;
       ``(IV) the diversity of the pharmaceutical distribution 
     supply chain by providing appropriate flexibility for each 
     sector, including both large and small businesses; and
       ``(V) the assessment pursuant to paragraph (3) with respect 
     to small business dispensers, including related public 
     comment and the public meeting, and requirements under this 
     section;

       ``(B) issue a notice of proposed rulemaking that includes a 
     copy of the proposed regulation;
       ``(C) provide a period of not less than 60 days for 
     comments on the proposed regulation; and
       ``(D) publish in the Federal Register the final regulation 
     not less than 2 years prior to the effective date of the 
     regulation.
       ``(h) Guidance Documents.--
       ``(1) In general.--For the purposes of facilitating the 
     successful and efficient adoption of secure, interoperable 
     product tracing at the package level in order to enhance drug 
     distribution security and further protect the public health, 
     the Secretary shall issue the guidance documents as provided 
     for in this subsection.
       ``(2) Suspect and illegitimate product.--
       ``(A) In general.--Not later than 180 days after the date 
     of enactment of the Drug Supply Chain Security Act, the 
     Secretary shall issue a guidance document to aid trading 
     partners in the identification of a suspect product and 
     notification termination. Such guidance document shall--
       ``(i) identify specific scenarios that could significantly 
     increase the risk of a suspect product entering the 
     pharmaceutical distribution supply chain;
       ``(ii) provide recommendation on how trading partners may 
     identify such product and make a determination on whether the 
     product is a suspect product as soon as practicable; and
       ``(iii) set forth the process by which manufacturers, 
     repackagers, wholesale distributors, and dispensers shall 
     terminate notifications in consultation with the Secretary 
     regarding illegitimate product pursuant to subsections 
     (b)(4)(B), (c)(4)(B), (d)(4)(B), and (e)(4)(B).
       ``(B) Revised guidance.--If the Secretary revises the 
     guidance issued under subparagraph (A), the Secretary shall 
     follow the procedure set forth in paragraph (5).
       ``(3) Unit level tracing.--
       ``(A) In general.--In order to enhance drug distribution 
     security at the package level, not later than 18 months after 
     conducting a public meeting on the system attributes 
     necessary to enable secure tracing of product at the package 
     level, including allowing for the use of verification, 
     inference, and aggregation, as necessary, the Secretary shall 
     issue a final guidance document that outlines and makes 
     recommendations with respect to the system attributes 
     necessary to enable secure tracing at the package level as 
     required under the requirements established under subsection 
     (g). Such guidance document shall--
       ``(i) define the circumstances under which the sectors 
     within the pharmaceutical distribution supply chain may, in 
     the most efficient manner practicable, infer the contents of 
     a case, pallet, tote, or other aggregate of individual 
     packages or containers of product, from a product identifier 
     associated with the case, pallet, tote, or other aggregate, 
     without opening each case, pallet, tote, or other aggregate 
     or otherwise individually scanning each package;
       ``(ii) identify methods and processes to enhance secure 
     tracing of product at the package level, such as secure 
     processes to facilitate the use of inference, enhanced 
     verification activities, the use of aggregation and 
     inference, processes that utilize the product identifiers to 
     enhance tracing of product at the package level, including 
     the standardized numerical identifier, or package security 
     features; and
       ``(iii) ensure the protection of confidential commercial 
     information and trade secrets.
       ``(B) Procedure.--In issuing the guidance under 
     subparagraph (A), and in revising such guidance, if 
     applicable, the Secretary shall follow the procedure set 
     forth in paragraph (5).
       ``(4) Standards for interoperable data exchange.--
       ``(A) In general.--In order to enhance secure tracing of a 
     product at the package level, the Secretary, not later than 
     18 months after conducting a public meeting on the 
     interoperable standards necessary to enhance the security of 
     the pharmaceutical distribution supply chain, shall update 
     the guidance issued pursuant to subsection (a)(2), as 
     necessary and appropriate, and finalize such guidance 
     document so that the guidance document--
       ``(i) identifies and makes recommendations with respect to 
     the standards necessary for adoption in order to support the 
     secure, interoperable electronic data exchange

[[Page 14643]]

     among the pharmaceutical distribution supply chain that 
     comply with a form and format developed by a widely 
     recognized international standards development organization;
       ``(ii) takes into consideration standards established 
     pursuant to subsection (a)(2) and section 505D;
       ``(iii) facilitates the creation of a uniform process or 
     methodology for product tracing; and
       ``(iv) ensures the protection of confidential commercial 
     information and trade secrets.
       ``(B) Procedure.--In issuing the guidance under 
     subparagraph (A), and in revising such guidance, if 
     applicable, the Secretary shall follow the procedure set 
     forth in paragraph (5).
       ``(5) Procedure.--In issuing or revising any guidance 
     issued pursuant to this subsection or subsection (g), except 
     the initial guidance issued under paragraph (2)(A), the 
     Secretary shall--
       ``(A) publish a notice in the Federal Register for a period 
     not less than 30 days announcing that the draft or revised 
     draft guidance is available;
       ``(B) post the draft guidance document on the Internet Web 
     site of the Food and Drug Administration and make such draft 
     guidance document available in hard copy;
       ``(C) provide an opportunity for comment and review and 
     take into consideration any comments received;
       ``(D) revise the draft guidance, as appropriate;
       ``(E) publish a notice in the Federal Register for a period 
     not less than 30 days announcing that the final guidance or 
     final revised guidance is available;
       ``(F) post the final guidance document on the Internet Web 
     site of the Food and Drug Administration and make such final 
     guidance document available in hard copy; and
       ``(G) provide for an effective date of not earlier than 1 
     year after such guidance becomes final.
       ``(i) Public Meetings.--
       ``(1) In general.--The Secretary shall hold not less than 5 
     public meetings to enhance the safety and security of the 
     pharmaceutical distribution supply chain and provide for 
     comment. The Secretary may hold the first such public meeting 
     not earlier than 1 year after the date of enactment of the 
     Drug Supply Chain Security Act. In carrying out the public 
     meetings described in this paragraph, the Secretary shall--
       ``(A) prioritize topics necessary to inform the issuance of 
     the guidance described in paragraphs (3) and (4) of 
     subsection (h); and
       ``(B) take all measures reasonable and practicable to 
     ensure the protection of confidential commercial information 
     and trade secrets.
       ``(2) Content.--Each of the following topics shall be 
     addressed in at least one of the public meetings described in 
     paragraph (1):
       ``(A) An assessment of the steps taken under subsections 
     (b) through (e) to build capacity for a unit-level system, 
     including the impact of the requirements of such subsections 
     on--
       ``(i) the ability of the health care system collectively to 
     maintain patient access to medicines;
       ``(ii) the scalability of such requirements, including as 
     it relates to product lines; and
       ``(iii) the capability of different sectors and subsectors, 
     including both large and small businesses, to affix and 
     utilize the product identifier.
       ``(B) The system attributes necessary to support the 
     requirements set forth under subsection (g), including the 
     standards necessary for adoption in order to support the 
     secure, interoperable electronic data exchange among sectors 
     within the pharmaceutical distribution supply chain.
       ``(C) Best practices in each of the different sectors 
     within the pharmaceutical distribution supply chain to 
     implement the requirements of this section.
       ``(D) The costs and benefits of the implementation of this 
     section, including the impact on each pharmaceutical 
     distribution supply chain sector and on public health.
       ``(E) Whether electronic tracing requirements, including 
     tracing of product at the package level, are feasible, cost 
     effective, and needed to protect the public health.
       ``(F) The systems and processes needed to utilize the 
     product identifiers to enhance tracing of product at the 
     package level, including allowing for verification, 
     aggregation, and inference, as necessary.
       ``(G) The technical capabilities and legal authorities, if 
     any, needed to establish an interoperable, electronic system 
     that provides for tracing of product at the package level.
       ``(H) The impact that such additional requirements would 
     have on patient safety, the drug supply, cost and regulatory 
     burden, and timely patient access to prescription drugs.
       ``(I) Other topics, as determined appropriate by the 
     Secretary.
       ``(j) Pilot Projects.--
       ``(1) In general.--The Secretary shall establish 1 or more 
     pilot projects, in coordination with authorized 
     manufacturers, repackagers, wholesale distributors, and 
     dispensers, to explore and evaluate methods to enhance the 
     safety and security of the pharmaceutical distribution supply 
     chain. Such projects shall build upon efforts, in existence 
     as of the date of enactment of the Drug Supply Chain Security 
     Act, to enhance the safety and security of the pharmaceutical 
     distribution supply chain, take into consideration any pilot 
     projects conducted prior to such date of enactment, including 
     any pilot projects that use aggregation and inference, and 
     inform the draft and final guidance under paragraphs (3) and 
     (4) of subsection (h).
       ``(2) Content.--
       ``(A) In general.--The Secretary shall ensure that the 
     pilot projects under paragraph (1) reflect the diversity of 
     the pharmaceutical distribution supply chain and that the 
     pilot projects, when taken as a whole, include participants 
     representative of every sector, including both large and 
     small businesses.
       ``(B) Project design.--The pilot projects under paragraph 
     (1) shall be designed to--
       ``(i) utilize the product identifier for tracing of a 
     product, which may include verification of the product 
     identifier of a product, including the use of aggregation and 
     inference;
       ``(ii) improve the technical capabilities of each sector 
     and subsector to comply with systems and processes needed to 
     utilize the product identifiers to enhance tracing of a 
     product;
       ``(iii) identify system attributes that are necessary to 
     implement the requirements established under this section; 
     and
       ``(iv) complete other activities as determined by the 
     Secretary.
       ``(k) Sunset.--The following requirements shall have no 
     force or effect beginning on the date that is 10 years after 
     the date of enactment of the Drug Supply Chain Security Act:
       ``(1) The provision and receipt of transaction history 
     under this section.
       ``(2) The requirements set forth for returns under 
     subsections (b)(4)(E), (c)(1)(B)(i), (d)(1)(C)(i), and 
     (e)(4)(E).
       ``(3) The requirements set forth under subparagraphs 
     (A)(v)(II) and (D) of subsection (c)(1), as applied to lot 
     level information only.
       ``(l) Rule of Construction.--The requirements set forth in 
     subsections (g)(4), (i), and (j) shall not be construed as a 
     condition, prohibition, or precedent for precluding or 
     delaying the provisions becoming effective pursuant to 
     subsection (g).
       ``(m) Requests for Information.--On the date that is 10 
     years after the date of enactment of the Drug Supply Chain 
     Security Act, the timeline for responses to requests for 
     information from the Secretary, or other appropriate Federal 
     or State official, as applicable, under subsections 
     (b)(1)(B), (c)(1)(C), and (e)(1)(C) shall be not later than 
     24 hours after receiving the request from the Secretary or 
     other appropriate Federal or State official, as applicable, 
     or in such other reasonable time as determined by the 
     Secretary based on the circumstances of the request.''.

