[Federal Register Volume 65, Number 182 (Tuesday, September 19, 2000)]
[Rules and Regulations]
[Pages 56480-56484]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-24008]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 203 and 205

[Docket No. 92N-0297]


Prescription Drug Marketing Act of 1987; Prescription Drug 
Amendments of 1992; Policies, Requirements, and Administration 
Procedures; Public Hearing

AGENCY: Food and Drug Administration, HHS.

ACTION: Announcement of public hearing; request for comments.

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SUMMARY: The Food and Drug Administration (FDA) is announcing a public 
hearing to discuss certain requirements of the final rule implementing 
the Prescription Drug Marketing Act of 1987 (PDMA), as modified by the 
Prescription Drug Amendments of 1992 (PDA) and the FDA Modernization 
Act of 1997 (Modernization Act), which published in the Federal 
Register of December 3, 1999 (64 FR 67720), (hereinafter referred to as 
the PDMA final rule). The purpose of the hearing is to elicit comment 
from interested persons, including professional groups and 
associations, the regulated industry, health care professionals, and 
consumers, on the potential impact of certain requirements in the PDMA 
final rule relating to wholesale distribution of prescription drugs by 
distributors that are not authorized distributors of record, and 
distribution of blood derivatives by

[[Page 56481]]

entities that meet the definition of a ``health care entity'' in the 
PDMA final rule. The agency will use information obtained from the 
hearing and the comments to this document to determine what steps, if 
any, should be taken to modify the requirements in the PDMA final rule.

DATES: The public hearing will be held on Friday, October 27, 2000, 
from 8:30 a.m. to 4:30 p.m. Submit written notices of participation and 
comments for consideration at the hearing to the docket number listed 
in the heading of this document by October 13, 2000.\1\ Written 
comments will be accepted after the hearing until November 20, 2000.
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    \1\ Until recently, two dockets were being used to receive 
comments on issues related to PDMA. One docket, the docket 
established in 1988, will no longer be used. For simplicity, all 
comments related to any issues involving PDMA should be forwarded to 
the docket listed in the heading of this document.

ADDRESSES:  The public hearing will be held at 5630 Fishers Lane, rm. 
1066, Rockville, MD 20852. Submit written notices of participation to 
the Dockets Management Branch (HFA-305), Food and Drug Administration, 
5630 Fishers Lane, rm. 1061, Rockville, MD 20852. Comments should also 
be submitted to the Dockets Management Branch (address above). 
Transcripts of the hearing will be available for review at the Dockets 
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Management Branch (address above).

FOR FURTHER INFORMATION CONTACT:  Anne M. Henig, Center for Drug 
Evaluation and Research (HFD-006), Food and Drug Administration, 5600 
Fishers Lane, Rockville, MD 20857, 301-594-5410.

SUPPLEMENTARY INFORMATION:

