[Federal Register Volume 66, Number 41 (Thursday, March 1, 2001)]
[Rules and Regulations]
[Pages 12850-12853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-4964]


-----------------------------------------------------------------------

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; Delay of Effective Date

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule; delay of effective date.

-----------------------------------------------------------------------

SUMMARY: The Food and Drug Administration (FDA) is further delaying, 
until April 1, 2002, the effective date regarding certain requirements 
of the final rule published in the Federal Register of December 3, 1999 
(64 FR 67720). The final rule implements the Prescription Drug 
Marketing Act of 1987 (PDMA), as modified by the Prescription Drug 
Amendments of 1992 (PDA), and the Food and Drug Administration 
Modernization Act of 1997 (the Modernization Act). FDA is further 
delaying the effective date for 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 entities that meet the definition 
of a ``health care entity'' in the final rule. In the Federal Register 
of May 3, 2000 (65 FR 25639), the agency previously delayed until 
October 1, 2001, the effective date of these requirements. The other 
provisions of the final rule became effective on December 4, 2000. The 
agency is taking this action to address concerns about the requirements 
raised by affected parties.
    FDA believes that this further delay of the effective date of 
certain requirements in the PDMA final rule satisfies the memorandum of 
January 20, 2001, from the Assistant to the President and Chief of 
Staff, entitled ``Regulatory Review Plan,'' published in the Federal 
Register on January 24, 2001 (66 FR 7702). That memorandum requested 
Federal agencies to delay by 60 days the effective date of any 
regulation that was not effective as of January 20, 2001. The action 
taken in this document to further delay the effective date of certain 
requirements of PDMA exceeds 60 days. To the extent that 5 U.S.C. 553 
applies to this action, it is exempt from notice and comment because it 
constitutes a rule of procedure under 5 U.S.C. 553(b)(A). 
Alternatively, the agency's implementation of this action without 
opportunity for public comment, effective immediately upon publication 
today in the Federal Register, is based on the good cause exceptions in 
5 U.S.C. 553(b)(B) and (d)(3). Seeking public comment is impracticable, 
unnecessary, and contrary to the public interest. As explained in the 
SUPPLEMENTARY INFORMATION section entitled ``Need to Further Delay the 
Effective Date,'' the delay will give distributors additional time to 
exhaust inventories of drugs that do not have acceptable pedigrees to 
avoid economic harm. Additionally, the delay will allow more time for 
FDA to make recommendations to Congress, for Congress to evaluate those 
recommendations and, if necessary,

[[Page 12851]]

time for a regulatory or legislative change.

DATES: The effective date for Secs. 203.3(u) and 203.50, and the 
applicability of Sec. 203.3(q) to wholesale distribution of blood 
derivatives by health care entities, added at 64 FR 67720, December 3, 
1999, is delayed until April 1, 2002.

FOR FURTHER INFORMATION CONTACT: Lee D. Korb, Center for Drug 
Evaluation and Research (HFD-7), Food and Drug Administration, 5600 
Fishers Lane, Rockville, MD 20857, 301-594-2041.

SUPPLEMENTARY INFORMATION:

I. Background

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

    PDMA (Public Law 100-293) was enacted on April 22, 1988, and was 
modified by the PDA (Public Law 102-353, 106 Stat. 941) on August 26, 
1992. The PDMA, as modified 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.
    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 (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.\1\ 
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.
---------------------------------------------------------------------------

    \1\ The statement required under section 503(e)(1)(A) of the act 
is commonly referred to as a drug ``pedigree.''
---------------------------------------------------------------------------

    On December 3, 1999, the agency published final regulations in part 
203 (21 CFR part 203) implementing these and other provisions of PDMA 
(64 FR 67720). Section 203.50 requires that, before the completion of 
any wholesale distribution of a prescription drug by a wholesale 
distributor that 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 final rule requires unauthorized distributors (i.e., 
those distributors who do not have a written authorization agreement) 
to provide a drug origin statement 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 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\
---------------------------------------------------------------------------

    \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
---------------------------------------------------------------------------

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.''
    Section 203.20 of the 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 organization. In Sec. 203.3(q) of 
the 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 final 
rule, a person could not simultaneously be a health care entity and a 
retail pharmacy or wholesale distributor. Thus, under the 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 the 
PDMA under Sec.  203.1 of the 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 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.

C. Events Leading to the Delay of the Effective Date

    After publication of the 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, the agency met with 
representatives from the wholesale drug industry and industry

[[Page 12852]]

associations to discuss their concerns. In addition, FDA received a 
petition for stay of action requesting that the relevant provisions of 
the final rule be stayed until October 1, 2001. The agency also 
received a petition for reconsideration from the Small Business 
Administration requesting that FDA reconsider the final rule and 
suspend its effective date based on the severe economic impact it would 
have on more than 4,000 small businesses.
    In addition to the submissions on wholesale distribution by 
unauthorized distributors, the agency received several letters on, and 
held several meetings to discuss, the implications of the final 
regulations for 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 medical care and services to the 
detriment of client hospitals and the patients they serve, and may 
disrupt the distribution of blood derivatives 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. 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.