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

       (a) Amendments.--
       (1) Requirement.--Section 503(e) (21 U.S.C. 353(e)) is 
     amended by striking paragraphs (1), (2), and (3) and 
     inserting the following:
       ``(1) Requirement.--Subject to section 583:
       ``(A) In general.--No person may engage in wholesale 
     distribution of a drug subject to subsection (b)(1) in any 
     State unless such person--
       ``(i)(I) is licensed by the State from which the drug is 
     distributed; or
       ``(II) if the State from which the drug is distributed has 
     not established a licensure requirement, is licensed by the 
     Secretary; and
       ``(ii) if the drug is distributed interstate, is licensed 
     by the State into which the drug is distributed if the State 
     into which the drug is distributed requires the licensure of 
     a person that distributes drugs into the State.
       ``(B) Standards.--Each Federal and State license described 
     in subparagraph (A) shall meet the standards, terms, and 
     conditions established by the Secretary under section 583.
       ``(2) Reporting and database.--
       ``(A) Reporting.--Beginning January 1, 2015, any person who 
     owns or operates an establishment that engages in wholesale 
     distribution shall--
       ``(i) report to the Secretary, on an annual basis pursuant 
     to a schedule determined by the Secretary--

       ``(I) each State by which the person is licensed and the 
     appropriate identification number of each such license; and
       ``(II) the name, address, and contact information of each 
     facility at which, and all trade names under which, the 
     person conducts business; and

       ``(ii) report to the Secretary within a reasonable period 
     of time and in a reasonable manner, as determined by the 
     Secretary, any significant disciplinary actions, such as the 
     revocation or suspension of a wholesale distributor license, 
     taken by a State or the Federal Government during the 
     reporting period against the wholesale distributor.
       ``(B) Database.--Not later than January 1, 2015, the 
     Secretary shall establish a database of authorized wholesale 
     distributors. Such database shall--
       ``(i) identify each authorized wholesale distributor by 
     name, contact information, and each State where such 
     wholesale distributor

[[Page 14644]]

     is appropriately licensed to engage in wholesale 
     distribution;
       ``(ii) be available to the public on the Internet Web site 
     of the Food and Drug Administration; and
       ``(iii) be regularly updated on a schedule determined by 
     the Secretary.
       ``(C) Coordination.--The Secretary shall establish a format 
     and procedure for appropriate State officials to access the 
     information provided pursuant to subparagraph (A) in a prompt 
     and secure manner.
       ``(D) Confidentiality.--Nothing in this paragraph shall be 
     construed as authorizing the Secretary to disclose any 
     information that is a trade secret or confidential 
     information subject to section 552(b)(4) of title 5, United 
     States Code, or section 1905 of title 18, United States Code.
       ``(3) Costs.--
       ``(A) Authorized fees of secretary.--If a State does not 
     establish a licensing program for persons engaged in the 
     wholesale distribution of a drug subject to subsection (b), 
     the Secretary shall license a person engaged in wholesale 
     distribution located in such State and may collect a 
     reasonable fee in such amount necessary to reimburse the 
     Secretary for costs associated with establishing and 
     administering the licensure program and conducting periodic 
     inspections under this section. The Secretary shall adjust 
     fee rates as needed on an annual basis to generate only the 
     amount of revenue needed to perform this service. Fees 
     authorized under this paragraph shall be collected and 
     available for obligation only to the extent and in the amount 
     provided in advance in appropriations Acts. Such fees are 
     authorized to remain available until expended. Such sums as 
     may be necessary may be transferred from the Food and Drug 
     Administration salaries and expenses appropriation account 
     without fiscal year limitation to such appropriation account 
     for salaries and expenses with such fiscal year limitation.
       ``(B) State licensing fees.--Nothing in this Act shall 
     prohibit States from collecting fees from wholesale 
     distributors in connection with State licensing of such 
     distributors.''.
       (2) Wholesale distribution.--Section 503(e) (21 U.S.C. 
     353(e)), as amended by paragraph (1), is further amended by 
     adding at the end the following:
       ``(4) For the purposes of this subsection and subsection 
     (d), the term `wholesale distribution' means the distribution 
     of a drug subject to subsection (b) to a person other than a 
     consumer or patient, or receipt of a drug subject to 
     subsection (b) by a person other than the consumer or 
     patient, but does not include--
       ``(A) intracompany distribution of any drug between members 
     of an affiliate or within a manufacturer;
       ``(B) the distribution of a drug, or an offer to distribute 
     a drug among hospitals or other health care entities which 
     are under common control;
       ``(C) the distribution of a drug or an offer to distribute 
     a drug for emergency medical reasons, including a public 
     health emergency declaration pursuant to section 319 of the 
     Public Health Service Act, except that, for purposes of this 
     paragraph, a drug shortage not caused by a public health 
     emergency shall not constitute an emergency medical reason;
       ``(D) the dispensing of a drug pursuant to a prescription 
     executed in accordance with subsection (b)(1);
       ``(E) the distribution of minimal quantities of drug by a 
     licensed retail pharmacy to a licensed practitioner for 
     office use;
       ``(F) the distribution of a drug or an offer to distribute 
     a drug by a charitable organization to a nonprofit affiliate 
     of the organization to the extent otherwise permitted by law;
       ``(G) the purchase or other acquisition by a dispenser, 
     hospital, or other health care entity of a drug for use by 
     such dispenser, hospital, or other health care entity;
       ``(H) the distribution of a drug by the manufacturer of 
     such drug;
       ``(I) the receipt or transfer of a drug by an authorized 
     third-party logistics provider provided that such third-party 
     logistics provider does not take ownership of the drug;
       ``(J) a common carrier that transports a drug, provided 
     that the common carrier does not take ownership of the drug;
       ``(K) the distribution of a drug, or an offer to distribute 
     a drug by an authorized repackager that has taken ownership 
     or possession of the drug and repacks it in accordance with 
     section 582(e);
       ``(L) salable drug returns when conducted by a dispenser;
       ``(M) the distribution of a collection of finished medical 
     devices, which may include a product or biological product, 
     assembled in kit form strictly for the convenience of the 
     purchaser or user (referred to in this subparagraph as a 
     `medical convenience kit') if--
       ``(i) the medical convenience kit is assembled in an 
     establishment that is registered with the Food and Drug 
     Administration as a device manufacturer in accordance with 
     section 510(b)(2);
       ``(ii) the medical convenience kit does not contain a 
     controlled substance that appears in a schedule contained in 
     the Comprehensive Drug Abuse Prevention and Control Act of 
     1970;
       ``(iii) in the case of a medical convenience kit that 
     includes a product, the person that manufacturers the kit--

