[Federal Register Volume 59, Number 49 (Monday, March 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5540]


[[Page Unknown]]

[Federal Register: March 14, 1994]


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Part III





Department of Health and Human Services





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Food and Drug Administration



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21 CFR Parts 203 and 205



Prescription Drugs, Policies, Requirements and Administrative 
Procedures; Proposed Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 203 and 205

[Docket No. 92N-0297]
RIN 0905-AC81

 

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

AGENCY: Food and Drug Administration, HHS.

ACTION: Proposed rule.

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SUMMARY: The Food and Drug Administration (FDA) is issuing a proposed 
rule to set forth agency policies and requirements and to provide 
administrative procedures, information, and guidance for those sections 
of the Prescription Drug Marketing Act of 1987 (PDMA), as modified by 
the Prescription Drug Amendments of 1992 (PDA), that were not 
implemented by the final rule that set forth Federal guidelines for 
State licensing of wholesale drug distributors (55 FR 38012, September 
14, 1990). FDA is also proposing to amend the definitions section of 
the State licensing guidelines to make the definition of ``wholesale 
distribution'' consistent with that in this proposed regulation.

DATES: Written comments by May 30, 1994.

ADDRESSES: Written comments to the Dockets Management Branch (HFA-305), 
Food and Drug Administration, rm. 1-23, 12420 Parklawn Dr., Rockville, 
MD 20857.

FOR FURTHER INFORMATION CONTACT: Richard L. Arkin, Center for Drug 
Evaluation and Research (HFD-362), Food and Drug Administration, 7500 
Standish Pl., Rockville, MD 20855, 301-594-1046.
SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Description of the Proposed Rule
    A. Scope
    B. Reimportation
    C. Sales Restrictions
    D. Samples
    E. Wholesale Distribution
    F. Request and Receipt Forms, Reports, and Records
    G. Penalties and Rewards
    H. Technical Amendment to State Licensing Guideline
III. Economic Analysis
IV. Executive Order 12612: Federalism
V. Paperwork Reduction Act of 1980
VI. Environmental Impact
VII. Request for Comments

I. Background

    On April 22, 1988, the President signed PDMA into law (Pub. L. 100-
293). According to the congressional findings that were made part of 
the text of PDMA as section 2, the legislation was intended to ensure 
that drug products purchased by consumers would be safe and effective 
and to avoid an unacceptable risk that counterfeit, adulterated, 
misbranded, subpotent, or expired drugs were being sold to American 
consumers. (See sec. 2(8), PDMA.)
    Congress found, among other things, that legislation was necessary 
because there were insufficient safeguards in the drug distribution 
system to prevent the introduction and retail sale of substandard, 
ineffective, or counterfeit drugs, and that a wholesale drug diversion 
submarket had developed that prevented effective control over, or even 
routine knowledge of, the true sources of drugs. (See secs. 2(2) and 
2(3), PDMA.)
    Congress found that large amounts of drugs had been reimported into 
the United States as American goods returned, causing a health and 
safety risk to American consumers because the drugs may have become 
subpotent or adulterated during foreign handling and shipping. Congress 
also found that a ready market for prescription drug reimports had been 
the catalyst for a continuing series of frauds against American 
manufacturers and had provided the cover for the importation of foreign 
counterfeit drugs. (See sec. 2(4), PDMA.)
    The congressional findings stated that the then-existing system of 
providing drug samples to physicians through manufacturers' 
representatives had been abused for decades and had resulted in the 
sale to consumers of misbranded, expired, and adulterated 
pharmaceuticals. (See sec. 2(6), PDMA.)
    According to the congressional findings, the bulk resale of below-
wholesale-priced prescription drugs by health care entities for 
ultimate sale at retail helped to fuel the diversion market and was an 
unfair form of competition to wholesalers and retailers who had to pay 
otherwise prevailing market prices. (See sec. 2(7), PDMA.)
    PDMA amends sections 301, 303, 503, and 801 of the Federal Food, 
Drug, and Cosmetic Act (the act) (21 U.S.C. 331, 333, 353, 381) to: (1) 
Ban the reimportation of prescription human drugs produced in the 
United States, except when reimported by the manufacturer or under FDA 
authorization for emergency medical care; (2) ban the sale, purchase, 
or trade, or the offer to sell, purchase, or trade, of any drug sample; 
(3) ban the sale, purchase, or trade, or the offer to sell, purchase, 
or trade, or counterfeit any drug coupon; (4) establish limits on the 
distribution of drug samples to practitioners licensed to prescribe 
such drugs or to pharmacies of hospitals or other health care entities, 
including a requirement that such distributions occur only at the 
request of a licensed practitioner; (5) require licensed practitioners 
to request samples in writing; (6) mandate storage, handling, and 
recordkeeping requirements for drug samples; (7) prohibit, with certain 
exceptions, the sale, purchase, or trade, or the offer to sell, 
purchase, or trade, of prescription human drugs that were purchased by 
hospitals or other health care entities, or which were donated or 
supplied at a reduced price to a charitable organization; (8) require 
State licensing of wholesale distributors of prescription drugs under 
Federal guidelines that include minimum standards for storage, 
handling, and recordkeeping; (9) require unauthorized wholesale 
distributors to provide to each wholesale distributor a statement 
identifying each sale of the drug before the sale to such wholesale 
distributor; and (10) set forth civil and criminal penalties for 
violations of these provisions.
    Most PDMA provisions became effective July 22, 1988. However, the 
drug sample distribution requirements (section 503(d) of the act (21 
U.S.C. 353(d))) became effective on October 20, 1988, and the 
requirement for State licensure of wholesale distributors (section 
503(e)(2) of the act) became effective on September 15, 1992 (2 years 
after the adoption of final rules by the agency setting standards for 
State licensing). In the Federal Register of September 13, 1988 (53 FR 
35325), FDA published proposed State licensing guidelines to implement 
that part of PDMA. FDA received approximately 50 comments on the 
proposal. These comments were made part of a public docket (Docket No. 
88N-0258), which is available for inspection at FDA's Dockets 
Management Branch (address above). After considering all the comments 
received on the proposed rule, FDA published revised State licensing 
guidelines as a final rule (21 CFR part 205) in the Federal Register of 
September 14, 1990 (55 FR 38012). That rule includes minimum 
requirements for storage and handling of prescription drugs and for 
establishment and maintenance of records of drug distribution.
    The PDMA State licensing requirements were modified by the 
enactment of PDA (Pub. L. 102-353, 106 Stat. 941) on August 26, 1992. 
Among other things, PDA amended section 503(e) of the act to establish 
a temporary Federal wholesale distributor registration procedure for 
wholesale drug distributors in those States that do not have a 
licensing program that meets the Federal guidelines. On September 3, 
1992, FDA issued a letter to industry and other interested persons 
providing information and guidance on the procedure to be followed by 
wholesale distributors required to register under the procedure 
established by PDA.
    PDA also recast other parts of PDMA. Among other things, PDA: (1) 
Amended section 303(b)(1) of the act to establish a scienter 
requirement (``knowingly'') for conviction of violations of certain 
prohibited acts under section 301(t) of the act relating to 
reimportation (section 801(d)(1) of the act), samples (section 
503(c)(1) of the act), coupons (503(c)(2) of the act), and unlicensed 
wholesale distributors (section 503(e)(2)(A) of the act); (2) amended 
section 503(d) of the act to prohibit the distribution of drug samples 
by anyone other than the manufacturer or authorized distributors of 
record, except that Congress excluded from the term ``distribute'' the 
provision of a drug sample to a patient by a licensed practitioner, 
health care professional acting at the direction and under the 
supervision of such a practitioner, and a hospital or health care 
entity pharmacy acting at the direction of such a practitioner; (3) 
amended section 503(d)(2) and (d)(3) of the act to disallow any 
distribution of drug samples by unauthorized distributors; (4) amended 
section 503(e)(1) of the act to require that unauthorized distributors 
provide a statement of origin identifying all prior sales, purchases, 
or trades of such drugs and the names and addresses of the parties to 
the transactions to all recipients; and (5) made certain conforming and 
technical changes to the statute.
    On August 1 and November 3, 1988, and January 26, 1990, FDA issued 
letters to the regulated industry and other interested persons 
providing information and guidance on those aspects of PDMA that were 
not implemented by the State licensing rule. The letters requested 
suggestions from the public regarding the drafting of regulations. 
Suggestions from the public have been made part of a public docket 
(Docket No. 88N-258L), which is also available for inspection at FDA's 
Dockets Management Branch (address above). The agency has received 
requests for the issuance of further guidance letters to provide 
specific information in certain areas or to answer particular 
questions. However, FDA believes that it is now appropriate to 
establish definitive requirements through notice and comment 
rulemaking.
    In drafting this proposed rule, the agency considered the comments 
submitted to Docket Nos. 88N-0258 and 88N-258L, including suggestions 
received in response to FDA's three guidance letters, pertinent 
comments received in response to the proposed rule on State licensing 
of wholesale distributors, and other written submissions.

II. Description of the Proposed Rule

    FDA is proposing to add a new part 203 to set forth agency policies 
and requirements and to provide administrative procedures, information, 
and guidance for those sections of PDMA that were not implemented by 
part 205. FDA is also proposing to amend Sec. 205.3 to make the 
definition of ``wholesale distribution'' consistent with that in 
proposed part 203.
    A summary of the provisions of proposed part 203 follows:

A. Scope

1. General
    It was intended that PDMA would protect the public against the 
threat of subpotent, adulterated, counterfeit, and misbranded drugs 
posed by the existence of drug diversion schemes and a drug diversion 
submarket, and the absence of appropriate controls over and creation 
and maintenance of appropriate records regarding the distribution of 
prescription drugs.
    Accordingly, the scope of the proposed rule, as set forth in 
proposed Sec. 203.1, includes establishment of procedures and 
requirements pertaining to the reimportation and wholesale distribution 
of prescription drugs; the sale, purchase, or trade (or the offer to 
sell, purchase, or trade) of prescription drugs by hospitals, health 
care entities, and charitable institutions; and the distribution of 
prescription drug samples.
2. Bulk Drugs
    Some questions have been raised about the applicability of PDMA to 
bulk drugs. The statutory language of PDMA encompasses all drugs 
subject to section 503(b) of the act within its scope.
    The legislative history (``Report of the Committee on Energy and 
Commerce,'' H. Rept. 100-76, April 30, 1987, and ``Report of the 
Committee on Finance,'' S. Rept. 100-202, March 18, 1988) or the 
congressional hearing record do not suggest that bulk drug substances 
be treated any differently from other prescription drugs. Bulk drug 
substances are susceptible to the same problems of lack of 
accountability and diversion that this legislation was intended to 
remedy. It is clear that applying the provisions of the statute to bulk 
drug substances would help protect against the abuses that Congress 
intended to address and contribute to the protection of the public 
health. Accordingly, bulk drug substances are, as drugs within the 
meaning of section 503(b) of the act, expressly brought within the 
scope of PDMA and these implementing regulations.
3. Biological Products
    Questions have also been raised about the applicability of PDMA to 
biological products, even though the statutory language of PDMA 
encompasses all drugs subject to section 503(b) of the act.
    There is nothing in the legislative history or the congressional 
hearing record to suggest that biological products that are 
prescription drugs under section 503(b) of the act should be treated 
differently from other prescription drugs. Biological products, except 
for blood and blood components intended for transfusion, are 
susceptible to the same problems of lack of accountability and 
diversion that this legislation was intended to remedy. It is clear 
that applying the provisions of the statute to biological products, 
except for blood and blood components intended for transfusion, or 
biological products which are also medical devices, would help protect 
against the abuses that Congress intended to address and contribute to 
the protection of the public health. Accordingly, biological products 
that are prescription drugs under section 503(b) of the act, except for 
blood and blood components intended for transfusion, fall under the 
scope of PDMA and are expressly included in these implementing 
regulations.
4. Blood and Blood Components Intended for Transfusion
    Since passage of PDMA, a number of persons have presented to FDA 
issues posed by the application of PDMA to the distribution and sale of 
blood and blood components intended for transfusion by blood 
establishments and hospitals. Two comments to the agency requested 
clarification of PDMA's scope and urged FDA to exempt blood 
establishments from all of PDMA's provisions. The comments contended 
that licensing blood distributors as wholesalers would seriously 
disrupt the Nation's blood services. A third comment suggested that the 
agency could, by notice and comment rulemaking, exempt blood and blood 
components from PDMA by declaring that they are not prescription drugs 
for PDMA purposes.
    PDMA, by its literal terms, applies to all drugs that are subject 
to section 503(b) of the act; that is, to all human prescription drugs, 
including biological products. There is no doubt that blood and blood 
components intended for transfusion are prescription drugs. (See 21 CFR 
606.121(c)(8)(i) and 610.61(s). See also 47 FR 22518, May 25, 1982; 46 
FR 40212, August 7, 1981.) However, if PDMA were considered applicable 
to the distribution of blood and blood components, the result would be 
to impede the existing blood distribution system, thereby interfering 
with our Nation's blood supply. Because application of PDMA to blood 
and blood components would produce this untenable result, FDA believes 
that Congress could not have intended to subject blood and blood 
components to PDMA's provisions.
    Moreover, the legislative history lacks any discussion of PDMA's 
application to blood and blood components and also clearly shows that 
Congress intended that PDMA remedy problems associated with the 
distribution of those drugs that are popularly referred to as 
``medicines'' or ``pharmaceuticals.'' (See Pub. L. 100-293, sec. 2 
(1988) (``Report of the Committee on Energy and Commerce,'' H. Rept. 
100-76, April 30, 1987, and ``Report of the Committee on Finance,'' S. 
Rept. 100-202, March 18, 1988).) Blood and blood components are unique 
drug products that are distributed in an entirely different way from 
other prescription drugs. FDA believes that the fact that blood and 
blood components are not part of the system of distribution and 
marketing that Congress intended to regulate under the terms of PDMA 
further signals that Congress could not have intended to include blood 
and blood components within the scope of the licensing requirement.
    Accordingly, FDA has taken a number of actions to clarify the scope 
of PDMA to prescription drugs other than blood and blood components 
intended for transfusion. In the final State licensing guideline rule 
(55 FR 38012 at 38024), FDA specifically excluded from the definition 
of ``wholesale distribution'' the sale, purchase, or trade of blood and 
blood components intended for transfusion (see Sec. 205.3(f)(8)). At 
the same time, FDA published another proposed rule, ``Applicability to 
Blood and Blood Components Intended for Transfusion; Guidelines for 
State Licensing of Wholesale Prescription Drug Distributors'' (55 FR 
38027, September 14, 1990), asking for comments on the exclusion of 
blood and blood components intended for transfusion from the PDMA State 
licensing guidelines.
    After considering the comments received and reviewing PDMA's 
purpose and its legislative history, FDA has tentatively concluded that 
PDMA is not intended to apply to blood and blood components intended 
for transfusion. Accordingly, at Sec. 203.1 the proposed rule would 
exclude blood and blood components intended for transfusion from the 
requirements of and the restrictions in PDMA and also adds specific 
language at Sec. 203.22(g) excluding blood and blood components 
intended for transfusion from the PDMA sales restrictions.
5. Oxygen
    Questions have also been raised about the applicability of PDMA to 
the drug oxygen, U.S.P. (U.S. Pharmacopeia). FDA advises that oxygen, 
U.S.P., is a prescription drug subject to section 503(b) of the act, 
and, therefore, within the scope of PDMA and these proposed 
regulations.

B. Reimportation

    Section 801(d) of the act (21 U.S.C. 381(d)) provides that a 
prescription drug that is manufactured in a State and exported may not 
be reimported into the United States unless it is imported by the 
manufacturer, except when authorized by the Secretary of Health and 
Human Services for emergency medical care. The delegation of authority 
provisions at 21 CFR 5.10 redelegate the functions of the Secretary to 
the Commissioner of Food and Drugs.
    Section 801(d) of the act responds to a finding that large amounts 
of drugs were being reimported into the United States as ``American 
Goods Returned,'' and that these imports posed a health and safety risk 
to American consumers because they could become subpotent or 
adulterated during foreign handling and shipping. (See sec. 2(4), 
PDMA.)
    The congressional findings also acknowledged that what was termed 
``the ready market for prescription drug reimports'' was ``the catalyst 
for a continuing series of frauds against American manufacturers and 
has provided the cover for the importation of foreign counterfeit 
drugs.'' (See sec. 2(5), PDMA.)
1. Restrictions on Reimportation
    Proposed Sec. 203.10 sets forth the restriction that no 
prescription drug manufactured in a State and exported from the United 
States may be reimported by anyone other than its manufacturer, except 
that FDA may grant permission to a person other than the manufacturer 
to reimport a prescription drug if it deems such reimportation is 
required for emergency medical care.
2. Defining ``Manufacturer''
    FDA defined the term ``manufacturer'' in the PDMA State licensing 
regulation to mean anyone engaged in manufacturing, preparing, 
propagating, compounding, processing, packaging, repackaging, or 
labeling of a prescription drug (Sec. 205.3(d)). This definition is 
somewhat more inclusive than the definition used earlier by the agency 
in the labeling provisions at Sec. 201.1 (21 CFR 201.1). The definition 
in Sec. 201.1(b) states that the manufacturer is the person who 
performs all of the following operations that are required to produce 
the product: (1) Mixing, (2) granulating, (3) milling, (4) molding, (5) 
lyophilizing, (6) tableting, (7) encapsulating, (8) coating, (9) 
sterilizing, and (10) filling sterile, aerosol, or gaseous drugs into 
dispensing containers; or at least some of the operations if the 
labeling indicates the presence of other manufacturers. Under 
Sec. 201.1, a packer or distributor is not the same as a manufacturer.
    FDA concluded that the more inclusive definition of 
``manufacturer'' was consistent with the intent of the statute in 
imposing the requirement for State licensing of wholesale drug 
distributors; however, the agency has preliminarily concluded that a 
less inclusive definition of that term would be more consistent with 
the intent of the remaining sections of PDMA. For example, the 
statutory provision against reimportation by persons other than the 
manufacturer (except when permission is granted by FDA) is intended to 
establish accountability in reimportations so that adulterated and/or 
misbranded goods do not reenter commercial channels in the United 
States. The reimportation provision is based on the assumption that a 
manufacturer, in the less inclusive sense, is the person most 
knowledgeable about the product's characteristics; is the most capable 
of determining that the product meets the stability, quality, and 
purity standards it is represented to possess; and is the only person 
capable of authenticating the basic integrity of the product.
    The remaining sections of PDMA are consistent with the less 
inclusive definition of ``manufacturer'' in Sec. 201.1, rather than the 
more inclusive definition in Sec. 205.3(d). Accordingly, proposed 
Sec. 203.3(p) proposes to adopt the definition of ``manufacturer'' in 
Sec. 201.1 for this rule.
3. Applications for Reimportation to Provide Emergency Medical 
CareProposed Sec. 203.11 provides an administrative procedure by which 
applications may be made by a person other than the manufacturer for 
the reimportation of prescription drugs for emergency medical care. The 
proposal would codify the current procedure whereby applications for 
reimportation are submitted to the Director of the FDA District Office 
in the district where reimportation is sought. The District Office 
would review and approve or disapprove each application.
4. An Appeal From an Adverse Decision by the District Office
    Proposed Sec. 203.12 would also codify the current procedure that 
permits an appeal from an adverse decision by the district office to be 
made to the Office of Compliance (HFD-300), Center for Drug Evaluation 
and Research, for prescription human drugs other than biological 
products. An appeal from an adverse decision involving human 
prescription biological products is to be made to the Office of 
Compliance (HFM-600), Center for Biologics Evaluation and Research.