I. Background

A. Legislative and Regulatory Requirements for Distribution of 
Prescription Drugs by Unauthorized Distributors

    PDMA, as amended by the PDA, amended 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, among other things, establish requirements for 
the wholesale distribution of prescription drugs; and to prohibit, with 
certain exceptions, the sale or offer to sell prescription drugs that 
have been purchased by a hospital or other health care entity or that 
have been donated or supplied at a reduced price to a charitable 
organization.
    Section 503(e)(1)(A) of the act states that each person who is 
engaged in the wholesale distribution of a prescription drug who is not 
the manufacturer or an authorized distributor of record for the drug 
must, before each wholesale distribution of a drug, provide to the 
person receiving the drug a statement, also known as a drug 
``pedigree,'' (in such form and containing such information as the 
Secretary may require) identifying each prior sale, purchase, or trade 
of the drug, including the date of the transaction and the names and 
addresses of all parties to the transaction. Section 503(e)(4)(A) of 
the act states that, for the purposes of section 503(e), the term 
``authorized distributors of record'' means those distributors with 
whom a manufacturer has established an ``ongoing relationship'' to 
distribute the manufacturer's products.
    In the PDMA final rule, the agency published regulations in part 
203 (21 CFR part 203) implementing these and other provisions of PDMA. 
Section 203.50 implements section 503(e)(1)(A) of the act and requires 
that, 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 must provide to the 
purchaser a statement identifying each prior sale, purchase, or trade 
of the drug. The identifying statement must include the proprietary and 
established name of the drug, its dosage, the container size, the 
number of containers, lot or control numbers of the drug being 
distributed, the business name and address of all parties to each prior 
transaction involving the drug, starting with the manufacturer, and the 
date of each previous transaction. Section 203.3(b) defines 
``authorized distributor of record'' as a distributor with whom a 
manufacturer has established an ongoing relationship to distribute the 
manufacturer's products. ``Ongoing relationship'' is defined in 
Sec. 203.3(u) to mean an association that exists when a manufacturer 
and a distributor enter into a written agreement under which the 
distributor is authorized to distribute the manufacturer's products for 
a period of time or for a number of shipments. If the distributor is 
not authorized to distribute a manufacturer's entire product line, the 
agreement must identify the specific drug products that the distributor 
is authorized to distribute.
    Thus, the PDMA final rule requires unauthorized distributors (i.e., 
those distributors who do not have a written authorization agreement) 
to provide a drug statement, or pedigree, to purchasers showing the 
entire prior sales history of the drug back to the first sale by the 
manufacturer. As discussed in the preamble to the PDMA final rule (64 
FR 67720 at 67747), manufacturers and authorized distributors of record 
are not required to provide an identifying statement when selling a 
drug, although the agency encouraged them to do so voluntarily to 
permit unauthorized distributors to continue to be able to purchase 
products from them.\2\
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    \2\ An unauthorized wholesale distributor that purchases a 
product from a manufacturer or authorized distributor of record 
without an identifying statement showing the prior sales of the drug 
could not provide an identifying statement to its purchasers and, 
therefore, could not conduct further wholesale transactions of the 
drug in compliance with Sec. 203.50.
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    The provisions in the PDMA final rule related to wholesale 
distribution of prescription drugs by unauthorized distributors (i.e., 
Secs. 203.3(u) and 203.50) were adopted from the provisions in the 
proposed rule published in the Federal Register of March 14, 1994 (59 
FR 11842), and are essentially the same as the proposed provisions, 
except the definition for ``ongoing relationship'' in the proposed rule 
was revised to eliminate certain requirements.\3\ The agency received 
two comments on the proposed definition of ongoing relationship and one 
comment on proposed Sec. 203.50, and responded in detail to those 
comments in the preamble to the PDMA final rule (see 64 FR 67720 at 
67727, 67728, and 67747).
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    \3\ The proposed rule defined ``ongoing relationship'' to 
require a written agreement and, in addition, the following two 
requirements that were eliminated in the final rule: (1) That a sale 
be completed under the written agreement and (2) that the 
distributor be listed on the manufacturer's list of authorized 
distributors.
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B. Legislative and Regulatory Requirements Restricting Distribution of 
Blood Derived Prescription Drug Products by Health Care Entities

    Section 503(c)(3)(A) of the act states that no person may sell, 
purchase, or trade, or offer to sell, purchase, or trade, any 
prescription drug that was purchased by a public or private hospital or 
other health care entity. Section 503(c)(3)(B) of the act states 
several exceptions to section 503(c)(3)(A), none of which are relevant 
to this discussion. Section 503(c)(3) of the act also states that 
``[f]or purposes of this paragraph, the term `entity' does not include 
a wholesale distributor of drugs or a retail pharmacy licensed under 
State law * * *.''
    Sections 203.20 of the PDMA final rule provides, with certain 
exceptions, that no person may sell, purchase, or trade, or offer to 
sell, purchase, or trade 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 institution. In 
Sec. 203.3(q)

[[Page 56482]]

of the PDMA final rule, ``Health care entity'' is defined as meaning 
any person that provides diagnostic, medical, surgical, or dental 
treatment, or chronic or rehabilitative care, but does not include any 
retail pharmacy or wholesale distributor. Under both the act and the 
PDMA final rule, a person could not simultaneously be a health care 
entity and a retail pharmacy or wholesale distributor. Thus, under the 
PDMA final rule, blood centers functioning as health care entities 
could not engage in wholesale distribution of prescription drugs, 
except for blood and blood components intended for transfusion, which 
are exempt from PDMA under Sec. 203.1 of the PDMA final rule. Blood and 
blood components include whole blood, red blood cells, platelets, and 
cryoprecipitated antihemophilic factor, which are prepared by blood 
banks who collect blood from donors and separate out the components 
using physical or mechanical means. Blood derivatives are derived from 
human blood, plasma, or serum through a chemical fractionation 
manufacturing process. Examples of blood derivative products include 
albumin, antihemophilic factor, immune globulin, and alpha-1 anti-
tripsin. As discussed in the preamble to the PDMA final rule in 
response to comments (64 FR 67720 at 67725 through 67727), blood 
derivative products are not blood or blood components intended for 
transfusion and therefore could not be distributed by health care 
entities, including full service blood centers that function as health 
care entities, after the final rule goes into effect. The agency 
received several comments on the proposed rule objecting to the 
applicability of the sales restrictions to the sale of blood 
derivatives by blood centers that function as health care entities, and 
responded in detail to those comments (see 64 FR 67720 at 67726).