       ``(I) purchased such product directly from the 
     pharmaceutical manufacturer or from a wholesale distributor 
     that purchased the product directly from the pharmaceutical 
     manufacturer; and
       ``(II) does not alter the primary container or label of the 
     product as purchased from the manufacturer or wholesale 
     distributor; and

       ``(iv) in the case of a medical convenience kit that 
     includes a product, the product is--

       ``(I) an intravenous solution intended for the 
     replenishment of fluids and electrolytes;
       ``(II) a product intended to maintain the equilibrium of 
     water and minerals in the body;
       ``(III) a product intended for irrigation or 
     reconstitution;
       ``(IV) an anesthetic;
       ``(V) an anticoagulant;
       ``(VI) a vasopressor; or
       ``(VII) a sympathomimetic;

       ``(N) the distribution of an intravenous drug that, by its 
     formulation, is intended for the replenishment of fluids and 
     electrolytes (such as sodium, chloride, and potassium) or 
     calories (such as dextrose and amino acids);
       ``(O) the distribution of an intravenous drug used to 
     maintain the equilibrium of water and minerals in the body, 
     such as dialysis solutions;
       ``(P) the distribution of a drug that is intended for 
     irrigation, or sterile water, whether intended for such 
     purposes or for injection;
       ``(Q) the distribution of medical gas, as defined in 
     section 575;
       ``(R) facilitating the distribution of a product by 
     providing solely administrative services, including 
     processing of orders and payments; or
       ``(S) the transfer of a product by a hospital or other 
     health care entity, or by a wholesale distributor or 
     manufacturer operating at the direction of the hospital or 
     other health care entity, to a repackager described in 
     section 581(16)(B) and registered under section 510 for the 
     purpose of repackaging the drug for use by that hospital, or 
     other health care entity and other health care entities that 
     are under common control, if ownership of the drug remains 
     with the hospital or other health care entity at all 
     times.''.
       (3) Third-party logistics providers.--Section 503(e) (21 
     U.S.C. 353(e)), as amended by paragraph (2), is further 
     amended by adding at the end the following:
       ``(5) Third-party logistics providers.--Notwithstanding 
     paragraphs (1) through (4), each entity that meets the 
     definition of a third-party logistics provider under section 
     581(22) shall obtain a license as a third-party logistics 
     provider as described in section 584(a) and is not required 
     to obtain a license as a wholesale distributor if the entity 
     never assumes an ownership interest in the product it 
     handles.''.
       (4) Affiliate.--Section 503(e) (21 U.S.C. 353(e)), as 
     amended by paragraph (3), is further amended by adding at the 
     end the following:
       ``(6) Affiliate.--For purposes of this subsection, the term 
     `affiliate' means a business entity that has a relationship 
     with a second business entity if, directly or indirectly--
       ``(A) one business entity controls, or has the power to 
     control, the other business entity; or
       ``(B) a third party controls, or has the power to control, 
     both of the business entities.''.
       (5) Standards.--Subchapter H of chapter V, as added by 
     section 202, is amended by adding at the end the following:

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

       ``(a) In General.--The Secretary shall, not later than 2 
     years after the date of enactment of the Drug Supply Chain 
     Security Act, establish by regulation standards for the 
     licensing of persons under section 503(e)(1) (as amended by 
     the Drug Supply Chain Security Act), including the 
     revocation, reissuance, and renewal of such license.
       ``(b) Content.--For the purpose of ensuring uniformity with 
     respect to standards set forth in this section, the standards 
     established under subsection (a) shall apply to all State and 
     Federal licenses described under section 503(e)(1) (as 
     amended by the Drug Supply Chain Security Act) and shall 
     include standards for the following:
       ``(1) The storage and handling of prescription drugs, 
     including facility requirements.
       ``(2) The establishment and maintenance of records of the 
     distributions of such drugs.
       ``(3) The furnishing of a bond or other equivalent means of 
     security, as follows:
       ``(A)(i) For the issuance or renewal of a wholesale 
     distributor license, an applicant that is not a government 
     owned and operated wholesale distributor shall submit a 
     surety bond of $100,000 or other equivalent means of security 
     acceptable to the State.
       ``(ii) For purposes of clause (i), the State or other 
     applicable authority may accept a surety bond in the amount 
     of $25,000 if the annual gross receipts of the previous tax 
     year for the wholesaler is $10,000,000 or less.
       ``(B) If a wholesale distributor can provide evidence that 
     it possesses the required bond in a State, the requirement 
     for a bond in another State shall be waived.

[[Page 14645]]

       ``(4) Mandatory background checks and fingerprinting of 
     facility managers or designated representatives.
       ``(5) The establishment and implementation of 
     qualifications for key personnel.
       ``(6) The mandatory physical inspection of any facility to 
     be used in wholesale distribution within a reasonable time 
     frame from the initial application of the facility and to be 
     conducted by the licensing authority or by the State, 
     consistent with subsection (c).
       ``(7) In accordance with subsection (d), the prohibition of 
     certain persons from receiving or maintaining licensure for 
     wholesale distribution.
       ``(c) Inspections.--To satisfy the inspection requirement 
     under subsection (b)(6), the Federal or State licensing 
     authority may conduct the inspection or may accept an 
     inspection by the State in which the facility is located, or 
     by a third-party accreditation or inspection service approved 
     by the Secretary or the State licensing such wholesale 
     distributor.
       ``(d) Prohibited Persons.--The standards established under 
     subsection (a) shall include requirements to prohibit a 
     person from receiving or maintaining licensure for wholesale 
     distribution if the person--
       ``(1) has been convicted of any felony for conduct relating 
     to wholesale distribution, any felony violation of subsection 
     (i) or (k) of section 301, or any felony violation of section 
     1365 of title 18, United States Code, relating to product 
     tampering; or
       ``(2) has engaged in a pattern of violating the 
     requirements of this section, or State requirements for 
     licensure, that presents a threat of serious adverse health 
     consequences or death to humans.
       ``(e) Requirements.--The Secretary, in promulgating any 
     regulation pursuant to this section, shall, notwithstanding 
     section 553 of title 5, United States Code--
       ``(1) issue a notice of proposed rulemaking that includes a 
     copy of the proposed regulation;
       ``(2) provide a period of not less than 60 days for 
     comments on the proposed regulation; and
       ``(3) provide that the final regulation take effect on the 
     date that is 2 years after the date such final regulation is 
     published.''.
       (b) Authorized Distributors of Record.--Section 503(d) (21 
     U.S.C. 353(d)) is amended by adding at the end the following:
       ``(4) In this subsection, the term `authorized distributors 
     of record' means those distributors with whom a manufacturer 
     has established an ongoing relationship to distribute such 
     manufacturer's products.''.
       (c) Effective Date.--The amendments made by subsections (a) 
     and (b) shall take effect on January 1, 2015.