C. Sales Restrictions

    Section 503(c)(3) of the act prohibits, with certain exceptions, 
the sale, purchase, or trade (or any offer to sell, purchase, or trade) 
of any prescription drug that was purchased by a public or private 
hospital or other health care entity, or donated or supplied at a 
reduced price to a charitable organization described in section 
501(c)(3) of the Internal Revenue Code of 1954.
1. Defining ``Charitable Organization''
    Section 501(c)(3) of the Internal Revenue Code generally exempts 
from income taxes not-for-profit organizations that operate for 
religious, charitable, scientific, literary, educational, and public 
safety purposes. However, such exemptions are not automatic. Under 26 
CFR 1.501, a charitable organization must apply for and be granted tax-
exempt status. Tax-exempt status may be revoked and the organization 
may lose its exemption if it fails to meet the requirements of the 
statute and regulations.
    It is FDA's view that an organization can be accurately described 
as one fitting the requirements of section 501(c)(3) of the Internal 
Revenue Code only if it has been granted tax-exempt status by the 
Department of the Treasury. Accordingly, FDA proposes to define the 
term ``charitable organization'' in proposed Sec. 203.3(f) as a 
nonprofit hospital, health care entity, organization, institution, 
foundation, association, or corporation that has been granted an 
exemption under section 501(c)(3) of the Internal Revenue Code of 1954, 
as amended.
2. Restrictions and Exclusions
    Proposed Sec. 203.20 restates the statutory restrictions on 
prescription drug sales by hospitals, health care entities, and 
charitable institutions (section 503(c)(3) of the act). These 
restrictions reflect a congressional finding that the resale of 
prescription drugs by health care entities at below wholesale prices 
had helped to fuel the drug diversion market and that such sales 
constituted an unfair form of competition to legitimate wholesalers and 
retailers paying the prevailing market prices. (See sec. 2(7), PDMA.)
    The statute does not distinguish sales made at the average 
wholesale price (AWP) and those made at below AWP or at more than the 
AWP. The sales restrictions apply to all sales, purchases, or trades by 
hospitals, health care entities, and charitable institutions. Sales of 
any human prescription drugs purchased by a hospital or other health 
care entity, or donated or supplied at reduced cost to a charitable 
institution, are prohibited unless excepted by section 503(c)(3)(B) of 
the act or exempted under proposed Secs. 203.22, 203.23, or 203.24.
    In its findings, Congress stated that it believed that these 
resales had helped to create an unacceptable risk that counterfeit, 
adulterated, misbranded, subpotent, or expired drugs would be sold to 
American consumers. (See sec. 2(8), PDMA.)
    a. Hospital, health care entity, or charitable institution cannot 
be wholesaler. FDA has learned that some hospitals and health care 
entities, including physicians, have obtained licenses as wholesale 
distributors in an effort to circumvent the statutory restrictions 
against the sale of prescription drugs by hospitals, health care 
entities, and charitable institutions. Those hospitals and health care 
entities that have secured wholesale drug distributor licenses claim 
that the statutory restrictions are made inapplicable to them by the 
first clause of the last sentence of section 503(c)(3) of the act, 
which reads: ``For purposes of this paragraph, the term `entity' does 
not include a wholesale distributor of drugs or a retail pharmacy 
licensed under State law * * *.''
    Such a reading is inconsistent not only with general rules of 
statutory construction, but with the intent of Congress as reflected in 
the legislative history. The legislative history, which addresses 
Congress' concern about donations to charitable institutions and 
institutional discounts for hospitals and health care entities, notes 
that some of these institutions had been sources of unfair competition 
and drug diversion, and explains that the statutory prohibition against 
the sale of drugs donated to or acquired at reduced price by charitable 
institutions or purchased by hospitals or health care entities is 
directed at preventing unfair profits through resales of such drugs. 
Congress said:
    Section 503(c)(3) would prohibit resales of pharmaceuticals by 
hospitals and other health care entities or charitable organizations 
with certain exceptions. This provision is intended to cover resales 
by both for profit and nonprofit health care entities. These 
institutions typically receive discount prices, substantially below 
the average wholesale price (AWP) for pharmaceuticals, based on 
their status as a health care entity or charity. When hospitals or 
other health care entities obtain pharmaceuticals at favorable 
prices and then resell those drugs at a profit, they are unfairly 
competing with wholesalers and retailers who cannot obtain such a 
favorable price. Such resales defraud manufacturers, who are led to 
believe that the drugs are for the use of the health care entity. In 
any case, these resales reward the unscrupulous and penalize the 
otherwise honest and efficient wholesaler or retailer while fueling 
the diversion market.

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

    FDA interprets the first clause of the last sentence of section 
503(c)(3) of the act to mean that the general prohibition against drug 
sales by hospitals, health care entities, and charitable institutions 
was not intended to interfere with the operations of legitimate 
licensed prescription drug wholesalers and retail pharmacies. Section 
503(c)(3) of the act does not open up a loophole for a hospital, health 
care entity, or charitable institution to avoid the statutory 
prohibition against drug sales simply by obtaining a wholesaler 
license.
    Accordingly, proposed Sec. 203.3(n) would state that a person 
cannot simultaneously be a ``health care entity'' and a retail pharmacy 
or wholesale distributor. The agency is also proposing to amend the 
State licensing guidelines by adopting the same definition for ``health 
care entity'' at Sec. 205.3(h).
    If a charitable institution or a for-profit or nonprofit hospital 
or health care entity has a corporate for-profit subsidiary that is a 
wholesale distributor or retail pharmacy, or if it is part of a group 
in which there is common control over the hospital or health care 
entity and a wholesale distributor or retail pharmacy, then the 
charitable institution, hospital, or health care entity would be 
prohibited under section 503(c)(3) of the act and proposed Secs. 203.20 
and 203.22 from transferring any prescription drug donated or supplied 
at reduced price to the charitable institution or purchased by the 
hospital or health care entity to the related wholesale distributor or 
retail pharmacy for further sale except for a sale under a valid 
prescription or for emergency medical reasons.
    A charitable institution, hospital, or health care entity that has 
a wholesale distributor or retail pharmacy subsidiary, or one that is 
part of a group in which there is common control over the charitable 
institution, hospital, or health care entity and a wholesale 
distributor or retail pharmacy, should maintain books and records that 
provide sufficient audit trails to trace the purchase and sale of 
prescription drugs to ensure that no prescription drug donated or 
supplied at reduced price to the charitable institution or purchased by 
the hospital or health care entity is transferred to a related 
wholesale distributor or retail pharmacy for further sale except for a 
sale under a valid prescription or for emergency medical reasons.
    b. Statutory exclusions. Proposed Sec. 203.22 restates the 
statutory exclusions to the sales restrictions. They are: (1) The 
purchase or other acquisition of a drug for its own use by a hospital 
or other health care entity that is a member of a group purchasing 
organization from the group purchasing organization or from other 
hospitals or health care entities that are members of the organization; 
(2) the sale, purchase, or trade of a drug or an offer to sell, 
purchase, or trade a drug by a charitable organization to a nonprofit 
affiliate of the organization to the extent otherwise permitted by law; 
(3) the sale, purchase, or trade of a drug or an offer to sell, 
purchase, or trade a drug among hospitals or other health care entities 
that are under common control; (4) the sale, purchase, or trade of a 
drug or an offer to sell, purchase, or trade a drug for emergency 
medical reasons; or (5) the sale, purchase, or trade of a drug, an 
offer to sell, purchase, or trade a drug, or the dispensing of a drug 
under a valid prescription.
    c. Common control. One statutory exclusion to the general 
prohibition against resale of drugs by hospitals, health care entities, 
and charitable institutions permits the sale, purchase, or trade of 
prescription drugs among hospitals and health care entities that are 
under common control. There is no statutory definition of the term 
``common control,'' nor is the term mentioned in the legislative 
history.
    The concept of common control can be found in other Federal 
regulatory schemes that were in use at the time PDMA was enacted into 
law. Both the Securities and Exchange Commission and the Environmental 
Protection Agency define ``common control'' to mean possession of the 
power to direct or cause the direction of the management and policies 
of a person or an organization, whether by ownership of stock, voting 
securities or rights, contract, or otherwise. (See 17 CFR 230.405 and 
40 CFR 66.3(f).) FDA included this definition in the State licensing 
guidelines at Sec. 205.3(f)(4). This proposal would adopt the same 
definition in proposed Sec. 203.3(g).
    d. Sales for emergency medical reasons. Section 503(c)(3) of the 
act permits the sale, purchase, or trade of prescription drugs by a 
hospital, health care entity, or charitable institution for emergency 
medical reasons. The statute states that ``emergency medical reasons'' 
includes transfers of a drug between health care entities or from a 
health care entity to a retail pharmacy undertaken to alleviate 
temporary shortages of the drug arising from delays in or interruptions 
of regular distribution schedules. The statute does not further 
elaborate on the term ``emergency medical reasons.''
    FDA believes that it may be useful to specify some of the 
circumstances in which a sale for emergency medical reasons would be 
allowed. (See proposed Sec. 203.3(k).)
    FDA received a significant number of comments from providers of 
emergency care, including emergency medical services, ambulance 
corporations, fire companies, rescue squads, urgent care providers, 
emergency care physicians and technicians, and State emergency care 
agencies and commissions that advised the agency that hospital 
pharmacies have traditionally supplied drugs for emergency use by 
emergency medical services and licensed practitioners' offices 
operating in the general service area of the hospital. Several comments 
stated that wholesale distributors are reluctant to open small accounts 
to provide such drugs for emergency care, and that nearby hospital 
pharmacies are the logical providers. Moreover, the comments noted that 
many States encourage hospitals to supply drugs for emergency use to 
emergency medical services, and some States require emergency services 
to acquire their drugs exclusively from hospitals.
    The proposal would allow sale of drugs by a hospital or health care 
entity to nearby emergency medical services such as ambulance services, 
rescue squads, and fire companies in the same State or service or 
marketing area for use in emergency treatment and to licensed 
practitioners for emergency office treatment. The proposal would also 
define emergency medical reasons to allow hospitals and health care 
entities to provide minimal emergency supplies to nursing homes.
    In contrast, FDA believes that the exception for emergency medical 
reasons does not permit hospitals or health care entities regularly to 
sell to licensed practitioners prescription drugs that will be used for 
routine office procedures.
    e. Government hospitals and health care entities. Proposed 
Sec. 203.22(f) would also exclude the sale, purchase, or trade of 
prescription drugs by Federal, State, and local government hospitals 
and health care entities to other Federal, State, and local government 
hospitals or health care entities from the general prohibition against 
the sale, purchase, or trade of prescription drugs by a hospital, 
health care entity, or charitable institution.
    Congress has established an extensive system of public hospitals 
and health care entities. These include hospitals, clinics, and 
dispensaries operated for the military by the Department of Defense; 
hospitals and clinics operated by the Veterans' Administration; and 
hospitals and clinics operated by the U.S. Public Health Service 
(including Indian Health Service hospitals and clinics).
    In addition, State and local governments have established public 
health hospitals, clinics, and dispensaries, including drug treatment 
inpatient and outpatient facilities. These facilities operate under a 
variety of organizational structures. They may be owned and operated by 
governmental entities, or be organized as private corporations or 
associations under contract to State or local government agencies.
    These health care entities may have interagency arrangements for 
the purchase and exchange of prescription drugs. Such facilities 
operate because of Federal, State, or local governmental commitments to 
provide health care to particular classes of patients in response to 
specific client needs. Among these needs are the provision of services 
to people with low incomes, the distribution of vaccines, and the 
dispensing of antitoxins and blood derivatives in public health 
emergencies.
    As noted, the adoption of the prohibition against sales by 
hospitals or health care entities was prompted in part because of the 
differential pricing structure that permits purchases by hospitals and 
health care entities at below wholesale prices and the resultant 
temptation to resell drugs so acquired at a profit. However, there is 
no financial incentive for a Federal, State, or local government 
hospital or health care entity to sell prescription drugs purchased at 
below wholesale prices because any profit from such a sale would go to 
the Federal or State treasury. Accordingly, FDA believes that there is 
little likelihood that permitting Federal, State, or local government 
hospitals and health care entities to sell prescription drugs to other 
Federal, State, or local government hospitals and health care entities 
would lead to the kinds of abuses that PDMA was designed to end.
    Therefore, proposed Sec. 203.22(f) would exclude such transactions 
from the general prohibition against resales by hospitals and health 
care entities and thus permit Federal, State, or local government 
hospitals and health care entities to sell drugs to other Federal, 
State, or local government hospitals and health care entities.
    FDA has been asked whether a State or local government agency, 
which, under a contract or memorandum of agreement, sends or allows 
some of its patients to be treated at a private local clinic or other 
health care entity, may transfer prescription drug products to such a 
facility to be dispensed to patients. In other words, would such a 
transfer violate the prohibition against the sale, purchase, or trade 
of prescription drugs by a hospital, health care entity, or charitable 
institution?
    FDA advises that if a State or local government agency functions as 
or operates a hospital, health care entity, or charitable institution, 
and a private health care entity is bound by a contractual agreement to 
the State or local government agency, then the State or local 
government hospital or health care entity may sell prescription drugs 
to the contract private health care entity provided that the 
prescription drugs sold are only used to serve government patients and 
programs. The State or local government hospital or health care agency 
supplying the drug and the contract health care entity would be 
obligated to implement appropriate controls to ensure that the drugs 
sold by the Government hospital or health care entity to the contract 
health care entity are dispensed to patients in the Government program 
and not diverted or sold to other patients or otherwise used for non-
Government purposes.
    If the State or local government agency does not function as or 
operate a hospital, health care entity, or charitable institution, and 
is acting as a prescription drug wholesaler, the prohibition against 
the sale of prescription drugs by a hospital, health care entity, or 
charitable institution would not be applicable.
3. Revocation of Acceptance, Reshipment, and Returns
    FDA proposes to clarify the circumstances under which hospitals, 
health care entities, and charitable institutions may, without 
violating section 503(c)(3) of the act, return or ship back 
prescription drugs to the manufacturer or distributor from which they 
were purchased.
    In particular, proposed Secs. 203.23 and 203.24 would, 
respectively, describe the conditions by which hospitals, health care 
entities, and charitable institutions may: (1) Revoke acceptance of any 
prescription drug received because of an ordering or delivery mistake 
and ship them back to the manufacturer or distributor, and (2) return a 
drug to the manufacturer or distributor.
    A number of persons who submitted comments to the PDMA docket 
questioned the effect of the new statutory language on commercial 
practice in the pharmaceutical industry. Several persons argued that 
the sales provisions in the Uniform Commercial Code treat a sale as 
completed once a nondefective product has been ordered, delivered, and 
paid for, unless specific contractual provisions make the sale 
conditional or revocable. Several persons urged that FDA view a return 
for cash or credit after a completed sale as a new and prohibited sales 
transaction.
    However, many other comments to the agency in the months after 
passage of PDMA observed that under common commercial practice in the 
pharmaceutical industry, manufacturers and wholesale distributors 
permit returns and urged that this practice be allowed to continue. FDA 
is aware that hospital, health care entity, or charitable institution 
pharmacies, and distributors sometimes return products because of 
overstocks, changes in institutional formularies, the death of a 
patient for whose use a drug product was acquired, or other reasons. 
The comments received by the agency argued that to permit returns would 
both help to keep down the costs of medical care and reduce the risk 
that adulterated or misbranded drugs would find their way into the 
diversion market.
    FDA has tentatively concluded that it should, under specified 
conditions, allow drug products to be shipped back or returned to the 
manufacturer or distributor, and this tentative conclusion is reflected 
in proposed Secs. 203.23 and 203.24.
    Under proposed Sec. 203.23, a hospital, health care entity, or 
charitable institution could revoke a sale and purchase transaction 
because of a mistake in ordering or delivery and ship the prescription 
drug back, provided: (1) The hospital, health care entity, or 
charitable institution ships the drug back within 10 working days of 
receipt; (2) the reshipment is made under proper storage, handling, and 
shipping conditions; and (3) if reshipped to the wholesale distributor, 
the hospital, health care entity, or charitable institution provides 
written notice to the manufacturer of the revocation and reshipment.
    The proposal would require that the manufacturer be notified of the 
reshipment so that any chargebacks to the manufacturer by the wholesale 
distributor or special price reduction credited by the manufacturer to 
the wholesale distributor would be factored into the credit or refund 
given the distributor. This is intended to prevent windfall profits 
from the return of a specially priced drug to the wholesale 
distributor.
    Under proposed Sec. 203.24, a hospital, health care entity, or 
charitable institution could return a product it had purchased from a 
manufacturer or wholesale distributor, provided that: (1) The hospital, 
health care entity, or charitable institution notifies the manufacturer 
that the prescription drug product has been returned to the wholesale 
distributor; and (2) the hospital, health care entity, or charitable 
institution fills out a credit memo. Proposed Sec. 203.24 would require 
the hospital, health care entity, or charitable institution to send a 
copy of the credit memo to the manufacturer, for the same reasons that 
notification of the manufacturer is required in the event of a 
revocation and reshipment, i.e., so that any chargebacks or reduced 
prices will be factored into any credit or refund to prevent windfall 
profits from the transaction.
    Proposed Secs. 203.23 and 203.24 would both require detailed 
documentation to provide the kind of accountability contemplated by the 
act to help ensure against diversion. To ensure that returned drugs 
remain safe and effective, both proposed sections would require that 
drugs returned to a manufacturer or wholesale distributor be kept under 
proper conditions for storage, handling, and shipping, and that written 
documentation reflecting the maintenance of proper conditions be 
provided to the manufacturer or wholesale distributor to which the 
drugs are returned.
    Under the proposal, the value of any credit, refund, or merchandise 
exchanged for the returned product could not exceed the purchase price.
    For purposes of clarification and to ensure that the State 
licensing regulation and this proposed rule, when adopted, are 
consistent, the agency is also proposing to amend the definitions in 
the State licensing guidelines at Sec. 205.3(f) by adding two 
additional exceptions to ``wholesale distribution'' for the reshipment 
of drugs, when conducted in accordance with Sec. 203.23, and drug 
returns, when conducted in accordance with Sec. 203.24.