C. Events Leading to the Delay of the Effective Date; Need for the 
Public Hearing

    After publication of the PDMA final rule, the agency received 
letters and petitions and had other communications with industry, 
industry trade associations, and members of Congress objecting to the 
provisions in Secs. 203.3(u) and 203.50. On March 29, 2000,\4\ the 
agency met with representatives from the wholesale drug industry and 
industry associations. The meeting participants discussed their 
concerns with both: (1) The requirement in Sec. 203.3(u) that there be 
a written authorization agreement between a manufacturer and 
distributor for the distributor to be considered an authorized 
distributor of record under Sec. 203.3(b), and (2) the requirement in 
Sec. 203.50 that unauthorized distributors provide a pedigree showing 
all prior sales going back to the manufacturer.
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    \4\ In a document published in the Federal Register of May 3, 
2000 (65 FR 25639 at 25640), the agency incorrectly stated that this 
meeting occurred in early February 2000.
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    The meeting participants asserted that manufacturers are unwilling 
to enter into written authorization agreements with the majority of 
smaller wholesalers. As a result, these wholesalers cannot become 
authorized distributors of record for the drugs they sell. The meeting 
participants also said that smaller wholesalers cannot obtain the 
required pedigree showing all prior sales of the drugs they purchase 
for sale because a large portion of these drugs are purchased from 
authorized distributors who are not required to provide a pedigree and 
who are unwilling to voluntarily provide them. The meeting participants 
asserted that authorized distributors will not voluntarily provide 
pedigrees when they sell drugs to unauthorized distributors because it 
would require them to change their warehouse and business procedures, 
which would entail additional effort and expense.
    The meeting participants asserted that implementation of the PDMA 
final rule will prevent over 4,000 smaller, unauthorized distributors 
from distributing drugs to their customers and may put them out of 
business, at least with respect to their prescription drug wholesale 
business. They also asserted that because many of their customers are 
smaller retail outlets that are not served by larger distributors, 
implementation of the PDMA final rule may leave certain markets for 
prescription drugs, and ultimately consumers for prescription drugs, 
underserved.
    In addition to the meeting discussed above and other informal 
communications that FDA has had with industry, industry associations, 
and Congress, FDA received a petition for stay of action requesting 
that the relevant provisions of the PDMA final rule be stayed until 
October 1, 2001. That petition was supported by numerous letters 
submitted to the docket from entities that would be considered 
unauthorized distributors under the PDMA final rule. The agency also 
received a petition for reconsideration from the Small Business 
Administration (SBA) requesting that FDA reconsider the PDMA final rule 
and suspend its effective date based on the projected severe economic 
impact it would have on over 4,000 small businesses. The petitions 
argued that the requirement for a written agreement in Sec. 203.3(u) is 
unreasonable because manufacturers are not willing to enter into such 
agreements with the majority of smaller distributors. The petitions 
also asserted that authorized wholesalers are not now able and could 
not provide, at a reasonable cost, a pedigree to their unauthorized 
distributor customers that meets the requirements of Sec. 203.50 of the 
PDMA final rule. The SBA petition asserted that, if the effective date 
of the PDMA final rule is not stayed, drug products now in the 
inventory of wholesalers will have to be cleared and new orders will 
have to cease or be severely limited to comply with the PDMA final 
rule's December 4, 2000, effective date, with corresponding disruptions 
in the distribution of drugs possible by summer 2000.
    In addition to the submissions on wholesale distribution by 
unauthorized distributors, the agency has received several letters on, 
and has held several meetings to discuss, the implications of the final 
regulations on blood centers that distribute blood derivative products 
and provide health care as a service to the hospitals and patients they 
serve. The blood center industry asserts that the regulations and, 
particularly the definition of ``health care entity,'' will severely 
inhibit their ability to provide full service care to the detriment of 
client hospitals and the patients they serve, and may disrupt the 
distribution of these products to the public. The agency also received 
a letter from Congress on this issue.
    Based on the concerns expressed by industry, industry associations, 
and Congress about implementing Secs. 203.3(u) and 203.50 by the 
December 4, 2000, effective date, the agency published a document in 
the Federal Register of May 3, 2000 (65 FR 25639), delaying the 
effective date for those provisions until October 1, 2001 (the May 2000 
document). In addition, the May 2000 document delayed the applicability 
of Sec. 203.3(q) to wholesale distribution of blood derivatives by 
health care entities until October 1, 2001. The May 2000 document also 
reopened the administrative record and gave interested persons until 
July 3, 2000, to submit written comments. As stated in the May 2000 
document, the purpose of delaying the effective date for these 
provisions was to give the agency time to obtain more information about 
the possible consequences of implementing them and to further evaluate 
the issues involved.