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

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

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

       ``(a) Requirements.--No third-party logistics provider in 
     any State may conduct activities in any State unless each 
     facility of such third-party logistics provider--
       ``(1)(A) is licensed by the State from which the drug is 
     distributed by the third-party logistics provider, in 
     accordance with the regulations promulgated under subsection 
     (d); or
       ``(B) if the State from which the drug distributed by the 
     third-party logistics provider has not established a 
     licensure requirement, is licensed by the Secretary, in 
     accordance with the regulations promulgated under subsection 
     (d); and
       ``(2) if the drug is distributed interstate, is licensed by 
     the State into which the drug is distributed by the third-
     party logistics provider if such State licenses third-party 
     logistics providers that distribute drugs into the State and 
     the third-party logistics provider is not licensed by the 
     Secretary as described in paragraph (1)(B).
       ``(b) Reporting.--Beginning 1 year after the date of 
     enactment of the Drug Supply Chain Security Act, a facility 
     of a third-party logistics provider shall report to the 
     Secretary, on an annual basis pursuant to a schedule 
     determined by the Secretary--
       ``(1) the State by which the facility is licensed and the 
     appropriate identification number of such license; and
       ``(2) the name and address of the facility and all trade 
     names under which such facility conducts business.
       ``(c) Costs.--
       ``(1) Authorized fees of secretary.--If a State does not 
     establish a licensing program for a third-party logistics 
     provider, the Secretary shall license the third-party 
     logistics provider located in such State and may collect a 
     reasonable fee in such amount necessary to reimburse the 
     Secretary for costs associated with establishing and 
     administering the licensure program and conducting periodic 
     inspections under this section. The Secretary shall adjust 
     fee rates as needed on an annual basis to generate only the 
     amount of revenue needed to perform this service. Fees 
     authorized under this paragraph shall be collected and 
     available for obligation only to the extent and in the amount 
     provided in advance in appropriations Acts. Such fees are 
     authorized to remain available until expended. Such sums as 
     may be necessary may be transferred from the Food and Drug 
     Administration salaries and expenses appropriation account 
     without fiscal year limitation to such appropriation account 
     for salaries and expenses with such fiscal year limitation.
       ``(2) State licensing fees.--
       ``(A) State established program.--Nothing in this Act shall 
     prohibit a State that has established a program to license a 
     third-party logistics provider from collecting fees from a 
     third-party logistics provider for such a license.
       ``(B) No state established program.--A State that does not 
     establish a program to license a third-party logistics 
     provider in accordance with this section shall be prohibited 
     from collecting a State licensing fee from a third-party 
     logistics provider.
       ``(d) Regulations.--
       ``(1) In general.--Not later than 2 years after the date of 
     enactment of the Drug Supply Chain Security Act, the 
     Secretary shall issue regulations regarding the standards for 
     licensing under subsection (a), including the revocation and 
     reissuance of such license, to third-party logistics 
     providers under this section.
       ``(2) Content.--Such regulations shall--
       ``(A) establish a process by which a third-party 
     accreditation program approved by the Secretary shall, upon 
     request by a third-party logistics provider, issue a license 
     to each third-party logistics provider that meets the 
     requirements set forth in this section;
       ``(B) establish a process by which the Secretary shall 
     issue a license to each third-party logistics provider that 
     meets the requirements set forth in this section if the 
     Secretary is not able to approve a third-party accreditation 
     program because no such program meets the Secretary's 
     requirements necessary for approval of such a third-party 
     accreditation program;
       ``(C) require that the entity complies with storage 
     practices, as determined by the Secretary for such facility, 
     including--
       ``(i) maintaining access to warehouse space of suitable 
     size to facilitate safe operations, including a suitable area 
     to quarantine suspect product;
       ``(ii) maintaining adequate security; and
       ``(iii) having written policies and procedures to--

       ``(I) address receipt, security, storage, inventory, 
     shipment, and distribution of a product;
       ``(II) identify, record, and report confirmed losses or 
     thefts in the United States;
       ``(III) correct errors and inaccuracies in inventories;
       ``(IV) provide support for manufacturer recalls;
       ``(V) prepare for, protect against, and address any 
     reasonably foreseeable crisis that affects security or 
     operation at the facility, such as a strike, fire, or flood;
       ``(VI) ensure that any expired product is segregated from 
     other products and returned to the manufacturer or repackager 
     or destroyed;
       ``(VII) maintain the capability to trace the receipt and 
     outbound distribution of a product, and supplies and records 
     of inventory; and
       ``(VIII) quarantine or destroy a suspect product if 
     directed to do so by the respective manufacturer, wholesale 
     distributor, dispenser, or an authorized government agency;

       ``(D) provide for periodic inspection by the licensing 
     authority, as determined by the Secretary, of such facility 
     warehouse space to ensure compliance with this section;
       ``(E) prohibit a facility from having as a manager or 
     designated representative anyone convicted of any felony 
     violation of subsection (i) or (k) of section 301 or any 
     violation of section 1365 of title 18, United States Code 
     relating to product tampering;
       ``(F) provide for mandatory background checks of a facility 
     manager or a designated representative of such manager;
       ``(G) require a third-party logistics provider to provide 
     the applicable licensing authority, upon a request by such 
     authority, a list of all product manufacturers, wholesale 
     distributors, and dispensers for whom the third-party 
     logistics provider provides services at such facility; and
       ``(H) include procedures under which any third-party 
     logistics provider license--
       ``(i) expires on the date that is 3 years after issuance of 
     the license; and
       ``(ii) may be renewed for additional 3-year periods.
       ``(3) Procedure.--In promulgating the regulations under 
     this subsection, the Secretary shall, notwithstanding section 
     553 of title 5, United States Code--
       ``(A) issue a notice of proposed rulemaking that includes a 
     copy of the proposed regulation;
       ``(B) provide a period of not less than 60 days for 
     comments on the proposed regulation; and
       ``(C) provide that the final regulation takes effect upon 
     the expiration of 1 year after the date that such final 
     regulation is issued.
       ``(e) Validity.--A license issued under this section shall 
     remain valid as long as such third-party logistics provider 
     remains licensed consistent with this section. If the 
     Secretary finds that the third-party accreditation program 
     demonstrates that all applicable requirements for licensure 
     under this

[[Page 14646]]

     section are met, the Secretary shall issue a license under 
     this section to a third-party logistics provider receiving 
     accreditation, pursuant to subsection (d)(2)(A).

     ``SEC. 585. UNIFORM NATIONAL POLICY.

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

     SEC. 206. PENALTIES.

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

     SEC. 207. CONFORMING AMENDMENT.

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

     SEC. 208. SAVINGS CLAUSE.

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

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Michigan (Mr. Upton) and the gentleman from California (Mr. Waxman) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Michigan.


                             General Leave

  Mr. UPTON. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days in which to revise and extend their remarks and 
insert extraneous material into the Record on the bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Michigan?
  There was no objection.
  Mr. UPTON. Mr. Speaker, I yield myself 3 minutes.
  I rise today in strong support of H.R. 3204, the Drug Quality and 
Security Act.
  I am so proud to say that this piece of legislation is a product of 
true bipartisan and bicameral work. The Senate and the House, 
Republicans and Democrats, came together to produce a bill that will 
protect American patients by ensuring that they receive safe drugs.
  This legislation will strengthen the prescription drug supply chain 
in order to protect American families against counterfeit drugs. The 
bill also eliminates and prevents increases in drug prices; it avoids 
additional drug shortages; and it eliminates hundreds of millions of 
dollars worth of duplicative government red tape on American 
businesses, which is harming job growth.
  The supply chain provisions of the Drug Quality and Security Act are 
the product of many years of tireless work. We know from stakeholders 
like Pfizer and Perrigo in Michigan that this is not just a patient 
safety issue; it's a jobs issue. This bill will bring certainty to the 
drug supply chain and ensure that patients will continue to receive the 
medicine that they need without interruption. This bill also addresses 
drug compounding.
  H.R. 3204 is the result of the Energy and Commerce Committee's 
thorough investigation of the NECC meningitis outbreak, which began its 
devastating spread almost a year ago today. To date, the CDC has linked 
64 deaths and nearly 750 cases in 20 States to contaminated drugs from 
the NECC. My home State of Michigan has been the hardest hit by the 
outbreak, with 19 lives needlessly lost--three in my district. The sad 
truth is that, yes, they could have been prevented.
  This legislation is an important step in helping to prevent any such 
tragedy from ever occurring again. By reviewing countless documents, 
holding four committee hearings, and reviewing various legislative 
proposals, we better understand what is needed to help prevent a future 
NECC, and we have built that into this legislation.
  Mr. Speaker, this bill upholds the current section 503(a) of the law, 
and provides it with the clarity that FDA needs by eliminating the 
unconstitutional provisions. The bill also requires FDA to engage in 
meaningful communication with State boards of pharmacy. Further, under 
this bill, entities engaged in sterile drug compounding can voluntarily 
register with FDA and operate under FDA regulation. Finally and 
importantly, this bill protects traditional pharmacy compounding that 
occurs in community pharmacies across the country. That's why the bill 
has the support of the National Community Pharmacists Association, and 
I would like to thank them for working with us so closely.
  I also want to thank Chairman Pitts, Chairman Murphy, Vice Chair 
Blackburn, Mr. Latta, and particularly Mr. Griffith for their 
outstanding leadership on these issues. I want to commend Mr. Waxman, 
Mr. Pallone, Mr. Dingell, Ms. DeGette, Mr. Green, and Mr. Matheson for 
their work as well.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Mr. UPTON. I yield myself an additional 1 minute.
  I also want to thank Chairman Harkin and Senator Alexander for their 
leadership, and I've talked with them a number of times over the last 
number of weeks.
  I want to thank our staffs on both sides, particularly on our side: 
Clay

[[Page 14647]]