D. Samples

    To provide accountability and oversight in the sample distribution 
process, PDMA established in section 503(d) of the act a strict system 
of controls over the distribution of prescription drug samples, which 
are defined in section 503(c)(1) of the act. Under the statutory 
scheme, no person could distribute any drug sample, except for a 
manufacturer or distributor who distributed drug samples in accordance 
with specific requirements and in response to a written request from a 
licensed practitioner.
    Under sections 503(d)(1) and (d)(2) of the act, both manufacturers 
and distributors could engage in sample distribution if certain 
requirements were followed. However, section 4(2) of PDA further 
restricted the persons who can engage in distribution of drug samples 
by amending section 503(d)(1) and (d)(2) of the act to restrict sample 
distributions to manufacturers and authorized distributors of record. 
This amendment is demonstrative of the intent of Congress, as reflected 
elsewhere in PDMA and PDA, to restrict the activities of drug 
distributors who are not authorized distributors of record. Proposed 
Secs. 203.30, 203.31, and 203.33 through 203.39 are consistent with 
this amendment.
    Under the revised statutory scheme, no person may distribute any 
drug sample, except for a manufacturer or authorized distributor of 
record who distributes drug samples in accordance with specific 
requirements and in response to a written request from a licensed 
practitioner.
    Section 503(d)(1) of the act states that, for purposes of this 
subsection, the term ``distribute'' does not include the providing of a 
drug sample to a patient by a practitioner licensed to prescribe such 
drug, by a health care professional acting at the direction and under 
the supervision of such a practitioner, or the pharmacy of a hospital 
or of another health care entity acting at the direction of such a 
practitioner who received the drug sample in accordance with the act 
and regulations. The definition of ``distribute'' in proposed 
Sec. 203.3(h) reflects this statutory exclusion.
    PDMA sets up two different sample distribution systems, depending 
on the mode of delivery: (1) By mail or common carrier, and (2) by 
means other than mail or common carrier, i.e., representative or 
detailer.
    If a sample is delivered by mail or common carrier, the statute 
requires the recipient to execute a written receipt when the drug 
sample is delivered and return the receipt to the manufacturer or 
authorized distributor of record from which the drug sample was 
received. If the sample is delivered by a representative, a number of 
additional procedures are required by the statute that pertain to 
storage and handling, inventories, recordkeeping, reporting of thefts 
and significant losses, notification of convictions of representatives 
for drug sample violations, and accountability. The statute specifies 
minimum requirements for the contents of written request forms and 
details certain recordkeeping and reporting requirements.
1. Requirements for Drug Sample Distribution
    The requirements for distribution of drug samples by manufacturers 
and authorized distributors of record by mail or common carrier are set 
forth in proposed Sec. 203.30. The requirements for distribution of 
drug samples by representatives are set forth in proposed Sec. 203.31. 
The proposed sections provide detailed requirements for written request 
forms, receipts, and recordkeeping.
    Most of these requirements are statutory; however, FDA has 
tentatively concluded that clarification of some of the statutory 
requirements is desirable. FDA also has tentatively concluded that 
other requirements should be imposed to help ensure smooth operation of 
the system, effective enforcement, effective accountability and 
oversight of drug sample distribution, and provide adequate safeguards 
against drug sample diversion.
2. Contents of the Sample Request Forms
    Proposed Secs. 203.30 and 203.31 would require the written request 
form for drug samples to bear certain information: (1) The name, 
address, professional title, signature of the practitioner making the 
request; (2) the practitioner's State license number or the Drug 
Enforcement Administration (DEA) identification number; (3) the 
proprietary or established name and strength of the drug sample 
requested; (4) the quantity requested; (5) the name of the manufacturer 
of the drug sample and the authorized distributor of record, if the 
drug sample is requested from a distributor; and (6) the date of the 
request.
    A number of comments suggested that it is sometimes difficult for a 
manufacturer or distributor to determine whether or not a particular 
person who wishes to receive drug samples is a licensed practitioner. 
FDA has added the requirement that the request form bear the 
practitioner's State license or DEA identification number to assist the 
manufacturer or distributor in determining whether or not a person is a 
licensed practitioner.
    The statute requires a request form to bear the ``identity'' of the 
drug sample being requested. FDA has clarified the meaning of 
``identity'' in the proposed rule by specifying that the request form 
bear the proprietary or established name and strength of the requested 
sample.
    PDMA requires that the request form bear the name of the 
manufacturer of the drug. However, where the statute also permits an 
authorized distributor of record to distribute drug samples, the 
identity is incomplete without naming both the manufacturer and 
distributor. In that circumstance, FDA proposes to require that the 
name of the distributor as well as the manufacturer be made part of the 
sample request form.
    The statute also permits delivery of a drug sample to the pharmacy 
of a hospital or other health care entity at the request of a licensed 
practitioner. However, the statute does not state how that request for 
delivery should be made. FDA has tentatively concluded that the name 
and address of the intended recipient should be part of the request 
form. This conclusion is reflected in the requirements in proposed 
Secs. 203.30 and 203.31 that, if the request is being made by a 
licensed practitioner for delivery of a drug sample to a hospital or 
health care entity pharmacy, the name and address of the intended 
recipient be included on the request form.
3. Drug Sample Receipts
    Proposed Secs. 203.30 and 203.31 would require the execution of a 
written receipt by the recipient upon delivery of a drug sample. The 
proposed sections also set out the contents of the receipt.
    The statute requires the execution of a receipt upon delivery of a 
drug sample by mail or common carrier to establish an audit trail for 
drug sample orders and deliveries and to ensure that drug samples 
ordered are received. The statute does not require the execution of a 
written receipt for samples delivered by representatives in the 
apparent belief that a representative always delivers a drug sample to 
a licensed practitioner at the same time that the licensed practitioner 
signs the request form.
    A number of comments suggested that samples frequently are not 
delivered at the time of the request, i.e., some time elapses between 
request and delivery, even when a representative personally delivers 
the drug sample. Sometimes the period of time is only a few minutes, 
but often it may be hours, days, or weeks. In some instances, a 
representative may receive a request for a drug sample at one sales 
call and deliver the requested sample at a later date. In these cases, 
because of lapses of memory, mistake, or because a diversion scheme may 
be underway, the samples delivered may not always match the request. 
Accordingly, the agency has tentatively concluded that the requirement 
for a written receipt should extend to all drug sample deliveries, and 
that requirement is included in proposed Secs. 203.30 and 203.31.
    A sample request and receipt need not be on separate forms if 
delivery is by a representative. A single form could be devised and 
used containing all of the required information, which could be fully 
completed and executed with a single signature, if the request and 
delivery are simultaneous, or executed in part with a signature for the 
request at the time of the request, and executed in part with a second 
signature acknowledging receipt at the time of the delivery.
    Proposed Secs. 203.30(c) and 203.31(c) state that a receipt is to 
be on a form designated by the manufacturer or distributor. If the drug 
sample is received by the requesting practitioner, both proposed 
sections would require that the receipt contain the name, address, 
professional title, and signature of the practitioner or the 
practitioner's designee who acknowledges delivery of the drug sample; 
the proprietary or established name and strength of the drug sample, 
the quantity, and the lot or control number of the drug sample 
delivered; and the date of the delivery. If the drug sample is received 
by the pharmacy of a hospital or other health care entity at the 
request of a licensed practitioner, both proposed sections would 
require the receipt to contain the name and address of the requesting 
licensed practitioner, the name and address of the hospital or health 
care entity pharmacy designated to receive the drug sample; the name, 
address, professional title, and signature of the person acknowledging 
delivery of the drug sample; the proprietary or established name and 
strength of the drug sample, the quantity, and the lot or control 
number of the drug sample delivered; and the date of the delivery. FDA 
believes this information is necessary to ensure that the sample 
received is the same as the sample requested.
4. Additional Requirements For Delivery of Drug Samples by 
Representatives
    PDMA provides that manufacturers and distributors that utilize 
representatives for the delivery of drug samples must abide by a number 
of additional requirements. These additional requirements are intended 
to guard against the kinds of abuses that Congress' findings stated had 
been an integral part of the drug sample delivery system and had led to 
large-scale drug sample diversion.
    a. Inventories of drug samples of manufacturers' and distributors' 
representatives. The statute provides that each drug manufacturer or 
distributor that engages in drug sample distribution is required to 
conduct, at least annually, a complete and accurate inventory of all 
drug samples in the possession of representatives (21 U.S.C. 
353(d)(3)(C)). The inventory is intended to guard against drug sample 
diversion by providing manufacturers and distributors information that 
will permit them to identify diverters and take appropriate action and 
provide data for FDA enforcement activities.
    The statute does not specify what is meant by such an inventory, 
nor how it is to be conducted and reported. It is FDA's preliminary 
view that such an inventory must go beyond a mere physical count, and 
that meaningful information and data can only be provided if the 
inventory is conducted utilizing generally accepted inventory practices 
and a reconciliation report is prepared that relates the latest 
inventory to the most recent prior inventory and to drug samples 
acquired and distributed in the interim.
    Accordingly, proposed Sec. 203.31(d) would require the manufacturer 
or distributor to inventory all drug samples in the possession of a 
manufacturer's or distributor's representative, and keep a record of 
the inventory. The record would be required to identify all drug 
samples by established or proprietary name, dosage strength, and number 
of sample units of each drug sample in stock.
    The proposal would require that the manufacturer or distributor 
reconcile the number of drug samples on hand with the number received 
during the reporting period. The reconciliation report would be 
required to include: (1) A report of the physical count of the most 
recently completed prior inventory; (2) a record of each drug sample 
shipment received since the most recently completed prior inventory, 
including the sender and date of the shipment, and the established or 
proprietary name, dosage strength, and number of sample units received; 
(3) a record of drug sample distributions since the most recently 
completed inventory showing the name and address of each recipient of 
each sample unit shipped, the date of the shipment, and the established 
or proprietary name, dosage strength, lot or control number, and number 
of sample units shipped; and (4) an explanation for any significant 
loss.
    To ensure impartiality, the proposal would also require that the 
inventory and reconciliation reports be conducted and prepared by 
persons other than the representatives being inventoried or their 
supervisors or managers in their direct line of supervision or command.
    To guard against drug sample diversion, the proposed section would 
require manufacturers and distributors to evaluate carefully any 
apparent discrepancy or significant loss in the inventory and 
reconciliation, and to investigate fully any significant loss that 
cannot be justified.
    b. Lists of manufacturers' and distributors' representatives. PDMA 
requires that each manufacturer or authorized distributor of record who 
distributes drug samples maintain a list of the names and addresses of 
its representatives who distribute drug samples and of the sites where 
drug samples are stored. The proposal restates this statutory 
requirement (Sec. 203.31(e)).
    c. Notification if representative is convicted of violations. The 
statute requires drug manufacturers or distributors of record to report 
to FDA any conviction of a representative for violations of section 
503(c)(1) of the act or a State law because of the sale, purchase, or 
trade of a drug sample or the offer to sell, purchase, or trade a drug 
sample. The proposal restates this statutory requirement 
(Sec. 203.31(f)).
5. Drug Sample Storage and Handling Requirements
    FDA has already excluded the distribution of drug samples by 
representatives from the definition of ``wholesale distribution'' in 
Sec. 205.3(f)(7), and the agency is proposing to adopt this exclusion 
in the definition of ``wholesale distribution'' in proposed 
Sec. 203.3(y). In view of this, representatives are not required to be 
licensed as wholesale distributors by the States. PDMA requires 
manufacturers and authorized distributors of record to store all drug 
samples under conditions that will maintain their stability, integrity, 
and effectiveness, and ensure that the drug samples are not 
contaminated, deteriorated, or otherwise adulterated. Proposed 
Sec. 203.32 reflects this requirement.
    A representative, as an agent of the manufacturer or authorized 
distributor of record, is bound by the same standard, and is required 
to take adequate precautions to ensure the safety and efficacy of any 
drug samples the representative distributes. Generally, if a 
representative follows the labeling and compendial requirements for 
storage and handling of a particular prescription drug in handling 
samples of that drug, the safety and efficacy of the drug sample may be 
assured.
6. Drug Sample Forms
    A number of persons posed questions regarding drug sample request 
and receipt forms. FDA does not contemplate developing its own forms 
for sample request and receipt, and instead intends to rely on 
manufacturers and distributors to develop appropriate forms. 
Accordingly, any written request or receipt form developed by a 
manufacturer or authorized distributor of record that complies with the 
requirements of proposed Sec. 203.33 would be acceptable to FDA if it 
contains the information and any signature required in this section.
    The agency wishes to encourage transmission and receipt of sample 
request and receipt forms by the most efficient and expeditious means. 
Accordingly, proposed Sec. 203.33 would permit such forms to be 
delivered by mail, common carrier, or private courier or to be 
transmitted photographically or electronically (i.e., by telephoto, 
wirephoto, radiophoto, facsimile transmission (FAX), xerography, or 
electronic data transfer) or by any other system, provided that the 
method for transmission meets the security requirements set forth in 
proposed Sec. 203.60(d).
7. Written Policies and Procedures and Other Requirements for Drug 
Sample Distribution
    FDA received a number of questions and comments from drug 
manufacturers and distributors seeking assistance in developing 
appropriate administrative systems for distributing drug samples. There 
are a wide variety of administrative systems in use, and enforcement 
has been complicated by the multiplicity of sample distribution 
procedures. Although standardization is not necessary, the agency 
believes that clear internal administrative systems are essential to 
ensure that sample distribution is carried out efficiently and that the 
statutory requirements are met.
    In addition, FDA expects that manufacturers and distributors will 
have administrative systems in place to review all losses and thefts so 
that patterns that may indicate the possibility of drug sample 
diversion will be detected. The agency believes that this is consistent 
with Congress' intent that manufacturers and distributors develop 
adequate audit and security systems to detect and investigate sample 
losses and thefts. (H. Rept. 100-76, p. 20; S. Rept. 100-202, p. 9.)
    Accordingly, under proposed Sec. 203.34, each manufacturer or 
authorized distributor of record that distributes drug samples would be 
expected to adopt an administrative system to monitor losses and 
thefts.
    Also, proposed Sec. 203.34 would require drug manufacturers and 
distributors to establish, maintain, and adhere to written policies and 
procedures describing its administrative systems for sample 
distribution. The proposed section contemplates that each 
manufacturer's or distributor's written policies and procedures would 
describe its administrative system for: (1) Distributing drug samples 
by mail or common carrier, including methodology for reconciliation of 
requests and receipts; (2) distributing drug samples by means other 
than mail or common carrier; (3) conducting its inventory of drug 
samples under proposed Sec. 203.31(d), including an inventory schedule; 
(4) auditing and detecting falsified or incomplete drug sample records; 
(5) identifying any significant loss of drug samples and notifying FDA 
of the loss; (6) monitoring any loss or theft of drug samples; and (7) 
storing drug samples by representatives.
8. Standing Requests
    Both the House Report and Senate Report state that it is the intent 
of Congress that separate written requests be made each time that 
samples are requested to be delivered and that standing requests do not 
fulfill the requirements of the statute, except that the Senate Report 
states that FDA may provide by regulation for the delivery by mail of a 
small number of samples for strictly limited periods of time. (H. Rept. 
100-76, p. 14; S. Rept. 100-202, p. 6.)
    Proposed Sec. 203.35 would require that separate written requests 
be made for each sample or group of samples and does not allow for 
open-ended or standing requests to order drug samples.
    The proposed section states, however, that the agency does not 
consider standing requests to include an arrangement by which a 
licensed practitioner requests in writing that a specified number of 
drug samples be delivered over a period of not more than 6 months, with 
the actual delivery dates for parts of the order to be set by 
subsequent communication.
9. Use of Fulfillment Houses, Shipping and Mailing Services, Other 
Contractors, and Comarketing Agreements
    FDA understands that some manufacturers and distributors employ 
third parties to meet some of the requirements imposed on them under 
PDMA. Third parties may include contractors such as fulfillment houses 
(companies that receive and fill orders), mailing services, and other 
contractors. In addition, some manufacturers and distributors enter 
into comarketing agreements in which one manufacturer or its 
representatives undertake a contractual commitment to provide specified 
services relating to drug marketing for one or more other manufacturers 
or distributors. FDA does not regard the use of third parties or entry 
into comarketing agreements as absolving a manufacturer or distributor 
from its responsibility for complying with the statute and regulations 
pertaining to the distribution of its drug samples.
    Accordingly, proposed Sec. 203.36 would make clear that a 
manufacturer or authorized distributor of record that uses a 
fulfillment house, shipping or mailing service, or other third party to 
fulfill some of the requirements of PDMA, or engages in a comarketing 
agreement with another manufacturer, remains responsible for creating 
and maintaining all requests, receipts, forms, reports, and records 
required under PDMA, PDA, and proposed part 203.
    The agency will give a manufacturer or distributor that contracts 
with a third party to maintain some or all of its records up to 48 
hours to produce requested forms, reports, records, or other required 
documents.
10. Investigation and Notification Requirements
    In proposed Sec. 203.37, FDA proposes to codify the requirements 
and procedures for undertaking investigations and making reports and 
notifications to the agency regarding sample distribution.
    a. Drug sample diversion. To ensure against drug sample diversion, 
proposed Sec. 203.37(a) would impose an investigation and reporting 
requirement on a manufacturer or distributor who has reason to believe 
that any person has falsified drug sample requests, receipts, or 
records. A full and complete investigation would have to be undertaken, 
and the manufacturer or distributor would be required to report to FDA 
that such an investigation is under way and that it has completed such 
an investigation. The proposal would require the report to include the 
reason for the investigation and the results of the investigation.
    Because persons who falsify drug sample requests may be prosecuted 
under Title 18 of the United States Code, and because falsifications 
are often associated with drug diversion, FDA is proposing to require 
manufacturers and distributors to report such offenses to the agency.
    Accordingly, the proposal would require that a manufacturer or 
distributor notify the agency of any falsification of drug sample 
requests, receipts, or records, no later than 5 working days of 
learning of the falsification. The proposal would permit an initial 
notification to be made by telephone or in writing, with a complete 
written report required not later than 30 days after the date of the 
initial telephone or written notification.
    b. Significant loss and known theft. PDMA requires a manufacturer 
or distributor that distributes drug samples to notify FDA of any 
significant loss of drug samples and any known theft of drug samples 
(21 U.S.C. 353(d)(3)(D)). FDA believes that enforcement would be 
facilitated if the manufacturer or distributor promptly notifies the 
agency upon becoming aware of a significant loss or theft. Accordingly, 
proposed Sec. 203.37(b) would require a manufacturer or distributor to 
notify FDA within 5 working days of becoming aware of such a loss or 
theft.
    FDA is proposing in Sec. 203.39 that charitable organizations be 
permitted to solicit and receive surplus drug samples from licensed 
practitioners. As part of this program, FDA proposes to require that a 
charitable institution that receives donated drug samples from a 
licensed practitioner also be required to notify FDA within 5 working 
days of becoming aware of a loss or theft.
    The reporting of any significant loss of drug samples is critical 
to the success of diversion control. Although a sample can 
inadvertently become adulterated through mishandling, spoilage, or 
exposure to the elements, and although samples are reported as stolen 
or lost from time to time, some representatives reportedly have used 
false claims of damage, theft, or loss to divert drug samples into 
illicit commercial channels.
    FDA intends this requirement to mean that the agency is to be 
advised of actual, physical losses, but not insignificant accounting 
mistakes. The agency does not seek to receive reports concerning minor 
mathematical errors that are caught and corrected in the normal course 
of business. These are not significant losses that would trigger the 
reporting requirement. FDA seeks comment on how to distinguish between 
significant losses and minor accounting or inventory errors.
    The agency is mindful of the difficulty of establishing a threshold 
for significant loss and requests comment on this issue and examples of 
situations that may and may not be appropriate reportable losses. FDA 
currently believes that a small discrepancy in the total inventory of a 
multimillion dollar company may not be significant and thus may not 
trigger the reporting requirement, but the loss of a hundred tablets of 
a particular drug by one sales representative in one quarter might be 
significant. Similarly, a bookkeeping imbalance may not be a loss, as 
long as it represents small inventory discrepancies that are likely to 
be accounted for in the normal course of audits or other methods of 
inventory control.
    FDA is not proposing to establish any ``tolerance'' level for 
sample losses below which no report is required. Each manufacturer or 
distributor is required to establish its own threshold for determining 
when inventory not accounted for is significant. This threshold should 
be derived from the firm's past experience in sample distribution and 
inventory and should be based on the level of accuracy of its internal 
audit and security system.
    Some manufacturers or distributors might be able to set a 
historically validated statistical baseline for the minimal amounts of 
shrinkage that might be caused by routine accounting errors, mistakes, 
or losses, and a statistical baseline for the frequency of occurrences 
that might routinely happen with a particular representative or 
product. However, any loss of drug samples exceeding the number or 
frequencies of the established baselines must be reported. In addition, 
any loss possibly associated with falsification of drug sample 
inventory or distribution records, or connected with diversion 
activity, suspicious circumstances, or theft must be investigated and 
reported.
    When FDA becomes aware of a significant loss or theft of drug 
samples, it may conduct its own investigation in cooperation with or 
independent of the manufacturer's or distributor's investigation.
    FDA is proposing that an initial notification of a significant loss 
or known theft be made by telephone or in writing, with a complete 
written report required not later than 30 days after the date of the 
initial notification.
    c. Conviction of a representative. PDMA requires a manufacturer or 
distributor to notify FDA of any conviction of its representatives for 
a violation of section 503(c)(1) of the act or any State law involving 
the sale, purchase, or trade of a drug sample or the offer to sell, 
purchase, or trade a drug sample (21 U.S.C. 353(d)(3)(E)).
    FDA believes that enforcement would be facilitated if prompt notice 
of such a conviction is provided to the agency. Accordingly, proposed 
Sec. 203.37(c)(1) would require a manufacturer or distributor to notify 
FDA within 5 working days of becoming aware of the conviction of one or 
more of its representatives for such a violation.
    To facilitate such reports, proposed Sec. 203.37(c) would permit an 
initial notification of such a conviction to be made by telephone or in 
writing, but would require a complete written report to be submitted no 
later than 30 days after the date of the initial notification.
    d. Selection of individual responsible for drug sample information. 
PDMA requires a manufacturer or distributor who distributes drug 
samples to provide FDA with the name and telephone number of the 
individual responsible for responding to a request for information 
respecting drug samples (21 U.S.C. 353(d)(3)(F)).
    FDA believes that enforcement would be facilitated if that 
information is transmitted to the agency shortly after a designation is 
made. Accordingly, proposed Sec. 203.37(d) would require a manufacturer 
or distributor to notify FDA in writing within 30 days of the selection 
of such an individual and would also require the manufacturer or 
distributor to supply the individual's business address to expedite 
easy communication.
    e. Whom to notify at FDA. The proposed rule would set forth the 
addresses to which notifications and reports are required to be made. 
Under the proposal, reports and notifications are required to be made 
to the Division of Drug Quality Evaluation (HFD-330), Center for Drug 
Evaluation and Research, for human prescription drugs; or the Division 
of Inspections and Surveillance (HFM-650), Center for Biologics 
Evaluation and Research, for human biological prescription drug 
products.
11. Sample Lot or Control Numbers
    A drug sample is a drug product as defined in 21 CFR 320.1(b). In 
21 CFR 201.10(i)(1)(iii) and 201.18 of the general labeling regulations 
and 21 CFR 211.130(b) of the current good manufacturing practice (CGMP) 
regulations, the label of drug products is required to bear an 
identifying lot or control number capable of yielding the complete 
manufacturing history of the package. Persons subject to the CGMP 
regulations are required under 21 CFR 211.196 to maintain distribution 
records containing lot or control numbers.
    Maintenance of records of lot numbers on drug samples will help 
provide the kind of accountability and oversight of prescription drug 
sample distribution that PDMA is intended to provide. A comment to the 
docket from the Department of Health and Human Services' Office of the 
Inspector General not only endorsed this view, but suggested that 
maintenance of drug sample distribution records, including lot numbers, 
would be important for enforcement purposes.
    Accordingly, proposed Sec. 203.38 would require the manufacturer or 
authorized distributor of record of drug samples to include in the drug 
sample labeling, the label of the sample unit, and distribution records 
identifying lot or control numbers that will permit the tracking of the 
distribution of each drug sample unit from the point of its manufacture 
to the representative or, if delivered by mail or common carrier, to 