[[Page 56483]]

    On May 16, 2000, the House Committee on Appropriations (the 
Committee) stated in its report accompanying the Agriculture, Rural 
Development, Food and Drug Administration, and Related Agencies 
Appropriations Bill, 2001 (report 106-619) that it supported the 
``recent FDA action to delay the effective date for implementing 
certain requirements of the Prescription Drug Marketing Act until 
October 1, 2001 and reopen the administrative record in order to 
receive additional comments.'' In addition, the Committee stated that 
it ``believes the agency should thoroughly review the potential impact 
of the proposed provisions on the secondary wholesale pharmaceutical 
industry.'' The Committee directed the agency to provide a report to 
the Committee by January 15, 2001, summarizing the comments and issues 
raised and agency plans to address the concerns.
    In light of the complexity of the issues involved and the 
potentially serious economic and public health consequences that 
implementation of the relevant provisions of the PDMA final rule may 
have, the agency believes that it is appropriate to hold a public 
meeting to solicit information from, and the views of, interested 
persons, including professional groups and associations, the regulated 
industry, health care professionals, and consumers. This will help to 
develop an adequate factual basis that the agency can use to determine 
whether it is in the public health interest to take steps to modify or 
change the requirements in the PDMA final rule.

II. Scope of the Hearing

    The PDMA final rule provisions discussed in this document raise 
many complex economic and public health issues. To promote a more 
useful discussion at the public hearing, FDA has developed the 
following list of questions, which are of specific interest. This list 
is not intended to be exclusive, and presentations and comments 
answering other questions or addressing other issues, to the extent 
that they are pertinent to the PDMA final rule provisions discussed in 
this document, are encouraged.

A. Questions on Distribution of Prescription Drugs by Unauthorized 
Distributors

    1. How does the PDMA final rule, as published, affect the ability 
of unauthorized distributors to engage in drug distribution, i.e., what 
specific requirements would be difficult or impossible for unauthorized 
distributors to meet? Why?
    2. If the PDMA final rule diminished the ability of unauthorized 
distributors to engage in drug distribution, what effect would this 
have on the drug distribution system? What, if any, adverse public 
health consequences would result? What would be the economic costs to 
manufacturers, distributors (authorized and unauthorized), and 
consumers of drugs?
    3. If the act were amended by Congress to delete the requirement 
for provision of a drug pedigree by unauthorized distributors, would 
there be an increased risk of distribution of counterfeit, expired, 
adulterated, misbranded, or otherwise unsuitable drugs to consumers and 
patients?
    4. If the act were amended by Congress to require authorized 
distributors to provide a pedigree, what types of additional costs and 
burdens would they incur?
    5. Could specific changes be made to the information that is 
required under Sec. 203.50 to appear on a pedigree to make it more 
practical, from an authorized distributor's standpoint, to voluntarily 
provide a pedigree? Would use of a standardized government form be 
helpful?
    6. If actual sales by a manufacturer to a distributor were used by 
FDA as the only criterion to determine whether an ongoing relationship 
exists between them (and as a result, whether the distributor is an 
authorized distributor of record), would it result in more distributors 
being authorized than if a written authorization agreement is required? 
What other types of criteria might be used by FDA to make this 
determination?