Alspach, Paul Edattel, John Stone, and Carly McWilliams. It is because 
of their collaborative and tireless efforts that we are near the 
resolution of last year's deadly outbreak, and their work is to be 
applauded.
  To all of the families who have lost loved ones and to those who are 
still suffering today--and I talked to someone just within the last 
hour whose relative is still suffering--we are near the resolution of 
last year's deadly outbreak.
  To those families who have lost loved ones and to those who are still 
suffering today, with this bill, we say: never again.
  I urge my colleagues to support the bill, and I reserve the balance 
of my time.
  Mr. WAXMAN. Mr. Speaker, I yield myself 3 minutes.
  I rise to support the passage of the Drug Quality and Security Act.
  It has been a year now since the tragic fungal meningitis outbreak 
caused by the New England Compounding Center in Massachusetts. At least 
64 people died, and over 750 people were sickened. More than 14,000 
others are still waiting--and must live in fear for years--to see 
whether they, too, will get meningitis. This was the largest outbreak 
of health care-associated infections in U.S. history and one of the 
Nation's worst public health disasters in recent memory.
  In recognizing the need to act in the face of this tragedy, Members 
on both sides of the aisle in both Houses of Congress came together in 
the months following the outbreak to try to figure out how to solve 
this problem.
  One thing was clear: FDA's authorities over compounding pharmacies 
were not up to the task. Divergent court decisions on the underlying 
statute had forced the agency to cobble together a piecemeal approach 
to regulating compounding pharmacies that was different in some parts 
of the country than in others. That untenable legal situation created 
loopholes that companies like NECC were able to exploit.
  FDA was also facing a pharmacy compounding industry that had 
dramatically changed since 1997, the last time Congress passed 
legislation on this issue. Since that time, hospitals have grown 
dependent on so-called ``outsourcers,'' very large compounding 
pharmacies that mix batches of customized drugs for hospitals.
  The legislation we are considering today will take a major step 
toward addressing these issues.
  First, it will correct the constitutional defect in the underlying 
law that has wreaked havoc on FDA's ability to regulate compounders.
  Second, it will give hospitals and doctors the ability to access a 
source of compounded medicines that are made in a facility that is 
subject to stringent FDA quality standards and oversight. All other 
compounding pharmacies will continue to be subject to current law.
  Third, the bill will remedy one of the major problems that surfaced 
in the NECC situation--a lack of effective communication between State 
boards of pharmacy and the FDA. Specifically, it will create a system 
in which State boards of pharmacy and FDA can notify each other when 
there are concerns about violations occurring at a particular 
compounding pharmacy.
  These authorities represent a significant improvement over current 
law, and they will go a long way toward better protecting public 
health.
  The SPEAKER pro tempore (Mr. Holding). The time of the gentleman has 
expired.
  Mr. WAXMAN. I yield myself an additional 30 seconds.
  Mr. Speaker, in addition to these important compounding authorities, 
this legislation will establish an electronic, interoperable system at 
the Federal level that tracks each package of drugs at the unit level 
and that involves the entire supply chain. This will help prevent 
Americans from being harmed by counterfeit and substandard medicines.
  There is no question in my mind that this bill represents a step 
forward, and I urge all of my colleagues to support it.
  I reserve the balance of my time.
  Mr. UPTON. At this time, I yield 3 minutes to the gentleman from 
Pennsylvania (Mr. Pitts), the chairman of the Health Subcommittee.
  Mr. PITTS. Mr. Speaker, I am very pleased that the House is 
considering today H.R. 3204, the Drug Quality and Security Act. This 
legislation would address two important issues affecting the quality 
and security of America's drug supply.
  First, the bill would protect traditional pharmacies and clarify laws 
related to human drug compounding in response to last year's nationwide 
meningitis outbreak--one of the largest public health crises in recent 
memory.
  Second, the bill would strengthen the prescription drug supply chain 
in order to protect American families against counterfeit drugs.
  As we all remember, in the summer and fall of 2012, a Massachusetts 
company, the New England Compounding Center, the NECC, shipped over 
17,000 vials of an injectable steroid solution from three contaminated 
lots to health care facilities across the country. After receiving 
injections of NECC's contaminated steroid, over 64 people died from 
complications associated with fungal meningitis, and 750 others were 
stricken with meningitis or other persistent fungal infections.
  Title I of H.R. 3204 is based off of Representative Morgan Griffith's 
Compounding Clarity Act and is the culmination of a nearly yearlong 
House Energy and Commerce Committee investigation. It clarifies FDA's 
authority over the practice of compounding drugs, and it requires FDA 
to engage in dialogue with State regulators to prevent against another 
tragedy like NECC's while protecting the role of traditional pharmacies 
in compounding.

                              {time}  1400

  Title II, based on Representative Bob Latta's Safeguarding America's 
Pharmaceuticals Act, addresses the safety of the Nation's prescription 
drug supply chain, as drugs travel from the manufacturer to the 
pharmacy. It creates a uniform national standard for drug supply chain 
security to protect Americans against counterfeit drugs while 
eliminating needless levels of bureaucracy.
  The Drug Quality and Security Act is the result of months of 
bipartisan, bicameral negotiation, and I would like to thank Chairman 
Upton, Ranking Member Waxman, Chairman Emeritus Dingell, 
Representatives Griffith, Latta, Pallone, DeGette, and Gene Green for 
their work on this important legislation, and also Senators Harkin and 
Alexander in the Senate.
  Finally, I would like to thank the staff of the Energy and Commerce 
Health Subcommittee, especially Clay Alspach, Paul Edattel, Carly 
McWilliams, Heidi Stirrup, and Monica Volante.
  This bill is supported by PhRMA, the Generic Pharmaceutical 
Association, the National Community Pharmacists Association, the 
Healthcare Supply Chain Association, and the Pharmaceutical 
Distribution Security Alliance, among others.
  I would urge all of my colleagues to support this commonsense, 
bipartisan legislation.
  Mr. WAXMAN. Mr. Speaker, I yield 3 minutes to the gentleman from New 
Jersey (Mr. Pallone), the ranking member on the Health Subcommittee.
  Mr. PALLONE. Thank you, Mr. Waxman.
  Mr. Speaker, I rise in support of the Drug Quality and Security Act. 
This bill represents a bipartisan, bicameral effort to clarify current 
pharmaceutical compounding laws and secure our Nation's pharmaceutical 
drug supply chain. It's the culmination of several months of hard work 
and tireless negotiations between our committee and the Senate Health 
Committee.
  As a result of the terrible tragedy in Massachusetts, the House 
Energy and Commerce Committee held hearings and engaged with 
stakeholders and the FDA in order to understand the existing problems 
and the best options for addressing them. What became clear was a need 
for patients and providers to have access to safe compounded drugs. 
This legislation helps ensure that quality compounded drugs are 
available to patients who need them.

[[Page 14648]]