the licensed practitioner. (In addition, as discussed earlier, proposed 
Secs. 203.30 and 203.31 also require that drug sample request and 
receipt forms include lot or control numbers.)
12. Sample Labels
    FDA has been advised that some manufacturers and distributors use 
ordinary stock packages as drug samples. The agency believes that this 
practice makes it difficult to distinguish samples from ordinary stock 
and contributes to drug diversion. FDA believes that it is essential 
that drug samples be clearly and easily recognizable.
    Accordingly, proposed Sec. 203.38(c) would require that each sample 
unit bear a label that clearly denotes its status as a drug sample. An 
appropriate designation would include (but not be limited to) the word 
``sample'' and the terms ``not for sale'' and ``professional courtesy 
package.'' The proposed section would also provide that drug products 
that are labeled or imprinted as samples are deemed to be drug samples 
within the meaning of the act.
    An article that meets the statutory definition of a drug sample 
that fails to bear the label required in proposed Sec. 203.38(c) would 
still be a sample despite the absence of the required label.
13. Disposition of Drug Samples by Licensed Practitioners
    PDMA permits manufacturers and distributors to distribute drug 
samples to licensed practitioners and to hospital or health care entity 
pharmacies at the request of a licensed practitioner, provided certain 
documents and records are created and maintained.
    PDMA restricts drug sample distribution to ``licensed 
practitioners'' and to hospital or health care entity pharmacies at the 
request of a ``licensed practitioner.'' A number of comments asked FDA 
to define the term ``licensed practitioner.'' For purposes of proposed 
part 203, FDA would, in proposed Sec. 203.3(o), define the term 
``licensed practitioner'' to mean any person licensed by State law to 
prescribe drugs.
    Physicians and surgeons, including osteopathic physicians and 
surgeons, are licensed to prescribe drugs in every State, as are 
dentists and dental surgeons. In most States, podiatrists and 
optometrists are licensed to prescribe certain drugs. In some States, 
pharmacists, physicians' assistants, paramedics, emergency medical 
technicians, certified nurse practitioners, certified nurse midwives, 
or other medical professionals or paraprofessionals may be licensed to 
prescribe drugs, sometimes on their own authority and sometimes on the 
authority of supervising physicians.
    Some States limit the authority to prescribe prescription drugs to 
specific protocols or formularies for certain professionals or 
paraprofessionals. For those professionals and paraprofessionals, FDA 
follows the requirements of those States and considers the authority to 
request and receive drug samples to be similarly limited.
    Section 503(d)(1) of the act provides that no person may distribute 
any drug sample unless the requirements set forth in paragraphs (d)(2) 
and (d)(3) of that section are followed. Paragraphs (d)(2) and (d)(3) 
set forth detailed requirements for manufacturers and authorized 
distributors of record to follow when they distribute drug samples by 
mail or common carrier and by representatives.
    In the section-by-section analysis that the Senate and House of 
Representatives ordered to be published in the Congressional Record 
when PDA was introduced and passed, Congress stated that it did not 
intend this prohibition to restrict the provision of a drug sample to a 
patient by a licensed practitioner or by another person at the 
direction of a licensed practitioner in certain circumstances. 
(Congressional Record, August 10, 1992, p. S 12061-2; August 12, 1992, 
p. H 8107-8.) Consequently, in PDA, Congress amended section 503(d)(1) 
of the act to clarify the prohibition by stating that providing or 
dispensing a drug sample in certain circumstances is not considered 
distribution within the meaning of the statute. The clarification 
specifically excludes from the term ``distribute'' the provision of a 
drug sample to a patient by: (1) A practitioner licensed to prescribe 
such drug, (2) a health care professional acting at the direction and 
under the supervision of such a practitioner, and (3) the pharmacy of a 
hospital or of another health care entity that received the drug sample 
in accordance with the act and regulations, and that is acting at the 
direction of the health care practitioner who requested the drug 
sample.
    A licensed practitioner who provides a drug sample other than as 
set forth in section 503(d)(1) of the act is engaging in an act of 
distribution, and drug sample distributions may be undertaken only as 
permitted by PDMA.
    FDA advises that PDMA and this proposed rule would permit a 
licensed practitioner to: (1) Dispense the drug sample as set forth in 
section 503(d)(1) of the act; (2) donate the drug sample to a 
charitable institution as provided for in proposed Sec. 203.39; (3) 
return the drug sample to the manufacturer or distributor; or (4) 
destroy the drug sample.
    FDA advises that any person, including a licensed practitioner, is 
prohibited from carrying out certain distributions of drug samples, 
including: (1) Selling, purchasing, or trading (or offering to sell, 
purchase, or trade) any drug sample; (2) requesting a manufacturer or 
distributor to deliver any drug sample to a retail pharmacy; (3) 
delivering any drug sample to a retail pharmacy to be dispensed by the 
pharmacist to a patient of the licensed practitioner or other persons; 
(4) giving any drug sample to a retail pharmacy; or (5) donating any 
drug sample to any charitable institution, except as provided in 
proposed Sec. 203.39.
    PDA singles out dispensing of drug samples by health care 
professionals who act at the direction and under the supervision of 
licensed practitioners, and hospital or health care entity pharmacies 
that receive drug samples in accordance with the act and regulations 
and that act at the direction of the health care practitioners who 
request samples. Thus, Congress clearly intended to distinguish these 
persons from retail pharmacists. The pharmacist in a retail pharmacy is 
an autonomous professional who is licensed by the State and supervised 
by the State Board of Pharmacy and independently dispenses drugs to 
patients in response to a prescription written by a separate licensed 
practitioner.
    A manufacturer or distributor is prohibited from delivering a drug 
sample to any retail pharmacy, and a retail pharmacy is barred from 
receiving any drug sample from any person.
    FDA has been advised that some licensed practitioners have 
requested that drug samples be delivered to retail pharmacies in rural, 
isolated, or medically underserved areas for dispensing to the 
practitioner's patients. FDA views this practice as being inconsistent 
with the accountability and oversight requirements imposed on sample 
distribution by PDMA. The agency believes it makes enforcement of the 
sample distribution sections difficult, and is a potential source of 
drug diversion. Accordingly, FDA advises that a practitioner should not 
request delivery of a drug sample to a retail pharmacy and that a 
retail pharmacy should not accept a drug sample from a licensed 
practitioner or from a manufacturer or distributor to be dispensed by 
the pharmacist to a practitioner's patients or to other persons.
    To cut off a potential source of drug diversion and promote 
enforcement of PDMA, FDA advises licensed practitioners that they 
should return adulterated or misbranded drug samples to the 
manufacturer or distributor, or destroy them. Examples of drug samples 
that may be adulterated or misbranded include, but are not limited to: 
(1) Samples that have gone beyond the labeled expiration date; (2) 
samples that are obviously discolored, soiled, spoiled, or otherwise 
deteriorated; (3) samples with mutilated or damaged packaging; and (4) 
samples with labeling that is torn, adjusted, or modified.
14. Donation of Drug Samples by Licensed Practitioners to Charitable 
Institutions
    FDA is aware of the practice whereby some licensed practitioners 
give significant quantities of drug samples to charitable institutions, 
such as free clinics, charity nursing homes, and charitable health care 
entities. Donated drug samples are then dispensed by staff of the 
charitable institutions to patients or given to domestic or overseas 
missions or other charitable institutions.
    Some charitable institutions actively solicit and collect donations 
of drug samples from licensed practitioners, and it is not uncommon for 
charitable institutions to rely on donated drug samples as a 
significant source of prescription drugs for patient care. In response 
to concerns about this practice, FDA established procedures for drug 
sample donations in Compliance Policy Guide (CPG) 7132.08, ``Collection 
and Charitable Distribution of Drugs,'' issued on October 1, 1980.
    FDA continues to be concerned about drug sample donations. The 
agency believes that ongoing donations of drug samples by licensed 
practitioners to charitable institutions could be considered as being 
inconsistent with the objectives of accountability and oversight of 
sample distribution that PDMA is designed to provide. The agency is 
concerned that this practice could make enforcement of the sample 
distribution sections difficult and provide an avenue for drug 
diversion.
    One of the principal purposes of PDMA was to prevent drug 
diversion. The easiest way to ensure that prescription drug samples 
will not be diverted by charitable institutions would be to prohibit 
such institutions from possessing them. However, Congress did not 
choose to do so. Indeed, PDMA explicitly allows prescription drug 
samples to be delivered by a manufacturer or distributor to the 
pharmacy of a hospital or health care entity at the written request of 
a licensed practitioner. Such a hospital or health care entity may be 
operated for profit or as a charitable institution. PDMA is silent, 
however, as to whether or not there are other legitimate means by which 
a charitable institution can acquire prescription drug samples.
    The operations of not-for-profit hospitals, health care entities, 
and charitable institutions were closely scrutinized by Congress before 
the passage of PDMA. Congress identified sales of drugs acquired at 
below-wholesale prices by hospitals, health care entities, and 
charitable institutions as a source of unfair competition for 
prescription drug wholesalers who are required to pay the average 
wholesale price, and suggested that such sales could be a source of 
drug diversion. (See sec. 2(7), PDMA.)
    Congress also identified the sale of prescription drug samples as a 
source of diversion (see sec. 2(6), PDMA), but did not suggest that 
charitable institutions were peculiarly likely to engage in this abuse. 
Instead, Congress sought to balance the need for restrictions that 
would prevent unfair competition and put an end to diversion of 
prescription drug samples with the goals of providing prescription 
drugs to all who need them and permitting the distribution, with 
appropriate restrictions, of prescription drug samples to patients.
    Congress did not alter this balance when in PDA, it revised the 
PDMA sample distribution restrictions.
    FDA has preliminarily concluded that development of a system that 
would permit licensed practitioners to donate excess quantities of 
prescription drug samples to charitable institutions for dispensing to 
patients or for further distribution to domestic or overseas charitable 
institutions for dispensing to patients would be consistent with PDMA, 
PDA, and the goal of providing adequate medical care to patients in 
need.
    A system that would permit such donations with adequate 
restrictions would ensure wider opportunities for the provision of 
medical care, including prescription drugs, to patients in need, and 
would, if appropriate controls were established similar to those 
governing sample distribution, be consistent with the language and 
intent of the statute. Controls would serve the objectives of 
accountability and oversight in the act and minimize the potential for 
drug diversion.
    Such a system would also prevent the waste of significant 
quantities of valuable prescription drugs that have been distributed as 
drug samples to licensed practitioners who have not used or dispensed 
them.
    FDA believes that such a system should contain audit and security 
protection, similar to those required in the statute for requesting 
drug samples from manufacturers or distributors and delivering them to 
licensed practitioners, to provide accountability and oversight, and to 
protect the public against drug diversion.
    In designing such a system, the agency has kept in mind that the 
day-to-day operations of licensed practitioners, including the 
provision of prescription drugs to patients, are regulated primarily by 
the States. In addition, there is nothing in the legislative history of 
PDMA or PDA that would suggest that Congress intended FDA to become 
more deeply involved in the regulation of the activities of licensed 
practitioners, except to the extent necessary to ensure that drug 
samples are not diverted and that they do not, as a result, become 
adulterated or misbranded.
    Accordingly, the agency is proposing to establish a system of drug 
sample donation controls in proposed Sec. 203.39. Proposed Sec. 203.39 
would set up a system that would permit a licensed practitioner to 
donate a drug sample to a charitable institution for dispensing to a 
patient of that institution or for distribution to another properly 
enrolled charitable institution for subsequent dispensing to patients, 
provided that the institution is properly enrolled and certain 
requirements are met.
    Under proposed Sec. 203.39, a charitable institution that wishes to 
solicit or receive drug samples would be required to: (1) Become 
properly enrolled by notifying the agency of its intention to solicit 
and receive drug sample donations and obtaining a central file number; 
and (2) maintain records of drug samples received as donations and 
subsequently dispensed or distributed to other charitable institutions.
    A recipient charitable institution must provide written 
certification of compliance with all regulations to a licensed 
practitioner or charitable institution that provides a drug sample 
before receiving any drug sample donation.
    Under the proposal, the charitable institution or organization 
(defined as one that has been granted tax exempt status by the 
Department of the Treasury under the requirements of section 501(c)(3) 
of the Internal Revenue Code of 1954) would be required to enroll with 
FDA. A charitable institution would be enrolled when it has notified 
the appropriate FDA district office that it intends to solicit and 
receive drug samples, has made application to the district office for a 
central file number, and has received the number. A charitable 
institution would also be required to be licensed by the State, if 
required by State law, and otherwise conform to State law.
    Proposed Sec. 203.39(b) would establish procedures that the 
charitable institution would be required to follow for receiving, 
holding, dispensing, and distributing donated drug samples. These 
requirements closely parallel the statutory and proposed regulatory 
requirements for request and delivery of drug samples by manufacturers 
and distributors to licensed practitioners.
    Under proposed Sec. 203.39(b)(1), a recipient charitable 
institution would be required to provide a written identification 
document to any employee or agent authorized to act on behalf of the 
institution in soliciting or receiving donations of prescription drug 
samples. The employee or agent identification document would be valid 
for a limited term, but could be renewed.
    FDA is not proposing to delineate the form and content of the 
required identification document, but it should be sufficient to 
readily identify the agent or employee of the charity and to establish 
that he or she has the authority to solicit and receive drug sample 
donations.
    Such an identification document would be acceptable to the agency, 
for example, if it: (1) Would be effective for a fixed term, e.g., 1 
year, and would bear an expiration date; (2) would include the name, 
address, and central file number of the charitable institution; (3) 
would exhibit the name, signature, and photograph of the authorized 
employee or agent; and (4) would display an affirmative statement that 
the employee or agent identified on the document is authorized by the 
institution to solicit and receive donations of prescription drug 
samples on behalf of the institution.
    Proposed Sec. 203.39(b)(2) would require each recipient charitable 
institution to maintain a current listing of all agents or employees 
authorized to solicit and receive drug samples on behalf of the 
institution. The listing would also be required to include the name and 
telephone number of the authorized agent or employee in charge of 
prescription drug sample solicitation, receipt, and redistribution.
    One problem associated with drug sample diversion has been the 
practice of ``shucking'' drug samples (separating drug sample dosage 
units from their sample packaging (usually blister packs, cards, or 
small boxes) and sample labeling) and repackaging them (often in 
plastic bags or ``baggies,'' or in other nonstandard containers with 
other sample dosage units from the same or different drug sample lots 
or production runs). This repackaging process may be accompanied by 
physical tampering with the sample dosage units with sharp or abrasive 
instruments or with solvents to remove imprints denoting their status 
as samples. Because this practice adulterates and misbrands the 
samples, proposed Sec. 203.39(b)(3) would require that a drug sample 
could be donated by a licensed practitioner or donating charitable 
institution and could be received by a charitable institution only in 
its original, unopened packaging with its labeling intact.
    Proposed Sec. 203.39(b)(4) would permit delivery of a donated drug 
sample to a recipient charitable institution by mail or common carrier, 
collection by an authorized agent or employee of the recipient 
charitable institution, or personal delivery by a licensed practitioner 
or an authorized agent or employee of the donating charitable 
institution. It would direct that the donor place the donated drug 
samples in a sealed carton for delivery to or collection by the 
recipient institution.
    Under proposed Sec. 203.39(b)(5), a donated drug sample could not 
be dispensed to a patient or be distributed to another charitable 
institution until a licensed practitioner or registered pharmacist at 
the recipient charitable institution has examined it to confirm that 
the drug sample delivered matches the donation record and that any 
adulterated or misbranded drug sample is eliminated. The recipient 
would be required to reject any drug sample that: (1) Is out of date; 
(2) has labeling that has become mutilated, obscured, or detached from 
the drug sample packaging; (3) shows evidence of having been stored or 
shipped under conditions that might adversely affect its stability, 
integrity, or effectiveness; (4) is for a drug product that has been 
recalled or is no longer marketed; or (5) is otherwise possibly 
contaminated, deteriorated, or adulterated.
    Proposed Sec. 203.39(b)(6) would require recipient charitable 
institutions to dispose of any drug sample found to be unsuitable by 
destroying it or by returning it to the manufacturer and to maintain 
complete records of the disposition of all drug samples destroyed or 
returned.
    Proposed Sec. 203.39(b)(7) would require that, if a donated drug 
sample is collected by an authorized agent or employee of the recipient 
charitable institution or is personally delivered by a licensed 
practitioner or an authorized agent of a donating charitable 
institution, the employee or agent of the recipient institution is to 
prepare at the time of collection or delivery a complete and accurate 
donation record for the samples. Both the donor and recipient would be 
required to sign the donation record when it is created, and the donor 
and recipient would each retain a copy.
    If a donated drug sample is transferred by mail or common carrier, 
the licensed practitioner or donating charitable institution would be 
required to prepare a donation record that would be signed by the 
licensed practitioner or authorized agent of the donating charitable 
institution (Sec. 203.39(b)(8) and (b)(9)). The donation record would 
be shipped with the drug sample. An authorized agent or employee of the 
recipient charitable institution would be required to countersign it, 
keep a copy, and return a copy to the licensed practitioner or donating 
charitable institution.
    Proposed Sec. 203.39(b)(9) would require the donation record to 
include: (1) The name, address, and telephone number of the licensed 
practitioner (or donating charitable institution), and the 
practitioner's professional title and State license number or DEA 
identification number; (2) the manufacturer, brand name, quantity, and 
lot or control number of the sample; (3) the date of the donation; (4) 
the signature of the licensed practitioner (or the signature of the 
authorized agent of the donating charitable institution); and (5) the 
signature of the authorized agent or employee of the recipient 
charitable institution.
    The proposal would require charitable institutions to maintain 
complete and accurate records of donation, receipt, inspection, 
inventory, dispensing, redistribution, destruction, and returns 
sufficient for complete accountability and auditing of drug sample 
stocks (Sec. 203.39(b)(10)).
    It would also require each recipient charitable institution to 
conduct an inventory of drug sample stocks, at least annually, 
utilizing independent inventory personnel, and to prepare a report 
reconciling the results of each inventory with the most immediate prior 
inventory. Inventory discrepancies and reconciliation problems would be 
required to be investigated by the charitable institution and reported 
to FDA (Sec. 203.39(b)(11)).
    Proposed Sec. 203.39(b)(12) would require that a recipient 
charitable institution provide written certification to the licensed 
practitioner or donating charitable institution that it is in 
conformity with all the requirements of proposed part 203 before 
receiving any drug sample donation. Such certification, which links the 
licensed practitioner with the charitable institution, could be made 
part of the donation record.
    Proposed Sec. 203.39(b)(13) would require a recipient charitable 
institution to store drug samples under conditions that will maintain 
the samples' stability, integrity, and effectiveness, and ensure that 
the drug samples will be free of contamination, deterioration, and 
adulteration.
    Proposed Sec. 203.39(c) would also specify that a charitable 
institution may donate drug samples to another recipient charitable 
institution for dispensing to patients, provided that the recipient 
charitable institution meets the appropriate requirements.
    In addition to the procedure for drug sample donations delineated 
in proposed Sec. 203.39, there are alternative means available for 
charities to receive donated prescription drug products from 
manufacturers and distributors. These include: (1) Direct donations of 
prescription drug stock by manufacturers or distributors, with records 
of distribution and receipt being maintained in accordance with State 
regulations; and (2) deliveries of drug samples to charity hospital and 
health care entity pharmacies by manufacturers and distributors or 
their representatives under the request of a licensed practitioner in 
accordance with the requirements set forth in proposed Secs. 203.30 and 
203.31.
15. Free Distributions That Are Not Samples
    There are certain situations in which manufacturers and 
distributors may deliver prescription drugs at no charge without such 
free distributions being samples. Accordingly, such distributions are 
not subject to the recordkeeping requirements for samples. 
Nevertheless, FDA believes that States and manufacturers and 
distributors should establish recordkeeping requirements and systems, 
where appropriate, to prevent diversion.
    a. Distribution of drugs to indigent patients. As noted above, a 
drug sample is defined at proposed Sec. 203.3(i) as a unit of a 
prescription drug that: (1) Is not intended to be sold; and (2) is 
intended to promote the sale of the drug. Drugs that are given free of 
charge to patients in some circumstances may not necessarily be 
samples. For example, manufacturers of some expensive new drugs have 
decided that, under certain circumstances, they will arrange for 
licensed practitioners to prescribe and dispense these drugs at no 
charge or at reduced cost to indigent patients. In FDA's view, if the 
objective of this practice is to ensure that patients in need of 
prescription drugs will have access to them, whatever their financial 
circumstances, then it is not a promotional scheme, and such drugs are 
not samples under section 503(c)(1) of the act or proposed 
Sec. 203.3(i).
    b. Starter packs. Starter packs are also not drug samples. Starter 
packs are prescription drug products distributed without charge by 
manufacturers or distributors to pharmacists with the intent that the 
pharmacists place the prescription drugs in stock and sell them at 
retail. Starter packs may be distributed by manufacturers' or wholesale 
distributors' representatives (detailers), by mail or common carrier, 
or by direct delivery from a manufacturer or distributor. Starter packs 
of solid oral dosage forms can be offered in ordinary stock packages, 
in special packaging comprised of unit-of-use or course-of-treatment 
sizes, or in special packaging smaller than standard stock packages 
whose sizes have no relationship to treatment regimens.
    Starter packs are intended to ``prime the pump'' by making a 
product available at no cost to the pharmacist so the pharmacist will 
fill prescriptions with the manufacturer's product. They permit the 
patient and pharmacist to become familiar with the manufacturer's 
product. Starter packs are a widely used selling tool and thus are 
intended to promote the sale of the drug. Representatives often will 
make a sales presentation before delivering them or at the same time 
they are delivered.
    PDMA's definition of drug sample sets up a two-element test that 
determines whether a particular item of prescription drug is a drug 
sample. The two-element test requires that the drug: (1) Is not 
intended to be sold; and (2) is intended to promote the sale of the 
drug. Starter packs meet the second element of the drug sample test 
because they are intended to promote the sale of a particular drug. 
However, even though starter packs are delivered without charge to 
pharmacists, they do not conform to the first element of the statutory 
drug sample definition because the manufacturer or distributor intends 
that they be sold by the pharmacist. Accordingly, starter packs are not 
samples.
    Because starter packs are not samples, they are not subject to the 
sample restrictions in PDMA. Instead, they are subject to regulation as 
prescription drugs under the act in like manner as stock shipments of 
prescription drugs. Because starter packs are not drug samples, the 
request, receipt, and recordkeeping requirements in PDMA for samples do 
not apply, and pharmacists are free to sell these products at retail.
    Because starter packs provide opportunities for diversion similar 
to those presented by drug samples, manufacturers, and distributors 
should establish and maintain accounting, audit, and security systems 
for starter packs to guard against diversion.
    c. Pharmacy colleges. For many years, manufacturers have given 
pharmacy schools and colleges pharmaceutical products for teaching 
purposes. These products are given to help the schools train pharmacy 
students in drug formulation, compounding, packaging, and labeling, and 
to familiarize students with dosage forms. These products are not 
intended to be distributed or dispensed, nor are they intended to 
promote the sale of the drug. Accordingly, the agency does not view 
prescription drugs donated to colleges of pharmacy for educational 
purposes as drug samples.
    d. Donations of drugs to charitable institutions. There is nothing 
in PDMA or in the legislative history of PDMA that would suggest that 
PDMA is intended to discourage direct donations by manufacturers or 
distributors of stock packages of prescription drug products to 
charitable institutions. Because these donations provide patients with 
the prescription drugs they need without regard to cost and are not 
intended to promote the sale of the drug, the distributions are not 
sample distributions within the meaning of section 503(c)(1) of the act 
or proposed Sec. 203.3(i).
16. ``Bid'' and ``Commercial'' Samples
    Manufacturers of drug products sometimes take delivery of bulk drug 
ingredients or precursor specimens for testing and evaluation purposes. 
These specimens are scrutinized for compatibility with a manufacturer's 
production equipment and to determine if they are suitable for use in 
formulating the drug products the manufacturer wishes to produce. 
Sometimes, manufacturers take delivery of examples of unpackaged 
finished dosage forms to determine if they are suitable for use with 
the manufacturer's packaging materials and equipment. These specimens, 
referred to as ``bid'' or ``commercial'' samples, are generally 
delivered in limited quantities for evaluation purposes.
    The act defines a drug sample as a unit of a drug subject to 
section 503(b) of the act (i.e., a prescription drug), which is not 
intended to be sold and is intended to promote the sale of the drug (21 
U.S.C. 353(c)(1)). Proposed Sec. 203.3(i) restates this definition. 
Because of the statutory language and the threat of diversion, persons 
who distribute ``bid'' or ``commercial'' samples should follow the 
requirements for sample distribution set forth in the act and this 
proposed rule.
17. Retail Pharmacists and Drug Samples
    Proposed Sec. 203.40 would provide that the presence in a retail 
pharmacy of any drug sample shall be considered evidence that the drug 
sample was obtained by the retail pharmacy in violation of section 
503(c)(1) of the act.