B. Questions on Distribution of Blood Derivatives by Blood Banks and 
Other Health Care Entities

    1. What distribution systems are available for blood derived 
products? Do these distribution systems differ from those for other 
types of prescription drugs? If so, how?
    2. What effect would the PDMA final rule, as published, have on the 
distribution system for blood derived products? What, if any, adverse 
public health consequences would result? What would be the economic 
costs to manufacturers, distributors, and consumers of blood derived 
products?
    3. If blood derived products were excluded from the sales 
restrictions (i.e., if such products were permitted to be sold by 
health care entities), would there be an increased risk of distribution 
of counterfeit, expired, adulterated, misbranded, or otherwise 
unsuitable blood derived products to consumers and patients? Why or why 
not?
    4. Do manufacturers of blood derived products provide these 
products to health care entities, particularly those that are also 
charitable organizations, at a lower price when compared to other 
customers? Do manufacturers sell these products to charitable or for 
profit health care entities with the understanding that the products 
will be used for patients of the purchasing health care entity and will 
not be resold to other health care entities, distributors, or retail 
pharmacies?

III. Notice of Hearing Under 21 CFR Part 15

    The Commissioner of Food and Drugs (the Commissioner) is announcing 
that the public hearing will be held in accordance with part 15 (21 CFR 
part 15). The presiding officer will be the Commissioner or her 
designee. The presiding officer will be accompanied by a panel of FDA 
employees with relevant expertise.
    Persons who wish to participate in the part 15 hearing must file a 
written notice of participation with the Dockets Management Branch 
(address above) prior to October 13, 2000. To ensure timely handling, 
any outer envelope should be clearly marked with the Docket No. 92N-
0297 and the statement ``FDA PDMA Hearing.'' Groups should submit two 
copies. The notice of participation should contain the person's name; 
address; telephone number; affiliation, if any; the sponsor of the 
presentation (e.g., the organization paying travel expenses or fees), 
if any; brief summary of the presentation; and approximate amount of 
time requested for the presentation. The agency requests that 
interested persons and groups having similar interests consolidate 
their comments and present them through a single representative. FDA 
will allocate the time available for the hearing among the persons who 
file notices of participation as described above. If time permits, FDA 
may allow interested persons attending the hearing who did not submit a 
written notice of participation in advance to make an oral presentation 
at the conclusion of the hearing.
    After reviewing the notices of participation and accompanying 
information, FDA will schedule each appearance and notify each 
participant by telephone of the time allotted to the person and the 
approximate time the person's oral presentation is scheduled to begin. 
The hearing schedule will be available at the hearing. After the 
hearing, the hearing schedule will be placed on file in the Dockets 
Management Branch under Docket No. 92N-0297.

[[Page 56484]]

    Under Sec. 15.30(f), the hearing is informal, and the rules of 
evidence do not apply. No participant may interrupt the presentation of 
another participant. Only the presiding officer and panel members may 
question any person during or at the conclusion of each presentation.
    Public hearings under part 15 are subject to FDA's policy and 
procedures for electronic media coverage of FDA's public administrative 
proceedings (part 10, subpart C (21 CFR part 10, subpart C)). Under 
Sec. 10.205, representatives of the electronic media may be permitted, 
subject to certain limitations, to videotape, film, or otherwise record 
FDA's public administrative proceedings, including presentations by 
participants. The hearing will be transcribed as stipulated in 
Sec. 15.30(b). The transcript of the hearing will be available on the 
Internet at http://www.fda.gov/ohrms/dockets and orders for copies of 
the transcript can be placed at the meeting or through the Freedom of 
Information Staff (HFI-35), Food and Drug Administration, 5600 Fishers 
Lane, Rockville, MD 20857.
    Any handicapped persons requiring special accommodations to attend 
the hearing should direct those needs to the contact person listed 
above.
    To the extent that the conditions for the hearing, as described in 
this document, conflict with any provisions set out in part 15, this 
document acts as a waiver of those provisions as specified in 
Sec. 15.30(h).

IV. Request for Comments

    Interested persons may submit to the Dockets Management Branch 
(address above) written notices of participation and comments for 
consideration at the hearing by October 13, 2000. To permit time after 
the hearing for all interested persons to submit data, information, or 
views on this subject, the administrative record of the hearing will 
remain open following the hearing until November 20, 2000. Persons who 
wish to provide additional materials for consideration should file 
these materials with the Dockets Management Branch (address above) by 
November 20, 2000. 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 Dockets Management Branch between 9 a.m. and 4 p.m., Monday 
through Friday.

    Dated: September 12, 2000.
William K. Hubbard,
Senior Associate Commissioner for Policy, Planning, and Legislation.
[FR Doc. 00-24008 Filed 9-18-00; 8:45 am]
BILLING CODE 4160-01-F