  This effort also makes clear that FDA's authorities over compounding 
pharmacies needed to be fixed. A court split decision over the statute 
had hampered FDA's ability to effectively enforce their authority over 
compounding pharmacies and ensure the safety and effectiveness of 
compounded medications. The bill before us will fix this constitutional 
flaw by deleting the provisions that were deemed unconstitutional by 
the courts.
  The bill will permit compounders who wish to practice outside the 
scope of traditional pharmacy to register as outsourcing facilities, 
but those who choose to remain traditional pharmacies will continue to 
be regulated as they are under current law. This gives doctors and 
hospitals the ability to purchase compounded drugs for their patients 
made in a facility that is subject to stringent FDA quality standards 
and oversight.
  In addition, the legislation offers providers and patients better 
information about compounded drugs by directing FDA to make a list of 
FDA-regulated outsourcing facilities available and requiring detailed 
labeling on compounded drugs. It will also improve communications and 
coordination with FDA and State authorities.
  The second title of the bill establishes a uniform, national drug-
tracing framework to track prescription drugs from the manufacturer to 
the pharmacy, and raises the standards for prescription drug 
wholesalers and third-party logistic providers across the U.S. This is 
the result of several years of work to address the growing problems of 
pharmaceutical theft, counterfeiting, and diversion.
  The bill before us today makes significant improvements from the bill 
that passed the House earlier this year. Most notably, it develops a 
workable pathway to unit-level, interoperable tracing in a decade.
  I think we should all be proud of the work our staffs have done. I 
would like to thank again Mr. Waxman, Mr. Upton, as well as Chairman 
Pitts, Mr. Dingell, Ms. DeGette, Mr. Green, Mr. Matheson, Mr. Latta, 
and Mr. Griffith for their work on this bill.
  Mr. Speaker, the American people deserve the peace of mind to know 
that the medicines they take are safe and effective. The Drug Quality 
and Security Act is a critically important step in protecting the 
public's health, and I urge Members to support this bipartisan, 
bicameral legislation.
  Mr. UPTON. Mr. Speaker, I yield 2 minutes to the gentleman from Ohio 
(Mr. Latta), a member of the committee.
  Mr. LATTA. I thank the chairman for yielding.
  Mr. Speaker, I rise today in support of the Drug Quality and Security 
Act of 2013.
  Title II of this legislation, Drug Supply Chain Security, is based on 
H.R. 1919, the Safeguarding America's Pharmaceuticals Act of 2013, 
which I introduced along with Congressman Matheson. H.R. 1919 was 
passed on the floor by a voice vote on June 3 of this year.
  Title II of this bill relates to the drug supply chain, and I am 
pleased that a bipartisan, bicameral agreement was reached to secure 
our drug supply chain and protect patients. Securing our Nation's 
pharmaceutical supply chain is extremely important, and passage of this 
bill is an important step forward in protecting America's families.
  Pharmaceutical distribution occurs nationwide, and it is estimated 
that within the United States there are more than 4 billion 
prescriptions filled each year. By replacing the current patchwork of 
multiple State laws with a uniform national standard, we're improving 
safety, eliminating duplicative regulations, and creating certainty for 
all members of the pharmaceutical supply chain. When anyone takes a 
prescribed medication, he or she should have full confidence that the 
medication is as prescribed and that no counterfeit or adulterated drug 
has entered the supply chain.
  To protect patient safety, the bill creates a uniform national 
standard for securing the drug distribution supply chain, thereby 
preventing duplicative State and Federal requirements relating to 
tracing. No State can impose additional or inconsistent regulations 
related to tracing products on supply chain members. The bill increases 
security of the supply chain by establishing tracing requirements for 
manufacturers, wholesale distributors, pharmacies, and repackagers 
based on the changes in ownership. The bill also establishes a 
collaborative, transparent process between the FDA and stakeholders to 
study ways to even further secure the drug supply chain through public 
meetings and pilot projects.
  I was successful in including language in the FDA user fee law to 
allow hospital systems to repackage drugs within a hospital system in 
the instance of a drug shortage.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Mr. UPTON. I yield the gentleman an additional 30 seconds.
  Mr. LATTA. I will continue working with hospital systems on the issue 
of permitting these systems to prepare batches of compounded drugs in 
advance of a specific physician prescription or order.
  Mr. Speaker, I want to especially thank Chairman Upton and 
Subcommittee Chairman Pitts for all their assistance in advancing this 
legislation. I want to thank the Health Subcommittee staff, especially 
my legislative director, Allison Witt, for all their hard work.
  Mr. Speaker, I urge full support of H.R. 3204.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore. Members are advised not to traffic the well 
while another Member is under recognition.
  Mr. WAXMAN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Michigan (Mr. Dingell), the chairman emeritus of our committee.
  Mr. DINGELL. Mr. Speaker, this is a good bill. It's not perfect, but 
it is a huge stride forward.
  It represents a major step in securing our pharmaceutical supply 
chain and improving FDA's authority to oversee compounding pharmacies. 
It also is done under a bipartisan, bicameral, cooperative, and 
enthusiastic effort by Members on both sides of the aisle and of the 
Capitol working together.
  It addresses the problems of the deadly fungal meningitis outbreak of 
several years ago, which were traced to lots of supposedly sterile 
steroid injections made at the New England Compounding Center. There 
were 264 cases of fungal meningitis in my home State and 19 deaths. 
This will address that concern in a very excellent way.
  It also sees to it that FDA and the States are able to cooperate 
together, have better funding and more authority over compounding 
pharmacies. It also does something else, which is very important: it 
sees to it that now we can track and trace pharmaceuticals through the 
channels of trade, a very important need. And it is for the first time 
going to see to it that Americans are able to address their concerns 
about the safety of pharmaceuticals in these important areas.
  I want to thank Chairman Upton for his leadership, Ranking Member 
Waxman, Representatives Pallone, Matheson, DeGette, Latta, Pitts, and 
Griffith, and my good friend, Mr. Green, for their hard work on this 
legislation. I hope that we can quickly send this legislation to the 
President's desk for signature.
  Now just one thought: why is it that on legislation of this kind, 
this body can work together, and we are not capable of dealing with 
massive problems like government shutdowns and dealing with continuing 
resolutions? Perhaps maybe a little bit of informed, intelligent 
behavior by this House on other matters would be in order.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore. The Chair will remind all persons in the 
gallery that they are here as guests of the House and that any 
manifestation of approval or disapproval of proceedings or other 
audible conversation is in violation of the rules of the House.
  Mr. UPTON. Mr. Speaker, I yield 3 minutes to the gentleman from 
Virginia (Mr. Griffith), who played a very large part on the 
compounding side of this legislation.

[[Page 14649]]


  Mr. GRIFFITH of Virginia. Mr. Speaker, I thank Subcommittee Chairman 
Pitts for giving me the freedom to work on this. I appreciate it very 
much.
  It has been a year since last fall's fungal meningitis outbreak 
associated with the tainted sterile compounded drugs from the New 
England Compounding Center. In my district and in our area in Virginia, 
we had several deaths, we had 50 confirmed cases, and we had 
approximately 1,400 patients who were notified that they could have 
been exposed to fungal meningitis because they received tainted steroid 
injections.
  In working on this bill, I appreciated the bipartisan manner that we 
used to address this and to work on this matter, particularly with my 
colleagues across the aisle, Representatives Gene Green and Diana 
DeGette, for whom I am very grateful for all of their time and effort 
by both them and their staffs. I should also thank my staff member who 
worked on this most, which was Adam Harbison.
  Having said that, I agree with Mr. Dingell that it is a good bill and 
not a perfect bill, but I am glad to see that language from the 
Griffith-Green-DeGette effort was adopted and the FDA will be required 
to engage in meaningful communication with all of the States when 
potential problems are identified, as this has always been my priority.
  In my opinion, this was the biggest failure of the FDA in handling 
the NECC case, as they were warned about problems by at least two 
States prior to this problem coming to the forefront with all of these 
deaths and with this horrible situation. Two States had sent out a 
warning signal. The State of Colorado had said, Wait a minute, we're 
not going to let these folks operate here. The State of Ohio had 
notified the FDA that they had concerns about NECC being a 
manufacturer, yet there was not any swift action taken on NECC or even 
an attempt to alert other States, including the State of Massachusetts, 
to the problems that were happening.
  I know there's a lot of concern out there by some in the medical 
community, particularly the doctors and some others, but this does not 
change the existing law on office use, and it does not change the 
existing law on repackaging.
  There were legal questions that evolved with this situation 
surrounding the advertising requirements of the original bill. I was a 
little surprised that the FDA had waited 10 years to bring that up, but 
this bill fixes that problem and takes away that cloud of uncertainty 
as to whether or not the whole bill was not constitutional because the 
advertising sections were not constitutional.
  This is a good bill. I'm just talking about the compounding sections, 
but also the track-and-trace sections are very good. I think we are 
drawing a clear line defining so that the FDA can better determine who 
are the traditional compounding pharmacies and who are really 
outsourcers or manufacturers. I think that is great that this bill has 
that in here.
  I would be remiss if I didn't tell a story that struck me last week 
as we are on that 1-year anniversary.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Mr. UPTON. I yield the gentleman an additional 1 minute.
  Mr. GRIFFITH of Virginia. Last week, I went to have lunch with my 
sons at their elementary school. As I was going in, the elementary 
school secretary said to me, ``I know I probably shouldn't say 
anything, but I want to thank you for working on this compounding 
bill.''
  Doug Wingate, who died a year ago, was my family's best friend, and 
he and his wife were supposed to be on a cruise for their 25th 
anniversary and instead we were attending his funeral. His wife last 
week was on that cruise with her son, but we can never bring her 
husband back. This bill will make sure that we don't have that problem 
again, and the other Doug Wingates of the world will not have to die in 
order for us to change the law to make a better protected system for 
the American people.