E. Wholesale Distribution

1. Identifying Statements (``Pedigrees'')
    Section 503(e)(1) of the act imposed a new requirement on 
``unauthorized'' or ``secondary'' wholesale prescription drug 
distributors (wholesale drug distributors who are not authorized 
distributors of record) to provide to a wholesale distributor 
purchaser, before the completion of a sale, a statement identifying 
each sale of the drug (often referred to as a ``statement of origin'' 
or ``drug pedigree''). PDA expanded this requirement by specifying the 
information to be included in the drug pedigree and mandating that it 
be provided to retail pharmacy buyers as well as wholesale distributor 
purchasers.
    The pedigree requirements for unauthorized distributors under PDMA, 
as later amended by PDA, have been a matter of continuing interest and 
discussion. These requirements affect only unauthorized wholesale 
distributors (i.e., those who do not have an ongoing business 
relationship with a manufacturer to distribute that manufacturer's 
drugs) and impose upon them more stringent requirements than are 
imposed on authorized distributors of record.
    Before passage of PDA, section 503(e)(1) of the act required that 
each person engaged in the wholesale distribution of drugs subject to 
section 503(b) of the act (prescription drugs) who is not an authorized 
distributor of record of such drugs provide to each wholesale 
distributor of such drugs a statement identifying each sale of the 
drug, including the date of the sale, before the sale to such wholesale 
distributor. Soon after the enactment of PDMA, the terms ``secondary'' 
and ``unauthorized'' distributors became common to describe persons who 
are not authorized distributors of record, and the term ``drug 
pedigree'' became popular to describe the required statement of origin.
    In order to make it possible to distinguish between authorized and 
unauthorized distributors, section 503(e)(1) of the act also required 
each manufacturer to maintain at its corporate offices a current list 
of its authorized distributors. This requirement was not altered by 
PDA, which otherwise amplified the pedigree requirement.
    When Congress adopted section 503(e)(1) of the act, it was 
responding to information uncovered by the Oversight Subcommittee of 
the House Committee on Energy and Commerce. The Committee found that 
most counterfeit, stolen, expired, or fraudulently obtained drugs 
entering commercial channels had been handled by distributors who were 
not authorized to distribute the manufacturer's product, rather than by 
the manufacturer's authorized distributors. Accordingly, Congress 
imposed a more stringent reporting requirement on distributions by 
unauthorized distributors, requiring them to inform their wholesale 
customers of all previous sales of the drug product. (H. Rept. 100-76, 
p. 17.)
    A number of comments to the agency after enactment of PDMA 
reflected concerns about application of the drug pedigree requirement. 
One comment asked FDA to consider whether the drug pedigree must 
include the name and address of the seller, or whether a general 
statement, such as ``this shipment of drugs came from an unnamed 
authorized distributor on ------------------ ----, 199--,'' or a coded 
statement, such as ``this shipment of drugs came from unauthorized 
distributor [code] on -------------- ----, 199--,'' would comply with 
PDMA.
    The agency stated its position on the form and content of the drug 
pedigree requirement in PDMA in a section of the August 1, 1988, 
information and guidance letter to regulated industry and other 
interested parties. The August 1, 1988, letter requested that any drug 
pedigree be in writing, that it bear the title ``Statement Identifying 
Prior Sales of Prescription Drugs by Unauthorized Distributors Required 
by the Prescription Drug Marketing Act,'' and that it include all 
necessary identifying information regarding all sales in the chain of 
distribution of the product, starting with the manufacturer or 
authorized distributor of record. The agency believed that this was 
consistent with the legislative history of PDMA, which indicated that 
Congress intended that the drug pedigree be a written certification 
fully identifying the source and place from which the drugs were 
obtained. (H. Rept. 100-76, p. 17; S. Rept. 100-202, p. 7.)
    In the August 1, 1988, letter, the agency requested that the 
identifying statement include the following information: (1) The 
business name and address of the source from which the drug was 
purchased; (2) the date of the sale; and (3) the identity, strength, 
container size, number of containers, and lot number(s) of the drug. 
FDA also requested that the drug pedigree accompany all products 
purchased from an unauthorized distributor, even when they are resold.
    Late in 1988, the American Association of Pharmaceutical 
Distributors (AAPD), an organization of wholesale prescription drug 
distributors who are not authorized distributors of record for some or 
all of the products they distribute, designed a form for drug pedigrees 
that substituted codes for names and addresses. AAPD's system, which is 
now reportedly being used by its members and certain nonmembers, is 
administered by an accountant employed by AAPD for that purpose. The 
agency does not know if other code systems exist that are being used in 
place of the required names and addresses on drug pedigrees.
    In the months following passage of PDMA, some Senators and members 
of Congress wrote to support coded pedigrees or pedigrees that did not 
disclose full names and addresses. However, others expressed their 
support for full disclosure on drug pedigrees.
    Even before passage of PDA, FDA considered that Congress had 
intended the PDMA drug pedigree requirement to require that each party 
in a chain of distribution be given sufficient information to make an 
informed determination as to the origin of drugs being purchased. In 
the agency's view, general statements of origin could not provide 
sufficient information for purchasers, and coded statements that made 
information unintelligible to purchasers without the intervention of a 
trade association or regulatory agency to decipher the code, would not 
provide purchasers with the information that Congress intended that 
they receive. In FDA's opinion, the only meaningful way to identify the 
``source and place'' from which drugs were obtained was to require that 
the identifying statement bear the business name and address of each 
previous distributor and the date of each prior sale. Furthermore, the 
only meaningful way to identify fully the drugs being described was to 
provide detailed particulars about the drugs being sold. FDA has stated 
this position in a number of letters, speeches, and public comments 
since PDMA became law.
    The PDA amendments to the PDMA significantly tightened the drug 
pedigree requirement and constitute Congress' latest word on the issue. 
PDA amended section 503(e)(1) of the act to require that unauthorized 
distributors provide, before a sale takes place, a drug pedigree to 
every wholesale distributor or retail pharmacy customer. The drug 
pedigree is required to identify all prior sales, purchases, or trades 
of such drugs and to specify by name and address all parties to the 
transactions. PDA also states that FDA may require additional 
information or a specific form for the drug pedigree.
    As Congress stated in the section-by-section analysis that 
accompanied PDA when it was introduced and passed, the stricter 
language in the PDA revision ``makes it clear'' that any wholesale 
distribution of a prescription drug by an unauthorized distributor, 
including any sale to another unauthorized distributor, an authorized 
distributor of record, or a retail pharmacy, must be preceded by a full 
and complete identifying statement. ``The identifying statement,'' the 
analysis added, ``must in all cases include the dates of each 
transaction involving the drug and the names and addresses of all 
parties to the transaction, and must contain any such other information 
as the Secretary may require.'' (Congressional Record, page S 12061, 
August 10, 1992; page H 8107, August 12, 1992.)
    Passage of PDA thus gave added emphasis to Congress' intent, as 
stated in the legislative history of PDMA, to restore accountability to 
the wholesale sector of the pharmaceutical market and to regulate the 
wholesale distribution of prescription drug products. (H. Rept. 100-76, 
pp. 16-17; S. Rept. 100-202, p. 7.)
    Proposed Sec. 203.50(a) would restate the statutory requirement 
that, before the completion of any wholesale distribution by an 
unauthorized wholesaler to another wholesale distributor or retail 
pharmacy, the seller is required to provide to the purchaser a 
statement identifying each prior sale, purchase, or trade of such drug. 
It would require that the drug pedigree include: (1) The proprietary 
and established name of the drug; (2) the dosage; (3) the container 
size; (4) the number of containers; (5) the drug's lot or control 
number(s); (6) the business name and address of all parties to each 
prior transaction involving the drug, starting with the manufacturer; 
and (7) the date of each previous transaction involving the drug.
2. Additional Manufacturing Processes
    A manufacturer applies at least one manufacturing process to a bulk 
drug substance or precursor product to produce a finished dosage form 
or a precursor product that will be further manufactured into a 
finished dosage form. Each of these processes produces a changed 
product. Accordingly, proposed Sec. 203.50(b) specifies that a 
manufacturer who subjects a drug to any additional manufacturing 
processes to produce a different drug is not required to provide to a 
purchaser a statement identifying the previous sales of the component 
drug or drugs.
3. Authorized Distributor Lists
    Proposed Sec. 203.50(c) would require each manufacturer to maintain 
at the corporate offices a current written list of all authorized 
distributors of record. The term ``authorized distributor of record'' 
is defined in proposed Sec. 203.3(b) to mean a distributor with whom a 
manufacturer has established an ongoing relationship to distribute such 
manufacturer's products. Because an agreement by which a single 
shipment of drugs is distributed would not constitute an ongoing 
relationship (see proposed Sec. 203.3(r)) that shipment would not 
establish an ``authorized distributor of record'' relationship.
    The proposal would also require the manufacturer's list to specify 
whether each distributor listed is authorized to distribute the 
manufacturer's full product line, or only particular, specified 
products. The proposal would also require the manufacturer to update 
the list on a continuing basis.
    In the PDMA legislative history, Congress stated that 
manufacturers' lists of authorized distributors of record should be 
freely available to the public. Accordingly, FDA is also proposing that 
each manufacturer make its list of authorized distributors of record 
available on request to the public for inspection and copying.
4. Unknown Origins or ``Salvaged'' Drugs
    A number of comments inquired about persons that purchase lost or 
abandoned drugs from transportation companies for sale to licensed 
wholesale distributors. This procedure is sometimes referred to as drug 
salvage, although it differs from the process identified as salvaging 
in 21 CFR part 211. These inquiries suggested that identifying 
statements for ``salvaged'' drugs should list the transportation 
company from which the drugs were ``salvaged'' as the point of origin.
    FDA believes that this kind of business operation cannot meet the 
requirements of the CGMP regulations, nor can it operate in a manner 
consistent with PDMA's requirements (e.g., that a wholesale distributor 
give a wholesale distributor purchaser a statement of origin for the 
product being sold).
    FDA's view is that the requirement for a statement of origin is 
designed to permit prospective purchasers to determine if the source of 
a drug is a legitimate source, such as an authorized distributor or 
secondary distributor licensed by the State as a wholesale distributor. 
The agency believes that an ``origin unknown'' statement or a statement 
that a particular shipment of prescription drugs originated as 
``salvage'' or that they came from a lost shipment from unknown persons 
at an unknown time would not be consistent with the meaning of that 
provision. Thus, in FDA's view, use of an ``origin unknown'' or 
``salvage'' statement would not meet the requirement for an identifying 
statement under section 503(e)(1) of the act.
5. State Licensing of Wholesale Distributors
    PDMA established a requirement that any person engaged in the 
wholesale distribution in interstate commerce of prescription drugs in 
a State be licensed by the State in accordance with guidelines issued 
as a final rule by the agency (21 U.S.C. 353(e)(2)). The final rule 
that set forth guidelines for State licensing of wholesale prescription 
drug distributors was published in the Federal Register of September 
14, 1990 (55 FR 38012), making the requirement that any person engaging 
in the wholesale distribution of prescription drugs in interstate 
commerce shall be licensed by the State in which it operates, become 
effective September 15, 1992.
    However, Congress passed PDA, which modified the State licensing 
requirement, before the date on which the requirement would have gone 
into effect. PDA amended section 503(e) of the act to establish a 
temporary Federal registration procedure for wholesale prescription 
drug distributors in those States that do not have a licensing program 
that meets the Federal guidelines.
    This temporary Federal wholesale distributor registration procedure 
expires on September 14, 1994. After that date, all persons engaged in 
the wholesale distribution of prescription drugs in interstate commerce 
are required to be licensed by the State.
    FDA issued a letter to industry and other interested persons on 
September 3, 1992, that provides information and guidance on the 
procedure to be followed by wholesale distributors required to register 
under the temporary Federal wholesale distributor registration 
procedure established by PDA. (See the Federal Register of December 2, 
1992 (57 FR 57068).)
6. Defining ``Wholesale Distribution''
    The term ``wholesale distribution'' is defined in section 
503(e)(4)(B) of the act as distribution of prescription drugs to other 
than the consumer or patient, but not including intracompany sales or 
distributions of drugs described in section 503(c)(3)(B) of the act. 
The exclusions under section 503(c)(3)(B) of the act are for the 
purchase or other acquisition by a hospital or other health care entity 
member of a group purchasing organization of a drug for its own use 
from the organization or from other hospitals or health care entity 
members of the organization; the sale, purchase, or trade of a drug or 
an offer to sell, purchase, or trade a drug by a charitable 
organization to a nonprofit affiliate of the organization to the extent 
otherwise permitted by law; the sale, purchase, or trade of a drug or 
an offer to sell, purchase, or trade a drug among hospitals or other 
health care entities under common control; the sale, purchase, or trade 
of a drug or an offer to sell, purchase, or trade a drug for emergency 
medical reasons; and the sale, purchase, or trade of a drug, an offer 
to sell, purchase, or trade a drug, or the dispensing of a drug 
pursuant to a prescription executed in accordance with section 503(b) 
of the act.
    These exclusions are part of the proposed definition of ``wholesale 
distribution'' in proposed Sec. 203.3(y).
    For clarity, FDA proposes to codify additional exclusions in 
proposed Sec. 203.3(y) that have already been discussed in this notice. 
They are the distribution of drug samples by manufacturers' and 
authorized distributors' representatives; the sale, purchase, or trade 
of blood and blood components intended for transfusion; drug 
reshipments, when conducted in accordance with proposed Sec. 203.23; 
and drug returns, when conducted in accordance with proposed 
Sec. 203.24.
    In addition, as discussed below, FDA is proposing to codify an 
exclusion from the definition of wholesale distribution for the sale of 
minimal quantities of drugs by retail pharmacies to licensed 
practitioners for office use.
    For consistency, FDA is also proposing to incorporate these 
additional exclusions in the definition of ``wholesale distribution'' 
at Sec. 205.3(f).
7. Sales to Licensed Practitioners by Retail Pharmacies
    In general, a retail pharmacy that engages in the business of 
selling prescription drugs to licensed practitioners is a wholesale 
distributor that, since September 15, 1992, has been required to be 
licensed by the State as a wholesaler or registered with FDA if the 
State does not have a conforming licensing program.
    Licensed practitioners often purchase small quantities of drugs 
from retail pharmacies for office use. Many wholesale distributors are 
reluctant to open accounts with individual practitioners for small 
quantities of drugs, and some practitioners believe that there is no 
cost-effective, reasonable alternative for making occasional purchases 
of small quantities of drugs for office use.
    The legislative history supports the view that Congress did not 
intend to interfere with this small-scale practice. According to the 
House Report, ``It is the express intent of the Committee that the 
scope of section 6 include distribution by * * * all sellers of 
prescription drugs in wholesale quantities to persons or firms other 
than the consumer or patient.'' (H. Rept. 100-76, p. 17.)
    FDA believes that permitting the sale of small quantities of 
prescription drugs by retail pharmacies to licensed practitioners for 
office use without the requirement of a State wholesale distributor's 
license satisfies a legitimate need and is consistent with the intent 
of the statute. Accordingly, the agency has included language in 
proposed Sec. 203.3(y) that would exclude the sale of minimal 
quantities of drugs by retail pharmacies to licensed practitioners for 
office use from the definition of ``wholesale distribution.''
    In this context, sales of prescription drugs by a retail pharmacy 
to licensed practitioners for office use will be considered to be 
minimal if the total annual dollar volume of prescription drugs sold to 
licensed practitioners does not exceed 5 percent of the dollar volume 
of that retail pharmacy's annual prescription drug sales.
    If a retail pharmacy is engaged in wholesale sales of prescription 
drugs in any amount after September 15, 1992, the presumption will be 
that the retail pharmacy is, in fact, a wholesale distributor that must 
be licensed by the State in accordance with part 205, or registered 
with FDA if the State does not have a conforming licensing program, 
unless it can be shown that the total annual dollar volume of its sales 
to licensed practitioners does not exceed 5 percent of the dollar 
volume of that pharmacy's annual prescription drug sales and the 
pharmacy does not otherwise engage in wholesale distribution.
8. Sales to Wholesale Distributors by Retail Pharmacies
    FDA received a number of questions asking whether PDMA prohibits a 
retail pharmacy from selling prescription drugs to a wholesale 
distributor. FDA advises that there is no provision in PDMA, the final 
PDMA State licensing guidelines, or this proposed rule that would 
prohibit a retail pharmacy from selling prescription drugs to a 
wholesale distributor. However, a retail pharmacy that engages in such 
sales would become a wholesale distributor that would be required to 
provide the wholesale distributor purchaser with an identifying 
statement for the drugs sold and would be required to have a valid 
State wholesale distributor license or be registered with FDA if the 
State does not have a conforming licensing program.