D. House Committee on Appropriations Reaction to Agency Delay and 
Committee's Report Request

    On May 16, 2000, the House Committee on Appropriations (the 
Committee) stated in its report accompanying the Agriculture, Rural 
Development, FDA, and Related Agencies Appropriations Bill, 2001 (H. 
Rept. 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.

E. Public Hearing

    After issuing the delay of the effective date for the relevant 
requirements of the final rule, the agency decided that it would be in 
the public interest to hold a public hearing to elicit comment on the 
requirements from interested persons. In the Federal Register of 
September 19, 2000 (65 FR 56480), the agency announced that a public 
hearing would be held on October 27, 2000, to discuss the requirements 
at issue (i.e., the requirements for unauthorized distributors and the 
provisions relating to distribution of blood derivatives by health care 
entities). The document set forth the purpose of the hearing and the 
procedure by which individuals could make a presentation at the 
hearing. In addition, the document set forth questions the agency 
wanted hearing participants and comments to address. The hearing was 
held on October 27, 2000, and comments were accepted until November 20, 
2000.

II. Need to Further Delay the Effective Date

    As discussed in section I of this document, the House Committee on 
Appropriations has 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. The agency is 
currently considering the comments and testimony received and preparing 
its report to Congress. If the agency determines that some type of 
action is appropriate, this action could take the form of a change or 
modification to the final rule initiated by the agency or a legislative 
change initiated by Congress. Obviously, it would take a significant 
amount of time beyond January 15, 2001, to initiate and carry out 
either change. The agency believes that a legislative change to the act 
could take well into the 2001 calendar year.
    In its hearing testimony and in a letter submitted on November 3, 
2000, the Pharmaceutical Distributors Association\3\ noted that if the 
final rule were to apply to drugs already in distribution as of the 
effective date of the final rule, a significant number of these drugs 
would have to be taken out of distribution because of the absence of a 
proper pedigree. The association specifically stated that if the final 
rule as published were to go into effect October 1, 2001, distributors 
would need to stop buying drugs that do not have the required pedigree 
under the final rule and would have to begin to exhaust existing 
inventories of drugs that do not have acceptable pedigrees by the 
beginning of the year 2001 to avoid economic harm. The association 
specifically sought a decision by the agency that the final rule not 
apply to prescription drugs already in distribution as of the effective 
date so those drugs could be distributed.
---------------------------------------------------------------------------

    \3\The Pharmaceutical Distributors Association is a trade 
association representing unauthorized wholesale prescription drug 
distributors.
---------------------------------------------------------------------------

    FDA acknowledges the concerns of the Pharmaceutical Distributors 
Association and has decided that, in light of the uncertainty regarding 
how to resolve the issues involved and the possible adverse 
consequences that could result from implementation of the relevant 
provisions of the final rule, it is reasonable and appropriate to delay 
the effective date of Secs. 203.3(u) and 203.50 for another 6 months 
until April 1, 2002. Additionally, the agency has decided to delay the 
applicability of Sec. 203.3(q) to wholesale distribution of blood 
derivatives by health care entities until April 1, 2002. This delay 
will allow time for the agency to make its recommendations to Congress, 
for Congress to evaluate those recommendations, and, depending on the 
decisions of the agency and Congress, for a regulatory or legislative 
change to address the issues raised. Although a further delay of the 
effective date of the relevant provisions of the final rule is not the 
exact relief requested by the Pharmaceutical Distributors Association, 
the agency believes that it accomplishes the same purpose in that it 
will permit unauthorized distributors to operate for an additional 6 
months without concern that the drugs in their inventory may become 
illegal to distribute and therefore valueless. All other provisions of 
the PDMA final rule became effective on December 4, 2000. This action 
should not be construed to indicate that FDA necessarily agrees with or 
has made decisions about the substantive arguments made in the 
petitions and other submissions related to implementation of 
Secs. 203.3(u) and

[[Page 12853]]

203.50, or Sec. 203.3(q), as it applies to wholesale distribution of 
blood derivatives by health care entities.
    This action is being taken under FDA's authority under 21 CFR 
10.35(a). The Commissioner of Food and Drugs finds that this further 
delay of the effective date is in the public interest.

    Dated: February 22, 2001.
Ann M. Witt,
Acting Associate Commissioner for Policy.
[FR Doc. 01-4964 Filed 2-28-01; 8:45 am]
BILLING CODE 4160-01-S