                              {time}  1415

  Mr. WAXMAN. Mr. Speaker, I yield 2 minutes to the gentlelady from the 
State of Colorado (Ms. DeGette).
  Ms. DeGETTE. Mr. Speaker, almost exactly 1 year ago, as you've heard, 
there was a tragic meningitis outbreak in Massachusetts; 64 people lost 
their lives, and 750 people were sickened.
  In the investigation of NECC, the compounding pharmacy, there was 
found black specks floating in the vials. There was found fungal 
material. The factory, itself, had greenish yellow residue on 
supposedly sterile equipment and surfaces that tested positive for mold 
and bacteria.
  In a series of hearings in our committee, we learned that the Food 
and Drug Administration Modernization Act of 1997 left a loophole large 
enough to allow large drug compounders to escape oversight by the FDA. 
The wording of the act also led to litigation and confusing court 
decisions about the FDA's authority over those manufacturers.
  This bill takes the first, albeit important, step to address these 
issues. It incorporates important pieces of bipartisan legislation, as 
you've heard, that I have introduced with the gentleman from Virginia 
(Mr. Griffith) and the gentleman from Texas (Mr. Gene Green). It 
deletes the provisions from existing law that were deemed 
unconstitutional by the courts. It also enhances cooperation between 
State boards of pharmacy and the FDA; and it gives doctors and 
hospitals the ability to purchase compounded drugs for their patients 
made in a facility that is subject to stringent FDA quality standards 
and oversight. Importantly, all other compounding pharmacies would 
continue to be subject to current law. Finally, the Drug Quality and 
Security Act will require within a decade the implementation of a 
nationwide system for the tracking and tracing of drugs as they move 
through the supply chain from manufacturer to pharmacy.
  I believe this will go a long way toward preventing dangerous 
counterfeit and substandard medicines from entering our drug supply. We 
still have work to do. We all agree with that. And I am committed to 
strengthening the law.
  The SPEAKER pro tempore. The time of the gentlewoman has expired.
  Mr. WAXMAN. I yield the gentlelady an additional 30 seconds.
  Ms. DeGETTE. I am committed to strengthening this law so that we 
never have any other tragedy such as what Mr. Griffith discussed, where 
we have a Doug Wingate who right now is missing his 25th anniversary 
cruise because he was killed by these tainted drugs.
  I'm proud to have worked with my colleagues from both sides of the 
aisle. I associate myself with the chairman emeritus' remarks that we 
should be able to do this on the continuing resolution and on the debt 
limit.
  I also want to thank all of our staff; and, in particular, my chief 
of staff, Lisa Cohen, who spent the entire August recess working on 
this. And I thank the chairman.
  Mr. UPTON. Mr. Speaker, I yield 2 minutes to the gentleman from 
Texas, Dr. Burgess, vice chair of both the Health and the O and I 
Subcommittees.
  Mr. BURGESS. I thank the chairman for yielding.
  Mr. Speaker, as an original cosponsor and as a negotiator of the 
House legislation, I rise in the strongest support of the track-and-
trace provisions which would protect the public and give confidence to 
doctors in practice that the drugs they are dispensing, in fact, came 
from the manufacturer.
  In regard to the language over compounding, there is, in fact, much 
to like. There was additional work that could have been done; but, 
unfortunately, due to the intransigent insistence of the Senate, we are 
considering these two issues together.
  Sixty American lives were lost a year ago. Excellent investigative 
work was done by our Subcommittee on Oversight and Investigations. And 
it is disturbing to me personally that not one person at the Food and 
Drug Administration has been held accountable for their failure to use 
existing authority or informing the State of what they knew.

[[Page 14650]]

  My test for consideration of new categories of regulation is that it 
must not impact the traditional practice of medicine, pharmacy, or 
compounding.
  Mr. Speaker, no bill is perfect. There's always the risk of 
unintended consequences. I sincerely hope that this language will pass 
this test; but if it does not, I hope that our committee and this body 
will stand ready to do the necessary oversight and correct any 
unintended consequences.
  Mr. WAXMAN. Mr. Speaker, I am pleased at this time to yield 2 minutes 
to the gentleman from Texas, (Mr. Green).
  Mr. GENE GREEN of Texas. Mr. Speaker, I rise in strong support of the 
Drug Quality and Security Act. This important bill is the result of 
weeks of bipartisan and bicameral negotiations.
  I want to thank my colleagues, Representatives Morgan Griffith and 
Diana DeGette, for joining me in our efforts over many months. I also 
want to thank Chairman Upton, Ranking Member Waxman, Chairman Pitts, 
Ranking Member Pallone, Chairman Emeritus Dingell, and my good friend 
Congressman Matheson for all their leadership through this process and 
their commitment to getting this final product to the floor. It was a 
group effort, which is how this body should function all the time.
  This bill is not perfect. We heard those concerns, and we have tried 
to address them, but the nature of compromise is not getting 
everything. The Energy and Commerce Committee investigated last year's 
outbreak and found there were breakdowns in the regulations at the 
State and, most concerning, at the Federal level.
  Large operators were able to sell products interstate in an 
unregulated gray area. In the case of the NECC, their sterile 
facilities were far from sterile. They operated without fear of 
penalties for far too long, and people died because of that.
  I'm proud to say that this bill fixes the problems that led to the 
fungal meningitis outbreak, and it requires the FDA to succeed where it 
failed in the past. Bad actors concerned more with profit than with 
public health ought not to be able to operate with impunity again.
  I hope that the FDA uses their enforcement discretion to maintain 
patient access to important drugs from nuclear pharmacies, certain 
repackaged drugs, and drugs for ``office use.''
  While I acknowledge there are problems, it is most important that we 
act to protect the public health. Our constituents, when they seek 
care, will now have the confidence that a sterile compounded product 
really is sterile.
  We must make sure another fungal meningitis outbreak is never allowed 
to occur again. This bill succeeds in that goal, and I am proud to 
support it.
  Mr. UPTON. Mr. Speaker, at this time I yield 2 minutes to the 
gentleman from Pennsylvania, Dr. Murphy, the chairman of the Oversight 
and Investigations Subcommittee.
  Mr. MURPHY of Pennsylvania. I thank the chairman.
  Mr. Speaker, we are here today in part to deal with the issue of the 
compounding pharmacies which allows the FDA to have greater oversight 
over interstate sales.
  How we got here is a tragedy. In our Oversight and Investigation 
Subcommittee, we found that some 64 people died from this pain 
medication manufactured by the New England Compounding Center. These 
patients trusted that the steroids injected into their spine or their 
joints to relieve chronic pain was perfectly safe because of the 
confidence our Nation's health care providers place in the Food and 
Drug Administration.
  That drug was contaminated with fungus and hurt people dramatically. 
More than 700 people received these lethal injections. Today, most are 
living with the unbearable horror of not knowing whether they will 
survive and must spend weeks in the hospital, missing work, holidays, 
and time with family, and must take large doses of morphine to ease the 
pain. Each day is lived under the deadly threat of an infection that 
could reach their brains and perhaps kill them.
  This outbreak is one of the worst public health disasters in our 
country's history and a terrible tragedy and an epic failure.
  Sadly, during our hearings, it was pointed out that while the FDA was 
still having multiple visits to compounding pharmacies, they still told 
us they did not have the authority. Unfortunately, several years had 
dragged on where the FDA heard numerous complaints about the problems 
with NECC. They told us it was too complex to act on it; but, clearly, 
it was not complex nor was it a surprise. Neither NECC nor its sister 
company, Ameridose, were operating in the shadows. They were under the 
nose of the FDA for a decade. The field staff were aware of it. There 
were warning signs, alarm bells, flashing red lights, complaints from 
patients, nurses, pharmacists, doctors, pain clinics, hospitals, and 
drug companies. So the FDA told us they need more authority. This bill 
will grant it to them.
  But I must say, in the context of this, when Dr. Hamburg told us it 
was too complex, I applaud Dr. Woodcock who told us they need to think 
more like physicians and less like attorneys. That is the right 
attitude.
  So with the passage of this bill, the FDA will have the authority it 
needs, will have to also make sure that they have the fortitude to take 
action on any compounding pharmacy that they see not up to the high 
level of standards the FDA sets, that all citizens expect.
  The Drug Quality and Security Act will end these problems, we hope, 
and these inspection holidays and reassure the American public that 
these medications--wherever they are manufactured--and most by 
compounding pharmacies do a superb job of maintaining sterile 
conditions. But in all cases, the FDA will have the authority to make 
sure they have the inspections and they have the team that can go in 
there and take solid action when these centers do not adhere to those 
high standards.
  Mr. WAXMAN. Mr. Speaker, I yield 2 minutes to the gentleman from Utah 
(Mr. Matheson).
  Mr. MATHESON. Mr. Speaker, the bill before us today has two main 
components. We talk about the drug compounding issue and also the issue 
of the drug supply chain, how we can track medications through the 
pharmaceutical supply chain to make sure that the materials are safe 
and have not been subject to counterfeit medications entering that 
supply chain.
  I would like to speak primarily about the supply chain component of 
the bill. That component of the bill is a product of several years of 
work and collaboration between a number of Members on both sides of the 
aisle, working with, beyond Members, a lot of stakeholders--the 
pharmaceutical supply chain stakeholders, the Food and Drug 
Administration, and others. And this act, in part, is going to provide 
immediate steps to help strengthen our drug supply chain from 
counterfeiters and other bad actors. It also establishes a clear and 
defined path toward full electronic product-level traceability.
  You know, we've seen this in recent press reports. Counterfeit meds 
can slip into our drug supply, and it's so tempting to the 
counterfeiters. When you think of last year alone, the prescription 
drug market in the United States, Americans spent $325 billion on 
prescription meds. So this is a lucrative market, and it's very 
tempting for counterfeiters. And that's why it's so important we ensure 
the integrity of the drug supply chain, and this bill is going to work 
to do just that.
  The other thing that bill does is it provides some much-needed 
regulatory certainty for everyone in the supply chain, establishing a 
national uniform standard for strengthening the integrity of the supply 
chain. And that's important, as opposed to having each State do their 
own thing. Then the participants in the supply chain are going to have 
to do 50 different sets of rules, and that doesn't make sense.
  And, finally, the bill establishes a collaborative process between 
the FDA and the industry to establish protocols for taking this 
traceability where you can track the meds all the way down to the unit 
level. That is going to provide the ultimate level of security and 
certainty for consumers across America