F. Request and Receipt Forms, Reports, and Records

    Proposed Sec. 203.60 sets forth standards for request and receipt 
forms, reports, and for the creation, retention, and maintenance of 
records and other documents under proposed part 203. These 
requirements, although procedural in nature, are essential for the 
efficient administration and enforcement of PDMA and proposed part 203.
1. Recordkeeping Media
    FDA is proposing that manufacturers and distributors have the 
option of creating or maintaining records on nonpaper media. FDA 
believes that recent technological advances compel the agency to 
reexamine how the requirements for written records (including forms 
bearing written signatures) can be satisfied by electronic media. FDA 
believes that greater efficiency, lower costs, and more effective 
enforcement can result from an effort to facilitate the development and 
use of photographic, electronic, and other nonpaper devices, and media 
for creation and maintenance of sample requests, receipts, records, and 
other forms.
    Accordingly, proposed Sec. 203.60(a) would permit request and 
receipt forms, reports, records, and other documents required by PDMA, 
PDA, and this proposed rule to be created on paper or on electronic 
media.
    Proposed Sec. 203.60(b) would permit request and receipt forms, 
reports, records, and other documents required by PDMA, PDA, and this 
proposal that are created on paper to be maintained on paper or by 
photographic or electronic recordation or imaging, provided that 
appropriate security and authentication requirements are followed.
    Proposed Sec. 203.60(c) would permit request and receipt forms, 
reports, records, and other documents required by PDMA, PDA, and this 
proposal that are created by means of electronic data entry and 
recordkeeping equipment to be stored using computer technologies, 
provided that appropriate security and authentication requirements are 
followed.
    Under this proposal, appropriate photographic records and 
electrographic records could include, but not be limited to, those 
maintained on microfilm, microcard, microfiche, and xerographic copies. 
Appropriate electronic records could include, but not be limited to, 
those maintained in analog or digital form or by means of image 
recording technology on computer disks, cards, tapes, memory chips, or 
optical media.
2. Security and Authentication Requirements for Request and Receipt 
Forms, Reports, Records, and Other Documents
    The proposed rule would require that any request or receipt form, 
report, record, or other document, and any signature appearing thereon, 
is to be created, maintained, or transmitted in a form that provides 
reasonable assurance of being: (1) Resistant to tampering, revision, 
modification, or alteration; (2) preserved in accessible and 
retrievable fashion; and (3) visible or readily made visible to permit 
copying or other means of duplication for purposes of review, analysis, 
verification, authentication, and reproduction by the person who 
executed the form or created the record, by the manufacturer or 
distributor, and by authorized personnel of FDA or other regulatory and 
law enforcement agencies.
3. Retention of Request and Receipt Forms, Reports, Lists, Records, and 
Other Documents
    The proposed rule also sets standards for the retention of request 
and receipt forms, reports, lists, records, and other documents. PDMA 
requires the retention of certain records for not less than 3 years. 
FDA believes that, with one exception, the 3-year minimum requirement 
should be extended to all records created and maintained under the 
statute and the proposed rule to ensure efficient enforcement and 
compliance operations. Accordingly, the proposal would state that any 
person required to create or maintain forms, reports, lists, or other 
records under the statute or regulations would have to retain them for 
at least 3 years after the date of their creation.
    The agency believes that a more stringent standard is necessary for 
the retention of records relating to drug sample distribution because 
some drug samples are relatively stable and may remain unexpired even 
though 3 or more years may have elapsed since they were packaged and 
shipped. Accordingly, the proposal would require that forms, reports, 
or records relating to the distribution of drug samples be retained for 
at least 3 years after the date of the record's creation or the date of 
expiration of a drug sample for which the record is being kept, 
whichever is later.
4. Availability of Forms, Reports, Lists, and Records
    Forms, reports, lists, or other records are of little value to FDA 
or other regulatory and law enforcement agencies, unless they are 
readily available for inspection and copying. Accordingly, the proposal 
would compel any person required to create or maintain forms, reports, 
lists, or other records under PDMA, PDA, or the proposed rule to make 
them available upon request, in a form that permits copying or other 
means of duplication, to FDA or other Federal, State, or local 
regulatory and law enforcement officials for review and reproduction.
5. Signatures on Forms, Reports, or Records
    By affixing a signature to a document, the person who signs it is 
giving his or her personal verification of the validity of a document. 
For example, by affixing a signature to a drug sample request form, the 
person signing it attests to the fact that he or she is a licensed 
practitioner and that he or she has requested delivery of a specific 
amount and type of drug sample. Similarly, a signature on a receipt 
verifies the delivery of the drug samples to the licensed practitioner 
or to the pharmacy of a hospital or other health care entity.
    FDA has preliminarily concluded that a valid signature need not be 
made by pen or indelible pencil on a piece of paper. Instead, the 
agency believes that in certain circumstances a valid signature can be 
created and recorded by electronic means.
    Accordingly, under proposed Sec. 203.61 a verifiable signature may 
be made by use of a writing or marking instrument such as a pen, 
indelible pencil, or electronic stylus on electronic pad. Because some 
imprinting or copying devices can be used to forge or falsely imprint a 
signature, and because false signatures and forgeries could be an 
integral part of a drug diversion scheme, the proposal would prohibit 
imprinting or automatic reproduction of a signature by a device or 
machine such as a stamp, copier, or autopen.
    Proposed Sec. 203.61 would establish performance standards and 
special security requirements for signatures signed on electronic 
media. Proposed Sec. 203.61(b) would require that if electronic media 
are used to execute and record signatures, it must be installed and 
operated with: (1) A system permitting visual review of the signature; 
(2) a system to detect or inhibit entry of a forged, traced, 
fraudulent, or counterfeit signature, i.e., authentication software; 
and (3) a mechanism that blocks alteration of documents or signatures 
after the signatures are made, i.e., a locking device.
    Persons interested in commenting on electronic records and 
electronic signatures should be aware that an agency task force, the 
FDA Electronic Identification/Signature Working Group, is currently 
assessing issues relating to electronic signatures and recordkeeping. 
In the Federal Register of July 21, 1992 (57 FR 32185), FDA published 
an advance notice of proposed rulemaking (ANPRM) entitled ``Electronic 
Identification/Signatures; Electronic Records; Request for Information 
and Comments.'' The notice stated that the agency is considering 
whether it should propose regulations that would, under certain 
circumstances, accept electronic signatures in place of handwritten 
signatures where signatures are currently required in Title 21 of the 
Code of Federal Regulations and is asking for comments on any related 
issues. Comments were to be identified with Docket No. 92N-0251. The 
working group has reviewed the comments in the docket and the agency is 
considering additional action. The agency's emerging position on 
electronic signatures and records will be coordinated with the final 
PDMA policies requirements and administrative procedures rule. 
Suggestions on electronic signatures and other signature substitutes 
and surrogates made to FDA in response to this proposed rule will also 
be made available to the working group force for its review.

G. Penalties and Rewards

1. Criminal Penalties
    Most violations of the act are punishable as misdemeanors, except 
that a violation committed after a prior conviction, or a violation 
committed with the intent to defraud or mislead, is punishable as a 
felony. In addition, FDA advises that persons who knowingly make any 
false, fictitious, or fraudulent statements or representations, or 
knowingly make or use any false writing or document, in any matter 
within the jurisdiction of a Federal department or agency; who engage 
in mail fraud or wire fraud; or who otherwise obstruct agency 
regulatory activities may be subject to prosecution under Title 18 of 
the United States Code.
    Most PDMA violations are felonies punishable by a prison term of 
not more than 10 years, a fine of not more than $250,000, or both. 
Felonies under PDMA include the knowing importation of a drug in 
violation of section 801(d)(1) of the act; the knowing sale, purchase, 
or trade of a drug or drug sample, or the knowing offer to sell, 
purchase, or trade a drug or drug sample in violation of section 
503(c)(1) of the act; the knowing sale, purchase, or trade of a drug 
coupon; the knowing offer to sell, purchase, or trade a drug coupon, or 
the knowing counterfeiting of such a coupon in violation of section 
503(c)(2) of the act; or the knowing distribution of drugs in violation 
of section 503(e)(2)(A) of the act. Misdemeanors include the 
distribution of a drug sample in violation of section 503(d) of the act 
and the failure to comply with the ``pedigree'' requirement of section 
503(e)(1)(A) of the act.
2. Civil Penalties
    PDMA also includes provisions for civil penalties for certain 
violations of the drug sample distribution requirements.
    A manufacturer or distributor who distributes drug samples by means 
other than mail or common carrier, whose representative, in the course 
of his or her employment, violates the PDMA prohibition against the 
sale, purchase, or trade or offer to sell, purchase, or trade drug 
samples, or any State law prohibiting the sale, purchase, or trade or 
offer to sell, purchase, or trade drug samples, is, upon conviction of 
the representative, subject to civil penalties as follows: (1) A civil 
penalty of not more than $50,000 for each of the first two such 
violations resulting in a conviction of any representative of the 
manufacturer or distributor in any 10-year period; and (2) a civil 
penalty of not more than $1,000,000 for each violation resulting in a 
conviction of any representative after the second conviction in any 10-
year period.
    A manufacturer or distributor who fails to report to FDA any 
conviction of one of its representatives for violations of section 
503(c)(1) of the act or any State law that prohibits the sale, 
purchase, or trade of a drug sample (or the offer to sell, purchase, or 
trade a drug sample) is subject to a civil penalty of not more than 
$100,000.
    In the Federal Register of May 26, 1993 (58 FR 30680), FDA 
published a proposed rule on procedures for administrative hearings on 
civil money penalties, including penalties under PDMA. FDA published a 
correction to this proposal in the Federal Register of July 27, 1993 
(58 FR 40103).
3. Rewards
    Section 7 of PDMA (section 303(b)(5) of the act) provides that a 
person who provides information leading to the institution of a 
criminal proceeding against, and conviction of, a person for the sale, 
purchase, or trade of a drug sample, or the offer to sell, purchase, or 
trade a drug sample in violation of section 503(c)(1) of the act, is 
entitled to one-half of the criminal fine imposed and collected for 
such violation, but not more than $125,000. The proposed rule provides 
in Sec. 203.70 that an application for such a reward be made to the 
Director, Office of Compliance, of the appropriate Center.

H. Technical Amendment to State Licensing Guideline

    FDA is proposing a technical amendment to the storage and handling 
requirements of the State licensing guideline at Sec. 205.50(c) to 
clarify the agency's intention that the paragraph require that 
prescription drugs be stored at appropriate temperatures in accordance 
with the requirements of the 22d edition of the U.S. Pharmacopoeia 
(U.S.P. XXII), the current edition of that compendium.

III. Analysis of Impacts

    FDA has examined the impacts of the proposed rule under Executive 
Order 12866 and the Regulatory Flexibility Act (Pub. L. 96-354). 
Executive Order 12866 directs agencies to assess all costs and benefits 
of available regulatory alternatives and, when regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity). The agency believes that 
this proposed rule is consistent with the principles set out in the 
Executive Order. In addition, the proposed rule is not a significant 
regulatory action as defined by the Executive Order.
    Most of the requirements in this proposed rule have already been 
implemented by the regulated industry in response to PDMA's enactment, 
FDA's guidance, and industry trade associations' recommendations.
    The regulatory costs of this proposal, which are due to increased 
paperwork requirements, were calculated by multiplying an estimate of 
the time necessary to complete the paperwork for each section by an 
hourly wage rate of $44.99. The agency estimates that nonprofit health 
care organizations (hospitals and charitable organizations) will 
require roughly 76,100 hours to complete the paperwork, at a cost of 
just over $3.4 million (76,000 hours X $44.99) annually. Pharmaceutical 
manufacturers and distributors will need about 476,000 hours to comply 
with the paperwork requirements, at a cost of around $21.4 million 
(476,000 hours X $44.99) annually. In total, therefore, the industry 
will utilize 552,000 hours (76,000 + 476,000) and spend approximately 
$24.8 million (3.4 million + 21.4 million) to complete the paperwork 
requirements. Further details for these estimates are included with the 
agency's paperwork reduction package, prepared pursuant to the 
Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
    The Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. Most of the requirements in this proposed rule have 
already been implemented by the regulated industry, including small 
entities, in response to PDMA's enactment, FDA's guidance, and industry 
trade association recommendations. Consequently, the agency certifies 
that the proposed rule will not have a significant economic impact on a 
substantial number of small entities. Accordingly, under the Regulatory 
Flexibility Act, no further analysis is required.

IV. Executive Order 12612: Federalism

    Executive Order 12612 requires Federal agencies to examine 
carefully regulatory actions to determine if they would have a 
significant impact on federalism. Using the criteria and principles set 
forth in the Order, the agency has considered the impact of this 
proposed rule on the States, on their relationship with the Federal 
government, and on the distribution of power and responsibilities among 
the various levels of government.
    FDA is publishing this proposed rule to set forth agency policies 
and requirements and provide administrative procedures, information, 
and guidance for those sections of PDMA that are not related to State 
licensing of wholesale drug distributors. Because enforcement of these 
sections of PDMA is a Federal responsibility, there should be little, 
if any, impact on the States from this rule, if it is finalized.
    FDA certifies that it has examined this proposed rule. Because it 
has little, if any, effect on federalism issues, as stated above, and 
because any effects are not significant, this proposed rule does not 
require an assessment under Executive Order 12612.

V. Paperwork Reduction Act of 1980

    This proposed rule contains information collections which are 
subject to review by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1980. The title, description, and 
respondent description of the information collection are shown below 
with an estimate of the annual reporting and recordkeeping burden. 
Included in the estimate is the time for reviewing instructions, 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the collection of information.
    Title: Prescription Drug Marketing Act of 1987; Policies, 
Requirements, and Administrative Procedures.
    Description: The information requirements contained in the proposed 
rule would collect information from establishments engaged in the 
reimportation and wholesale distribution of drugs subject to section 
503(b) of the act; the sale, purchase, or trade (or offer to sell, 
purchase, or trade) of prescription drugs by hospitals, health care 
entities, and charitable institutions; and the distribution of 
prescription drug samples.
    Description of Respondents: Businesses, hospitals, health care 
entities, charitable institutions, and other for-profit and not-for-
profit organizations; small businesses or organizations.

           Estimated Annual Reporting and Recordkeeping Burden          
------------------------------------------------------------------------
                        Annual                   Average                
      Section         number of      Annual     burden per     Annual   
                     respondents   frequency    response    burden hours
------------------------------------------------------------------------
203.11.............           12            1       30 min        6.00  
203.23(b), (c).....       44,469            2       15 min   22,234.00  
203.24.............       44,469            3       20 min   44,469.00  
203.30(a), (b), (c)       34,000          120        1 min   68,000.00  
203.31(a), (b), (c)       34,000          480        1 min  272,000.00  
203.31(d)..........       27,200            1       30 min   13,600.00  
203.31(e)..........        4,700            1        1 min       78.33  
203.31(f)..........           12            1       30 min        6.00  
203.34.............        4,700            1       24 hrs  112,800.00  
203.37(a)..........           48            1       30 min       24.00  
203.37(b)..........        1,200            1       60 min    1,200.00  
203.37(c)..........            2            1       30 min        6.00  
203.37(d)..........        4,700            1       15 min    1,175.00  
203.39(a)(2)(i)....        6,800            1       15 min    1,700.00  
203.39(b)(1), (2),                                                      
 (6), (7), (8),                                                         
 (9), (10), (12)...          300            1        3 hrs      900.00  
203.39(b)(11), (14)        6,800            1       60 min    6,800.00  
203.50(a)..........          125            1       30 min       62.50  
203.50(c)..........        4,700            1       90 min    7,050.00  
                    ----------------------------------------------------
  Total burden                                                          
   hours...........  ...........  ...........  ...........   552,111.33 
------------------------------------------------------------------------

    The agency has submitted a copy of this proposed rule to OMB for 
its review of these information collections. Interested persons are 
requested to send comments regarding this burden estimate or any other 
aspect of thiscollection of information, including suggestions for 
reducing the burden, to FDA's Dockets Management Branch (address 
above), and to the Office of Information and Regulatory Affairs, OMB, 
rm. 3208, New Executive Office Bldg., Washington, DC 20503, Attn.: Desk 
Officer for FDA.

VI. Environmental Impact

    The agency has determined under 21 CFR 25.24(a)(7) and (a)(8) that 
this action is of a type that does not individually or cumulatively 
have a significant effect on the human environment. Therefore, neither 
an environmental assessment nor an environmental impact statement is 
required.

VII. Request for Comments

    Interested persons may, on or before May 30, 1994, submit to the 
Dockets Management Branch (address above) written comments regarding 
this proposal. Two copies of any comments are to be submitted, except 
that individuals may submit one copy. Comments are to be identified 
with the docket number found in brackets in the heading of this 
document. Received comments may be seen in the office above between 9 
a.m. and 4 p.m., Monday through Friday.

List of Subjects

21 CFR Part 203

    Drugs, Labeling, Manufacturing, Prescription drugs, Reporting and 
recordkeeping requirements, Warehouses.

21 CFR Part 205

    Intergovernmental relations, Prescription drugs, Reporting and 
recordkeeping requirements, Security measures, Warehouses.
    Therefore, under the Federal Food, Drug, and Cosmetic Act and under 
authority delegated to the Commissioner of Food and Drugs, it is 
proposed that Title 21 of the Code of Federal Regulations be amended as 
follows:
    1. Part 203 is added to read as follows:

PART 203--PRESCRIPTION DRUG MARKETING

Subpart A--General Provisions

Sec.
203.1  Scope.
203.2  Purpose.
203.3  Definitions.

Subpart B--Reimportation

203.10  Restrictions on reimportation.
203.11  Applications for reimportation to provide emergency medical 
care.
203.12  An appeal from an adverse decision by the district office.

Subpart C--Sales Restrictions

203.20  Sales restrictions.
203.22  Exclusions.
203.23  Revocation of acceptance and reshipment.
203.24 Returns.

Subpart D--Samples

203.30  Sample distribution by mail or common carrier.
203.31  Sample distribution by means other than mail or 
commoncarrier (direct delivery by a representative or detailer).
203.32  Drug sample storage and handling requirements.
203.33  Drug sample forms.
203.34  Policies and procedures; administrative systems.
203.35  Standing requests.
203.36  Fulfillment houses, shipping and mailing 
services,comarketing agreements, and third party recordkeeping.
203.37  Investigation and notification requirements.
203.38  Sample lot or control numbers; labeling of sample units.
203.39  Donation of drug samples to charitable institutions.
203.40  Retail pharmacists and drug samples.

Subpart E--Wholesale Distribution

203.50  Requirements for wholesale distribution of 
prescriptiondrugs.

Subpart F--Request and Receipt Forms, Reports, and Records

203.60  Request and receipt forms, reports, and records.
203.61  Signatures.

Subpart G--Rewards

203.70  Application for a reward.

    Authority: Secs. 301, 303, 501, 502, 503, 510, 701, 704, 801 of 
the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 331, 333, 351, 
352, 353, 360, 371, 374, 381).

Subpart A--General Provisions


Sec. 203.1  Scope.

    This part sets forth procedures and requirements pertaining to the 
reimportation and wholesale distribution of prescription drugs, 
including both bulk drug substances and finished dosage forms, and to 
the sale, purchase, or trade (or the offer to sell, purchase, or trade) 
of prescription drugs, including bulk drug substances, by hospitals, 
health care entities, and charitable institutions, and to the 
distribution of prescription drug samples. Blood and blood components 
intended for transfusion are excluded from the restrictions in and the 
requirements of the Prescription Drug Marketing Act of 1987 and the 
Prescription Drug Amendments of 1992.


Sec. 203.2  Purpose.

    The purpose of this part is to implement the Prescription Drug 
Marketing Act of 1987 and the Prescription Drug Amendments of 1992, 
except for those sections relating to State licensing of wholesale 
distributors (see part 205 of this chapter), to protect the public 
health, and to protect the public against drug diversion by 
establishing procedures, requirements, and minimum standards for the 
distribution of prescription drugs and prescription drug samples.


Sec. 203.3  Definitions.

    (a) The act means the Federal Food, Drug, and Cosmetic Act, as 
amended (21 U.S.C. 301 et seq.).
    (b) Authorized distributor of record means a distributor with whom 
a manufacturer has established an ongoing relationship to distribute 
such manufacturer's products.
    (c) Blood means whole blood collected from a single donor and 
processed either for transfusion or further manufacturing.
    (d) Blood component means that part of a single-donor unit of blood 
separated by physical or mechanical means.
    (e) Bulk drug substance means any drug or drug component furnished 
in other than finished dosage form that is intended to furnish 
pharmacological activity or other direct effect in the diagnosis, cure, 
mitigation, treatment, or prevention of disease, or to affect the 
structure or any function of the body of humans.
    (f) Charitable institution or charitable organization means a 
nonprofit hospital, health care entity, organization, institution, 
foundation, association, or corporation that has been granted an 
exemption under section 501(c)(3) of the Internal Revenue Code of 1954, 
as amended.
    (g) Common control means the power to direct or cause the direction 
of the management and policies of a person or an organization, whether 
by ownership of stock, voting rights, by contract, or otherwise.
    (h) Distribute means to sell, offer to sell, deliver, or offer to 
deliver a drug to a recipient, except that the term ``distribute'' does 
not include the providing of a drug sample to a patient by:
    (1) A practitioner licensed to prescribe such drug;
    (2) A health care professional acting at the direction and under 
the supervision of such a practitioner; or
    (3) The pharmacy of a hospital or of another health care entity 
that is acting at the direction of such a practitioner and that 
received such sample in accordance with the act and regulations.
    (i) Drug sample means a unit of a prescription drug that is not 
intended to be sold and is intended to promote the sale of the drug.
    (j) Drug coupon means a form that may be redeemed, at no cost or at 
reduced cost, for a drug that is prescribed in accordance with section 
503(b) of the act.
    (k) Emergency medical reasons include, but are not limited to, 
transfers of a prescription drug between health care entities or from a 
health care entity to a retail pharmacy to alleviate a temporary 
shortage of a prescription drug arising from delays in or interruption 
of regular distribution schedules; sales to nearby emergency medical 
services, i.e., ambulance companies and fire fighting organizations in 
the same State or same marketing or service area, or nearby licensed 
practitioners, of drugs for use in the treatment of acutely ill or 
injured persons; provision of minimal emergency supplies of drugs to 
nearby nursing homes for use in emergencies or during hours of the day 
when necessary drugs cannot be obtained; and transfers of prescription 
drugs by a retail pharmacy to another retail pharmacy to alleviate a 
temporary shortage; but do not include regular and systematic sales to 
licensed practitioners of prescription drugs that will be used for 
routine office procedures.
    (l) FDA means the U.S. Food and Drug Administration.
    (m) Group purchasing organization means any entity established, 
maintained, and operated for the purchase of prescription drugs for 
distribution exclusively to its members with such membership consisting 
solely of hospitals and health care entities bound by written contract 
with the entity.
    (n) Health care entity means any person that provides diagnostic, 
medical, surgical, or dental treatment, or chronic or rehabilitative 
care, but does not include any retail pharmacy or any wholesale 
distributor. A person cannot simultaneously be a ``health care entity'' 
and a retail pharmacy or wholesale distributor.
    (o) Licensed practitioner means any person licensed by State law to 
prescribe drugs.
    (p) Manufacturer means any person who is a manufacturer as defined 
by Sec. 201.1 of this chapter.
    (q) Nonprofit affiliate means any not-for-profit organization that 
is either associated with or a subsidiary of a charitable organization 
as defined in section 501(c)(3) of the Internal Revenue Code of 1954.
    (r) Ongoing relationship means an association that exists when a 
manufacturer and a distributor enter into a written agreement under 
which the distributor is authorized to sell the manufacturer's products 
for a period of time or for a number of shipments, at least one sale is 
made under that agreement, and the name of the authorized distributor 
of record is entered on the manufacturer's list of authorized 
distributors of record.
    (s) PDA means the Prescription Drug Amendments of 1992.
    (t) PDMA means the Prescription Drug Marketing Act of 1987.
    (u) Person includes any individual, partnership, corporation, or 
association.
    (v) Prescription drug means any drug (including any biological 
product, except for blood and blood components intended for transfusion 
or biological products which are also medical devices) required by 
Federal law (including Federal regulation) to be dispensed only by a 
prescription, including finished dosage forms, bulk drug substances, 
and active ingredients subject to section 503(b) of the act.
    (w) Representative means an employee or agent of a drug 
manufacturer or distributor who promotes the sale of prescription drugs 
to licensed practitioners and who may solicit or receive written 
requests for the delivery of drug samples. A detailer is a 
representative.
    (x) Sample unit means a packet, card, blister pack, bottle, 
container, or other single package comprised of one or more dosage 
units of a prescription drug sample, intended by the manufacturer or 
distributor to be distributed by a licensed practitioner to a patient 
in an unbroken or unopened condition.
    (y) Wholesale distribution means distribution of prescription drugs 
to persons other than a consumer or patient, but does not include:
    (1) Intracompany sales;
    (2) The purchase or other acquisition by a hospital or other health 
care entity that is a member of a group purchasing organization of a 
drug for its own use from the group purchasing organization or from 
other hospitals or health care entities that are members of such 
organizations;
    (3) The sale, purchase, or trade of a drug or an offer to sell, 
purchase, or trade a drug by a charitable organization to a nonprofit 
affiliate of the organization to the extent otherwise permitted by law;
    (4) The sale, purchase, or trade of a drug or an offer to sell, 
purchase, or trade a drug among hospitals or other health care entities 
that are under common control;
    (5) The sale, purchase, or trade of a drug or an offer to sell, 
purchase, or trade a drug for emergency medical reasons;
    (6) The sale, purchase, or trade of a drug, an offer to sell, 
purchase, or trade a drug, or the dispensing of a drug under a 
prescription executed in accordance with section 503(b) of the act;
    (7) The distribution of drug samples by manufacturers' and 
authorized distributors' representatives;
    (8) The sale, purchase, or trade of blood or blood components 
intended for transfusion;
    (9) The reshipment of drugs, when conducted in accordance with 
Sec. 203.23;
    (10) Drug returns, when conducted in accordance with Sec. 203.24; 
or
    (11) The sale of minimal quantities of drugs by retail pharmacies 
to licensed practitioners for office use.
    (z) Wholesale distributor means any person engaged in wholesale 
distribution of prescription drugs, including, but not limited to, 
manufacturers; repackers; own-label distributors; private-label 
distributors; jobbers; brokers; warehouses, including manufacturers' 
and distributors' warehouses, chain drug warehouses, and wholesale drug 
warehouses; independent wholesale drug traders; and retail pharmacies 
that conduct wholesale distributions.

Subpart B--Reimportation


Sec. 203.10  Restrictions on reimportation.

    No prescription drug that was manufactured in a State and exported 
from the United States may be reimported by anyone other than its 
manufacturer, except that FDA may grant permission to a person other 
than the manufacturer to reimport a prescription drug if it deems such 
reimportation is required for emergency medical care.


Sec. 203.11  Applications for reimportation to provide emergencymedical 
care.

    (a) Applications for reimportation for emergency medical care are 
required to be submitted to the director of the FDA District Office in 
the district where reimportation is sought (addresses found in 
Sec. 5.115 of this chapter).
    (b) Applications for reimportation to provide emergency medical 
care will be reviewed and approved or disapproved by each district 
office.


Sec. 203.12  An appeal from an adverse decision by the district office.

    An appeal from an adverse decision by the district office involving 
prescription human drugs other than biological products may be made to 
the Office of Compliance (HFD-300), Center for Drug Evaluation and 
Research, Food and Drug Administration, 7500 Standish Pl., Rockville, 
MD 20855. An appeal from an adverse decision by the district office 
involving prescription human biological products may be made to the 
Office of Compliance (HFM-600), Center for Biologics Evaluation and 
Research, Food and Drug Administration, 1401 Rockville Pike, Rockville, 
MD 20852.

Subpart C--Sales Restrictions


Sec. 203.20  Sales restrictions.

    Except as provided in Secs. 203.22, 203.23, and 203.24, no person 
may sell, purchase, or trade, or offer to sell, purchase, or trade, any 
prescription drug that was:
    (a) Purchased by a public or private hospital or other health care 
entity; or
    (b) Donated or supplied at a reduced price to a charitable 
organization.


Sec. 203.22  Exclusions.

    Section 203.20 does not apply to:
    (a) The purchase or other acquisition of a drug for its own use by 
a hospital or other health care entity that is a member of a group 
purchasing organization from the group purchasing organization or from 
other hospitals or health care entities that are members of the 
organization.
    (b) The sale, purchase, or trade of a drug or an offer to sell, 
purchase, or trade a drug by a charitable organization to a nonprofit 
affiliate of the organization to the extent otherwise permitted by law.
    (c) The sale, purchase, or trade of a drug or an offer to sell, 
purchase, or trade a drug among hospitals or other health care entities 
that are under common control.
    (d) The sale, purchase, or trade of a drug or an offer to sell, 
purchase, or trade a drug for emergency medical reasons.
    (e) The sale, purchase, or trade of a drug, an offer to sell, 
purchase, or trade a drug, or the dispensing of a drug under a valid 
prescription.
    (f) The sale, purchase, or trade of a drug or the offer to sell, 
purchase, or trade a drug by hospitals or health care entities owned or 
operated by Federal, State, or local governmental units to other 
hospitals or health care entities owned or operated by Federal, State, 
or local governmental units.
    (g) The sale, purchase, or trade of, or the offer to sell, 
purchase, or trade, blood or blood components intended for transfusion.


Sec. 203.23  Revocation of acceptance and reshipment.

    The revocation of a sale and purchase transaction by a hospital, 
health care entity, or charitable institution because of a mistake in 
ordering or delivery and the reshipment of the prescription drug to a 
manufacturer or wholesale distributor for a credit or refund are exempt 
from the prohibitions in Sec. 203.20, provided that:
    (a) The hospital, health care entity, or charitable institution 
ships the drug back to the manufacturer or distributor from which the 
drug was received within 10 working days of receipt;
    (b) The reshipment is made under proper conditions for storage, 
handling, and shipping; and written documentation showing that proper 
conditions were maintained is provided to the manufacturer or 
distributor to whom the drug is reshipped;
    (c) If reshipped to the wholesale distributor, the hospital, health 
care entity, or charitable institution provides written notice to the 
manufacturer of the revocation and reshipment that includes the 
following information:
    (1) The name and address of the hospital, health care entity, or 
charitable institution;
    (2) The name and address of the manufacturer and wholesale 
distributor;
    (3) The product name and lot number;
    (4) The quantity involved in the revocation and reshipment; and
    (5) The date of the revocation and reshipment.


Sec. 203.24  Returns.

    The return of a prescription drug purchased by a hospital or health 
care entity, or acquired at a reduced price by or donated to a 
charitable institution, to the manufacturer or the wholesale 
distributor that sold, donated, or supplied the prescription drug, is 
exempt from the prohibitions in Sec. 203.20, provided that:
    (a) The hospital, health care entity, charitable institution, or 
wholesale distributor notifies the manufacturer that the prescription 
drug product has been returned to the wholesale distributor;
    (b) The hospital, health care entity, or charitable institution 
documents the return by filling out a credit memo specifying:
    (1) The name and address of the hospital, health care entity, or 
charitable institution;
    (2) The name and address of the manufacturer or wholesale 
distributor from which it was acquired;
    (3) The product name and lot or control number;
    (4) The quantity returned; and
    (5) The date of the return.
    (c) The hospital, health care entity, or charitable institution 
forwards a copy of each credit memo to the manufacturer and retains a 
copy of each credit memo for its records;
    (d) The value of any credit, refund, or exchange for the returned 
product does not exceed the purchase price or, if a donation, the fair 
market price of the returned product; and
    (e) Any drugs returned to a manufacturer or wholesale distributor 
are kept under proper conditions for storage, handling, and shipping, 
and written documentation showing that proper conditions were 
maintained is provided to the manufacturer or wholesale distributor to 
which the drugs are returned.

Subpart D--Samples


Sec. 203.30  Sample distribution by mail or common carrier.

    (a) Requirements for drug sample distribution by mail or common 
carrier. A manufacturer or authorized distributor of record may 
distribute a drug sample to a practitioner licensed to prescribe the 
drug that is to be sampled, or, at the written request of a licensed 
practitioner, to the pharmacy of a hospital or other health care 
entity, by mail or common carrier, provided that:
    (1) The licensed practitioner executes and submits a written 
request to the manufacturer or authorized distributor of record, as set 
forth in paragraph (b) of this section, before the delivery of the drug 
sample;
    (2) The recipient executes a written receipt, as set forth in 
paragraph (c) of this section, when the drug sample is delivered; and
    (3) The recipient returns the receipt to the manufacturer or 
distributor from which the drug sample was received.
    (b) Contents of the written request form for delivery of samples by 
mail or common carrier. (1) A written request for a drug sample to be 
delivered by mail or common carrier to a licensed practitioner is 
required to contain the following:
    (i) The name, address, professional title, signature of the 
practitioner making the request;
    (ii) The practitioner's State license number or Drug Enforcement 
Administration identification number;
    (iii) The proprietary or established name and strength of the drug 
sample requested;
    (iv) The quantity requested;
    (v) The name of the manufacturer, and the authorized distributor of 
record, if the drug sample is requested from an authorized distributor 
of record; and
    (vi) The date of the request.
    (2) A written request for a drug sample to be delivered by mail or 
common carrier to the pharmacy of a hospital or other health care 
entity is required to contain, in addition to all of the information in 
paragraph (b)(1) of this section, the name and address of the pharmacy 
of the hospital or other health care entity to which the drug sample is 
to be delivered.
    (c) Contents of the receipt to be completed upon delivery of a drug 
sample. The receipt is to be on a form designated by the manufacturer 
or distributor, and is required to contain the following:
    (1) If the drug sample is delivered to the licensed practitioner 
who requested it, the receipt is required to contain the name, address, 
professional title, and signature of the practitioner or the 
practitioner's designee who acknowledges delivery of the drug sample; 
the proprietary or established name and strength of the drug sample, 
the quantity, and the lot or control number of the drug sample 
delivered; and the date of the delivery.
    (2) If the drug sample is delivered to the pharmacy of a hospital 
or other health care entity at the request of a licensed practitioner, 
the receipt is required to contain the name and address of the 
requesting licensed practitioner, the name and address of the hospital 
or health care entity pharmacy designated to receive the drug sample; 
the name, address, professional title, and signature of the person 
acknowledging delivery of the drug sample; the proprietary or 
established name and strength of the drug sample, the quantity, and the 
lot or control number of the drug sample delivered; and the date of the 
delivery.


Sec. 203.31  Sample distribution by means other than mail or 
commoncarrier (direct delivery by a representative or detailer).

    (a) Requirements for drug sample distribution by means other than 
mail or common carrier. A manufacturer or authorized distributor of 
record may distribute by means other than mail or common carrier, e.g., 
by a representative or detailer, a drug sample to a practitioner 
licensed to prescribe the drug to be sampled, or, at the written 
request of such a licensed practitioner, to the pharmacy of a hospital 
or other health care entity, provided that:
    (1) The manufacturer or authorized distributor of record receives 
from the licensed practitioner a written request signed by the licensed 
practitioner before the delivery of the drug sample;
    (2) A receipt is signed by the recipient, as set forth in paragraph 
(c) of this section, when the drug sample is delivered;
    (3) The receipt is returned to the manufacturer or distributor; and
    (4) The requirements of paragraphs (d) through (f) of this section 
are met.
    (b) Contents of the written request forms for delivery of samples 
by a representative. (1) A written request for delivery of a drug 
sample by a representative to a licensed practitioner is required to 
contain the following:
    (i) The name, address, professional title, signature of the 
practitioner making the request;
    (ii) The practitioner's State license number or Drug Enforcement 
Administration identification number;
    (iii) The proprietary or established name and strength of the drug 
sample requested;
    (iv) The quantity requested;
    (v) The name of the manufacturer and the authorized distributor of 
record, if the drug sample is requested from an authorized distributor 
of record; and
    (vi) The date of the request.
    (2) A written request for delivery of a drug sample by a 
representative to the pharmacy of a hospital or other health care 
entity is required to contain, in addition to all of the information in 
paragraph (b) of this section, the name and address of the pharmacy of 
the hospital or other health care entity to which the drug sample is to 
be delivered.
    (c) Contents of the receipt to be completed upon delivery of a drug 
sample. The receipt is to be on a form designated by the manufacturer 
or distributor, and is required to contain the following:
    (1) If the drug sample is received by the licensed practitioner who 
requested it, the receipt is required to contain the name, address, 
professional title, and signature of the practitioner or the 
practitioner's designee who acknowledges delivery of the drug sample; 
the proprietary or established name and strength of the drug sample, 
the quantity, and the lot or control number of the drug sample 
delivered; and the date of the delivery.
    (2) If the drug sample is received by the pharmacy of a hospital or 
other health care entity at the request of a licensed practitioner, the 
receipt is required to contain the name and address of the requesting 
licensed practitioner, the name and address of the hospital or health 
care entity pharmacy designated to receive the drug sample; the name, 
address, professional title, and signature of the person acknowledging 
delivery of the drug sample; the proprietary or established name and 
strength of the drug sample, the quantity, and the lot or control 
number of the drug sample delivered; and the date of the delivery.
    (d) Inventories of drug samples of manufacturers' and distributors' 
representatives. Each drug manufacturer or authorized distributor of 
record that distributes drug samples by means of representatives shall 
conduct, at least annually, a complete and accurate drug sample 
inventory, utilizing generally accepted inventory practices. All drug 
samples in the possession or control of each manufacturer's and 
distributor's representatives are required to be inventoried, and the 
results of the inventory are required to be recorded in an inventory 
record and reconciliation report.
    (1) The inventory record is required to identify all drug samples 
by the proprietary or established name and dosage strength, and number 
of sample units of each drug sample in stock.
    (2) The reconciliation report is required to include:
    (i) A report of the physical count of the most recently completed 
prior inventory;
    (ii) A record of each drug sample shipment received since the most 
recently completed prior inventory, including the sender and date of 
the shipment, and the proprietary or established name, dosage strength, 
and number of sample units received;
    (iii) A record of drug sample distributions since the most recently 
completed inventory showing the name and address of each recipient of 
each sample unit shipped, the date of the shipment, and the proprietary 
or established name, dosage strength, lot or control number, and number 
of sample units shipped; and
    (iv) An explanation for any significant loss.
    (3) The inventory and reconciliation reports shall be conducted and 
prepared by persons other than the representatives being inventoried or 
supervisors or managers in their department, division, or branch, or in 
their direct line of supervision or command.
    (4) A manufacturer or authorized distributor of record shall 
carefully evaluate any apparent discrepancy or significant loss in its 
inventory and reconciliation, and shall fully investigate any such 
discrepancy or significant loss that cannot be justified.
    (e) Lists of manufacturers' and distributors' representatives. Each 
drug manufacturer or authorized distributor of record who distributes 
drug samples by means of representatives shall maintain a list of the 
names and addresses of its representatives who distribute drug samples 
and of the sites where drug samples are stored.
    (f) Notification if representative is convicted of violations. Drug 
manufacturers or authorized distributors of record shall report to FDA 
any conviction of their representatives for violations of section 
503(c)(1) of the act or a State law because of the sale, purchase, or 
trade of a drug sample or the offer to sell, purchase, or trade a drug 
sample.


Sec. 203.32  Drug sample storage and handling requirements.

    (a) Storage and handling conditions. Manufacturers, authorized 
distributors of record, and their representatives shall store and 
handle all drug samples under conditions that will maintain their 
stability, integrity, and effectiveness, and ensure that the drug 
samples are free of contamination, deterioration, and adulteration.
    (b) Compliance with compendial and labeling requirements. A 
manufacturer, authorized distributor of record, and their 
representatives can generally comply with this section by following the 
compendial and labeling requirements for storage and handling of a 
particular prescription drug in handling samples of that drug.


Sec. 203.33  Drug sample forms.

    A sample request or receipt form may be delivered by mail, common 
carrier, or private courier or may be transmitted photographically or 
electronically (i.e., by telephoto, wirephoto, radiophoto, facsimile 
transmission (FAX), xerography, or electronic data transfer) or by any 
other system, provided that the method for transmission meets the 
security requirements set forth in Sec. 203.60(d).


Sec. 203.34  Policies and procedures; administrative systems.