[[Page 14651]]

and the integrity of the drug supply chain.
  I want to thank so many people, but I particularly want to thank 
Chairman Upton and Ranking Member Waxman for their work on this. I also 
would like to thank a couple of colleagues who worked on this issue 
before who are no longer Members of Congress, Mr. Buyer and Mr. 
Bilbray, who spent a lot of time; in the current Congress, Congressman 
Latta and Mr. Dingell as well.
  Mr. UPTON. Mr. Speaker, I have no further requests for time on our 
side, so I'm ready to close.
  Mr. WAXMAN. Mr. Speaker, at this time I yield 2 minutes to a good 
friend from the State of Connecticut (Ms. DeLauro).
  Ms. DeLAURO. Mr. Speaker, I rise in opposition to the act before us. 
I support the track-and-trace provisions to prevent fake medication 
from entering the drug supply, and I commend the ranking member for his 
efforts.
  But the voluntary approach to regulating large-scale compounding 
pharmacies in this bill is not strong enough to ensure the public's 
safety in this arena.
  This is a life-and-death issue. Last year, one single compounding 
pharmacy in Massachusetts caused a fungal meningitis outbreak that 
sickened over 700 people and caused over 60 deaths, which is why I 
introduced legislation to draw a clear line between whether a business 
is a traditional compounding pharmacy or a drug manufacturer, like the 
one in New England, and to ensure the proper mandatory FDA regulation 
of compounding drug manufacturers shipping mass amounts of drugs across 
State lines.
  Under this bill, large-scale, high-risk compounding manufacturers 
would voluntarily register with the Food and Drug Administration 
without meaningful enough penalties for failing to comply. That New 
England Compounding Center, responsible for over 60 deaths, would not 
have to register. This voluntary approach will continue to expose 
patients to potentially unsafe mass-produced compounded drugs that are 
not approved or evaluated by the FDA for safety, efficacy, and adequate 
directions for use. It is an approach that can do real harm, and it is 
time for the FDA to be the regulatory agency it was intended to be.
  At the very least, given that lives are at stake, the House should 
consider this issue as a stand-alone bill, through regular order, with 
the opportunity for amendments.

                              {time}  1430

  It should not be on a suspension calendar; and as it is on the 
suspension calendar, I must oppose this bill.
  Mr. UPTON. Mr. Speaker, we have no further speakers, and I reserve 
the balance of my time.
  Mr. WAXMAN. Mr. Speaker, I yield 1 minute to the gentleman from New 
York (Mr. Engel).
  Mr. ENGEL. I thank the gentleman for yielding to me, and I rise in 
support of this compromise legislation before us today. I believe that 
H.R. 3204 will enable our country to further secure our pharmaceutical 
distribution chain and help keep patients who depend on compounding 
pharmacies safe.
  I am proud of the Energy and Commerce Committee because concerns that 
many of us had about the previous version of this track-and-trace 
legislation have been taken care of in this bill. They have been 
addressed in this bill. The previous bill was H.R. 1919, and we had 
difficulty with it. So I look forward to supporting this bill. We held 
hearings, and we are compromising on both sides. I wish Congress would 
take our lead on other issues and compromise, but I am happy to support 
this bill. I urge my colleagues to vote ``aye.''
  Mr. UPTON. I continue to reserve the balance of my time.
  Mr. WAXMAN. Mr. Speaker, I yield myself the balance of my time.
  I want to thank Chairman Upton, Chairman Pitts, and Ranking Member 
Pallone. On the Democratic staff, Tiffany Guarascio for Mr. Pallone; 
Greg Sunstrum for Mr. Dingell; Rachel Stauffer and Lisa Cohen for Ms. 
DeGette; Nate Tipton from Mr. Green's office; Joel Bailey for Mr. 
Matheson; Karen Nelson, Eric Flamm, and Rachel Sher--all of these 
people played an essential role in getting this bill through.
  I want to single out Mr. Griffith who introduced the bill in the 
House, along with Ms. DeGette and Mr. Green, that served as a 
foundation for the compounding debate. Mr. Matheson and Mr. Latta 
introduced the House track-and-trace bill.
  Everybody didn't get what they wanted. This bill is a compromise. 
This institution has to reach compromises to get things done. We cannot 
have every issue litigated and relitigated. Once the law is settled, we 
must go on. And I am chagrined that we are likely to close the 
government because, on the other side of the aisle, the leadership in 
this House wants to keep the fight going on the Affordable Care Act. It 
is the law. It has been affirmed by the courts. It is about to be put 
in place. We should work together to solve our country's problems, not 
make them worse by failing to compromise and work with each other.
  I yield back the balance of my time.
  Mr. UPTON. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, this legislation that we hopefully will pass in the next 
few minutes is very important. It clearly, I think, would have saved 
the lives of those folks that were taken, and it reflects the hard work 
of our committee on a bipartisan basis.
  From the very start, the Oversight and Investigation Subcommittee 
went to work. It got to the bottom of a very tragic situation that 
impacted some 20 States, hundreds and hundreds of people, and we've 
changed that system now. Because of their work and their investigation, 
we came back and moved legislation through the proper channels, regular 
order, through the Health Subcommittee and through our committee. We 
worked very closely with Republicans and Democrats in the Senate to 
craft this bill that would have stopped this awful thing that happened 
a year ago.
  Congress does work and can work when we work together, and I am proud 
of this product. I am proud of this legislation. I urge the Senate to 
take it up in the next day or two so we can, in fact, get it to the 
President's desk, and I thank every Member who worked so hard.
  We saw today certainly the personal impact on all of our districts 
and on the Members themselves. Many of us, in fact, did know folks 
directly impacted not only through death, but also those who were 
impacted because of the impact on their own lives as they still try to 
recuperate and survive. I urge all of my colleagues to vote ``yes.''
  I yield back the balance of my time.
  Mr. POLIS. Mr. Speaker, I rise in support of H.R. 3204, the Drug 
Quality Security Act.
  The merits of this legislation are clear: it provides additional 
oversight of the preparation of compound medications. It institutes new 
labeling requirements and clarifies existing ones. And it helps us 
track products from manufacturer to consumer. Coloradans in my district 
will be safer when this bill is signed into law.
  But Mr. Speaker, this bill also serves as a reminder that despite the 
differences between Republicans and Democrats on so many issues, we 
still can come together to do the work of the American people.
  Last year, we saw the tragic results of unregulated and unsafe 
compounding. This year, we're seeing Congress respond by passing a bill 
supported by patient advocates, the public health community, and 
stakeholders at all parts of the pharmaceutical supply chain.
  No, this legislation isn't perfect. But it represents a significant 
step forward in protecting public health and safety, and it shows that 
we can join together to get things done.
  That's how this chamber should work, Mr. Speaker, and I'm hopeful 
that the my colleagues on both sides will continue to legislate by 
seeking common ground, rather than focusing on the issues that divide 
us.
  Mr. SESSIONS. Mr. Speaker, I rise concerning certain provisions of 
H.R. 3204, legislation addressing human drug compounding and drug 
supply chain security.
  This legislation confirms that Section 503(A), originally passed in 
1997, allows the U.S. Food and Drug Administration (FDA) to enter into 
memorandums of understanding with the states to address ``the 
distribution of inordinate amounts of compounded products

[[Page 14652]]

interstate,'' and to make sure that there are procedures that provide 
``for appropriate investigation by a State agency of complaints 
relating to compounded drug products distributed outside such State.''
  It is my understanding that this authority is to be used by the FDA 
to make sure that systems and procedures are set up so that consumers 
have available redress for any potential problem with compounded 
prescriptions that are shipped across state lines. I am aware of 
concerns that the FDA may use this authority to try to restrict 
interstate commerce rather than following the letter of the law, which 
seeks to guarantee ``appropriate investigation'' on complaints and 
other issues that may arise.
  Mr. Speaker, I will continue to monitor the implementation of Section 
503(A) in consultation with compounding pharmacies in Texas, and call 
on the FDA to ensure that these provisions are not used to restrict 
interstate sales of compounded pharmaceuticals within all applicable 
laws and regulations.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Michigan (Mr. Upton) that the House suspend the rules 
and pass the bill, H.R. 3204.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

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