    Each manufacturer or authorized distributor of record that 
distributes drug samples shall establish, maintain, and adhere to 
written policies and procedures describing its administrative systems 
for the following:
    (a) Distributing drug samples by mail or common carrier, including 
methodology for reconciliation of requests and receipts;
    (b) Distributing drug samples by means other than mail or common 
carrier including the methodology for their independent sample 
distribution security and audit system;
    (c) Conducting its inventory of drug samples under Sec. 203.31(d), 
including an inventory schedule;
    (d) Auditing and detecting falsified or incomplete drug sample 
records;
    (e) Identifying any significant loss of drug samples and notifying 
FDA of the loss;
    (f) Monitoring any loss or theft of drug samples; and
    (g) Storing drug samples by representatives.


Sec. 203.35  Standing requests.

    Manufacturers or authorized distributors of record shall not 
distribute drug samples on the basis of open-ended or standing 
requests, but shall require separate written requests for each drug 
sample or group of samples. An arrangement by which a licensed 
practitioner requests in writing that a specified number of drug 
samples be delivered over a period of not more than 6 months, with the 
actual delivery dates for parts of the order to be set by subsequent 
oral communication or electronic transmission, is not considered to be 
a standing request.


Sec. 203.36  Fulfillment houses, shipping and mailing 
services,comarketing agreements, and third party recordkeeping.

    (a) Responsibility for creating and maintaining forms, reports, and 
records. Any manufacturer or authorized distributor of record that uses 
a fulfillment house, shipping or mailing service, or other third party, 
or engages in a comarketing agreement with another manufacturer or 
distributor to distribute drug samples or to meet any of the 
requirements of PDMA, PDA, or this part, remains responsible for 
creating and maintaining all requests, receipts, forms, reports, and 
records required under PDMA, PDA, and this part.
    (b) Responsibility for producing requested forms, reports, or 
records. A manufacturer or authorized distributor of record that 
contracts with a third party to maintain some or all of its records 
shall produce requested forms, reports, records, or other required 
documents within 48 hours of a request by an authorized representative 
of FDA or another Federal, State, or local regulatory or law 
enforcement official.


Sec. 203.37  Investigation and notification requirements.

    (a) Investigation of falsification of drug sample records. (1) A 
manufacturer or authorized distributor of record that has reason to 
believe that any person has falsified drug sample requests, receipts, 
or records shall conduct a full and complete investigation, and shall 
notify FDA, by telephone or in writing, within 5 working days of 
becoming aware of a falsification and within 5 working days of the 
completion of an investigation.
    (2) A manufacturer or authorized distributor of record shall 
provide FDA with a complete written report, including the reason for 
and the results of the investigation, not later than 30 days after the 
date of the initial notification.
    (b) Significant loss or known theft of drug samples. (1) A 
manufacturer or authorized distributor of record that distributes drug 
samples or a charitable institution that receives donated drug samples 
from a licensed practitioner shall notify FDA, by telephone or in 
writing, within 5 working days of becoming aware of any significant 
loss or known theft of drug samples and within 5 working days of the 
completion of an investigation into a report of a significant loss or 
known theft.
    (2) A manufacturer or authorized distributor of record shall 
provide FDA with a complete written report not later than 30 days after 
the date of the initial notification.
    (c) Conviction of a representative. (1) A manufacturer or 
authorized distributor of record that distributes drug samples shall 
notify FDA, by telephone or in writing, within 30 days of becoming 
aware of the conviction of one or more of its representatives for a 
violation of section 503(c)(1) of the act or any State law involving 
the sale, purchase, or trade of a drug sample or the offer to sell, 
purchase, or trade a drug sample.
    (2) A manufacturer or authorized distributor of record shall 
provide FDA with a complete written report not later than 30 days after 
the date of the initial notification.
    (d) Selection of individual responsible for drug sample 
information. A manufacturer or authorized distributor of record that 
distributes drug samples shall inform FDA in writing within 30 days of 
selecting the individual responsible for responding to a request for 
information about drug samples of that individual's name, business 
address, and telephone number.
    (e) Whom to notify at FDA. Notifications and reports concerning 
prescription human drugs shall be made to the Division of Drug Quality 
Evaluation (HFD-330), Office of Compliance, Center for Drug Evaluation 
and Research, Food and Drug Administration, 7500 Standish Pl., 
Rockville, MD 20855. Notifications and reports concerning prescription 
human biological products shall be made to the Division of Inspections 
and Surveillance (HFM-650), Office of Compliance, Center for Biologics 
Evaluation and Research, Food and Drug Administration, 1401 Rockville 
Pike, Rockville, MD 20852.


Sec. 203.38  Sample lot or control numbers; labeling of sample units.

    (a) Lot or control number required on drug sample labeling and 
sample unit label. The manufacturer or authorized distributor of record 
of a drug sample shall include in the labeling of the drug sample and 
the label of the sample unit an identifying lot or control number that 
will permit the tracking of the distribution of each drug sample unit.
    (b) Lot or control number required on all drug sample distribution 
records. All drug sample distribution records required under this part 
shall contain the lot or control number.
    (c) Labels of sample units. Each sample unit shall bear a label 
that clearly denotes its status as a drug sample, e.g., ``sample,'' 
``not for sale,'' ``professional courtesy package.''
    (1) A drug that is labeled as a drug sample is deemed to be a drug 
sample within the meaning of the act.
    (2) A drug product dosage unit that bears an imprint identifying 
the dosage form as a drug sample is deemed to be a drug sample within 
the meaning of the act.
    (3) Notwithstanding the above, any article that is a drug sample as 
defined in section 503(c)(1) of the act and Sec. 203.3(i) that fails to 
bear the label required in this paragraph is a drug sample.


Sec. 203.39  Donation of drug samples to charitable institutions.

    (a) A charitable institution may receive a drug sample donated by a 
licensed practitioner for dispensing to a patient of the charitable 
institution, provided that the charitable institution meets the 
conditions set forth in paragraph (b) of this section; and
    (1) The charitable institution is licensed by the State, if 
required by State law, and is otherwise in compliance with State law; 
and
    (2) The charitable institution has enrolled with FDA. A charitable 
institution is enrolled when it has notified the FDA district office in 
which it is located (addresses found in Sec. 5.115 of this chapter) 
that it intends to solicit and receive drug samples, has made 
application to the district office for a central file number, and has 
received such a number.
    (i) A person, partnership, or corporation that seeks to enroll with 
FDA as a charitable institution for the solicitation and receipt of 
donated drug samples is required to provide the following information 
to the district office:
    (A) The name, address, and telephone number of the person, 
partnership, or corporation seeking to enroll; and
    (B) The name, address, and telephone number of the agent, employee, 
or other individual responsible for solicitations and receipt of 
donated drug samples.
    (ii) Once the required information has been provided, the district 
office will advise the applicant charitable institution that it has 
been enrolled and issue the applicant a central file number.
    (b) Each recipient charitable institution shall comply with the 
following procedures for receiving, holding, dispensing, and 
distributing donated drug samples:
    (1) A recipient charitable institution shall provide a written 
identification document to any employee or agent authorized to act on 
behalf of the institution in soliciting or receiving donations of 
prescription drug samples. The employee or agent identification 
document shall be valid for a limited term, but may be renewable.
    (2) Each recipient charitable institution shall maintain a current 
listing of all agents or employees authorized to solicit and receive 
drug samples on behalf of the institution. The listing shall include 
the name and telephone number of the authorized agent or employee in 
charge of prescription drug sample solicitation, receipt, and 
redistribution.
    (3) A drug sample donated by a licensed practitioner or donating 
charitable institution may be received by a charitable institution only 
in its original, unopened packaging with its labeling intact.
    (4) Delivery of a donated drug sample to a recipient charitable 
institution may be completed by mail or common carrier, collected by an 
authorized agent or employee of the recipient charitable institution, 
or personal delivery by a licensed practitioner or an authorized agent 
or employee of the donating charitable institution. The licensed 
practitioner or donating charitable institution shall place donated 
drug samples in a sealed carton for delivery to or collection by the 
recipient institution.
    (5) A donated drug sample may not be dispensed to a patient or be 
distributed to another charitable institution until it has been 
examined by a licensed practitioner or registered pharmacist at the 
recipient charitable institution to confirm that the donation record 
accurately describes the drug sample delivered and that no drug sample 
is adulterated or misbranded for any reason, including, but not limited 
to, the following:
    (i) The drug sample is out of date;
    (ii) The labeling has become mutilated, obscured, or detached from 
the drug sample packaging;
    (iii) The drug sample shows evidence of having been stored or 
shipped under conditions that might adversely affect its stability, 
integrity, or effectiveness;
    (iv) The drug sample is for a prescription drug product that has 
been recalled or is no longer marketed; or
    (v) The drug sample is otherwise possibly contaminated, 
deteriorated, or adulterated.
    (6) The recipient charitable institution shall dispose of any drug 
sample found to be unsuitable by destroying it or by returning it to 
the manufacturer. The charitable institution shall maintain complete 
records of the disposition of all destroyed or returned drug samples.
    (7) If a donated drug sample is collected by an authorized agent or 
employee of the recipient charitable institution or is personally 
delivered by a licensed practitioner or an authorized agent of a 
donating charitable institution, the employee or agent of the recipient 
institution shall prepare at the time of collection or delivery a 
complete and accurate donation record containing the information set 
forth in paragraph (b)(9) of this section, a copy of which shall be 
retained by the recipient and by the donor.
    (8) If the donated drug sample is transferred by mail or common 
carrier, the donor shall prepare a complete and accurate donation 
record for any drug sample so transferred.
    (i) The donor shall include a copy of the donation record with the 
drug sample shipment.
    (ii) An authorized agent or employee of the recipient charitable 
institution shall countersign the donation record, return one copy to 
the donor, and retain one copy for the recipient's records.
    (9) The completed donation record is required to include the 
following information:
    (i) The name, address, and telephone number of the licensed 
practitioner (or donating charitable institution); and the 
practitioner's professional title and State license number or Drug 
Enforcement Administration identification number;
    (ii) The manufacturer, brand name, quantity, and lot or control 
number of the drug sample donated;
    (iii) The date of the donation;
    (iv) The signature of the licensed practitioner making the donation 
(or the signature of the authorized agent of the donating charitable 
institution); and
    (v) The signature of the authorized agent or employee of the 
recipient charitable institution.
    (10) Each recipient charitable institution shall maintain complete 
and accurate records of donation, receipt, inspection, inventory, 
dispensing, redistribution, destruction, and returns sufficient for 
complete accountability and auditing of drug sample stocks.
    (11) Each recipient charitable institution shall conduct an 
inventory of prescription drug sample stocks, at least annually, 
utilizing independent inventory personnel, and shall prepare a report 
reconciling the results of each inventory with the most immediate prior 
inventory. Drug sample inventory discrepancies and reconciliation 
problems shall be investigated by the charitable institution and 
reported to FDA.
    (12) A recipient charitable institution shall provide written 
certification to the licensed practitioner or donating charitable 
institution that it is in conformity with all the requirements of this 
part before receiving any drug sample donation. Such certification may 
be made part of the donation record.
    (13) A recipient charitable institution shall store drug samples 
under conditions that will maintain the sample's stability, integrity, 
and effectiveness, and will ensure that the drug samples will be free 
of contamination, deterioration, and adulteration.
    (14) A charitable institution shall notify FDA within 5 working 
days of becoming aware of a significant loss or known theft of 
prescription drug samples.
    (c) A charitable institution may donate drug samples to another 
recipient charitable institution for dispensing to patients, provided 
that the recipient charitable institution meets the requirements set 
forth in paragraphs (a) and (b) of this section.


Sec. 203.40  Retail pharmacists and drug samples.

    The presence in a retail pharmacy of any drug sample shall be 
considered evidence that the drug sample was obtained by the retail 
pharmacy in violation of section 503(c)(1) of the act.

Subpart E--Wholesale Distribution


Sec. 203.50  Requirements for wholesale distribution of prescription 
drugs.

    (a) Identifying statement for sales by unauthorized distributors. 
Before the completion of any wholesale distribution by a wholesale 
distributor of a prescription drug for which the seller is not an 
authorized distributor of record to another wholesale distributor or 
retail pharmacy, the seller shall provide to the purchaser a statement 
identifying each prior sale, purchase, or trade of such drug. This 
identifying statement shall include:
    (1) The proprietary and established name of the drug;
    (2) Dosage;
    (3) Container size;
    (4) Number of containers;
    (5) The drug's lot or control number(s);
    (6) The business name and address of all parties to each prior 
transaction involving the drug, starting with the manufacturer; and
    (7) The date of each previous transaction.
    (b) Identifying statement not required when additional 
manufacturing processes are completed. A manufacturer that subjects a 
drug to any additional manufacturing processes to produce a different 
drug is not required to provide to a purchaser a statement identifying 
the previous sales of the component drug or drugs.
    (c) List of authorized distributors of record. Each manufacturer 
shall maintain at the corporate offices a current written list of all 
authorized distributors of record.
    (1) Each manufacturer's list of authorized distributors of record 
shall specify whether each distributor listed thereon is authorized to 
distribute the manufacturer's full product line, or only particular, 
specified products.
    (2) Each manufacturer shall update its list of authorized 
distributors of record on a continuing basis.
    (3) Each manufacturer shall make its list of authorized 
distributors of record available on request to the public for 
inspection or copying. A manufacturer may impose reasonable copying 
charges for such requests from members of the public.

Subpart F--Request and Receipt Forms, Reports, and Records


Sec. 203.60  Request and receipt forms, reports, and records.

    (a) Creation of request and receipt forms, reports, records, and 
other documents. Request and receipt forms, reports, records, and other 
documents required by PDMA, PDA, and this part may be created on paper 
or on electronic media.
    (b) Maintenance of request and receipt forms, reports, records, and 
other documents created on paper. Request and receipt forms, reports, 
records, and other documents created on paper may be maintained on 
paper or by photographic or electronic imaging, provided that the 
security and authentication requirements described in paragraph (d) of 
this section are followed.
    (c) Maintenance of request and receipt forms, reports, records, and 
other documents created by electronic means. Request and receipt forms, 
reports, records, and other documents created by means of electronic 
data entry and recordkeeping equipment may be stored using computer 
technologies, provided that the security and authentication 
requirements described in paragraph (d) of this section are followed.
    (d) Security and authentication requirements for request and 
receipt forms, reports, records, and other documents. A request or 
receipt form, report, record, or other document, and any signature 
appearing thereon, shall be created, maintained, or transmitted in a 
form that provides reasonable assurance of being:
    (1) Resistant to tampering, revision, modification, fraud, 
unauthorized use, or alteration;
    (2) Preserved in accessible and retrievable fashion; and
    (3) Visible or readily made visible to permit copying or other 
means of duplication for purposes of review, analysis, verification, 
authentication, and reproduction by the person who executed the form or 
created the record, by the manufacturer or distributor, and by 
authorized personnel of FDA and other regulatory and law enforcement 
agencies.
    (e) Retention of request and receipt forms, reports, lists, 
records, and other documents. (1) Any person required to create or 
maintain reports, lists, or other records under PDMA, PDA, or this part 
shall retain them for at least 3 years after the date of their 
creation.
    (2) Any person required to create or maintain reports, or records 
relating to the distribution of drug samples shall retain them for at 
least 3 years after the date of their creation or 3 year after the date 
of expiration of a drug sample for which the record is being kept, 
whichever is later.
    (3) Any person required to create or maintain reports, or records 
relating to the distribution of drug samples shall maintain a record of 
the distribution of drug samples that identifies the drugs distributed 
and the recipients of the distributions and all drug samples destroyed 
or returned to the manufacturer. These records shall be maintained for 
3 years from the date on which they were created.
    (f) Availability of request and receipt forms, reports, lists, and 
records. Any person required to create or maintain request and receipt 
forms, reports, lists, or other records under PDMA, PDA, or this part 
shall make them available upon request, in a form that permits copying 
or other means of duplication, to FDA or other Federal, State, or local 
regulatory and law enforcement officials for review and reproduction.


Sec. 203.61  Signatures.

    (a) Signatures on request and receipt forms, reports, and records. 
A verifiable signature on a request and receipt form, report, record, 
or other document shall be made by means of a writing or marking 
instrument such as a pen, indelible pencil, or electronic stylus on 
electronic pad. Imprinting or automatic reproduction of a signature by 
a device or machine (such as a stamp, copier, or autopen) is 
prohibited.
    (b) Performance standards and special security requirements for 
signatures on electronic media. If an electronic pad and stylus or 
other electronic medium is used to execute and record signatures, it 
shall be installed and operated with:
    (1) A system permitting visual review of the signature;
    (2) An authentication system to detect or inhibit entry of a 
forged, traced, fraudulent, or counterfeit signature; and
    (3) A locking mechanism that blocks alteration of documents or 
signatures after the signatures are made.
    (c) Signature surrogates. [Reserved]

Subpart G--Rewards


Sec. 203.70  Application for a reward.

    (a) Reward for providing information leading to the institution of 
a criminal proceeding against, and conviction of, a person for the 
sale, purchase, or trade of a drug sample. A person who provides 
information leading to the institution of a criminal proceeding 
against, and conviction of, a person for the sale, purchase, or trade 
of a drug sample, or the offer to sell, purchase, or trade a drug 
sample, in violation of section 503(c)(1) of the act, is entitled to 
one-half the criminal fine imposed and collected for such violation, 
but not more than $125,000.
    (b) Procedure for making application for a reward for providing 
information leading to the institution of a criminal proceeding 
against, and conviction of, a person for the sale, purchase, or trade 
of a drug sample. A person who provides information leading to the 
institution of a criminal proceeding against, and conviction of, a 
person for the sale, purchase, or trade of a drug sample, or the offer 
to sell, purchase, or trade a drug sample, in violation of section 
503(c)(1) of the act, may apply for a reward by making written 
application to: (1) Director, Office of Compliance (HFD-300), Center 
for Drug Evaluation and Research, 7500 Standish Pl., Rockville, MD 
20855; or (2) Director, Office of Compliance (HFM-600), Center for 
Biologics Evaluation and Research, 1401 Rockville Pike, Rockville, MD 
20852, as appropriate.

PART 205--GUIDELINES FOR STATE LICENSING OF WHOLESALE PRESCRIPTION 
DRUG DISTRIBUTORS

    2. The authority citation for 21 CFR part 205 continues to read as 
follows:

    Authority:  Secs. 501, 502, 503, 701, 704 of the Federal Food, 
Drug, and Cosmetic Act (21 U.S.C. 351, 352, 353, 371, 374).

    3. Section 205.3 is amended by adding new paragraphs (f)(9), 
(f)(10), (f)(11), and (h) to read as follows:

Sec. 205.3  Definitions.

* * * * *
    (f) *  *  *
    (9) The reshipment of drugs, when conducted in accordance with 
Sec. 203.23 of this chapter;
    (10) Drug returns, when conducted in accordance with Sec. 203.24 of 
this chapter; or
    (11) The sale of minimal quantities of drugs by retail pharmacies 
to licensed practitioners for office use.
* * * * *
    (h) Health care entity means any person that provides diagnostic, 
medical, surgical, or dental treatment, or chronic or rehabilitative 
care, but does not include any retail pharmacy or any wholesale 
distributor. A person cannot simultaneously be a ``health care entity'' 
and a retail pharmacy or wholesale distributor.
    4. Section 205.50 is amended by revising the introductory text of 
paragraph (c) and paragraph (c)(1) to read as follow:

Sec. 205.50  Minimum requirements for the storage and handling of 
prescription drugs and for the establishment and maintenance of 
prescription drug distribution records.

* * * * *
    (c) Storage. All prescription drugs shall be stored at appropriate 
temperatures and under appropriate conditions in accordance with the 
requirements, if any, in the labeling of such drugs, or with the 
requirements in the U.S. Pharmacopeia XXII (U.S.P. XXII), which is 
incorporated by reference in accordance with 5 U.S.C. 552(a) and 1 CFR 
part 51. Copies are available from the U.S. Pharmacopeial Convention, 
Inc., 12601 Twinbrook Pkwy., Rockville, MD 20852, or available for 
inspection at the Office of the Federal Register, 800 North Capitol 
St., NW., suite 700, Washington, DC.
    (1) If no storage requirements are established for a prescription 
drug, the drug shall be held at ``controlled room temperature'' as 
defined in U.S.P. XXII to help ensure that its identity, strength, 
quality, and purity are not adversely affected.
* * * * *

    Dated: March 1, 1994.
 Michael R. Taylor,
 Deputy Commissioner for Policy.
[FR Doc. 94-5540 Filed 3-11-94; 8:45 am]
BILLING CODE 4160-01-F